HC&D, LLC v. DCK Pacific Construction, LLC.

FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
23-FEB-2023
12:06 PM
Dkt. 71 AMOP

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

---o0o---

HC&D, LLC, a Hawaii Limited Liability Company,
Plaintiff-Appellee, v.
DCK PACIFIC CONSTRUCTION, LLC, a Hawaii Limited Liability
Company; and TERRACE PACIFIC INSURANCE, LTD.,
a Hawaii Corporation, Defendants-Appellants

NO. CAAP-XX-XXXXXXX

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 16-1-1185)

FEBRUARY 23, 2023

LEONARD, PRESIDING JUDGE, NAKASONE AND MCCULLEN, JJ.

AMENDED OPINION OF THE COURT BY LEONARD, J.,
WITH MCCULLEN, J., CONCURRING AND DISSENTING

This case involves a dispute between a contractor and a

subcontractor over payment for materials and services. The

contractor argues that its "pay-if-paid" provision does not

conflict with the "payment is due" provision added by the

subcontractor. The parties agree that in case of a conflict, the
FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

subcontractor's terms prevail. We hold that, in light of all of

the relevant contract language, the payment terms conflict and

the subcontractor's term prevails. We further hold that the

contractor raised a genuine issue of material fact concerning

whether certain materials were defective when delivered. We

affirm in part, vacate in part, and remand the case.

Defendants-Appellants DCK Pacific Construction, LLC

(DCK) and Terrace Pacific Insurance, Ltd. (TPI or Surety)1

(together, Appellants) appeal from the July 3, 2017 Final

Judgment entered by the Circuit Court of the First Circuit

(Circuit Court).2

I. BACKGROUND

The State of Hawai‘i (State) contracted with DCK, a

general contractor, to perform work at the Honolulu airport for

the HNL Aircraft Maintenance and Cargo Complex, Project Nos.

A011-25-14, AO1125-15, and AO1127-17 (HNL TMP Project). From

September 5, 2013, through November 10, 2015, Plaintiff-Appellee

HC&D, LLC (HC&D) (formerly known as Ameron Hawaii, LLC, a dba of

Ameron International Corp. (Ameron))3 supplied concrete materials

and other products and services to DCK for the HNL TMP Project.

DCK did not pay HC&D for certain materials and services.

1
DCK, as principal, and TPI, as surety, executed a surety
performance bond for the HNL TMP Project, which is defined below.
2
The Honorable Rhonda A. Nishimura presided.
3
For the sake of clarity, we refer to HC&D, although certain
documents refer to Ameron.

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A. Relevant Procedural History

On June 22, 2016, HC&D filed a complaint against DCK

and TPI. In Count I, HC&D alleged that it was entitled to

payment from the Surety for the unpaid amount for the materials

and/or services provided for the HNL TMP Project. In Count II,

HC&D alleged that it was entitled to payment from the Surety for

the unpaid amount for the materials and/or services provided for

a different airport project (Elliot Street Project), which is not

at issue in this appeal. In Count III, HC&D alleged breach of

contract against DCK for its failure to pay HC&D amounts due on

the HNL TMP and Elliott Street Projects.4

On January 11, 2017, HC&D moved for summary judgment on

Count I and Count III, to the extent that Count III related to

the HNL TMP Project (Motion for Summary Judgment). HC&D asserted

that on November 14, 2013, it entered into a subcontract with

DCK, Purchase Order No. 42006-107 (Purchase Order or

Subcontract), which was later amended by two change orders. HC&D

also asserted that it performed all of its obligations pursuant
to the Subcontract and thus, there were no conditions precedent

to HC&D's entitlement to payment for the subject materials and

labor. HC&D contended, inter alia, that payment was required

even if the State had not paid DCK, because the parties had

agreed that HC&D's terms and conditions would prevail in case of

a conflict, and HC&D's terms and conditions required payment

within a specified period of time.

4
A fourth count was dismissed with prejudice by stipulation and
order.

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DCK and TPI opposed the Motion for Summary Judgment,

contending that there were material defects in the concrete

provided by HC&D; the amounts claimed by HC&D were incorrect; and

the State had not paid DCK for the amounts claimed (due to

alleged deficiencies), and under the terms of the Subcontract,

payment by the State to DCK was a condition precedent to any

payment being owed by DCK to HC&D. In reply, HC&D argued, inter

alia, that DCK failed to raise a genuine issue of material fact

as to an August 7, 2015 delivery.

