Adelman v. Steely

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
14-FEB-2024
08:05 AM
Dkt. 180 SO

NO. CAAP-XX-XXXXXXX
(Consolidated with CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I

CAAP-XX-XXXXXXX
WARREN ADELMAN, EMILY ADELMAN,
Plaintiffs-Appellants,
v.
CRAIG STEELY, Defendant-Appellee,
and
JOHN DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS
1-10; DOE CORPORATIONS 1-10; DOE ENTITIES 1-10; AND
DOE GOVERNMENTAL ENTITIES 1-10, Defendants

AND
CAAP-XX-XXXXXXX
WARREN ADELMAN, EMILY ADELMAN,
Plaintiffs-Appellants/Cross-Appellees,
v.
CRAIG STEELY, Defendant-Appellee/Cross-Appellant,
and
JOHN DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS
1-10; DOE CORPORATIONS 1-10; DOE ENTITIES 1-10; AND
DOE GOVERNMENTAL ENTITIES 1-10, Defendants

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 16-1-0482-03 (KTN))

SUMMARY DISPOSITION ORDER
(By: Leonard, Acting Chief Judge, Wadsworth and McCullen, JJ.)

This is a consolidated appeal from proceedings

involving a jury-waived trial. In CAAP-XX-XXXXXXX,
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Plaintiffs-Appellants/Cross-Appellees Warren Adelman and Emily

Adelman (the Adelmans) appeal from the February 12, 2018 Findings

of Fact (FOFs), Conclusions of Law (COLs) and Order (FOFs/COLs/

Order) entered by the Circuit Court for the First Circuit

(Circuit Court).1 In CAAP-XX-XXXXXXX, the Adelmans appeal from

the April 10, 2018 Final Judgment (Final Judgment), the March 19,

2018 Order on Plaintiffs' Motion for Attorneys' Fees and Costs

and Defendant's Motion for Costs (Both Filed on February 26,

2018) (Order on Fees and Costs), and the FOFs/COLs/Order, all

entered by the Circuit Court. Defendant-Appellee/Cross-Appellant

Craig Steely (Steely) cross-appeals from the Final Judgment, the

Order on Fees and Costs, and the FOFs/COLs/Order.

The Adelmans raise six (6) points of error on appeal,

contending that the Circuit Court erred in: (1) failing to

conclude that Steely breached his architectural standard of care

(SOC) owed with respect to his design specifications for the

Adelman's New Home (New Home); (2) concluding that Steely's

failure to personally inspect the New Home's roof before

construction was completed did not cause the Adelmans' actual

damages; (3) concluding that the Adelmans were obligated to

accept a replacement roof, and that their failure to accept that

replacement constituted a failure to mitigate damages; (4)

failing to conclude that Steely breached their Abbreviated Form

of Agreement Between Owner and Architect (Agreement) by failing

to observe, inspect, and guard the Adelmans against defects in

the New Home's concrete floors; (5) failing to conclude that

1
The Honorable Keith K. Hiraoka presided.

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Steely's conduct constituted unfair or deceptive trade acts or

practices; and (6) denying the Adelmans' request for

reimbursement of their full attorneys' fees.

Steely raises three (3) points of error, arguing that

the Circuit Court erred in: (1) concluding that Steely breached

the Agreement by not personally inspecting the New Home's roof

before construction was completed; (2) awarding the Adelmans

their prevailing party attorneys' fees and costs; and (3)

concluding that Steely's Hawai#i Rules of Civil Procedure (HRCP)

Rule 68 Offer of Settlement (Settlement Offer) was invalid.

Upon careful review of the record and the briefs

submitted by the parties, and having given due consideration to

the arguments advanced and the issues raised by the parties, we

resolve the parties' points of error as follows:

(1) The Adelmans argue that Steely breached his SOC

and violated the Agreement by failing to specify the New Home's

roofing system, and assigning said duty to the general contractor

and/or subcontractor(s).2 The Adelmans assert that Steely's duty
for the roofing arose from §§ 1.1.2, 2.3.1, and 9.5 of the

Agreement, was non-delegable under the Agreement and common law,

and that the Circuit Court erred in its FOF 88 and mixed FOF/COL

1.c.

