Leong v. Honolulu Ford, Inc. ( 2021 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
10-DEC-2021
09:03 AM
Dkt. 30 SO
SCWC-XX-XXXXXXX
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
________________________________________________________________
JOY P. LEONG AND STEPHEN B. LINDSEY III,
Petitioners/Plaintiffs-Appellants/Cross-Appellees,
vs.
HONOLULU FORD INC.,
Respondent/Defendant-Appellee/Cross-Appellant.
________________________________________________________________
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIV. NO. 1RC14-1-7680)
SUMMARY DISPOSITION ORDER
(By: Recktenwald, C.J., Nakayama, McKenna, and Wilson, JJ., and
Circuit Judge Kuriyama, in place of Pollack, J., recused)
I. INTRODUCTION
This case arises from a dispute over the sale of a
used 2009 Shelby Cobra GT500KR, a limited edition of an exotic
Ford Mustang sports car (“Vehicle”), by Respondent/Defendant-
Appellee/Cross-Appellant Honolulu Ford, Inc.1 (“HFI”). Following
1 HFI asserts in its response to Buyers’ application for writ of
certiorari that “the Defendant/Appellee/Cross-Appellant in this case is a
dissolved entity and no longer a going concern” and therefore “it is unclear
what relief, if any, could be afforded by further review.” Despite HFI’s
contention that this case is “no longer a going concern[,]” Buyers are
(continued . . .)
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negotiations and the execution of two purchase agreements,
Petitioners/Plaintiffs-Appellants/Cross-Appellees Joy P. Leong
and Stephen B. Lindsey III (“Buyers”) took possession of the
Vehicle. Although Buyers had raised concerns about the
Vehicle’s clutch during the test drives, it was not until Buyers
had the opportunity to drive the Vehicle home that they
concluded some aspect of the clutch assembly was defective.
Buyers returned the Vehicle to HFI after driving it for forty-
seven miles and asked HFI to repair the clutch free of charge.
HFI refused to repair the Vehicle at no cost to Buyers and,
following rescission of the purchase agreement, refused to
return Buyers’ $1,000.00 deposit because HFI claimed Buyers
caused the Vehicle to have a “burnt clutch.”
(...continued)
entitled to proceed in their action against HFI and may recover any award
from HFI’s designated trustees. Makaneole v. Pacific Ins. Co., 77 Hawai‘i
417, 420-21, 886 P.2d 754, 757-58 (1994).
Statutes permitting suit against “dissolved” corporations
(“survival statutes”) generally permit individuals or entities to recover
from dissolved corporations. 36 A.L.R. 7th Art. 4 (2018). Hawai‘i’s survival
statute is no exception. Hawai‘i Revised Statutes (“HRS”) § 634-61 (1972)
provides:
The death of a plaintiff or defendant or the
dissolution of a corporate plaintiff or defendant
shall not cause an action to abate, but it may be
continued upon substitution of the proper parties as
provided by the rules of court, or if the claim is
one which survives to or against the surviving
parties the action shall proceed in favor of or
against the surviving parties as provided by the
rules of court.
HRS § 634-61.
2
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Buyers asserted numerous claims alleging that HFI had
engaged in unfair or deceptive acts or practices (“UDAP”) when
it sold Buyers the Vehicle. Buyers seek review of the
Intermediate Court of Appeals’ (“ICA”) affirmance of the
District Court of the First Circuit’s (“district court”) Order
Granting Defendant HFI’s Motion for Summary Judgment2 entered on
March 24, 2015 (“Summary Judgment Order”) and the Judgment3
entered on August 25, 2015 against Buyers on all remaining
claims.
Among other claims, Buyers argue that HFI was
statutorily required to provide a warranty for the clutch
assembly in the Vehicle, but refused to do so, and instead,
misrepresented the nature of the damage that was found on the
Vehicle. Following the rescission of the sales agreement,
Buyers allege that HFI improperly retained Buyers’ $1,000.00
deposit by claiming that Buyers destroyed the Vehicle’s clutch
assembly by driving the Vehicle for forty-seven miles.
On certiorari, Buyers raise three main issues:
(1) whether the ICA was correct in ruling that summary judgment
was appropriately granted against Buyers’ claim that HFI
2 The Honorable Michael K. Tanigawa presided over the summary
judgment hearing and entered the Summary Judgment Order.