B. Key Contract Provisions

The Subcontract is comprised of a three-page document,

signed by each of the parties, with each page initialed at the

bottom by the signors, and with attachments including an Appendix

"A" and HC&D's General Terms and Conditions of Concrete Sales.

Page 2, Section 4 of the Conditions (DCK Conditions) provides,

in relevant part:
4. INVOICES PAYMENT TERMS: . . . Payments will be made
within Forty Five (45) days after the date of receipt of
[HC&D]'s invoice. Receipt of payment from the [State] to
the [DCK] for [HC&D's] work is an absolute condition
precedent to the [HCD's] right to payment.

The following was typed on the bottom of page 3 of the

Subcontract:
"**'[HC&D] General Terms and Conditions of Concrete Sales' will prevail in
case of any conflict.**
(See attached Terms and Conditions of Sales)

Appendix "A" states: "Notwithstanding anything to the

contrary within this Subcontract agreement (hereinafter

"Agreement"), the following conditions shall govern[.]" One of

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the listed conditions states: "8. Insert [HC&D] Terms and

Conditions making it part of the purchase order."

Section 6 of HC&D's General Terms and Conditions of

Concrete Sales (HC&D Terms and Conditions) provides:
6. PAYMENT TERMS: Payment for all purchases is due no
later than thirty (30) days following the last day of the
month in which the purchase was made. All balances not paid
as above shall bear interest at the rate of 1-1/2% per month
from the due date, or at the highest rate allowed by the
usury laws of Hawaii, whichever is less. . . . In no event
shall [DCK] make any set off or reduction to amounts owed to
[HC&D] hereunder.

C. The Circuit Court's Decision
On February 9, 2017, a hearing was held on the Motion

for Summary Judgment. After hearing the arguments of the

parties, the Circuit Court announced its ruling, stating, inter

alia:
There is no dispute that the parties entered into a
contract, and both parties, who are not novices, in fact
they are in the business of entering into similar contracts,
that they have initialed all the pages and that there was an
agreement acknowledged by DCK in terms of incorporating. . .
let's see. In particular, page 3 of 3, that [HC&D's]
general terms and conditions of concrete sales will prevail
in case of any conflict.

[DCK] argues that there is no conflict, that that
particular condition that if DCK does not get paid by the
State, no one will get paid. [The] argument is that that
does not present any conflict with [HC&D's] condition with
respect to 30 days. In looking at [HC&D's] term and
condition regarding payment terms, paragraph 6, "Payment for
all purchases is due no later than 30 days following the
last day of the month in which the purchase was made[,]"
[DCK] says that particular payment term does not conflict
with their condition in that if they don't get paid, we're
not going to pay you within 30 days.
The Court finds that there is a conflict between those
two conditions, and DCK agreed that if there is any
conflict, that [HC&D's] terms and conditions prevail. So
the Court will grant the summary judgment in favor of HC&D
with respect to Count 1, and this is the bond on AHB 0330
for the [HNL TMP Project], and with respect to Count 3, that
part of Count 3 for the breach of contract for the [HNL TMP
Project].

The Circuit Court entered a written order on the Motion

for Summary Judgment on March 28, 2017, entering summary judgment

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against TPI on Count I and against DCK on Count III as it

pertained to the HNL TMP Project. The Circuit Court entered

summary judgment against Appellants for the HNL TMP Project,

jointly and severally, in the amount of $130,301.39. The circuit

court also awarded HC&D $452.17 in costs and $7,598.50 in

attorneys' fees. Appellants timely appealed.

II. POINTS OF ERROR

DCK raises two points of error on appeal, contending

that the Circuit Court erred in: (1) concluding that Section 6

of the HC&D Terms and Conditions conflicted with Section 4 of the

DCK Conditions, and thus, the HC&D payment term prevailed over

DCK's "pay-if-paid" condition precedent; (2) granting summary

judgment as to HC&D's August 7, 2015 concrete shipment, as DCK

raised a genuine issue of material fact concerning whether the

concrete shipment met contract requirements.

III. APPLICABLE STANDARDS OF REVIEW

We review a circuit court's granting of summary

judgment de novo using the same standard applied by the circuit

court. Nozawa v. Operating Eng'rs Loc. Union No. 3, 142 Hawai‘i

331, 338, 418 P.3d 1187, 1194 (2018) (citation omitted). "When

reviewing the court's interpretation of a contract, the

construction and legal effect to be given a contract is a

question of law freely reviewable by an appellate court."