Upon review, the Circuit Court did not clearly err in

its FOF 88 or mixed FOF/COL 1.c., nor in concluding that Steely

2
The Adelmans claim that Steely breached the anti-assignment
provision in § 9.5 of the Agreement. As the Circuit Court found, Steely did
not assign his obligations under the Agreement to Romanchak. The aesthetic
architectural design approved by Mrs. Adelman was conceived and documented by
Steely, not Romanchak. The soils, civil and structural engineering aspects of
the project were not within Steely's scope of work.

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did not breach his SOC or the Agreement in not specifying the New

Home's roofing system.

In FOF 88, the Circuit Court found, after considering

expert testimony, that "[a]lthough the architect ordinarily

specifies the roofing system, it is within the standard of an

architect's professional skill and care to recommend acceptable

alternatives and have the general contractor and owner select the

actual system to use." (Emphasis added). In mixed FOF/COL 1,

the court concluded that "Steely's aesthetic design concept for
the [New Home] complied with his obligations under the Agreement

under the facts of this case[.]" In reaching its decision, the

court gave more credibility to Steely's expert, James Reinhardt,

who testified that "in this case" Steely appropriately deferred

the decision of the proper roofing system to Chris Smith (Smith

Builders), in part because Smith was a local Maui contractor.

Reinhardt's testimony corresponded with his expert report in

which Reinhardt opined, inter alia, that Steely had recommended

one of three various roofing systems3 - any of which Reinhardt

reported "could have performed satisfactorily" on the New Home -

but the decision to use a different system was made by "the

Owner, the Contractor, the roofer and the material supplier[,]"

without Steely. This court does not review the decisions of a

trial court regarding credibility of witnesses, that is the

province of the trial court. See Porter v. Hu, 116 Hawai#i 42,

3
Additional evidence showed that the EPDM system that was among
those Steely suggested had been used successfully on Steely's prior home
designs on the Island of Hawai#i, but there was no roofing contractor on Maui
to install such a system within the Adelmans' budget.

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60, 169 P.3d 994, 1012 (App. 2007). Thus, we conclude the

Circuit Court did not clearly err in finding Steely did not

breach his SOC or the Agreement.

(2) The Adelmans contend that Steely's failure to

personally inspect the New Home's roofing before construction was

completed breached the Agreement and caused the Adelmans' actual

damages.4

To state a claim for breach of contract, a plaintiff

must show "the existence of the contract, performance by the
plaintiff or excuse for nonperformance, breach by the defendant

and damages." First Com. Mortg. Co. v. Reece, 108 Cal. Rptr. 2d

23, 33 (Cal. Ct. App. 2001). "Causation of damages in contract

cases requires that the damages be proximately caused by the

defendant's breach[,]" meaning the plaintiff must show that the

breach "was a substantial factor in causing damage to the

[plaintiff]."5 Troyk v. Farmers Grp., Inc., 90 Cal. Rptr. 3d

589, 628-29 (Cal. Ct. App. 2009) (citations omitted) (emphasis

altered).

The Circuit Court found that Steely breached the

Agreement by failing to personally inspect the roof before

construction was completed, but that the damages incurred by the

Adelmans to replace the roofing system were not caused by

Steely's breach. The court did not clearly err.

4
The Adelmans reference the Agreement's §§ 2.3.1, 2.4.5, 2.4.8,
2.4.9, and 2.4.10.
5
The Agreement contains a choice of laws provision pursuant to
which California law applies.

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Expert witness testimony elicited that the applicable

SOC in overseeing construction includes observing critical

elements, like roofing, to ensure building is in compliance with

the construction documents. This includes going up on to the

roof to inspect the construction. Here, the roofing system

selected and installed consisted of two elements, a top layer of

GacoRoof, and a "silicon fluid applied coating," over the bottom

layer. The top layer of GacoRoof was not installed at the

manufacturer's recommended thickness, and the bottom layer was of
a material that was appropriate as an underlayment, but

inappropriate as a base layer, which is how it was installed.

Had Steely actually looked at the roof before construction was

completed, he would have seen the defects, and rightfully

rejected the Smith Builders' work under § 2.4.10 of the

Agreement. However, even if Steely had climbed on to the roof to

inspect it after installation of the roofing system was

completed, the faulty installation was by then already done.