3 The Honorable Gerald H. Kibe presided over the trial and entered
the Judgment.
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violated HRS § 480-2 (2002), which prohibits unfair or deceptive
trade practices, by increasing the contract price by $1,800.47
above the price that had been negotiated; (2) whether the ICA
was correct in finding that HFI was entitled to retain the
$1,000.00 deposit to offset its costs in repairing the clutch;
and (3) whether HFI was statutorily required to repair the
Vehicle at no cost to Buyers.
The district court erroneously interpreted
HRS § 481J-2 (2008)4 to conclude that the warranty for used motor
vehicles in HRS § 481J-2 does not cover a clutch assembly. The
4 HRS § 481J-2 (2008) provides in relevant part:
Used motor vehicles: written warranty required, terms.
(a) No used motor vehicle shall be sold in this State by a
dealer to a consumer unless accompanied by a written
warranty covering the full cost of both parts and labor
necessary to repair any defect or malfunction in a part
covered under subsection (c) that impairs the used motor
vehicle’s safety or use. Defects and malfunctions that
affect only appearance shall not be deemed to impair safety
or use for the purposes of this chapter.
. . . .
(c) The written warranty shall require the dealer or its
agent to repair or, at the election of the dealer,
reimburse the consumer for the reasonable costs of
repairing the failure of a covered part. Covered parts
shall at least include the following items:
(1) Engine, including all lubricated parts, water
pump, fuel pump, manifolds, engine block, cylinder
head, rotary engine housings, flywheel, gaskets, and
seals;
(2) Transmission, including the transmission case,
internal parts, torque converter, gaskets, and seals,
except four-wheel drive vehicles shall be excluded
from coverage as provided for in this paragraph;
(continued . . .)
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district court also erred when it found that Buyers failed to
carry their burden of proving that the clutch assembly was
damaged or otherwise defective when they took possession of the
Vehicle. These errors are due to a distinction between the
language that HFI used to describe the damage/defect that it
found on the Vehicle (a “burnt clutch”) and the actual repairs
that HFI eventually made to the Vehicle (replacement of the
entire “clutch assembly” including the pressure pad, slave
cylinder, and flywheel). HFI was statutorily required to repair
the clutch assembly in the Vehicle without charge and, thus, was
not entitled to retain Buyers’ $1,000.00 deposit.
(...continued)
(3) Drive axle, including front and rear drive axle
housings and internal parts, axle shafts, propeller
shafts, and universal joints, except four-wheel drive
vehicles shall be excluded from coverage as provided
in this paragraph;
(4) Brakes, including master cylinder, vacuum assist
booster, wheel cylinders, hydraulic lines and
fittings, and disc brake calipers;
(5) Radiator;
(6) Steering, including the steering gear housing and
all internal parts, power steering pump, valve body,
piston, and rack; and
(7) Alternator, generator, starter, and ignition
system, excluding the battery.
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II. STANDARDS OF REVIEW
A. Summary Judgment
We review the district court’s orders of summary
judgment under the same standard applied by the district court.
Makaneole, 77 Hawai‘i at 420, 886 P.2d at 757. “Summary judgment
is appropriate where the moving party demonstrates that there
are no genuine issues of material fact and it is entitled to
judgment as a matter of law.” Reed v. City & Cty. of Honolulu,
76 Hawai‘i 219, 225, 873 P.2d 98, 104 (1994).
B. Statutory Interpretation
The district court’s interpretation of a statute is
reviewed de novo. State v. Pacheco, 96 Hawai‘i 83, 94, 26 P.3d
572, 583 (2001).
III. DISCUSSION
A. The ICA Did Not Err in Finding that There Was No Unfair or
Deceptive Act or Practice Where Buyers Voluntarily Signed
Contracts Agreeing to a Base Price of $41,800.47 for the
Vehicle
In order to obtain relief under HRS § 480-2,5 a
consumer must establish: “(1) a violation of HRS § 480-2;
5 HRS § 480-2 provides:
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.
(continued . . .)
