Hashimoto v. Cockett (In re Cockett)

Full title: In re: KEITH C. COCKETT, Debtor. DENNIS HASHIMOTO and JESSICA HASHIMOTO…

Court: UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF HAWAII

Date published: Jun 12, 2015

Case No. 13-01918 (Bankr. D. Haw. Jun. 12, 2015)

Opinion

Case No. 13-01918 Adv. Pro. No. 14-90020

06-12-2015

In re: KEITH C. COCKETT, Debtor. DENNIS HASHIMOTO and JESSICA HASHIMOTO, Plaintiffs, v. KEITH C. COCKETT, Defendant.

TSUGAWA BIEHL LAU & MUZZI A Hawaii Limited Liability Law Company CHRISTOPHER J. MUZZI 6939 Bishop Place 1132 Bishop Street, Suite 2400 Honolulu, Hawaii 96813 Telephone No.: (808) 531-0490 Facsimile No.: (808) 534-0202 Email: cmuzzi@hilaw.us Attorneys for Plaintiffs DENNIS HASHIMOTO and JESSICA HASHIMOTO

Judge: Robert J. Faris

TSUGAWA BIEHL LAU & MUZZI
A Hawaii Limited Liability Law Company
CHRISTOPHER J. MUZZI 6939
Bishop Place
1132 Bishop Street, Suite 2400
Honolulu, Hawaii 96813
Telephone No.: (808) 531-0490
Facsimile No.: (808) 534-0202
Email: cmuzzi@hilaw.us
Attorneys for Plaintiffs
DENNIS HASHIMOTO and JESSICA HASHIMOTO
(Chapter 7)

PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

TRIAL:
Date: Week of May 4, 2015
Time: 9:30 a.m.
Judge: Robert J. Faris
Relates to Docket No. 1 PLAINTIFFS' PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW

Plaintiffs DENNIS HASHIMOTO and JESSICA HASHIMOTO ("Plaintiffs"), by and through their attorney, Tsugawa Biehl Lau & Muzzi, LLLC, hereby submit the following proposed findings of fact and conclusions of law, pursuant to the Court's directive at the conclusion of trial of the above-captioned adversary proceeding.

I. PROPOSED FINDINGS OF FACT

To the extent any of the following findings of fact constitute conclusions of law, they are adopted as such.

1. On or about April 24, 2005, Plaintiffs DENNIS HASHIMOTO and JESSICA HASHIMOTO ("Plaintiffs") entered into an AIA Abbreviated Standard Form of Agreement Between Owner and Architect ("Architect's Agreement") with Keith Cockett & Associates, Inc. ("Cockett & Associates") for design and construction administration services with respect to the construction of a new home for Plaintiffs on a lot located at 1005 Hoa Street, Honolulu, Hawaii (the "Project").¹

1 Exhibit 65.

2. Debtor Keith C. Cockett ("Debtor") is the president and sole shareholder of Cockett & Associates.² Debtor as the only employee and only architect with Cockett & Associates and provided all services under the Architect's Agreement to Plaintiffs.³

2 Exhibit 1.

3 Declaration of Jessica Hashimoto dated April 6, 2015 ("Jessica Declaration") at ¶3; Trial Tr. (5/5/15) 97:14-18.

3. Debtor drafted the Architect's Agreement.⁴

4 Declaration of Keith C. Cockett ("Cockett Declaration") at ¶9

4. Pursuant to the Architect's Agreement, Debtor agreed to prepare certain design development documents and construction documents for the Project ("Project Plans"), including all required drawings and specifications setting forth in detail the requirements for the construction of the Project.⁵

5 Exhibit 65 at 1 and Exhibit 2004.

5. Also, pursuant to the Architect's Agreement, Debtor had construction administration responsibilities. The relevant portions of the Architect's Agreement include the following:

§ 2.6.2 The Architect shall provide administration of the Contract for Construction as set forth below and in the edition of AIA Document A201, General Conditions of the Contract for Construction, current as of the date of this Agreement, unless otherwise provided in this Agreement.



§ 2.6.4 The Architect shall be a representative of and shall advise and consult with the Owner during the administration of the Contract for Construction. The Architect shall have authority to act on behalf of the Owner only to the extent provided in this Agreement unless otherwise

modified by written amendment.



§ 2.6.5 The Architect, as a representative of the Owner, shall visit the site at intervals appropriate to the stage of the Contractor's operations, or as otherwise agreed by the Owner and the Architect in Article 12, (1) to become generally familiar with and to keep the Owner informed about the progress and quality of the portion of the Work completed, (2) to endeavor to guard the Owner against defects and deficiencies in the Work, and (3) to determine in general if the Work is being performed in a manner indicating that the Work, when fully completed, will be in accordance with the Contract Documents. . . . .



§ 2.6.6 The Architect shall report to the Owner known deviations from the Contractor Documents and from the most recent construction schedule submitted by the Contractor. . . .



§ 2.6.9.1 The Architect shall review and certify the amounts due the Contractor and shall issue certificates in such amounts.