Mikelson v. United Servs. Auto. Ass'n, 107 Hawai‘i 192, 197, 111

P.3d 601, 606 (2005) (citation and internal quotation marks

omitted).

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IV. DISCUSSION

A. The Disputed Contract Terms

Appellants state two propositions in their first point

of error. Appellants first contend that the Circuit Court erred

in interpreting the Subcontract by concluding that Section 6 of

the HC&D Terms and Conditions conflicted with Section 4 of the

DCK Conditions. Appellants further contend that "thus" the

Circuit Court erred in holding that Section 6 of the HC&D Terms

and Conditions prevailed over Section 4 of the DCK Conditions.

Appellants expressly acknowledge, elsewhere in the Opening Brief

(and in the proceedings below), that the Subcontract provides

that the HC&D Terms and Conditions would control in the case of

any conflict between the DCK Conditions and the HC&D Terms and

Conditions.5

Section 4 of the DCK Conditions states in full:
4. INVOICES PAYMENT TERMS: [HC&D] shall submit its
invoices in form satisfactory to, or as may be required by,
[DCK]. Invoices may be submitted to cover deliveries in
whole or in part of the goods, materials, articles or
services constituting this order. [HC&D] recognizes that
all or some of the goods, materials, articles or services
may form a part of work being performed by [DCK] under a
contract with the [State] and invoices for deliveries made
may be incorporated by [DCK] into its overall billing under
such contract. Payments will be made within Forty Five (45)
days after the date of receipt of [HC&D's] invoice. Receipt
of payment from the [State] to [DCK] for [HC&D's] work is an
absolute condition precedent to [HC&D's] right to payment.
Payments will be made in full unless [DCK's] contract with
its client provides for retention, in which case [DCK] shall
retain a like amount from [HC&D] (for "Incorporated" goods,
materials, articles or services only). Retention will be
paid to [HC&D] upon the receipt of corresponding retention
payments by [DCK] under its contract with the client. When
discounts are offered by [HC&D] for prompt payments, the
discount period shall be computed starting with the date of
receipt by [DCK] of the goods, materials, articles or
services, or the date the invoice therefore was approved by

5
As set forth above, surrounded by asterisks, the Subcontract
states that the HC&D Terms and Conditions "will prevail in case of any
conflict" and references the attached HC&D Terms and Conditions.

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[DCK], which ever is the later. [DCK's] payment for all or
any part of the purchase price shall not constitute a waiver
of any of [DCK's] rights hereunder.

(Emphasis added).

Section 4 of the DCK Conditions includes what is

sometimes referred to as a "pay-if-paid" term, as well as a 45-

day timing provision. A pay-if-paid term is a condition

precedent, and "as the name suggests, provides that a

subcontractor will be paid only if the contractor is paid and

thus ensures that each contracting party bears the risk of loss

only for its own work." BMD Contractors, Inc. v. Fid. & Deposit

Co. of Maryland, 679 F.3d 643, 649 (7th Cir. 2012) (emphasis

omitted). For example, when a contract states that the

"[c]ontractor's receipt of payment from the owner is a condition

precedent to contractor's obligation to make payment to the

subcontractor; the subcontractor expressly assumes the risk of

the owner's nonpayment and the subcontract price includes the

risk." Id. (citation and internal quotation marks omitted).6

DCK argues that, although its 45-day payment timing

provision conflicts with HC&D's 30-day payment period, there is

no conflict between DCK's pay-if-paid provision and HC&D's

6
"A condition is an event, not certain to occur, which must occur,
unless its non-occurrence is excused, before performance under a contract
becomes due." Brown v. KFC Nat'l Mgmt. Co., 82 Hawai #i 226, 246, 921 P.2d
146, 166 (1996) (quoting Restatement (Second) of Contracts § 224 (1981)).
"Condition precedent" is a term of art, defined as "[a]n act or event, other
than a lapse of time, that must exist or occur before a duty to perform
something promised arises." Black's Law Dictionary (11th ed. 2019). In other
words, "[i]f the condition does not occur and is not excused, the promised
performance need not be rendered." Id. Some courts have held that
"condition precedents are not favored in contract law, and will not be upheld
unless there is clear language to support them." Lemoine Co. of Alabama,
L.L.C. v. HLH Constructors, Inc., 62 So.3d 1020, 1025 (Ala. 2010) ( Lemoine)
(citation and internal quotation marks omitted).