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(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). A
trade practice violates HRS § 480-2 when “it offends established
public policy and when the practice is immoral, unethical,
oppressive, unscrupulous or substantially injurious to
consumers.” Balthazar v. Verizon Hawaii, Inc., 109 Hawai‘i 69,
77, 123 P.3d 194, 202 (2005) (internal quotation marks omitted)
(quoting Hawai‘i Cmty. Fed. Credit Union v. Keka, 94 Hawai‘i 213,
228, 11 P.3d 1, 16 (2000)). This court has held that “a
deceptive act or practice is (1) a representation, omission, or
practice that (2) is likely to mislead consumers acting
reasonably under the circumstances where (3) the representation,
(...continued)
(b) In construing this section, the courts and the
office of consumer protection shall give due consideration
to the rules, regulations, and decisions of the Federal
Trade Commission and the federal courts interpreting
section 5(a)(1) of the Federal Trade Commission Act (15
U.S.C. 45(a)(1)), as from time to time amended.
(c) No showing that the proceeding or suit would be
in the public interest (as these terms are interpreted
under section 5(b) of the Federal Trade Commission Act) is
necessary in any action brought under this section.
(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.
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omission, or practice is material.” Courbat v. Dahana Ranch,
Inc., 111 Hawai‘i 254, 262, 141 P.3d 427, 435 (2006) (cleaned up)
(quoting F.T.C. v. Verity Int’l, Ltd., 443 F.3d 48, 63 (2d Cir.
2006)).
Here, Buyers argue that HFI violated HRS § 480-2 by
increasing the base price of the Vehicle from a negotiated price
of $40,000.00 to $41,800.47 in the first and second purchase
contracts without bringing the change in price to Buyers’
attention. In granting summary judgment on this issue in favor
of HFI, the district court found that there was no question of
material fact that the alleged behavior did not constitute a
deceptive act or practice. The ICA affirmed the grant of
summary judgment on the grounds that Buyers had voluntarily
signed two purchase agreements that readily identified the base
price of the Vehicle as $41,800.47.
In HFI’s pre-trial Request for Admissions, completed
by Buyer Lindsey, Buyers “[a]dmit” that “[Buyers] agreed to
purchase the Vehicle for $49,262.83, including fees.”6 This
6 The base price of the vehicle excluded fees and additional costs.
$41,800.47 was the base price used to calculate the total price of $49,262.83
for the vehicle purchase. Buyers allege that:
[they are] not saying that they did not agree to buy
the car for a certain price, nor, for that matter, that
they did not actually buy it at that price. They were
saying that their agreement to buy at $49,262.83
(originally $46,917.28) and their actual purchase at that
price were obtained by fraud, in that they were tricked
(continued . . .)
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admission, coupled with the fact that Buyers signed two purchase
contracts agreeing to the base price of $41,800.47, demonstrates
that Buyers were aware that they were purchasing the Vehicle for
the price that appeared in the contract. See Leong v. Kaiser
Found. Hosps., 71 Haw. 240, 245, 788 P.2d 164, 168 (1990)
(explaining that the “general rule of contract law is that one
who assents to a contract is bound by it and cannot complain
that he has not read it or did not know what it contained”).
Moreover, the purchase contracts signed by Buyers contained
merger clauses, stating that the contracts were complete and
final representations of the terms of the contracts. Because
Buyers were, or should have been, aware that they were agreeing
to purchase the Vehicle for a base price of $41,800.47, the
alleged increase in price from the negotiated price of
$40,000.00 does not amount to a violation of HRS § 480-2 because
the act or practice was “[un]likely to mislead consumers acting
reasonably under the circumstances[.]” See Courbat, 111 Hawai‘i
at 262, 141 P.3d at 435. Accordingly, the district court did
(...continued)
into signing the agreement to buy at that price through the
process of (1) Defendant’s salespeople and Plaintiffs
having successfully negotiated the price to be $40,000 for
the car itself, followed by (2) Defendant’s substituting
$41,800.47 as the “Base Price of Vehicle.” Defendant used
the larger figure in calculating the “Total Price” on the
“AUTOMOBILE PURCHASE AGREEMENT.” Defendant had a duty to
disclose the change but remained silent.
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not err in granting summary judgment in favor of HFI as to the
question of whether HFI committed a UDAP violation related to
the sales price of the Vehicle.