§ 2.6.9.2 The Architect's certification for payment shall constitute a representation to the Owner, based on the Architect's evaluation of the Work as provided in Section 2.6.5 and on the data comprising the Contractor's Application for Payment, that the Work has progressed to the point indicated and that, to the best of the Architect's knowledge, information and belief, the quality of the Work is in accordance with the Contract Documents. . . . .



§ 2.6.10 The Architect shall have authority to reject Work that does not conform to the Contract Documents. Whenever the Architect considers it necessary or advisable, the Architect shall have authority to require inspection or testing of the Work in accordance with the provisions of the Contract Documents, whether or not such Work is fabricated, installed or completed. . . . .

§ 2.6.13 The Architect shall prepare Change Orders and Construction Change Directives, with supporting documentation and data if deemed necessary by the Architect as provided in Sections 3.1.1 and 3.3.3, for the Owner's approval and execution in accordance with the Contract Documents, and may authorize minor changes in the Work not involving an adjustment in the Contract Sum or an extension of the Contract Time which are consistent with the intent of the Contract Documents.

(Emphases added.)

6. The relevant provisions of AIA Document A201 ("General Conditions") that were incorporated into the Architect's Agreement include § 4.2.1 (architect owners' representative); § 4.2.2 (architect, as owner's representative, will visit site to become generally familiar with and keep owner informed about the process and quality of work completed; to endeavor to guard the owner against defects and deficiencies in the work; and to determine in general if the work is being performed in a manner indicating that, when fully completed, will be in accordance with the contract documents); § 4.2.5 (review and certification of payments); § 4.2.6 (architect authority to reject work); § 4.2.8 (architect prepare change orders and construction change directives) and ¶ 12.3.1 (owner acceptance of nonconforming work with reduction of contract sum).⁶

6 Exhibit 142.

7. On January 8, 2007, a building permit for the Project was applied for with the Department of Planning and Permitting ("DPP").⁷

7 Exhibit 3.

8. On or about November 25, 2008, Plaintiffs engaged Evans Construction, LLC ("Evans Construction") as the general contractor for the Project (the "Construction Contract").⁸ David E. Evans ("DEE") was the principal member of Evans Construction and was directly involved with the Project.

8 Exhibit 66.

9. During the negotiation of the contract price for the Construction Contract, Debtor dealt directly with Evans Construction regarding the quote and gave Evans Construction three chances to increase the quoted price (which Evans Construction did) because Debtor thought the original quote from Evans Construction was too low.⁹ Debtor eventually thought the revised quote was acceptable and directed Plaintiffs to accept.¹⁰

9 Jessica Rebuttal Declaration at ¶12.

10 Id.

10. DEE only held a class "B" contractor's license effective December 22, 2006.¹¹

11 Exhibit 4 and Trial Tr. (5/5/15) at 46:22-23.

11. DEE never held a class "A" contractor's license.¹²

12 Trial Tr. (5/5/15) at 46:24 - 47:1.

12. At no time did DEE (or Debtor) hold the specialty classifications C-13 (electrical); C-21 (flooring); C-27 (landscaping); C-31b (stone masonry); C-37 (plumbing); C-37c (vacuum and air systems); or C-49 (swimming pool).¹³

13 Exhibit 4 note 1 and Trial Tr. (5/5/15) at 47:9-23.

13. Pursuant to the Construction Contract, DEE and Evans Construction obliged themselves to complete construction of the Project, including a new house, garage, lanai, swimming pool, cabana, outdoor wall, and other structures in accordance with the Project Plans.¹⁴

14 Exhibit 66 at 1.

14. The Project Plans incorporated by reference the General Conditions.¹⁵

15 Exhibit 133 (Project Plans) and Exhibit 142 (AIA Document 201).

15. Pursuant to the Architect's Agreement, Debtor was at all times responsible for administering the Construction Contract, including visiting the Project site, observing construction, endeavoring to guard against defects and deficiencies, informing Plaintiffs of construction progress and any known deviations from the Project Plans, certifying applications for payment, preparing written change orders and construction change directives, and otherwise representing Plaintiffs during the course of construction.¹⁶

16 Exhibit 65 at p.3.

16. The Project Plans bear Debtor's stamp which provides that, "This work was prepared by me or under my supervision and construction of this project will be under my observation."¹⁷

17 Exhibits 5, 6, and 7 (Building Permits, Stamped Project Plans).

17. The Project was the first time Debtor and Cockett & Associates had worked with DEE and Evans Construction.¹⁸ During the course of construction of the Project, Debtor and Cockett & Associates developed a business relationship with DEE and Evans Construction that was separate from the Debtor's work on the Project.¹⁹

18 Exhibit 8, at 60:22-62:14.

19 Exhibits 9, 10, 11 and 25.

18. At Debtor's suggestion, Debtor, Plaintiffs and DEE began having weekly meetings/dinner on Monday nights.²⁰

20 Jessica Rebuttal Declaration at ¶15.

19. Soon after commencement of the Project, Debtor and Evans began working on four other projects together.²¹

21 Exhibits 9, 10, 11 and 25.

20. Debtor and DEE quickly developed a mutual admiration for each other, conversing at each Monday meeting/dinner about their past athletic accomplishments²², which both display on their professional resumes.²³