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payment terms. We reject DCK's argument that Section 6 of the

HC&D Terms and Conditions merely speaks to the timing of payment,

and therefore, does not conflict with the DCK payment term.

Section 6 of the HC&D Terms and Conditions states in

full:
6. PAYMENT TERMS: Payment for all purchases is due no
later than thirty (30) days following the last day of the
month in which the purchase was made. All balances not paid
as above shall bear interest at the rate of 1-1/2% per month
from the due date, or at the highest rate allowed by the
usury laws of Hawaii, whichever is less. A prompt payment
cash discount of 1% of the purchase price will be allowed
for purchase price payments made within ten (10) days after
the statement date provided that purchaser has no
outstanding prior balances. All sales are subject to
[HC&D's] approval of [DCK's] credit. [HC&D] reserves a
security interest in the goods pursuant to the Uniform
Commercial Code and in all proceeds thereof until payment in
full of the purchase price. [DCK] shall execute and deliver
to [HC&D] such UCC financing statements and other documents
as may be requested by [HC&D] for the purpose of perfecting
[HC&D's] security interest in the product and proceeds. In
no event shall [DCK] make any set off or reduction to
amounts owed to [HC&D] hereunder.

(Emphasis added).

There are a variety of differences between these two

payment provisions, but most relevant here is that Section 4 of

DCK's Conditions makes payment to DCK from its client a condition

precedent to its payment obligation to HC&D, whereas under

Section 6 of HC&D's Terms and Conditions, DCK's obligation to pay

HC&D arises no later than thirty days after the month of the

delivery of the concrete. Either payment is subject to a

condition precedent or payment is due no later than a date

certain after delivery. This is a clear conflict. Interpreting

the Subcontract to impose a condition precedent to payment would

effectively render the thirty-day payment obligation meaningless,

as payment would never be due unless DCK was paid first.

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Section 7 of HC&D's Terms and Conditions supports this

interpretation by including Buyer's failure to make any payment

to Seller when due as a default under the Subcontract.7

DCK points to the Alabama Supreme Court's decision in

Lemoine, arguing that the case stands for the proposition that a

pay-if-paid provision does not conflict with a payment timing

provision set forth in the same contract. However, the contract

language at issue in Lemoine is quite different than the language

here. In Lemoine, the pay-if-paid provision stated:
Notwithstanding anything else in this Subcontract or
the Contract Documents, the obligation of [the contractor]
to make any payment under this Subcontract is subject to the
express and absolute condition precedent of payment by [the
client]. It is expressly agreed that [the contractor] and
its surety shall have no obligation to pay for any work done
on this Project, until [the contractor] has received payment
for such work from [the client]. [The subcontractor]
expressly assumes the risk of nonpayment by [the client].

Lemoine, 62 So.3d at 1026 (emphasis added; ellipses omitted).

The Lemoine timing provision simply stated "a final

payment . . . shall be made within 45 days after the last of the

following. . ." Id.

7
Section 7 of the HC&D Terms and Conditions states:

7. BUYER'S DEFAULT: If [DCK] fails to make any payment to
[HC&D] when due, if [DCK's] financial responsibility becomes
impaired or unsatisfactory in [HC&D's] sole judgment, or if
[DCK] commits a material breach of this contract, or
inhibits or frustrates [HC&D's] performance of this Contract
by any act or failure to act, [HC&D] may, without breach of
contract and without prior notice or demand, suspend or
cancel further performance or deliveries due hereunder.
[DCK] shall be liable to [HC&D] for any losses or damages of
[HC&D] arising from such [DCK] defaults and failures, as
well as any resulting delays to [HC&D's] performance. [HC&D]
may, at its sole option and in its discretion, resume
performance of this contract upon [DCK's] performance of its
obligations, [DCK's] payment of all accrued amounts due
[HC&D], [DCK's] removal of any inhibiting cause, and upon
[DCK's] providing sufficient assurance or security for its
performance as [HC&D] in its sole judgment may determine to
be required.

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The Alabama court noted, inter alia, that the

subcontractor expressly assumed the risk of nonpayment. Id. at

1027. There is no such assumption of risk language in the

Subcontract here. On the contrary, HC&D's Terms and Conditions

contain a payment term that is completely different than the

payment term in the 3-page Purchase Order; it indicates that

payment is due no later than the specified date certain and that

in no event shall DCK make any set off or reduction, and sets

forth consequences for failure to pay when due, including accrual

of interest, suspension or cancellation of HC&D's further

performance, and liability for losses or damages.