The evidence supported finding that the "means,

methods, techniques, . . ." of the contractor and/or

subcontractor led to the failure. Thus, Steely's failure to

inspect the roofing was not "a substantial factor in causing" the

Adelmans claim for damages from the roofing. Breach of the SOC

and causation are ordinarily left to the trier of fact to decide,

and we cannot conclude the Circuit Court's findings were clearly

erroneous. See Ramirez v. Plough, Inc., 863 P.2d 167, 171 (Cal.

1993).

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(3) The Adelmans contend that the Circuit Court erred

in concluding that they were obligated to accept a new roof

replacement, installed by Smith Builders under its own warranty,

and that their failure to accept such replacement constituted a

failure to mitigate damages. However, the court did not find

whether the rejection was reasonable or unreasonable, nor did the

court find/conclude that the Adelmans failed to mitigate their

damages. The court found that Steely's breach was not a legal

cause of the Adelmans' damages. Thus, the Adelmans' third point
of error is without merit.

(4) The Adelmans contend, with regard to the "design

and construction" of the concrete floor, that the Circuit Court

clearly erred in finding that none of Steely's other acts or

omissions were legal causes of any damages to the Adelmans.6 The

Adelmans assert that if Steely had been on site, performing his

obligations under the Agreement, the Smith Builders' alleged

defective work would never have happened, or at least would have

been remedied.

Evidence adduced at trial supports that Steely

discussed flooring options with Mrs. Adelman, Mrs. Adelman had

input on and reviewed other flooring options before the finished

concrete was finally chosen, and that Steely properly deferred

the structural design of the floor to the Adelmans' structural

engineer Walter Vorfeld, who followed the recommendations of the

geotechnical engineer when preparing his structural designs.

6
The Adelmans cite to FOF/COL 1.g., and FOF 128.

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As to the floor's finish, evidence showed that Steely

specified the products and steps, but that the Smith Builders

deviated from Steely's specifications. Expert witness testimony

found that the efflorescence was caused by moisture in the slab,

and while the expert witnesses disagree over the source of the

moisture in the slab, none were Steely's responsibility under the

Agreement. The Agreement provided that Steely would "not be

required to make exhaustive or continuous on-site inspections to

check the quality or quantity of" the Smith Builders' work, nor
would Steely "have control over or charge of and shall not be

responsible for construction means, methods, techniques,

sequences or procedures . . . since these are solely" the Smith

Builders' responsibility under their separate contract with the

Adelmans. The Circuit Court did not clearly err in concluding

that none of Steely's acts or omissions were legal causes of the

damages to the concrete floor.

(5) The Adelmans contend that Steely committed unfair

and deceptive trade practices when he: (a) held himself out as

authorized to practice in Hawai#i when he was not licensed; (b)

created a "plan stamping scheme to evade licensing laws"; (c)

certified fraudulent invoices to an unlicensed contractor; and

(d) falsely represented he had professional liability insurance.

Upon review, we conclude the court did not err in

finding Steely was not liable to the Adelmans for unfair or

deceptive trade acts or practices.

"A deceptive act or practice is '(1) a representation,

omission, or practice that (2) is likely to mislead consumers

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acting reasonably under the circumstances where (3) the

representation, omission, or practice is material.'" Hungate v.

Law Office of David B. Rosen, 139 Hawai#i 394, 411, 391 P.3d 1,

18 (2017) (citation and brackets omitted); see also Hawaii

Revised Statutes (HRS) § 480-2 (2008)7 and HRS § 480-13(b)

(2008).8 To obtain relief for unfair or deceptive trade acts or

practices, a consumer must establish: (1) a violation of HRS §

480-2; (2) injury to the consumer caused by such a violation; and

(3) proof of the amount of damages. Davis v. Wholesale Motors,
Inc., 86 Hawai#i 405, 417, 949 P.2d 1026, 1038 (App. 1997)

(emphasis added) (citations omitted). The Hawai#i Supreme Court

has provided that in determining whether the defendant's conduct

was the legal cause of the plaintiff's injuries, the conduct must

be a substantial factor in bringing about the harm. See O'Grady

v. State, 140 Hawai#i 36, 44, 398 P.3d 625, 633 (2017).