22 Jessica Rebuttal Dec at ¶16.

23 Exhibits 2001 and 2020.

21. While many deviations from the Project Plans were not disclosed to Plaintiffs, on some occasions, Debtor and DEE would make suggestions or presentations to Plaintiffs at some of these Monday meetings regarding changes that Debtor and/or DEE wanted to make to various aspects of the Project.²⁴ Neither Debtor nor DEE told Plaintiffs why these suggestions were being made or that they were made to make up for construction mistakes or deficiencies in the Project Plans.²⁵

24 Jessica Rebuttal Declaration at ¶16.

25 Jessica Rebuttal Declaration at ¶18; Exhibit 29.

22. Plaintiffs, for the most part, wanted the Project built according to the Project Plans.²⁶

26 Jessica Rebuttal Declaration at ¶67.

23. Debtor began casually approving substitutions and changes from the Project Plans without Plaintiffs' approval or consent (and often without their knowledge), and without creating any change orders or construction change directives for the Project Plans or giving Plaintiffs any credits for eliminated or substituted materials.²⁷

27 Jessica Declaration at ¶¶20, 26-30, 32-34, 36-37, and 49-51; Exhibits 13, 14, 21, 26, 29, 35, 36, 44, 49, 50, 52, 57, 69, 70, 80, 114, 124, 126, 128, 130, 132, and 2025.

24. Plaintiffs first realized that Debtor and Evans Construction were significantly deviating from the Project Plans without informing them in or about September of 2009 and asked them to refrain from further deviations without their approval.²⁸ The initial deviations from the Project Plans appeared to be to cover up mistakes made by Evans Construction or Debtor.

28 Exhibit 26.

25. Debtor also began to protect Evans Construction and DEE from the reasonable requests from Plaintiffs, that Evans Construction correct deficiencies and defects in construction,²⁹ and appeared concerned about keeping Evans Construction in business, stating in response to one of Plaintiffs' inquiries regarding an Evans Construction bill, "we don't want to put him in a situation where he can't pay his workers" in response to a request from Plaintiffs about whether they should pay for work involving a disputed rock wall.³⁰

29 Jessica Declaration at ¶80; and Exhibits 13, 14, 21, 22, 23, 24, 26, 28, 29, 32, 35, 36, 47, 50, 52, 125 and 135.

30 Exhibit 31.

26. Throughout the course of construction of the Project, DEE and Evans Construction failed to comply with the Project Plans.³¹

31 Exhibit 12 (the "LaPrade List"); Exhibits 13, 14, 26.

27. Debtor did not inform Plaintiffs of known deviations and defects.³²

32 Jessica Declaration at ¶¶18, 20, 24-29, 32-34, 36-37, 48-51, 61 and 68; Exhibits 13, 14, 22, 25, 28, 29, 32, 35, 41, 50, 52, 70, 114 and 130; and Trial Tr. (5/5/15) at 14:24 - 15:6.

28. It was not until Plaintiffs hired Shinsato Engineering, Inc. to inspect and report on the rock walls and concrete work done by Evans Construction,³³ that they were made aware that they should have a professional inspect the Project.³⁴

33 Exhibit 43.

34 Jessica Rebuttal Declaration at ¶68.

29. Around June 15, 2010, Debtor provided Plaintiffs with a punch list of items to be completed.³⁵ The punch list provided to the Plaintiffs by Debtor did not identify a number of major deviations from the Project Plans, or the use of substandard and inferior materials, or the elimination of items Plaintiffs were entitled to under the Construction Contract and Project Plans without any credit to Plaintiffs.³⁶

35 Exhibit 51.

36 Jessica Declaration at ¶15; and compare Exhibit 12 with Exhibit 51.

30. Shortly after June 15, 2010, Plaintiffs hired Arne LaPrade as a construction consultant who inspected the Project.

31. As a result of his inspection of the Project, Mr. LaPrade created the LaPrade List.³⁷

37 Exhibit 12.

32. The LaPrade List was reviewed by Debtor and his comments appear in handwriting on the list.³⁸

38 Exhibit 12 and Trial Tr. (5/6/15) at 34:3-6.

33. Mr. LaPrade walked Plaintiffs through the Project with the LaPrade List and Project Plans and showed Plaintiffs the existing condition of the Project and how it differed from the Project Plans as set forth on the LaPrade List.³⁹

39 Trial Tr. (5/5/15) at 36:1-5; Jessica Declaration at ¶18.

34. DEE and Evans Construction further failed to comply with applicable laws, regulations and codes of the State of Hawaii and the City and County of Honolulu, industry standards, and specific instructions from Plaintiffs.⁴⁰