B. The Statutory Warranty Under HRS § 481J-2 Covers the
Components of the Clutch Assembly and Required HFI to
Repair Such Damage at No Cost to Buyers
HRS § 481J-2 governs used motor vehicle sales and
warranties. It requires the dealer to provide a written
warranty covering “the full cost of both parts and labor
necessary to repair any defect or malfunction in a part covered
under subsection (c) that impairs the used motor vehicle’s
safety or use.” HRS § 481J-2(c) includes an enumerated list of
covered items:
(c) . . . Covered parts shall at least include the
following items:
(1) Engine, including all lubricated parts, water
pump, fuel pump, manifolds, engine block, cylinder
head, rotary engine housings, flywheel, gaskets, and
seals;
(2) Transmission, including the transmission case,
internal parts, torque converter, gaskets, and seals,
except four-wheel drive vehicles shall be excluded
from coverage as provided for in this paragraph;
(3) Drive axle, including front and rear drive axle
housings and internal parts, axle shafts, propeller
shafts, and universal joints, except four-wheel drive
vehicles shall be excluded from coverage as provided
in this paragraph;
(4) Brakes, including master cylinder, vacuum assist
booster, wheel cylinders, hydraulic lines and
fittings, and disc brake calipers;
(5) Radiator;
(6) Steering, including the steering gear housing and
all internal parts, power steering pump, valve body,
piston, and rack; and
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(7) Alternator, generator, starter, and ignition
system, excluding the battery.
HRS § 481J-2(c) (emphasis added). The question of whether the
clutch assembly is covered under HRS § 481J-2(c) is fundamental
to the determination of Buyers’ claims. Though the ICA did not
discuss whether the clutch assembly is covered under HRS § 481J-
2(c), the district court held in Finding of Fact (“FOF”) Number
(“No.”) 29 that “[m]anual clutch mechanisms are not included in
express warranties for used car sales under HRS § 481J-2.” To
determine whether HRS § 481J-2(c) covered the clutch assembly,
the district court consulted the Merriam-Webster Dictionary as
to the definition of the word “clutch.” Using the Merriam-
Webster definition, the district court determined in FOF No. 30
that “[t]he Merriam-Webster Dictionary denotes that a clutch
mechanism is situated between the engine and the transmission of
a motor vehicle”7 and explained that “the clutch is what’s
between the engine and what some people call the gear box, i.e.
transmission. So I’m satisfied that, in common terminology, it
was not intended that clutch mechanisms be included within the
express warranty for used car sales.” In FOF No. 32, the
7 The district court noted at trial that the Merriam-Webster
Dictionary explained that “if you were in the British Isles, clutch would be
included in the drive shaft, the entire mechanism, but if you are in the U.S.
of A, the clutch is what’s between the engine and what some people call the
gear box, i.e. transmission.” Indeed, even by the dictionary definition
relied upon by the district court, the “drive shaft” is specifically
enumerated as a covered part in HRS § 481J-2(c).
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district court found that “[e]ven if the clutch was covered by
the warranty covering the Vehicle, HFI was not required to
undertake warranty repairs on the clutch in the event of abuse
or neglect” and “obviously it’s [Buyers’] burden to establish by
a preponderance that . . . [the clutch] wasn’t that way [(i.e.,
burned out)] before.”8 Accordingly, the district court concluded
that “as to the warranty issue, there is no unfair or deceptive
act or practice” because even if the clutch assembly was covered
under HRS § 481J-2(c), HRS § 481J-2(c)’s warranty would not
apply because Buyers failed to prove that they did not engage in
abuse or neglect that damaged the clutch. As discussed below,
FOF Nos. 29, 30, and 32 are clearly erroneous.
Statutory interpretation is a question of law that is
reviewed de novo. Courbat, 111 Hawai‘i at 260, 141 P.3d at 433.
When construing a statute, “our foremost obligation is to
ascertain and give effect to the intention of the legislature,
which is to be obtained primarily from the language contained in
the statute itself.” Id. (quoting Gray v. Admin. Dir. of the
Court, 84 Hawai‘i 138, 148, 931 P.2d 580, 590 (1997)). HRS
§ 481J-2(c) is unambiguous as to whether it covers the
components of the clutch assembly--the “flywheel” and the
8 As discussed infra, it was error for the district court to place
this burden on Buyers, as HFI’s claim that it was entitled to retain the
$1,000.00 deposit to offset the cost of the repairs was in the nature of an
affirmative defense, the burden of which was on HFI.
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“gaskets” and “seals” that failed in the slave cylinder--that
HFI replaced. Accordingly, the district court’s reliance on the
Merriam-Webster Dictionary, and its FOF No. 30, was error.