7
HRS § 480-2 provides, in pertinent parts:
§ 480-2. Unfair competition, practices, declared
unlawful. (a) Unfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or
commerce are unlawful.
. . . .
(d) No person other than a consumer, the attorney
general or the director of the office of consumer protection
may bring an action based upon unfair or deceptive acts or
practices declared unlawful by this section.
(e) Any person may bring an action based on unfair
methods of competition declared unlawful by this section.
8
HRS § 480-13(b) provides, in pertinent part:

§ 480-13. Suits by persons injured; amount of
recovery, injunctions.
. . . .
(b) Any consumer who is injured by any unfair or
deceptive act or practice forbidden or declared unlawful by
section 480-2:
(1) May sue for damages sustained by the consumer[.]

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Regarding the Adelmans' contentions (a) and (d), the

Circuit Court did not find that Steely's representations or

omissions regarding where he was licensed or if he carried

professional liability insurance were unfair or deceptive. The

court concluded that neither act/omission was a legal cause of

the Adelmans' damages. The court correctly determined that the

contractor's and/or subcontractor's means, methods, techniques,

sequences or procedures for construction were the cause of the

Adelmans' damages from defects in the roofing and the floor. The
Adelmans argue that "[i]f Steely had disclosed he was not a

Hawaii-licensed architect the Adelmans never would have hired

him," and "never would have endured this nightmare of problems."

We conclude that the Circuit Court did not clearly err in finding

that Steely's conduct was not a substantial factor in the

Adelmans' damages.

Regarding contention (b), Romanchak reviewed the

architectural plans, commented on and directed changes to the

plans, concluded they were appropriate given the nature and

location of the project, and stamped the sheets in approval.

This does not violate Hawai#i Administrative Rules (HAR) § 16-

115-10(4),9 and, as the Circuit Court found in an unchallenged

finding, it is not unusual for Hawai#i licensed architects and

mainland architects to work together in this manner.

9
HAR § 16-115-10(4) states:

§ 16-115-10. Misconduct in the practice.
(4) "Plan stamping"; i.e. sealing, stamping, or
certifying any document which was not prepared by or
supervised by the licensee[.]

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Finally, regarding contention (c), § 2.4.9 of the

Agreement provides that Steely's payment certifications were

representations that the work had progressed to the point as

indicated on the contractor's payment applications. Steely was

not responsible for determining whether the contractors were

properly licensed, or who actually performed the work under the

contract, as § 4.4 of the Agreement provided that the Adelmans

were responsible for auditing the payments to verify the

contractor's applications.
Thus, the Circuit Court did not err in concluding

Steely was not liable for unfair or deceptive trade acts or

practices.

(6) The Adelmans argue that the Circuit Court erred in

denying the Adelmans' request for reimbursement from Steely for

their full attorneys' fees. This point of error is not based on

the Circuit Court erring in awarding $0.25 as a statutory maximum

25% of $1.00, but is premised on the Adelmans' other points of

error and that, with those other alleged errors corrected, the

Adelmans' recovery would be much greater. In light of our

disposition of the Adelman's other points of error, we conclude

that this argument is without merit.

(1) Steely contends that the Circuit Court erred in

concluding that he breached the Agreement by failing to

personally inspect the roof before construction was completed.

As discussed, expert testimony established that Steely's duties

under his SOC in overseeing construction included inspecting the

roof to observe whether it was proceeding in line with the

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construction documents. The court did not clearly err in

determining Steely breached the agreement by not physically

inspecting the roof prior to completion.

(2) Steely argues that the Circuit Court erred in

determining that the Adelmans were the prevailing party for the

purposes of moving for an award of attorneys' fees and costs

under HRS § 607-14 (2016).

HRS § 607-14 provides that, in an action in assumpsit,

reasonable attorneys' fees shall be taxed in favor of the
prevailing party and against the losing party. "A party need not

'sustain his entire claim' in order to be a 'prevailing party'

for purposes of entitlement to costs and attorneys' fees."