40 Exhibits 15, 16, and 17 (Notice of Violation).

35. DEE and Evans Construction performed work that reflected major deviations from the Project Plans, and also reflected glaringly substandard construction and unsafe conditions.⁴¹ Plaintiffs observed the following specific defects, deficiencies and deviations during their walk through of the Project with LaPrade, which include, but are not limited to, the following:

41 Jessica Declaration at ¶14.

• Front entry is incomplete, unsafe, and deviates from design plans, including missing and misplaced windows and door;



• Roofing is incomplete, unsafe, and deviates from design plans, including excessive nailing through sheathing, broken tiles, drainage defects, and other defects;



• Swimming pool is incomplete, unsafe, and deviates from design plans, and exhibits numerous deficiencies, poor workmanship, and unsafe conditions;



• Laundry room is incomplete, unsafe, and deviates from design plans, including misplaced and defective doors;



• Railings are incomplete, unsafe, and deviate from design plans, including misplaced railings and defects in materials and workmanship;



• Wooden floors are incomplete, unsafe, and deviate from design plans, including defects in materials and workmanship;



• Steps and staircases are incomplete, unsafe, and deviate from design plans, including defects in materials and workmanship;

• Electrical work is defective, unsafe, and incomplete, including mislocation of electrical box;



• Plumbing is defective, unsafe, and incomplete;



• Gas line work is defective, unsafe, and incomplete;



• Grading is defective, unsafe, and incomplete;



• Sewer lines are defective, unsafe, and incomplete;



• Air conditioning is defective, unsafe, and incomplete;



• Hot water venting is defective, unsafe, and incomplete;



• Boulders abandoned on jobsite are unsafe and must be removed;



• Driveway and motor court are defective, unsafe, and incomplete;



• Garage is defective, unsafe, and incomplete, including smaller and narrower layout than specified in Project Plans;



• Curbs and sidewalk are defective, unsafe, and incomplete;



• Kitchen appliances are not installed;



• Copper-lined planters are missing;



• Cabinetry is missing from several areas of the home;



• Square footage of the home deviates substantially from Project Plans;

• Numerous finishes are damaged and incomplete, including trellis work, windows, doors, walls, gutters, light fixtures, and many other items;



• Structural steel beams welded instead of bolted, wrong connectors used and steel beam(s) notched;⁴² and



• Numerous other defects and unfinished aspects of the Project exist.⁴³

42 Exhibit 77.

43 Jessica Declaration at ¶18; Exhibit 12.

36. Debtor also removed all path and stairs moss rock wall references on Project Plans without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁴⁴ Debtor did not create a change order or a construction change directive crediting Plaintiffs relating to this item.

44 Exhibits 13 and 45.

37. Debtor made changes to the Project Plans reducing the linear feet of walls (deleted 70 feet and added 38 feet), but did not create a change order or a construction change directive crediting Plaintiffs.⁴⁵

45 Jessica Declaration at ¶22; Exhibits 13 and 48.

38. Debtor made changes to the Project Plans for the front door and entry way without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁴⁶ The changes made by Debtor resulted in a building code violation that will cost a significant amount of money to remedy.⁴⁷

46 Exhibit 13.

47 Exhibit 17; Jessica Declaration at ¶25.

39. Debtor approved the substitution of material, change of design and deletion of a plastered radial beam with respect to the trellis at the front entry without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁴⁸ Even if Debtor did not approve of the substitution of material, change of design and deletion of a plastered radial beam, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

48 Jessica Declaration at ¶29.

40. Debtor deleted strip drains from the entry lanai and lower level lanai by the pool without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁴⁹

49 Jessica Declaration ¶27; Trial Tr. (5/5/15) at 79:24 - 80:6; and Exhibits 126 and 2025.

41. Debtor approved the relocation of an electric meter box from the location in the Project Plans agreed to by Plaintiffs and Debtor in order to protect it from the elements to an exposed area without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁵⁰ Even if Debtor did not approve of the relocation of an electric meter box, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

50 Jessica Declaration ¶28; Exhibits 49, 50, and 72.

42. Debtor approved the substitution of material, change of design and deletion of a plastered radial beam with respect to the trellis at the lower lanai without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁵¹ Even if Debtor did not approve of the substitution of material, change of design, and deletion of a plastered radial beam, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

51 Jessica Declaration ¶29; Cockett Declaration at ¶23.n.

43. Debtor approved the substitution of cedar with untreated Douglas fir as the soffit material throughout the exterior of house without Plaintiffs' knowledge and approval or a credit to Plaintiffs, even though the use of cedar was specifically agreed to in the Project Plans by Debtor and Plaintiffs because of its known benefits of weathering well and being insect resistant.⁵² Even if Debtor did not approve of the substitution of cedar with untreated Douglas fir as the soffit material throughout the exterior of house, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

52 Jessica Declaration ¶30 and Exhibit 74.

44. Debtor authorized the elimination from the Project Plans of copper-lined planters on the upper and lower decks without Plaintiffs' knowledge and approval or a credit to Plaintiffs.⁵³ Debtor did not create a change order or a construction change directive crediting Plaintiffs relating to this item.

