State v. Atwood. , 129 Haw. 414 ( 2013 )

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Electronically Filed
Supreme Court
SCWC-30337
03-JUN-2013
11:08 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
STATE OF HAWAI#I, Respondent/Plaintiff-Appellee,
vs.
TERRANCE E. ATWOOD, Petitioner/Defendant-Appellant.
SCWC-30337
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 30337; CR. NO. 07-1-0635)
JUNE 3, 2013
NAKAYAMA, ACTING C.J., ACOBA, MCKENNA, AND POLLACK, JJ.,
AND CIRCUIT JUDGE SAKAMOTO, IN PLACE OF RECKTENWALD, C.J., RECUSED
OPINION OF THE COURT BY NAKAYAMA, ACTING C.J.
In this case involving an uncompleted home remodeling
contract, we hold that breach of the contract alone does not
suffice to establish probable cause to charge a defendant with
Theft in the First Degree by deception where the record does not
establish that the defendant did not intend to perform his part
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of the bargain nor otherwise deprive the complainant of property
exceeding $20,000 in value.
In 2006, Petitioner/Defendant-Appellant Terrance E.
Atwood entered into a contract with complainant Jenwei Luu, M.D.
for the purpose of remodeling the bathrooms in Luu’s house.
Atwood represented to Luu that he was a licensed contractor when
he was in fact not; after Luu discovered that Atwood was
unlicensed, however, he decided to keep Atwood on the job because
of the time and money already invested. Before the remodeling
was completed, Luu fired Atwood due to a dispute regarding the
purchasing of materials. After an investigation by the Regulated
Industries Complaint Office (RICO) of the Department of Commerce
and Consumer Affairs (DCCA), the State presented its case to a
grand jury and obtained an indictment charging Atwood with one
count of Theft in the First Degree and one count of Unlicensed
Activity.
Atwood moved to dismiss the theft charge, arguing that
the State’s evidence presented to the grand jury did not
demonstrate his intent not to perform his part of the contract
and thus failed to establish probable cause for the grand jury to
indict him for theft. The Circuit Court of the Second Circuit1
denied the motion but permitted Atwood to file an interlocutory
1
The Honorable Richard T. Bissen, Jr. presided.
2
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appeal; the Intermediate Court of Appeals (ICA) affirmed the
circuit court’s denial of the motion. The ICA concluded that
there was sufficient evidence for the grand jury to indict Atwood
for first-degree theft given his misrepresentation to Luu that he
was an unlicensed contractor, which thereby induced Luu to enter
into a contract and pay Atwood $95,930 before ultimately firing
him and hiring another contractor to finish the job.
On certiorari, Atwood makes the same arguments to this
court in seeking dismissal of the theft charge. Because we agree
with Atwood that the evidence in the record did not suffice to
establish probable cause that he committed theft of property
exceeding $20,000 in value, we conclude that the circuit court
erred in denying his motion to dismiss the charge of Theft in the
First Degree and that the ICA erred in affirming the circuit
court’s order denying the motion. Accordingly, we vacate the
judgments of the circuit court and the ICA and remand this case
to the circuit court with instructions to dismiss Count One of
the indictment charging Atwood with Theft in the First Degree.
I. BACKGROUND
A. Grand Jury Proceedings
On October 12, 2007, the State filed an indictment
returned by the Maui Grand Jury charging Atwood with one count of
Theft in the First Degree in violation of Hawai#i Revised
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Statutes (HRS) § 708-830.5(1)(a)2 and one count of Unlicensed
Activity in violation of HRS § 436B-27(b).3
According to testimony given before the grand jury on
2
HRS § 708-830.5 (Supp. 2006) provided then, as it does now, in
pertinent part:
Theft in the first degree. (1) A person commits the offense
of theft in the first degree if the person commits theft:
(a) Of property or services, the value of which exceeds
$20,000[.]
. . .
(2) Theft in the first degree is a class B felony.
Further, HRS § 708-830 (Supp. 2006) provided then, as it does now,
in pertinent part:
Theft. A person commits theft if the person does any of the
following:
. . .
(2) Property obtained or control exerted through deception.
A person obtains, or exerts control over, the property of
another by deception with intent to deprive the other of the
property.
Definition and discussion of the terms “deception” and “deprive” appear infra.
3
HRS § 436B-27 (Supp. 2006) provided then, as it does now, in
pertinent part:
Civil and criminal sanctions for unlicensed activity; fines;
injunctive relief; damages; forfeiture.
. . .
(b) Any person, who engages in an activity requiring a
license issued by the licensing authority and who fails to
obtain the required license, or who uses any word, title, or
representation to induce the false belief that the person is
licensed to engage in the activity, other than a
circumstance of first instance involving the inadvertent
failure to renew a previously existing license, shall be
guilty of a misdemeanor and be subject to a fine of not more
than $1,000 or imprisoned not more than one year, or both,
and each day’s violation shall be deemed a separate offense.