HRS § 481J-2 requires the dealer, here, HFI, to
provide a written warranty covering “the full cost of both parts
and labor necessary to repair any defect or malfunction in a
part covered under subsection (c) that impairs the used motor
vehicle’s safety or use.” The plain language of HRS § 481J-2(c)
explicitly lists “covered parts” that include components of the
manual clutch assembly that were replaced by HFI. It is
undisputed that HFI replaced at least the clutch pressure pad,
the slave cylinder (due to a failed rubber gasket), and the
flywheel in the Vehicle. Explicitly listed among the covered
parts in HRS § 481J-2(c) are the flywheel, gaskets, seals, all
lubricated parts, internal parts, and torque converter.9
HFI was explicitly required to cover the components on
the clutch assembly--“gaskets” and “seals” that failed in the
slave cylinder and the “flywheel”--that it replaced in the
Vehicle. HFI mechanic and expert witness Henry Tabios
(“Tabios”) testified that a “slave leak” occurs in “the
hydraulic part of the clutch” and Buyers’ expert witness Kenneth
Moniz (“Moniz”) testified that such a leak would be caused by a
9 An HFI expert witness stated in an interrogatory that a clutch is
part of a transmission; however, he changed his testimony at trial.
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leak in the “rubber seal, and most leaks [are] from wear and
tear.” HRS § 481J-2(c) lists “all lubricated parts,” “internal
parts,” and lists “gaskets[] and seals” twice, under both
subsections (c)(1) and (c)(2). Thus, the slave cylinder (or, at
the very least, the gaskets and seals that failed in the slave
cylinder) is covered under the statutory warranty. See HRS
§ 481J-2(c). HRS § 481J-2(c) explicitly requires a dealer to
warrant the “flywheel[.]” Id. It is uncontested that the
flywheel was damaged and had to be replaced. Accordingly, the
flywheel is covered under the statutory warranty. See id.
Although HRS § 481J-2(c) does not explicitly name the “clutch”
or “clutch assembly[,]” the statute’s reference to the “torque
converter” captures the statute’s intent to cover the equivalent
components in a manual transmission vehicle. Buyers’ expert
witness, Moniz, testified that “the torque converter” in an
automatic vehicle “has the same function as a clutch” in a
manual transmission vehicle. Therefore, the entire clutch
assembly (including the clutch pressure pad) is covered under
the statutory warranty, and the district court’s FOF No. 29 was
erroneous.10 See HRS § 481J-2(c).
10 The interpretation of HRS § 481J-2(c)(2) could also rely on the
commonsense understanding of the word “transmission” as itself including the
“clutch assembly” in a vehicle with a manual transmission. While the clutch
mechanism sits in between the engine and the transmission, a reasonable
consumer is likely to read “transmission” as encompassing the clutch, given
(continued . . .)
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The district court also erred in holding that Buyers
failed to carry “their burden of proving that the clutch
[assembly] was damaged or otherwise defective when they took
possession of the Vehicle.” The placement of this burden on
Buyers was an error of law, and the district court’s FOF No. 32-
-that “[e]ven if the clutch was covered by the warranty covering
the Vehicle, HFI was not required to undertake warranty repairs”
because the Buyers failed “to establish by a preponderance that
. . . [the clutch] was burned out, burned, wasn’t that way
before”--was erroneous.
Here, where HFI retained Buyers’ $1,000.00 deposit to
offset the costs of the “clutch assembly” replacement, the
burden was on HFI to prove that Buyers ruptured a gasket on the
slave cylinder and destroyed the clutch assembly in the span of
forty-seven miles, not as a result of “normal wear or usage[.]”
As discussed below, Buyers established by uncontested expert
testimony that a leaky slave cylinder cannot be caused by use or
(...continued)
the clutch mechanism’s essentiality in engaging and disengaging the
transmission from the drive shaft’s moving parts. Moreover, unlike HRS §
481J-2(c), other state statutes explicitly exclude parts of a vehicle that
wear out with ordinary use. See N.J. Rev. Stat. § 56:8-67(1) (2013)
(defining “covered item[s]” to exclude “a manual clutch, pressure plate,
throw-out bearings, clutch master or slave cylinders”) If the Hawai‘i
legislature intended to exclude “wear items,” such as the clutch, they could
have done so, but did not. As the commonsense understanding of
“transmission” includes the clutch in a vehicle with manual transmission, and
the Hawai‘i legislature did not exclude “wear items,” the clutch and clutch
assembly are covered by the warranty.