53 Jessica Declaration ¶32; Trial Tr. (5/5/15) at 139:23 - 140:5; and Exhibit 14.

45. Debtor authorized the substitution of frameless corner windows with cheaper seamed windows without Plaintiffs' knowledge and approval and without credit to the Plaintiffs.⁵⁴ Even if Debtor did not approve of the substitution of frameless corner windows with cheaper seemed windows, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

54 Jessica Declaration ¶33.

46. Debtor approved changes to the quality and design of the rails on the upper and lower decks from higher-cost copper and teak to lower-cost welded steel pipes without Plaintiffs' knowledge and approval and without credit to the Plaintiffs.⁵⁵ Even if Debtor did not approve changes to the quality and design of the rails on the upper and lower decks from higher-cost copper and teak to lower cost welded steel pipes, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

55 Jessica Declaration ¶34; Exhibits 70 and 79.

47. Debtor approved changes to the quality and design of the rails for the master bedroom deck from higher-cost, custom-made powder coated aluminum to lower cost metal piping without Plaintiffs' knowledge and approval and without credit to the Plaintiffs.⁵⁶ Even if Debtor did not approve changes to the quality and design of the rails for the master bedroom deck from higher-cost, custom made powder coated aluminum to lower cost metal piping, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

56 Jessica Declaration ¶36; and Exhibit 70; Jessica Rebuttal Declaration at ¶35.

48. Debtor approved changes to the size, quality, and style of the interior handrails without Plaintiffs' knowledge and approval and without credit to the Plaintiffs.⁵⁷ The location of the handrails was initially changed without Plaintiffs' knowledge to accommodate an error in the design of the laundry room, which required the installation of a pocket door on the side of the steps where the handrails were located on the Project Plans because the swinging door would not open all the way if built according to the Project Plans.⁵⁸ The interior handrails are in violation of the building codes as set forth in the C&C's Notice of Violation.⁵⁹ Even if Debtor did not approve changes to the size, quality and style of the interior handrails, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

57 Jessica Declaration ¶37; and Exhibits 14 and 70.

58 Jessica Rebuttal Declaration at ¶31.

59 Exhibit 17.

49. Debtor, without Plaintiffs' knowledge and approval and without consultation with the structural engineer, supervised Evans Construction on the installation of steel beams⁶⁰ and instructed Evans Construction to notch certain steel beams, which compromises their integrity and that of the complete load path and uplift ties.⁶¹

60 Jessica Rebuttal Declaration at ¶43.

61 Jessica Declaration ¶48.

50. Debtor eliminated the linen closet in the cabana bathroom without Plaintiffs' knowledge and approval and without a credit to the Plaintiffs.⁶² Even if Debtor did not eliminate the linen closet in the cabana bathroom, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

62 Jessica Declaration ¶50.

51. Debtor eliminated the built-in shelving in the cabana without Plaintiffs' knowledge and approval and without a credit to the Plaintiffs.⁶³ Even if Debtor did not eliminate the built-in shelving in the cabana, Debtor did not reject this work as not conforming to the Project Plans or cause the amount due under the Construction Contract to be reduced by an amount appropriate and equitable.

63 Jessica Declaration ¶51.

52. Although Debtor knew that Plaintiffs wanted Monier brand roof tiles, and that the Project Plans called for Monier brand tiles, Debtor did not inform Plaintiffs that the sample tile provided by Evans Construction was not a Monier tile, but a less sturdy clay tile.⁶⁴

64 Jessica Rebuttal Declaration ¶27.

53. In early 2010, the rock walls, rock berm and concrete paths became a very serious concern because the construction of these walls appeared to be very haphazard and unprofessionally done.⁶⁵ For example, the mortar mix would crumble when touched, the caps of the rock walls were cracking, rocks were falling off the walls, erosion was taking place on the berm and Plaintiffs observed that the walls were not being built to plans and specifications.⁶⁶ Plaintiffs asked to the point of begging that Evans Construction cause the rock walls and berm to be fixed. But Evans Construction adamantly affirmed that the walls and pathways were safe and that it was built to "last the life of the property".⁶⁷ Despite communicating Plaintiffs' serious concerns about the rock walls to Debtor, Debtor refused ask Evans Construction to repair or build the walls properly but only offered alternatives that were unacceptable and superficial.⁶⁸

65 Jessica Declaration at ¶¶ 68-70; Exhibit 73.

66 Id.

67 Id.

68 Id.

54. Debtor knew that DEE and Evans Construction were acting in a manner that created defects, deficiencies, and deviations from the Project Plans.

55. Debtor failed to reject nonconforming work and materials; and failed to disclose to Plaintiffs numerous defects, deficiencies, and deviations, many of which Plaintiffs discovered on their own.