The Alabama court also relied on the plain and

unambiguous language specifying that "[n]otwithstanding anything

else in this Subcontract or the Contract Documents" the risk-

shifting condition precedent applied to the contractor's payment

obligation. Id. No such language appears in the Subcontract; on

the contrary, the Subcontract expressly states that HC&D's Terms

and Conditions prevail in case of a conflict.

We conclude that the Circuit Court did not err by

concluding that Section 6 of the HC&D Terms and Conditions

conflicted with Section 4 of the DCK Conditions. Therefore, in

light of the entirety of the Subcontract, especially in light of

the parties' agreement that the HC&D Terms and Conditions will

prevail in case of any conflict, we conclude that the Circuit

Court did not err in holding that Section 6 of the HC&D Terms and

Conditions prevailed over Section 4 of the DCK Conditions.

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B. The Issue of Concrete Standards

In the second point of error, Appellants contend that

the Circuit Court erred in failing to find that DCK raised a

genuine issue of material fact concerning whether an August 7,

2015 shipment of concrete failed to meet the contract standards.

In opposition to HC&D's motion for summary judgment,

DCK provided the Declaration of Kelvin Osborne (Osborne), Vice

President of Operations for DCK. Osborne attested that he had

personal knowledge of the facts contained in his declaration.

Osborne averred, inter alia, that HC&D delivered defective cement

mix on August 7, 2015, which resulted in cracking concrete slabs.

With its reply memorandum, HC&D submitted the declaration of Eric

Shimabukuro (Shimabukuro), Vice President Operations-Oahu for

HC&D. Shimabukuro acknowledged that there was shrinkage cracking

of the concrete, but disputed that the cracking was due to

defective concrete.

HC&D argued before the Circuit Court, and again argues

on appeal, that Osborne's declaration is silent as to the basis
for his conclusion that the cement (or concrete) delivered by

HC&D was defective. We recognize that Osborne's declaration does

not specifically state his qualifications for his opinion that

"delivery issues on August 7, 2015 stemming from HC&D's plant

caused the concrete to become too dry and when it was placed it

did not set properly." However, in the declaration, Osborne does

aver that he is the Vice President of Operations for DCK, at

least implying a certain level of expertise, and he claims that

he has personal knowledge of the facts stated, at least implying

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that he perceived the events on and after the August 7, 2015

concrete delivery. Osborne declared, inter alia, that the State

refused to pay for the cracked concrete slabs because of

defective cement mix delivered by HC&D on August 7, 2015, which

resulted in cracking concrete slabs.

Affidavits supporting and opposing summary judgment

"shall be made on personal knowledge, shall set forth such facts

as would be admissible in evidence, and shall show affirmatively

that the affiant is competent to testify to the matters stated

therein." Hawai#i Rules of Civil Procedure Rule 56(e). "A

witness may not testify to a matter unless evidence is introduced

sufficient to support a finding that the witness has personal

knowledge of the matter. Evidence to prove personal knowledge

may, but need not, consist of the witness'[s] own testimony."

Hawai#i Rules of Evidence (HRE) Rule 602 (2016). "Personal

knowledge" means "that the witness perceived the event about

which [they] testif[y] and that [they have] a present

recollection of that perception." HRE Rule 602 cmt. HRE Rule

701 provides that lay witness testimony "in the form of opinions

or inferences is limited to those opinions or inferences which

are (1) rationally based on the perception of the witness, and

(2) helpful to a clear understanding of the witness'[s] testimony

or the determination of a fact in issue." HRE Rule 701 "retains

the common-law requirement that lay opinion be based upon

firsthand knowledge[.]" HRE Rule 701 cmt.

Nevertheless, the Hawai#i Supreme Court has held:
In reviewing a circuit court's grant or denial of a
motion for summary judgment, the appellate court 'must view

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all of the evidence and the inferences drawn therefrom in
the light most favorable to the party opposing the motion'
and any doubt should be resolved in favor of the non-moving
party. . . . Therefore, if the evidence presented on the
motion is subject to conflicting interpretations, or
reasonable men might differ as to its significance, summary
judgment is improper.