4
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October 12, 2007 and the findings of fact entered on December 16,
2009, Luu hired Atwood as a contractor to remodel the bathrooms
in his home in Kihei. Atwood had been referred to Luu by one of
Luu’s friends and presented himself as a licensed contractor;
Atwood also showed Luu two job sites representing his work, but
Luu later learned that one of the sites was not Atwood’s. On May
14, 2006, Luu and Atwood signed a contract that had been drafted
by Atwood at the agreed price of $89,394, and Atwood thereafter
began the remodeling work.
Due to concerns about delays and work quality, Luu
contacted DCCA on January 26, 2007; DCCA informed Luu that Atwood
was not a licensed contractor and furthermore that the license
number Atwood gave Luu belonged to a contractor on the island of
Hawai#i. Nevertheless, Luu explained that he kept Atwood on the
job because
by that time we had already paid him that $95,000[4]. We
were just too far into it. He kept assuring us that he
would finish. We at that time had already started looking
into our options, talking to lawyers on what we can do to
get him to finish. And all of the lawyers we talked to have
told us that we were basically at his mercy, we have to wait
for him to finish. So that’s why we had to continue.
On February 26, 2007, Luu had Atwood meet him at the plumbing
store where Atwood was supposed to have ordered certain plumbing
materials. Luu reviewed several items with Atwood that Atwood
4
Although the contract price was $89,394, Luu had paid Atwood a
total of $95,930, including cost overruns, as of the time Atwood was fired.
5
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had not purchased although Luu had already paid him to do so;
because Atwood refused to buy the materials at that meeting at
Luu’s request, Luu fired Atwood that day and hired another
contractor to finish the job at an additional cost of at least
$38,000.
The grand jury also heard the testimony of Robert
Hottenstein, the supervising investigator for DCCA’s Maui RICO
office. Hottenstein testified that Atwood had never held a valid
contractor’s license in Hawai#i and that the license number
Atwood provided to Luu actually belonged to someone else who said
he did not know Atwood, had never met Atwood, and had not given
Atwood permission to use his license. Hottenstein also stated
that for the purpose of determining how much money Atwood
received from Luu, Luu submitted twenty-two cancelled checks
totaling approximately $78,000. Hottenstein further stated that
he sent a letter to Atwood asking a series of questions; Atwood
submitted a written response establishing that the value of his
work was over $1,000, the threshold for which state law requires
a contractor’s license.
B. Motion to Dismiss Count One
On October 28, 2009, Atwood filed a motion to dismiss
Count One of the indictment, the charge of Theft in the First
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Degree, for lack of probable cause and as a de minimis offense.5
In an extensive memorandum in support of the motion, Atwood
stressed that nonperformance of the remodeling contract in this
case could only give rise to a civil breach-of-contract action
between Atwood and Luu and could not establish criminal liability
for the offense of theft by deception. In that regard, Atwood
noted that criminal liability for theft can attach when an actor
receives something of value in return for a contractual promise
but has no intention of fulfilling his or her part of the
contract. Accordingly, absent the actor’s specific intent not to
fulfill the contract, nonperformance or midperformance breach of
the contract alone cannot result in any criminal liability.
Atwood thus argued that the grand jury lacked probable cause to
return an indictment in Count One because it was not presented
with evidence sufficient to establish that Atwood entered into a
contract with Luu with an intention not to fulfill his
obligations to Luu under that contract.
The State argued in opposition that the definition of
“deception” in HRS § 708-8006 is met not only when a defendant
5
Although Atwood argued de minimis as an alternate ground for
dismissal, he did not preserve that argument in the ICA or in this court;
consequently, it is not discussed.
6
HRS § 708-800 (1993) provides, in pertinent part:
“Deception” occurs when a person knowingly:
(continued...)
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intends not to perform a promise, but also when the defendant
“[c]reates or confirms another’s impression which is false and
which the defendant does not believe to be true” or “[f]ails to
correct a false impression which the person previously has
created or confirmed[.]” (Quoting HRS § 708-800). The State
further argued that “Doctor Luu’s reliance on [Atwood]’s
representation that he was a licensed contractor was a matter of
pecuniary significance[]” and therefore that Atwood did not fall
within the exception delineating that “deception” “does not . . .
include falsity as to matters having no pecuniary
6
(...continued)
(1) Creates or confirms another’s impression which is false
and which the defendant does not believe to be true;
(2) Fails to correct a false impression which the person
previously has created or confirmed;
(3) Prevents another from acquiring information pertinent to
the disposition of the property involved;
(4) Sells or otherwise transfers or encumbers property,
failing to disclose a lien, adverse claim, or other legal
impediment to the enjoyment of the property, whether that
impediment is or is not valid, or is or is not a matter of
official record; or
(5) Promises performance which the person does not intend to
perform or knows will not be performed, but a person’s
intention not to perform a promise shall not be inferred
from the fact alone that the person did not subsequently
perform the promise.