56. Debtor knew that Evans Construction was using its own employees to perform work on the swimming pool.

57. Debtor was aware of numerous defects and deficiencies with respect to the pool, and that it would cost over $59,000 to fix, but did not reject the pool work.⁶⁹ Instead, Debtor obtained a quote from a licensed pool contractor who described all the problems with the pool to Plaintiffs in his repair estimate.⁷⁰ Plaintiffs were expected to pay to fix the pool; Debtor did not approach Evans Construction to pa to fix the pool or to provide a credit to Plaintiffs.⁷¹

69 Exhibits 21 and 57.

70 Trial Tr. (5/5/15) at 22:23 - 24:12.

71 Id. at 24:13-23.

58. On numerous occasions throughout 2009 and 2010, including at a meeting held at the Project site, DEE and Evans Construction represented to Plaintiffs that Basaltic Termite Barrier "(BTB") had been installed, that a vapor barrier had been installed, and that other insect-proofing had been completed. Debtor knew that these statements were false because Plaintiff Jessica Hashimoto discussed the matter with Debtor before their meeting on the subject, and gave him the copy of the Red-X Termite report before the meeting, and let him know that no other area except for the kitchen level was treated.⁷² Debtor failed to reject the deviation from the Project Plan; failed to cause the other areas of the Project to be treated with termiticide; and failed to provide for a credit for Plaintiffs for the nonconforming work.

72 Exhibit 61.

59. Debtor knew or should have known that DEE was performing work that it was not licensed to do, and/or that DEE was using subcontractors that were not properly licensed, including for the swimming pool,⁷³ air conditioning,⁷⁴ rock walls, concrete slabs, excavation and grading, painting, plastering, flooring, tile and structural steel⁷⁵.

73 Exhibit 37.

74 Exhibit 24.

75 Jessica Rebuttal Dec at ¶43.

60. Debtor did nothing to determine if Evans Construction's subcontractors were appropriately licensed,⁷⁶ and, thus, did not take any action to endeavor to guard Plaintiffs from unlicensed work.

76 Trial Tr. (5/5/15) at 114:2-4.

61. Debtor held a class B contractor's license between August 18, 2005 and September 30, 2006 and should have been familiar with the limitations on what a class B contractor could do.

62. Also, in 2004, Debtor was aware of the importance of the proper licensing of contractors as he had received a warning letter from State of Hawaii, Department of Commerce and Consumer Affairs' Regulated Industries Complaints Office ("RICO") relating to an allegation of aiding and abetting unlicensed persons.⁷⁷

77 Jessica Rebuttal Declaration at ¶5.

63. Based on Debtor's knowledge and experience, Debtor was aware of the licensing requirements for contractors and specialty contractors.

64. On a number of occasions, when Plaintiffs raised concerns regarding the Project, primarily when Plaintiffs told Debtor they wanted what was called for in the Project Plans and it would have resulted in an expense to Evans Construction, Debtor would simply dismiss them. On other occasions when Plaintiffs raised concerns regarding the Project, Debtor evidenced his lack of loyalty to the Plaintiffs and favoritism for DEE and Evans by responding, "Do you want to put a young man [Evans] out of business?"; "Do you want him [Evans] to file for bankruptcy?"; or make other similar comments.⁷⁸

78 Jessica Declaration at ¶72; Jessica Rebuttal Declaration at ¶¶28 and 32.

65. In order to close the building permits and obtain a certificate of occupancy that would allow the Project to be inhabited by the Plaintiffs, a number of special inspections were required to be successfully completed.⁷⁹

79 Revised Ordinances of Honolulu 16-1.1 (adopting International Building Code and International Residential Code for One- and Two Family Dwellings) at sections 110.1 and 110.2, and 1704.

66. Plaintiffs retained Xiang Yee as the structural engineer for the Project.⁸⁰ Mr. Yee was to perform special inspections for the following types of work and certify that based on observations during construction, the work was completed in conformance with the approved plans and specifications, and the applicable workmanship provisions of the Building Code:

80 Jessica Declaration at ¶53.

Item 1 - Concrete

Item 4 - Reinforcing Steel

Item 7 - Structural Masonry

Item 16 - Sheathed Shear Walls and Diaphragms

Item 17 - Complete Load Path and Uplift Ties⁸¹

81 Declaration of Xiang Yee dated March 12, 2015 ("Yee Declaration") at ¶4; Declaration of Xiang Yee dated April 27, 2015 ("Yee Rebuttal Declaration") at ¶6; Exhibit 5.

67. Although Debtor claims to have tried to contact Mr. Yee with respect to other issues, Debtor failed to contact the structural engineer to perform any of the special inspections.⁸²

82 Jessica Declaration at ¶55; Yee Declaration at ¶6.

68. Debtor deliberately chose not to contact Mr. Yee because he would slow down construction.⁸³

83 Jessica Declaration at ¶56.

69. Plaintiff Jessica Hashimoto immediately contacted Mr. Yee in early 2010 when she found out that the structural special inspections had not occurred.⁸⁴

84 Jessica Declaration at ¶¶ 57-58; Yee Rebuttal Declaration at ¶9.

70. By May 2010, the house was ostensibly approximately 90% complete.⁸⁵

85 Yee Declaration at ¶7.

71. Mr. Yee went to the Project site to assess whether he could perform the inspections and determined that he could not do so because the walls, ceilings, and floors were closed and I could not inspect what was done.⁸⁶