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misuse in forty-seven miles. Accordingly, HFI could not have
established by a preponderance that Buyers damaged the clutch
due to “abuse or neglect” rendering the HRS § 481J-2(c) warranty
inapplicable.
Accordingly, the district court’s FOF No. 28 (that
Buyers had “failed to sustain their burden of proof that the
clutch was damaged or otherwise defective at the time they took
possession of the Vehicle”) was clearly erroneous. Likewise,
the ICA erred in finding that that FOF No. 28 was not “clearly
erroneous.”
C. The ICA Erred by Finding that HFI was Entitled to Retain
the $1,000.00 Deposit to Offset its Costs in Repairing the
Clutch
Buyers argue that the ICA incorrectly held that the
district court did not err when it found that HFI did not commit
a UDAP violation by retaining Buyers’ $1,000.00 deposit.11 The
district court, and subsequently the ICA, found that HFI was
entitled to retain Buyers’ deposit, in part, because the
purchase agreement contained a term which stated that “If I do
not accept delivery of the vehicle I purchased, [HFI] may keep
11 The district court originally ruled in favor of Buyers on summary
judgment for Buyers’ third UDAP claim (that the clutch assembly was defective
at delivery and HFI was not entitled to retain the $1,000.00 deposit).
However, testimony was presented at trial on this point, and the district
court included in its FOF No. 28, that “Plaintiffs have failed to sustain
their burden of proof that the clutch was damaged or otherwise defective at
the time they took possession of the Vehicle[.]”
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my cash deposit as payment for [HFI’s] costs.” HFI provided
evidence, including the testimony of Tabios and HFI’s Exhibit Q,
that established that it cost HFI $1,110.04 or 1,109.7512 to
replace the broken clutch assembly that, by HFI’s own evidence,
included the flywheel, clutch, pressure pad, and slave cylinder.
Whether HFI could retain the $1,000.00 deposit depends
upon whether the clutch assembly was defective when Buyers took
possession of the Vehicle or whether Buyers caused the damage to
the clutch assembly in the forty-seven miles they had possession
of the Vehicle. In answering this question, the ICA concluded
that the district court’s finding that “Buyers failed in their
burden of proving that the clutch was damaged or otherwise
defective when they took possession of the Vehicle” was not
“clearly erroneous” because HFI presented substantial evidence
that the “clutch was ‘burnt’” by Buyers after Buyers received
possession of the car.
This finding was erroneous. The evidence established
that the entire “clutch assembly” was replaced, not just the
clutch pressure pad, due in part to a leaky slave cylinder and a
burned flywheel. Moreover, the evidence was uncontested that a
leaky hydraulic slave cylinder cannot be caused by use or misuse
12 HFI’s version of the receipt has a handwritten price of
$1,109.75. Buyers’ version of what appears to be an internal version of the
same receipt lists the price as $1,110.04.
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for forty-seven miles.13 Evidence that the leaky hydraulic slave
cylinder cannot be caused by use or misuse for forty-seven
miles14 in conjunction with evidence that the “clutch assembly”
was damaged and needed to be replaced, established that the
clutch was damaged or defective when Buyers took possession of
the Vehicle.
Both Buyers testified that Lindsey raised concerns
about the clutch during the test drive15 and that HFI told Buyers
not to worry, repeating that “it was a high-performance clutch”
and, therefore, felt different.16 Testimony from Buyers’ expert
witness Moniz suggested that the “soft” clutch that Lindsey
13 Moniz testified that “40 miles additional mileage” on any vehicle
would “never, ever” cause the clutch assembly to wear out, “[s]omething must
have given way.” Likewise, Moniz testified that a failure in the slave
cylinder could not be caused by driving for “40 miles” and if it failed
during the “40 miles” Buyers drove it, “[i]t must have been coincidental,
because I don’t think you can drive a car for 40 miles and cause it to leak.
It had to have been on its way out.”
14 Expert witness Tabios testified that the entire clutch assembly
needed to be replaced because the slave cylinder “had a seepage, so they
ended up replacing that. But the main problem on this was the clutch disc
was burnt.” Tabios also testified that he observed “burn marks on the clutch
disc and the fly wheel.” The invoice produced by HFI for the repair listed
the “description of cause” as “replace flywheel, clutch, and pressure plate;
replace clutch slave-leaking; bleed clutch system, top off fluid level.”