The term “deception” does not, however, include falsity as
to matters having no pecuniary significance, or puffing by
statements unlikely to deceive ordinary persons in the group
addressed. “Puffing” means an exaggerated commendation of
wares or services in communications addressed to the public
or to a class or group.
(Emphasis added).
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significance[.]” (Quoting HRS § 708-800).
In response, Atwood disputed the State’s contention
that he had “created a false impression of a matter of pecuniary
significance.” He reiterated his contention that theft by
deception is only applicable to contract disputes where the
defendant had no intention of performing the promised contractual
obligations at the time of formation of the contract, and
therefore that “[a]ny misrepresentations not accompanied by the
specific intent not to perform the contract do not implicate
criminal law.”
The circuit court held a hearing on Atwood’s motion to
dismiss on December 2, 2009 and denied the motion after argument
from both parties. The court then filed its Findings of Fact,
Conclusions of Law, and Order Denying Defendant’s Motion to
Dismiss Count One on December 16, 2009, entering the following
relevant conclusions of law:
3. “Deception” occurs when a person knowingly: (1)
creates or confirms another’s impression which is false and
which the defendant does not believe to be true; or (2)
fails to correct a false impression which he previously has
created or confirmed. The term “deception” does not include
falsity as to matters having no pecuniary significance.
Section 708-800, H.R.S.
4. A contract is an agreement between two or more
persons which creates an obligation to do or not do
something. A contract may be oral or written. A contract
requires proof of all of the following elements: persons
with capacity and authority to enter into the contract; and
an offer; and an acceptance of that offer producing a mutual
agreement, or a meeting of the minds, between the persons as
to all the essential elements of the agreement at the time
the offer was accepted; and consideration. Hawaii Civil
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Jury Instructions, Number 15.1, 1999 Edition [including
Instructions Received through January 1, 2009].
5. Fraudulent inducement to enter a contract is shown
when: (1) there was representation of a material fact; and
(2) the representation was false when it was made; and (3)
the party making the representation either knew that it was
false when it was made or was reckless in making the
representation without knowing that it was true or false;
and (4) that the party intended that the other party relied
upon the representation; and (5) that the party relied upon
the representation by entering into the contract; and (6)
the reliance upon the representation was reasonable. Hawaii
Civil Jury Instructions, Number 15.27.
6. The [c]ourt finds that there is sufficient
probable cause to support the charge in Count One, Theft in
the First Degree, by deception, in violation of Section 708-
830.5, H.R.S. The [c]ourt finds that Dr. Luu did not enter
into a valid contract with [Atwood]. [Atwood] deceived or
fraudulently induced Dr. Luu to enter into the agreement of
May 14, 2006, because [Atwood]: (1) fraudulently represented
that he was a licensed contractor; (2) gave a license number
that belonged to another individual on the Big Island; and
(3) showed off remodeling projects at other locations that
were not his projects, in essence, passing off the work of
others as his own work.
7. The [c]ourt further finds that there is sufficient
evidence before the Grand Jury that Doctor Luu’s reliance on
[Atwood]’s representation that [Atwood] was a licensed
contractor was a matter of pecuniary significance, and that
but for [Atwood]’s representation, Dr. Luu would not have
entered into the contract and paid [Atwood] any money. The
[c]ourt notes that Dr. Luu’s reliance on [Atwood]’s
representation that he was a licensed contractor was
reasonable. Parties who contract with licensed contractors,
as opposed to unlicenced [sic] builders, are entitled to
some relief when there is injury by any act, representation,
transaction, or conduct of a duly licensed contractor. [See,
e.g., Section 444-26 H.R.S. which established a Contractors
[sic] recovery fund; Graham Construction Supply, Inc. v.
Schraeder Construction, Inc., 63 Haw. 540, 632 P.2d 649,
(1981); Educators Ventures, Inc. v. Bundy, 3 Haw. App. 435,
652 P.2d 637. (1982); Kuhnert v. Allison, 76 Haw. 39, 868
P.2d 457, (1994)].
(Some brackets in original and some added). On January 5, 2010,
Atwood filed an application for interlocutory appeal from the
order denying his motion to dismiss Count One; the circuit court
granted the application on January 26, 2010. Atwood timely filed
his notice of appeal on February 12, 2010 pursuant to the circuit
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court’s extension of time to file such notice to February 14,
2010.
