CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (ICA NO. 30337; CR. NO. 07-1-0635)
David A. Sereno, for petitioner/defendant-appellant
Peter A. Hanano, for respondent/plaintiff- appellee
NAKAYAMA, ACTING C.J., ACOBA, MCKENNA, AND POLLACK, JJ., AND CIRCUIT JUDGE SAKAMOTO, IN PLACE OF RECKTENWALD, C.J., RECUSED
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 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 Circuitdenied the motion but permitted Atwood to file an interlocutory 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.
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 Statutes (HRS) § 708-830.5(1) (a) and one count of Unlicensed Activity in violation of HRS § 436B-27(b).
According to testimony given before the grand jury on 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 . 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 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 Degree, for lack of probable cause and as a de minimis offense.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 ...