HFI’s invoice listed the part number, quantity, and list number for the “new
parts” that were installed during the repair, including the “flywheel[,]” a
“KIT - CL[,]” a “cylinder[,]” “cylinder ASY - clutch[,]” and “fluid -
brake[.]”
15 Lindsey testified that “you had to feed it a – a lot of gas so it
wouldn’t stall out[.]”
16 HFI salesperson Angel Mendias testified that the issues during
the test drive were not due to “something wrong with the clutch,” rather the
issue was “[t]he way [Lindsey] was shifting[.]”
18
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complained of during the test drive was the result of a leaky
gasket in the slave cylinder. Thus, this record supports the
conclusion that the clutch assembly was damaged or defective
when Buyers took possession of the Vehicle and was not damaged
as a result of Buyers’ use or misuse.
Lindsey’s presale concerns about the clutch are
evidenced not only by his and Leong’s testimony, but also by the
“Get Ready Authorization” containing handwritten notes in a box
titled “ADDITIONAL AGREEMENTS[.]” The additional agreements
stated: “sold as is [and] as equipped” with the circled phrase
“have service check clutch cust. states ‘soft’” and an “OK”
written next to the manager’s initials “HV[.]” Accordingly, the
evidence demonstrates that Buyers raised concerns after test
driving the Vehicle about a “soft clutch”--consistent with a
leaky slave cylinder--prior to signing the second Vehicle
purchase agreement,17 and HFI represented that it would “check
[the] clutch” as an “additional agreement” to the sale.18
The district court, and subsequently the ICA,
determined that HRS § 481J-2 did not cover the clutch assembly
17 The handwritten note appears to have been written after the first
purchase agreement was signed but before the second purchase agreement was
signed.
18 The ICA did not consider the evidence of the handwritten notation
on the Get Ready Authorization.
19
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and that Buyers had “failed in their burden of proving that the
clutch was damaged or otherwise defective when they took
possession of the Vehicle.”
As discussed previously, HRS § 481J-2 explicitly
covers the flywheel, gaskets, seals, all lubricated parts,
internal parts, and torque converter. The evidence in the
record--that the clutch assembly had to be replaced and that
damage requiring such replacement would “never, ever” be caused
by driving just forty-seven miles--supports the conclusion that
the clutch assembly, or at least the slave cylinder, was
defective at the time Buyers took delivery of the Vehicle. Put
simply, the record does not contain evidence to support the
district court’s finding that Lindsey, who had life-long
experience driving manual transmission vehicles19 and had over
275,000 miles on the manual clutch of his Ford F-350, would burn
out the clutch assembly and cause a slave cylinder leak by
driving a high-performance racing vehicle for forty-seven miles.
Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 116,
839 P.2d 10, 27-28 (1992) (holding that a “FOF is clearly
erroneous when, despite evidence to support the finding, the
appellate court is left with the definite and firm conviction in
reviewing the entire evidence that a mistake has been
19 Lindsey testified that he been driving manual transmission
vehicles “[s]ince I was 15” and has only owned manual transmission vehicles.
20
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committed”). Consequently, the district court’s finding that
the warranty for used cars in HRS § 481J-2 did not cover the
clutch assembly and that Buyers had “failed in their burden of
proving that the clutch was damaged or otherwise defective when
they took possession of the Vehicle” was clearly erroneous.
V. CONCLUSION
For the foregoing reasons, we affirm in part and
vacate in part the ICA’s March 12, 2020 Judgment on Appeal
affirming the district court’s March 24, 2015 Order on Motion
for Summary Judgment and August 25, 2015 Judgment. The ICA
erred when it affirmed the district court regarding Buyers’
remaining UDAP claims. Therefore, this case is remanded to the
district court for proceedings consistent with this summary
disposition order. The ICA’s judgment on appeal is affirmed in
all other respects.
DATED: Honolulu, Hawaiʻi, December 10, 2021.
Charles S. Lotsof /s/ Mark E. Recktenwald
for petitioners
/s/ Paula A. Nakayama
Benjamin M. Crepes,
Kevin W. Herring, and /s/ Sabrina S. McKenna
(Michael R. Vieira on
the briefs) for /s/ Michael D. Wilson
respondent
/s/ Christine E. Kuriyama
21