C. The ICA’s May 17, 2012 Summary Disposition Order
On interlocutory appeal to the ICA, Atwood’s sole point
of error was that the circuit court erred by denying his motion
to dismiss the charge of Theft in the First Degree in Count One
of the indictment. As he did in the circuit court, Atwood
contended that the evidence presented by the State to the grand
jury did not suffice to establish that Atwood did not intend to
fulfill his contractual obligations to Luu when they made their
contract, or at anytime thereafter; consequently, there was no
evidence to support the State’s position that Atwood had
committed theft by deception simply by accepting Luu’s money.
Atwood stressed that at most, “rather than theft by deception,
the evidence before the grand jury showed the possible existence
of a civil contract dispute.”
The State argued in opposition that the grand jury had
sufficient facts to support its finding of probable cause; thus,
Atwood was properly charged with Theft in the First Degree under
a theory of theft by deception. The State added that a defendant
may be charged with theft by deception even in situations where
civil contractual obligations are involved, citing State v.
Gaylord, 78 Hawai#i 127, 890 P.2d 1167 (1995), and State v.
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Borochov, 86 Hawai#i 183, 948 P.2d 604 (App. 1997). In the
present case, the State argued that the grand jury was presented
with sufficient evidence to show that Atwood had misrepresented
his license status, and that in doing so he was able to enter
into the contract with Luu; therefore, “Atwood acted willfully
and by deception to induce the contract and obtain payment
thereunder.” (Citing State v. Souza, 119 Hawai#i 60, 73, 193
P.3d 1260, 1273 (App. 2008)).
The ICA affirmed the circuit court’s December 16, 2009
order denying Atwood’s motion to dismiss Count One. State v.
Atwood, No. 30337, 127 Hawai#i 241, 277 P.3d 335, 2012 WL
1764084, at *4 (App. May 17, 2012) (SDO). The ICA concluded that
probable cause existed to indict Atwood for Theft in the First
Degree because Atwood misrepresented that he was a licensed
contractor and Luu relied on this misrepresentation, entered into
a remodeling contract with Atwood, and paid Atwood $95,930 before
ultimately terminating him. Id. at *2. Relying on the
definition of “deception” found in HRS § 708-800, the ICA noted
that “Atwood knowingly created an impression that he was a
licensed contractor by stating that he was a licensed
contractor.” Id. Based on this misrepresentation, Luu entered
into a contract that he otherwise would not have and gave Atwood
a total of $95,930. Id. Accordingly, the ICA concluded that
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this constituted sufficient evidence to support the indictment.
Id.
In response to Atwood’s argument that “there was no
proof that he did not intend to perform the contract when it was
made[,]” the ICA agreed with the State and noted that Atwood’s
argument “ignore[d] sections 1 and 2 of the definition of
deception which prohibits creating or confirming an impression
which is false.” Id. at *3. Although a contract may have
existed between Atwood and Luu, the ICA noted that the existence
of a contract did “not foreclose criminal liability for other
means of deception as specified by HRS § 708-800.” Id.
Accordingly, in the ICA’s view, “evidence that Atwood did not
intend to perform the contract at the time it was made [wa]s not
required to indict Atwood for Theft in the First Degree under the
theory asserted by the prosecution.” Id.
The ICA also rejected Atwood’s argument that the
provisions of HRS chapters 436B and 444 were sufficient to
regulate contractors and that the penalties provided in those
chapters are distinct from the crimes enumerated in the Hawai#i
Penal Code. Id. Rather, the ICA pointed to an Ohio case holding
that the statute barring a person from holding oneself out as an
attorney without having been licensed did not preclude
prosecution of that person for theft by deception. Id. (citing
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State v. Brown, 671 N.E.2d 280, 282 (Ohio App. 1995)). Thus, in
the present case, the fact that Atwood falsely held himself out
as a licensed contractor did not prohibit simultaneous
prosecution for theft; as the ICA also noted, theft by deception
“requires obtaining or exerting control over property of another
by deception, something that is not required to establish a
violation of HRS [c]hapters 436B or 444.” Id. at *4.
The ICA entered judgment on June 25, 2012. Atwood
timely filed his application on August 24, 2012, and the State
timely filed a response to the application on September 10, 2012.
II. STANDARD OF REVIEW
A. Sufficiency of Evidence to Support Grand Jury Indictment
“A grand jury indictment must be based on probable cause.”