Nationstar Mortg. LLC v. Kanahele, 144 Hawai#i 394, 401-02, 443

P.3d 86, 93-94 (2019) (citations omitted). This court has also

observed:
Courts will treat the documents submitted in support
of a motion for summary judgment differently from those in
opposition. Although they carefully scrutinize the
materials submitted by the moving party to ensure compliance
with the requirements of Rule 56(e), HRCP (1990), the courts
are more indulgent towards the materials submitted by the
non-moving party. 10A C. Wright, A. Miller and M. Kane,
Federal Practice and Procedure: Civil § 2738 (1983) (Wright
and Miller). This is because of the drastic nature of
summary judgment proceedings, which should not become a
substitute for existing methods of determining factual
issues.

Miller v. Manuel, 9 Haw. App. 56, 66, 828 P.2d 286, 292 (1991)

(citation omitted); see also Pioneer Mill Co. v. Dow, 90 Hawai#i

289, 295-96, 978 P.2d 727, 733-34 (1999) (emphasizing that

inferences to be drawn from the facts alleged in materials

considered by the court in deciding a summary judgment motion

must be viewed in the light most favorable to the non-moving

party).

Viewing the evidence in the light most favorable to the

non-moving party, we conclude that Osborne's declaration was at

least minimally sufficient to raise a genuine issue of material

fact, and the Circuit Court erred in granting summary judgment on

HC&D's claim for $45,374.48 owed for the August 7, 2015 concrete

delivery.

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V. CONCLUSION

For these reasons, the Circuit Court's July 3, 2017

Judgment is affirmed in part and vacated in part. The Judgment

is vacated as to the award of $45,374.48 allegedly owed for the

August 7, 2015 concrete delivery, and affirmed in all other

respects. This case is remanded to the Circuit Court for further

proceedings on HC&D's claims arising out of the August 7, 2015

concrete delivery.

On the briefs: /s/ Katherine G. Leonard
Presiding Judge
Paul R. Grable,
(Lyons, Brandt, Cook & /s/ Karen T. Nakasone
Hiramatsu), Associate Judge
for Defendants-Appellants.

Patricia Kehau Wall,
(Tom, Petrus & Miller, LLLC),
for Plaintiff-Appellee.

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CONCURRING AND DISSENTING OPINION BY MCCULLEN, J.

On its face, DCK's Pay-If-Paid Clause unambiguously

provides that the seller has no right to payment unless the buyer

received payment from the client:

"Receipt of payment from the Client to the Buyer
for Seller's work is an absolute condition
precedent to the Seller's right to payment."

More specifically, this Pay-If-Paid Clause transfers the risk of

the client's nonpayment from the buyer to the seller.

In this case, the State of Hawai#i contracted with DCK

for work at the Honolulu airport. To do some of that work, DCK

ordered concrete from HC&D (formerly Ameron), who then delivered

the concrete. The State, however, rejected the concrete and

refused to pay DCK, who in turn did not pay HC&D. But HC&D wants

to get paid.

So what happens now? For that, I turn to the agreement

between DCK and HC&D, who the circuit court noted were not

novices. Beginning with DCK's Purchase Order, it set forth terms

of payment:
Except as may be modified in this order, the following
conditions are a part thereof, and acceptance of this order
constitutes Seller's agreement thereof:

. . . .
4. Invoices Payment Terms: . . . . Payments will be made
within Forty Five (45) days after the date of receipt of
Seller's invoice [(45-day Clause)]. Receipt of payment from
the Client to the Buyer for Seller's work is an absolute
condition precedent to the Seller's right to payment
[(Pay-If-Paid Clause)]. . . .

. . . .
**Ameron Hawaii General Terms and Conditions of Concrete
Sales' will prevail in case of any conflict.**
(See attached Terms and Conditions of Sales)
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(Emphasis added.) Critical to the analysis here is the added

provision that HC&D's Terms and Conditions will prevail where

there is a conflict.

Attached to DCK's Purchase Order was an Appendix A,

which inserted HC&D's Terms and Conditions into DCK's Purchase

Order, making it a part of the purchase order notwithstanding

anything to the contrary:
Contract Drawings, Specifications, Addendums, and Other
HNL Aircraft Maintenance and Cargo Complex
Honolulu International Airport, Oahu, Hawaii

Notwithstanding anything to the contrary within this
Subcontract agreement (hereinafter "Agreement"), the
following conditions shall govern:
1. Attachment #1 is not applicable to Ameron Hawaii.