Fought & Co. v. Steel Enq'q. and Erection, Inc., 87 Hawai#i 37,

52, 951 P.2d 487, 502 (1998) (citation omitted). Rather "[t]he

'prevailing party' is the one who 'prevails on the disputed main

issue[,]' [and] [e]ven if the party does not prevail 'to the

extent of his original contention, he will be deemed to be the

successful party for the purpose of taxing costs and attorney's

fees.'" Nelson v. Hawaiian Homes Comm'n, 130 Hawai#i 162, 165,

307 P.3d 142, 145 (2013) (emphasis added) (citation omitted).

The "disputed main issue," is identified by looking to "the

principal issues raised by the pleadings and proof in a

particular case[.]" Fought & Co., 87 Hawai#i at 52-53, 951 P.2d

at 502-03 (quoting MFD Partners v. Murphy, 9 Haw. App. 509, 514,

850 P.2d 713, 716 (1992)).

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The Adelmans' complaint sought damages primarily under

the theory of breach of contract, and the Circuit Court found

that Steely had breached the Agreement, and awarded the Adelmans

nominal damages. Thus, the Adelmans prevailed on their main

disputed issue of whether Steely breached the Agreement, even if

they did not prevail to the extent of all of their claims nor in

the amount of damages sought. See MFD Partners v. Murphy, 9 Haw.

App. at 514, 850 P.2d at 716 (holding that the plaintiffs, who

only obtained nominal damages, were the prevailing party for
purposes of an award of attorneys' fees and costs because they

prevailed on the two principal issues in the case). Accordingly,

the Circuit Court did not err in determining that the Adelmans

were the prevailing party, and the court did not abuse its

discretion in awarding attorneys' fees and costs.

(3) Finally, Steely contends that the Circuit Court

erred in concluding that his Settlement Offer was invalid because

it did not include the proposed "general settlement and release

agreement" in, or with, the offer.

For a Rule 68 offer to be valid and enforceable, "it is

essential that [the offeree] be able to discern with certainty

what the precise terms of the offer are," and that, "[b]ecause of

the special considerations in a Rule 68 offer, courts may be

particularly prone to interpret the language of a Rule 68 offer

against the defendant that drafted it." Collins v. S. Seas Jeep

Eagle, 87 Hawai#i 86, 90, 952 P.2d 374, 378 (1997) (citation and

internal quotations omitted). "[A]n offer that does not satisfy

the requirements of Rule 68 does not entitle the offeror to the

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special benefits of Rule 68." Crown Properties, Inc. v. Fin.

Sec. Life Ins. Co., Ltd., 6 Haw. App. 105, 113, 712 P.2d 504, 510

(1985).

Here, Steely's Settlement Offer included a monetary

amount to settle all claims, but also included the requirement

that the Adelmans "sign a general release and settlement

agreement relating to any and all claims alleged or which could

have been alleged against Steely in this action" and that the

offer "may only be accepted in its entirety." However, the offer
did not include a draft of such release and settlement agreement

for the Adelmans to review to understand to what they would be

agreeing. The Circuit Court provided that "[i]f the Rule 68

offer requires that the offeree sign a separate settlement

agreement, the proposed document should either be attached to the

offer or the text embedded within the offer so that the offeree

can know exactly what she or he is being asked to sign." Because

the Settlement Offer would require the Adelmans to agree to a

separate settlement agreement that they had not seen, the Circuit

Court did not abuse its discretion in finding the offer invalid

under Rule 68.

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Accordingly, the Circuit Court's April 10, 2018 Final

Judgment, February 12, 2018 FOFs/COLs/Order, and March 19, 2018

Order on Fees and Costs are affirmed.

DATED: Honolulu, Hawai#i, February 14, 2024.

On the briefs: /s/ Katherine G. Leonard
Acting Chief Judge
Bruce A. Voss,
Jai Keep-Barnes, /s/ Clyde J. Wadswroth
(Bay Lung Rose & Holma), Associate Judge
for Plaintiffs-Appellants/
Cross-Appellees. /s/ Sonja M.P. McCullen
Associate Judge
Bennett J. Chin,
Jesse J.T. Smith,
(McCorriston Miller Mukai
(MacKinnon LLP),
for Defendant-Appellee/
Cross-Appellant.

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