State v. Okumura, 59 Haw. 549, 550, 584 P.2d 117, 119
(1978). Probable cause is established by “a state of facts
as would lead a person of ordinary caution or prudence to
believe and conscientiously entertain a strong suspicion of
the guilt of the accused.” State v. Chung, 75 Haw. 398,
409-10, 862 P.2d 1063, 1070 (1993). “The evidence to
support an indictment need not be sufficient to support a
conviction.” State v. Ganal, 81 Hawai#i 358, 367, 917 P.2d
370, 379 (1996). “In reviewing the sufficiency of the
evidence to establish probable cause before the grand jury,
‘every legitimate inference that may be drawn from the
evidence must be drawn in favor of the indictment and
neither the trial court nor the appellate court on review
may substitute its judgment as to the weight of the evidence
for [that of] the Grand Jury.’” Id. (quoting State v. Kuba,
68 Haw. 184, 191, 706 P.2d 1305, 1310-11 (1985)).
State v. Ontai, 84 Hawai#i 56, 63, 929 P.2d 69, 76 (1996).
III. DISCUSSION
As he did to the circuit court in support of his motion
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to dismiss and to the ICA on appeal from denial of that motion,
Atwood argues to this court that there is no evidence in the
record that he intended to deprive Luu of the value of any
property by accepting Luu’s money without fulfilling his part of
the remodeling contract. Accordingly, Atwood maintains that the
State did not establish probable cause to enable the grand jury
to return an indictment, at least with respect to Count One
charging him with Theft in the First Degree.
In response, the State essentially argues that the ICA
properly affirmed the circuit court’s order because there was
sufficient evidence before the grand jury to find probable cause
for a charge of Theft in the First Degree. In fact, the State
argues that “[Atwood] does not appear to contest that there was
sufficient evidence of probable cause presented to the grand jury
for all of the elements of Theft in the First Degree, except for
the intent to deprive element.” (Emphasis in original). With
respect to the intent to deprive7 element, the State submits that
7
HRS § 708-800 (1993) provides, in pertinent part:
“Deprive” means:
(1) To withhold property or cause it to be withheld from a
person permanently or for so extended a period or under such
circumstances that a significant portion of its economic
value, or of the use and benefit thereof, is lost to the
person; or
(2) To dispose of the property so as to make it unlikely
that the owner will recover it; or
(continued...)
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“there was evidence of [Atwood]’s intent to deprive both at the
formation and performance stages of the contract.” (Emphasis in
original). At the time of contract formation, Atwood had falsely
represented to Luu that he was a licensed contractor and that he
had completed other projects on Maui; as a result of hiring
Atwood based on these misrepresentations, Luu paid Atwood a total
of $95,930. Further, evidence was presented that during the
performance of the contract, Atwood did not buy certain supplies
needed for the job and even asked Luu for additional money to buy
supplies that should have already been purchased. The State thus
concludes that “in drawing every legitimate inference from the
evidence before the grand jury in favor of the indictment, there
was a state of facts that would lead a person of ordinary caution
or prudence to believe and conscientiously entertain a strong
suspicion of guilt of [Atwood] for the offense of Theft in the
First Degree.”
We agree with Atwood that where a defendant is charged
with theft by deception in a situation involving a contract, the
7
(...continued)
(3) To retain the property with intent to restore it to the
owner only if the owner purchases or leases it back, or pays
a reward or other compensation for its return; or
(4) To sell, give, pledge, or otherwise transfer any
interest in the property; or
(5) To subject the property to a claim of a person other
than the owner.
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intent element of the crime is not met where evidence shows that
the defendant performed, or intended to perform, his or her part
of the contract; conversely, the intent element is satisfied only
when the defendant intends not to perform his or her contractual
obligations. Subsequent breach of the contract may give rise to
potential civil remedies grounded in contract law, but unless
accompanied by the intent to deprive the complainant of the value
of his or her property, such breach does not create criminal
liability for theft. We further conclude that, based on Atwood’s
performance of his part of the contract and the failure of the
State to produce evidence of the value of the work completed by
Atwood, the State failed to establish that Atwood deprived Luu of
property exceeding $20,000 in value, the threshold for first-
degree theft. Accordingly, we conclude that the circuit court
erred in not dismissing Count One of the indictment.