86 Id. at ¶ 7; Yee Rebuttal Declaration at ¶9.

72. At the site, Debtor informed Mr. Yee that he was going to perform all of the special inspections for which Mr. Yee had been hired (Item Nos. 1, 4, 7, 16, and 17), because Debtor had observed construction of the Project.⁸⁷

87 Yee Rebuttal Declaration at ¶10.

73. Mr. Yee told Debtor to remove Mr. Yee's name from the building permit and Project Plans because he was not given the opportunity to inspect the house while it was being built. Debtor did not take any action to remove Mr. Yee's name from the special inspection list that was submitted to and approved by the City & County of Honolulu Department of Permitting and Planning (the "C&C").⁸⁸

88 Id. at ¶¶ 8-9.

74. On September 30, 2010, the C&C caused a Notice of Violation to be issued for the Project identifying various violations of the Revised Ordinances of Honolulu.⁸⁹

89 Exhibit 17.

75. On or about November 9, 2010, the C&C received a letter from Cockett & Associates signed by Debtor dated November 8, 2010 informing the C&C that certain special inspections, Item Nos. 17 (Complete Load Path and Uplift Ties) and 18 (Termite Protection), had been completed and that based on observations during construction, the work was completed in conformance with the approved plans and specifications, and the applicable workmanship provisions of the Building Code.⁹⁰

90 Exhibit 2017.

76. Despite the requirements on the C&C Form BD200.8 "Building Code Requirements For Special Inspectors" ("Special Inspection Form") which Debtor submitted to the C&C for Items Nos. 17 and 18 identifying himself as the special inspector for those items, Debtor failed to comply with the duties and responsibilities of a special inspector, including furnishing such inspection reports to Plaintiffs and bringing discrepancies to the immediate attention of Evans Construction.⁹¹

91 Exhibit 8 at 71:2-6; Exhibit 28.

77. Further, based on Mr. Yee's observations, special inspection Items No. 17 and 18 do not conform to the Project Plans, including because steel beams were not placed and installed as per the Project Plans and did not meet minimum structural code requirements, and because a basaltic termite barrier was not used.⁹² Even though some termiticide may have been applied, it was only applied to 1,600 square feet of the concrete slab on grade, which corresponds to the lower level of the house.⁹³ There is no evidence that termiticide was applied to the mid- and upper levels of the house, the garage slab, the lanai and entryways.

92 Yee Declaration at ¶¶12-13; Exhibits 61; 2022, and 2023.

93 Exhibits 61, 2022 and 2023.

78. Debtor did not perform the special inspection for Item Nos. 1, 4, 7, or 16,⁹⁴ which Mr. Yee was hired to do, but which Debtor told Mr. Yee he would.

94 Trial Tr. (5/5/15) at 171:1-5.

79. Plaintiffs brought numerous discrepancies in the workmanship and materials to the attention of DEE, Evans Construction, Debtor, and Cockett & Associates.⁹⁵

95 Exhibits 12, 13, 14, 21, 22, 23, 26, 29, 35, 40, 41, 42, 44, 46, 47, 49, 57, 70, 98, 100, 103, 104, 122, 129, and 132.

80. Plaintiffs presented a list of deficiencies to DEE and Evans Construction.⁹⁶ However, DEE and Evans Construction refused to cure the defects, in violation of the Construction Contract.⁹⁷

96 Exhibit 12.

97 Exhibit 58.

81. Debtor refused to reject nonconforming work and materials, and refused to assist in developing a plan to cure the defects. Debtor instead urged Plaintiffs simply to accept the construction defects.⁹⁸

98 Jessica Declaration at ¶82.

82. Debtor willfully refused and failed to properly review invoices submitted by DEE and Evans Construction. Debtor instead urged Plaintiffs simply to pay all invoices received from DEE and Evans Construction, except for the final invoices because Debtor advised that Plaintiffs should retain 10% until completion.⁹⁹

99 Exhibit 32.

83. Debtor ignored specific instructions and requests from Plaintiffs that Debtor assist Plaintiffs in evaluating the accuracy of invoices submitted.¹⁰⁰

100 Exhibits 57, 103, 104, 105, 108, 113, 118, 125, and 127.

84. Despite Debtor's knowledge that substandard materials were being used or that items in the Project Plans were being eliminated either by Debtor or Evans Construction, Debtor never created any change orders or construction change directives requiring Evans Construction to credit Plaintiffs for such deficiencies.