2. Attachment #2 is not applicable to Ameron Hawaii.
3. Exhibit 1 Appendix 1 is not applicable to Ameron
Hawaii.

4. Exhibit 1 Appendix 2 is not applicable to Ameron
Hawaii.

5. Activity Hazard Analysis is not applicable to Ameron
Hawaii.
6. Exhibit 1 Appendix 4 is not applicable to Ameron
Hawaii.

7. Competent Person Designation is not applicable to
Ameron Hawaii.
8. Insert Ameron Hawaii Terms and Conditions making it
part of the purchase order.

9. Ameron Hawaii will provide Certificate of Insurance.

10. Ameron Hawaii will provide Company Safety Plan.
11. Ameron Hawaii is not onsite doing any work function,
only delivery of ready mix concrete.

(Emphasis added and formatting altered.)

Like DCK's Purchase Order, HC&D's Terms and Conditions

also addressed terms of payment:

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6. PAYMENT TERMS: Payment for all purchases is due no
later than thirty (30) days following the last day of the
month in which the purchase was made [(30-Day Clause)]. All
balances paid as above shall bear interest at the [rate] of
1-1/2% per month from the due date, or at the highest rate
allowed by the usury laws of Hawaii, whichever is
less. . . . In no event shall Buyer make any set off or
reduction to amounts owed to Seller hereunder.

(Emphasis added.)1

The parties do not contest that HC&D's Terms and

Conditions were inserted into DCK's Purchase Order. The parties

do not contest that HC&D's Terms and Conditions prevail should

there be any conflict. And the parties do not contest that the
45-Day Clause conflicts with the 30-Day Clause and, thus, the 30-

Day Clause prevails.

1
The Pay-If-Paid Clause is not a reduction or setoff of amounts owed.
See Majority Opinion at 11; Black's Law Dictionary, 1648 (11th ed. 2019)
(defining setoff as "[a] debtor's right to reduce the amount of a debt by any
sum the creditor owes the debtor").
Instead, the Pay-If-Paid Clause establishes a condition that must be
present before there is a right to payment. HC&D must have a right to payment
before that payment can be reduced or setoff.

Thus the language, "In no event shall Buyer make any set off or
reduction to amounts owed to Seller hereunder[,]" does not conflict with the
Pay-If-Paid Clause. See Majority Opinion at 11. It may, however, conflict
with other sections of DCK's Purchase Order not at issue in this appeal such
as portions of Paragraph 14 that address reduction in payment and buyer's
right to setoff:
Seller shall be paid therefore at applicable unit prices or
on the basis of percentage completed which had been agreed
upon at time of acceptance. Buyer shall have the right to
take possession of any goods, material or articles in
Seller's possession, whether or not such items have been
fabricated and/or manufactured for the intended purpose of
this order at the time of termination, and Buyer shall
reimburse Seller for the cost thereof plus 5% for overhead
and profit, subject to Buyer's right to set-off . . . .

(Emphases added.)
Similarly, the Pay-If-Paid Clause is not a default for nonpayment. See
Majority Opinion at 10; Black's Law Dictionary, 526 (11th ed. 2019) (defining
default as "[t]he omission or failure to perform a legal or contractual duty;
esp., the failure to pay a debt when due").

HC&D must have a right to payment before DCK can be in default for
nonpayment.

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But, HC&D then argues that its 30-Day Clause also

conflicts with the Pay-If-Paid Clause.

"Contract terms are interpreted according to their

plain, ordinary, and accepted sense in common speech." Hawaiian

Ass'n of Seventh-Day Adventists v. Wong, 130 Hawai#i 36, 45, 305

P.3d 452, 461 (2013) (citation omitted). "Further, in construing

a contract, a court's principal objective is to ascertain and

effectuate the intention of the parties as manifested by the

contract in its entirety. If there is any doubt, the

interpretation which most reasonably reflects the intent of the

parties must be chosen." Laeroc Waikiki Parkside, LLC v. K.S.K.

(Oahu) Ltd. P'ship, 115 Hawai#i 201, 213, 166 P.3d 961, 973

(2007) (citation, brackets, and internal quotation marks

omitted).