A. The circuit court erred in denying Atwood’s motion to
dismiss because there was no evidence to show that Atwood
intended to deprive Luu of the value of any property
The main thrust of Atwood’s argument has consistently
been that in order to establish probable cause for a charge of
theft by deception, the State must present evidence that Atwood
entered into a contract with Luu and intended to deprive Luu of
the value of Luu’s property by accepting payment without
performing his part of the contract. The commentary to the theft
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statutes in the Hawai#i Penal Code reflects this general
statement of the law: “With respect to contractual obligations, a
present intent not to perform would constitute deception,
although mere breach at some future time, without such present
intent, would not.” HRS § 708-833 cmt. (1993).8
We also find support for Atwood’s position in several
of the cases he has cited. In Smith v. State, for example, Smith
contracted with the complainant to screenprint T-shirts and
accepted complainant’s money, but was ultimately unable to
produce the shirts despite making some efforts. 665 So. 2d 1002,
1003 (Ala. Crim. App. 1995). On appeal, the Alabama Court of
Criminal Appeals reversed Smith’s theft conviction, concluding
that “[Smith] correctly allege[d] that the State failed to prove
the element of intent to deprive the owner of her property as
8
Although Atwood argues, and many cases and treatises confirm, that
the defendant’s intent to deprive must exist at the time of formation of the
contract between the defendant and the complainant, we also note that the
intent to deprive may also be formed subsequent to contract formation. See,
e.g., Ehrhardt v. State, 334 S.W.3d 849, 856 (Tex. App. 2011) (“The requisite
criminal intent can be formed after the formation of a contract.”);
Higginbotham v. State, 356 S.W.2d 584, 588 (Tex. App. 2011) (citing Ehrhardt,
334 S.W.3d at 856) (footnote omitted) (“Although there was no evidence
presented that Higginbotham possessed the requisite criminal intent at the
time the contract was formed, this [c]ourt has held that the requisite intent
can be formed after the formation of a contract.”); State v. Frost, 99 So. 3d
1075, 1080-81 (La. App. 2012) (noting that “a defendant can form an intent to
steal after taking possession of property through honest means” and “the
timing of a defendant’s intent to deprive permanently is inconsequential, and
the inquiry into that intent should focus only on whether such an intent was
actually formed”). Regardless of when the defendant forms the intent to
deprive, however, “the deprivation of property cannot occur prior to the
formation of the requisite intent.” Higginbotham, 356 S.W.3d at 588 (citing
Ehrhardt, 334 S.W.3d at 856; Cortez v. State, 582 S.W.2d 119, 120-21 (Tex.
Crim. App. 1979)).
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alleged in the indictment.” Id. at 1002 (citing Ala. Code § 13A-
8-2(1) (1975)). As relevant to this discussion, the court also
noted that Smith “failed to perform a contractual obligation he
had with the victim, and as such, his actions constitute, if
anything, a breach of contract, which merits a civil remedy.”
Id. at 1004 (emphasis added).
In Commonwealth v. Layaou, the Pennsylvania Superior
Court reversed Layaou’s conviction for theft by deception in a
home remodeling case after he began but then failed to complete
the job, forcing complainants to hire another contractor at
additional cost. 405 A.2d 500, 501 (Pa. Super. 1979). The court
noted that the initial expenditure of money and manpower “d[id]
not support a finding that [Layaou] never intended to perform; if
anything, it more strongly support[ed] a finding that [Layaou]
intended to perform originally but for some reason later
abandoned the job.” Id. The Layaou court also noted that “[t]he
[complainants’] claims against him are more appropriately
resolved in a civil action.” Id. at 502. The same court
reversed another conviction for theft by deception based on an
unfinished home remodeling contract where the defendant began but
did not return to finish the job. See Commonwealth v. Bentley,
448 A.2d 628 (Pa. Super. 1982). There, the court held that “the
record fail[ed] to show any evidence as to appellant’s intent
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except his failure to perform. This alone is insufficient.” Id.
at 631.
In a relatively recent case from South Dakota, Kent
Jackson was found guilty of grand theft by deception after
failing to complete a commercial roof installation for a variety
of reasons. State v. Jackson, 765 N.W.2d 541, 542-44 (S.D.
2009). In reversing Jackson’s conviction, the South Dakota
Supreme Court concluded that his failure to perform resulted from
conduct and happenstance occurring subsequent to formation of the
roofing contract: “The State provided no evidence indicating
that, at the time Jackson received the down payment from [the
complainant], Jackson had the intent to deceive him of his
property. . . . Jackson’s misfortune of bad luck, unavoidable
delays, and perhaps not the ideal characteristics of a
businessman do not equate to a specific intent to deprive [the
complainant] of his money.” Id. at 547-48 (emphasis added).
Finally, in a recently decided case, the Maryland Court
of Appeals affirmed the judgment of the Maryland Special Court of
Appeals reversing Leon Coleman’s conviction on eight counts of
theft by deception. State v. Coleman, 33 A.3d 468 (Md. 2011),
aff’g 11 A.3d 326 (Md. App. 2010). In that case, prospective
homebuyers paid Coleman to purchase unimproved lots in a
subdivision and then construct houses on those lots; the project
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failed because Coleman could not obtain required permits and ran
out of the homebuyers’ money before any houses could be
constructed. Id. at 470-71. In affirming the reversal of
Coleman’s conviction, the court noted that Coleman “gave value,
i.e. conveyed the lots, for the money he received in the way of
advances to pay for the lots, as provided under the contracts[,]”
and that Coleman had been working to draft floor plans and obtain
necessary building permits. Id. at 474. Thus, “Coleman’s
actions between the time of contract and the arrest manifested
his intent to perform[,]” and “[t]here was insufficient evidence
of intentional deprivation to support Coleman’s theft
convictions[.]” Id. at 474, 478.
As in the cited cases, we agree with Atwood that
probable cause did not exist to charge him with theft by
deception because the State did not present any evidence to the
grand jury to show that Atwood entered into a contract with Luu
intending to obtain Luu’s money without performing his part of
the contract. Cf. HRS § 708-833 cmt. (“It should be noted that
in all theft offenses, the requisite mental state is intent to
deprive the owner of the value of property or services.”). On
the contrary, the evidence available to us shows that Atwood
expended substantial time and effort on the project between May
2006 and February 2007. While some of the evidence suggested
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that Atwood’s work was not of the best quality, Atwood
substantially performed what he promised to do according to the
contract; any shortcomings in his work product are a matter of
civil, not criminal, law. Further, Atwood did not fully complete
the job because Luu fired him due to a contractual dispute over
the purchase of materials; the firing did not appear to implicate
other potential factors such as the quality of Atwood’s work or
his status as an unlicensed contractor. Moreover, Atwood did not
prematurely abandon the job or disappear without a means to be
contacted, as the defendants did in the cases we have cited from
other jurisdictions.9
Because Atwood may have induced Luu to enter the
contract by representing himself as a licensed contractor when in
fact he has never been so licensed in this state, the State
maintains that Atwood therefore obtained Luu’s money by deception
as that term is defined in HRS § 708-800; ultimately, however, we
reach the same result that probable cause did not exist to
support the theft charge. Atwood notes that any
misrepresentation on which a theft charge is based must be
accompanied by the intent to deceive. He therefore relies on the
9
Again, we note that, despite their abandonment of or inability to
complete their respective projects, the defendants in the cited cases all had
their convictions reversed because there was ultimately no evidence that they
possessed the intent not to perform their contractual obligations, and in many
cases there was in fact evidence of substantial performance.
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case law addressing theft by deception, only some of which we
have cited above, as well as definition (5) of “deception” in HRS
§ 708-800, which provides that deception “occurs when a person
knowingly . . . [p]romises performance which the person does not
intend to perform or knows will not be performed, but a person’s
intention not to perform a promise shall not be inferred from the
fact alone that the person did not subsequently perform the
promise.”
In contrast, the State has relied on definition (1),
which provides that deception occurs when a person knowingly
“[c]reates or confirms another’s impression which is false and
which the defendant does not believe to be true[,]” and
definition (2), which provides that deception occurs when a
person knowingly “[f]ails to correct a false impression which the
person previously has created or confirmed[.]” (Quoting HRS §
708-800). Therefore, according to the State’s theory of the
case, which the ICA adopted in its SDO,
Atwood knowingly created an impression that he was a
licensed contractor by stating that he was a licensed
contractor. Based on Atwood’s misrepresentation of being a
licensed contractor, Luu agreed to hire Atwood. Luu then
gave Atwood money totaling $95,930.00. There was sufficient
evidence to indict Atwood for theft in the first degree.
Atwood, 2012 WL 1764084, at *2. Respectfully, we disagree with
the State’s position because, as Atwood notes, any
misrepresentation on which a theft charge is based must be
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accompanied by the intent to deceive. Atwood thus maintains that
the State has incorrectly conflated these two requirements by
arguing that Atwood induced Luu into entering the contract by
misrepresenting himself to be a licensed contractor, and
therefore under definitions (1) and (2) of “deception,” any money
paid to Atwood under the contract would support the theft by
deception charge. Taken to its logical end, though, the State’s
position would require us to conclude that had Luu paid Atwood
the total cost of the remodeling work, and had Atwood been
allowed to complete the job, Atwood would nevertheless have
committed theft by deception at the same time he completed
performance of the contract, simply because of his initial
misrepresentation that he was licensed. We do not agree that a
defendant can be charged with theft in such a situation. Rather,
we agree with Atwood’s position that there must be evidence
showing that he intended to deprive Luu of Luu’s property
notwithstanding the misrepresentation concerning his status as a
licensed contractor. See Evans v. State, 508 So. 2d 1205, 1208
(Ala. Crim. App. 1987) (citing Ala. Code § 13A-8-2(2) (1975))
(“Yet, deception, unaccompanied by an intent to deprive the owner
of its property, is not theft.”).