"A condition is an event, not certain to occur, which

must occur, unless its non-occurrence is excused, before

performance under a contract becomes due." Brown v. KFC Nat'l

Mgmt. Co., 82 Hawai#i 226, 246, 921 P.2d 146, 166 (1996) (quoting

Restatement (Second) of Contracts § 224 (1981)). "Condition

precedent" is a term of art, defined as "[a]n act or event, other

than a lapse of time, that must exist or occur before a duty to

perform something promised arises." Black's Law Dictionary 366

(11th ed. 2019). In other words, "[i]f the condition does not

occur and is not excused, the promised performance need not be

rendered." Id. "[I]t is well-established that condition

precedents are not favored in contract law, and will not be

upheld unless there is clear language to support them." Lemoine

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Co. of Alabama, L.L.C. v. HLH Constructors, Inc., 62 So.3d 1020,

1025 (Ala. 2010) (citation and internal quotation marks omitted).

A Pay-If-Paid clause is a condition precedent, and "as

the name suggests, provides that a subcontractor will be paid

only if the contractor is paid and thus ensures that each

contracting party bears the risk of loss only for its own work."

BMD Contractors, Inc. v. Fid. & Deposit Co. of Maryland, 679 F.3d

643, 649 (7th Cir. 2012). "While interpreting contract language

to work a forfeiture is not favored, there comes a point where

language is simply so clear that no other interpretation is

warranted." 3 Philip L. Bruner & Patrick J. O'Connor, Jr.,

Bruner & O'Connor on Construction Law § 8:55 (July 2022 Update).

In Maryland, the Court of Special Appeals reviewed the

language, "[i]t is specifically understood and agreed that the

payment to the trade contractor is dependent, as a condition

precedent, upon the construction manager receiving contract

payments including retainer from the owner." Gilbane Bldg. Co.

v. Brisk Waterproofing Co., 585 A.2d 248, 250 (Md. Ct. Spec.

App. 1991) (emphasis removed and added). The court held that

this language "unquestionably establishes a condition precedent."

Id. at 251.

In Alabama, the supreme court reviewed the language

that "the obligation of Lemoine to make any payment under this

Subcontract . . . is subject to the express and absolute

condition precedent of payment by Vista Bella." Lemoine, 62

So.3d at 1026 (emphasis removed and added; brackets omitted).

The court described this language as "plain and unambiguous" and

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held that it was an enforceable condition precedent. Id. at

1027.

The United States Court of Appeals for the Seventh

Circuit reviewed the language that "[i]t is expressly agreed that

owner's acceptance of subcontractor's work and payment to the

contractor for the subcontractor's work are conditions precedent

to the subcontractor's right to payments by the contractor. "BMD

Contractors, 679 F.3d at 647 (formatting altered and emphasis

added). The court held that the "language is plain" and "receipt

of payment is a condition precedent to its obligation to pay

. . . ." Id. at 649. The court explained that "the condition-

precedent language is clear and sufficient on its face to

unambiguously demonstrate the parties' intent that BMD would not

be paid unless Industrial Power itself was paid" and

"[a]dditional transfer-of-risk language is not necessary." Id.

This is all to say that expressly stating payment by

the client is a "condition precedent" plainly and unambiguously

demonstrates the intent of the parties to transfer the risk of a

client's nonpayment from one party to another party.

Here, the language of the Pay-If-Paid Clause plainly

and unambiguously demonstrated an intent to transfer the risk of

the State's nonpayment as it expressly stated that payment by the

client was an "absolute condition precedent" to seller's right of

payment. On the other hand, the 30-Day Clause established the

timing of when payment was due, which was "no later than thirty

(30) days following the last day of the month in which purchase

was made."

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Thus, the Pay-If-Paid Clause speaks to if payment is

due, and the 30-Day Clause speaks to when payment is due.

Nothing in the 30-Day Clause extinguishes the transfer

of the risk of nonpayment. Nothing in the 30-Day Clause excuses

the absolute condition precedent. And nothing in 30-Day Clause

indicates that the parties intended to assign the risk of the

State's nonpayment differently than set forth in the Pay-If-Paid

Clause.

In short, the timing in which the payment is due (30-

Day Clause) cannot occur until there is a right to receive that

payment (Pay-If-Paid Clause) in the first place. So, in my view,

the 30-Day Clause does not conflict with the Pay-If-Paid Clause,

but rather follows from it.

Based on the foregoing, I respectfully dissent from the

majority's resolution of the first point of error, but concur in

the majority's resolution of the second point of error.

/s/ Sonja M.P. McCullen
Associate Judge

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