Thus, while the State presented evidence that Luu hired
Atwood based on his ultimately false representations concerning
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his license status and his prior work product, there was no
evidence presented to indicate that Atwood intended to deprive
Luu of the value of any property. Rather, the State’s evidence
actually showed that Atwood performed his part of the contract
until he was no longer permitted to do so by virtue of being
fired by Luu. Accordingly, the State’s evidence did not suffice
to establish probable cause for the grand jury to return an
indictment charging Atwood with Theft in the First Degree by
deception.
B. The circuit court also erred in denying Atwood’s motion to
dismiss because the State did not establish that Atwood satisfied
the threshold for Theft in the First Degree by depriving Luu of
property exceeding $20,000 in value
We also note that the State specifically sought an
indictment from the grand jury charging Atwood with committing
one count of Theft in the First Degree. Under HRS § 708-
830.5(1)(a), “[a] person commits the offense of theft in the
first degree if the person commits theft . . . [o]f property or
services, the value of which exceeds $20,000[.]” However, the
evidence presented to the grand jury did not actually establish
the value of the property allegedly wrongfully obtained by
Atwood; consequently, Count One of the indictment should have
been dismissed because the State did not meet its burden of
establishing probable cause that Atwood committed theft of over
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$20,000 from Luu.
Pursuant to their contract, Luu paid money to Atwood
over a period of several months and received the benefit of
Atwood’s remodeling work in return. However, the record does not
indicate a specific dollar amount for the value of the remodeling
services actually performed by Atwood between May 2006 and
February 2007.
In the State’s view, because Luu would not have hired
Atwood had he known Atwood’s representations were false, any
money that Luu subsequently paid to Atwood pursuant to the
contract was obtained by deception and would therefore count
toward the $20,000 threshold for charging Atwood with Theft in
the First Degree. Accordingly, Atwood would have met that
threshold amount whether the $89,394 contract price, the $95,390
total price with overruns, or the $78,000 amount representing the
cancelled checks Luu submitted to DCCA was used.
While these figures all far exceed the $20,000
threshold for charging Atwood with Theft in the First Degree, the
State’s evidence to the grand jury did not show what exact amount
of the total sum Luu paid to Atwood qualified as a deprivation of
Luu’s property as opposed to simply being payment for services
actually rendered. The State also did not present any evidence
showing that Atwood otherwise deprived Luu of the value of Luu’s
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property by, for example, spending the money on himself or on
items not related to the remodeling.
As another alternative, the State argued that the
$20,000 threshold was met because Luu subsequently paid $38,000
to a replacement contractor to complete the construction after he
fired Atwood. However, because there is no evidence of the value
of the work that was done by Atwood, the amount paid to the
replacement contractor is immaterial and cannot support the
conclusion that Atwood intended to deprive Luu of the value of
that specific amount of money; accordingly, we cannot agree with
the State’s argument.
As we recently stated:
[I]n order for the grand jury to have found probable
cause to support Taylor’s indictment for first degree
theft, the State must have produced evidence of each
essential element of the offense. See Ontai, 84
Hawai#i at 64, 929 P.2d at 77. This court has held
that there are three material elements for theft in
the first degree under HRS §§ 708-830(1) and 708-
830.5(1)(a): that “the defendant intended to: (2)
deprive the other of his or her property; and (3)
deprive another of property that exceeds $20,000 in
value.” State v. Duncan, 101 Hawai#i 269, 279, 67
P.3d 768, 778 (2003).
State v. Taylor, 126 Hawai#i 205, 218, 269 P.3d 740, 753 (2011).
In this case, although the State posited several different
amounts of money paid to Atwood that it argues would have
satisfied the $20,000 threshold for first-degree theft, all of
those amounts reflected payments made by Luu to Atwood in
exchange for the remodeling work that was actually completed
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between May 2006 and February 2007. Because there was no showing
that any of the money paid to Atwood was not in exchange for the
remodeling work that Atwood actually performed, the State
therefore did not provide the grand jury with any specific amount
of property of which Luu was allegedly unlawfully deprived.
Accordingly, the State did not present evidence
sufficient to establish probable cause that Atwood committed the
offense of Theft in the First Degree, and the circuit court
should have therefore dismissed Count One of the indictment.
IV. CONCLUSION
Based on the foregoing, we vacate the ICA’s June 25,
2012 Judgment on Appeal and the circuit court’s December 16, 2009
Findings of Fact, Conclusions of Law, and Order Denying
Defendant’s Motion to Dismiss Count One, and we remand this case
to the circuit court with instructions to dismiss Count One of
the indictment.
David A. Sereno, /s/ Paula A. Nakayama
for petitioner/defendant-
appellant /s/ Simeon R. Acoba, Jr.
Peter A. Hanano, /s/ Sabrina S. McKenna
for respondent/plaintiff- /s/ Richard W. Pollack
appellee
/s/ Karl K. Sakamoto
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