85. Plaintiffs and Debtor discussed and agreed specifically at the beginning of the design process the possible injury for deviating from the Project Plans relating to (i) the location of the electrical box; (ii) the use of the Monier roof tiles; and (iii) use of cedar wood for the trellis.¹⁰¹ Respectively, when drawing up the Project Plans, (i) Plaintiffs stated emphatically that they wanted the electrical box in a protected corner of the house, so that it would not be subject to the brunt of salt from ocean winds; (ii) Plaintiffs stated that they wanted to use Monier roof tiles, which Plaintiffs are familiar with, as that brand of tiles are on their current house, and which are very sturdy and do not crumble or crack like other roof tiles; and (iii) Plaintiffs stated that they wanted to use cedar wood for the trellis, because it lasts longer and is insect resistant.¹⁰² Debtor agreed and incorporated these items into the Project Plans.¹⁰³ Then Debtor made unilateral changes to all of these items, or approved changes without Plaintiffs' permission or failed to reject such nonconforming work, which was never credited to Plaintiffs and the natural consequence of which was harm to Plaintiffs.

101 Jessica Declaration at ¶5-7.

102 Id.

103 Exhibit 133.

86. The resulting injuries were as Plaintiffs predicted (and specifically identified for Debtor). With respect to the electrical box, Debtor moved the location of the electrical box to an unprotected area of the house in order to save money that would have been spent placing it in the correct location. The inevitable injury is that the salt air has already corroded the electrical box, which needs to be replaced.¹⁰⁴ With respect to the trellis, Debtor knew or should have known that Evans Construction was substituting materials and not using cedar, but did nothing. The resulting injury is that the trellis is weathering prematurely and is vulnerable to insect damage.¹⁰⁵ With respect to the roof tiles, Debtor allowed Evans Construction to use a different roof tile that is an inferior product and did not reject the clay tiles. And inevitably, the roof tiles are cracking and need to be replaced in total.¹⁰⁶

104 Exhibit 72.

105 Exhibit 81.

106 Exhibit 84.

87. Neither the Plaintiffs nor Evans Construction and/or DEE made a request of Debtor, either orally or in writing, to interpret or decide matters relating to performance of the Contract Documents pursuant to § 2.6.15 of the Architect's Agreement or § 4.2.11 of the General Conditions.

88. Neither the Plaintiffs nor Evans Construction and/or DEE submitted a claim or dispute for decision to Debtor, either orally or in writing, pursuant to § 2.6.17 of the Architect's Agreement or § 4.4.1 of the General Conditions.

89. Debtor's actions favored Evans Construction and harmed Plaintiffs.

90. Debtor had a personal interest in Evans Construction remaining in business.

91. Because Evans Construction was the contractor on four other jobs for which Debtor was the architect (and on which Debtor invited Evans Construction to bid), if Evans Construction went out of business or filed bankruptcy, the Debtor's four other jobs with Evans Construction would be adversely affected. Debtor testified that generally it would take longer and be more expensive if another contractor had to finish a project that was started by another contractor.¹⁰⁷ Debtor also admitted that the replacement contractor would typically not want to take responsibility for work done by the prior contractor.¹⁰⁸ Because Debtor invited Evans Construction to bid on the four projects,¹⁰⁹ it would have reflected poorly on Debtor if Evans Construction went out of business during those projects.

107 Trial Tr. (5/05/15) at 144:12-17.

108 Trial Tr. (5/05/15) at 144:18-20.

109 Cockett Declaration at ¶42.

92. Both Debtor and DEE testified that there was intended to be a final reconciliation upon the completion of the construction of the Project where Plaintiffs would have received credit for various items.

93. Debtor's and DEE's testimony regarding the intention that there be a final reconciliation where Plaintiffs would receive credits is not credible. This testimony is contrary to the requirements of the Architect's Agreement, the Construction Contract and the Project Plans, included the General Conditions. This testimony is also contrary to Evans' Construction's actions during the contract where it charged Plaintiffs for upgrades that Plaintiffs had to pay for immediately, such as for the cabana deck, additional rock walls,¹¹⁰ and the additional bathroom. This testimony is also contradicted by the letters of Evans Construction's counsel demanding additional monies without providing any credits.¹¹¹

110 Exhibits 31, 58 and 2024.

111 Exhibits 58 and 2024.

94. To date, Plaintiffs paid Evans Construction $1,201,807.92 out of the $1,307,764.34 contract price; Plaintiffs received a settlement payment from Evans in the amount of $305,000 (of which approximately $156,000 was expended for attorneys' fees and costs, including experts); and it will cost Plaintiffs an additional $600,000 - $807,000 to bring the home up to code and in minimal conformance with the Project Plans.¹¹²

112 Jessica Declaration at ¶86.

95. Plaintiffs would not have acted as they did - continuing with the Project and continuing to pay Evans Construction while allowing their home to be constructed with significant deviations from the Project Plans- if Debtor had told them all about the defects and deficiencies and deviations from the Project Plans.¹¹³ Instead, by keeping quiet and reassuring Plaintiffs that everything was okay, Plaintiffs have suffered harm.

113 Jessica Rebuttal Declaration at ¶69.

96. After Debtor filed bankruptcy, Plaintiffs requested various documents from the Debtor, including: "Any and all documents relating to the value of Keith Cockett & Associates, Inc., including tax returns, financial statements, profit and loss statements, balance sheets, accounts payables lists, accounts receivables lists, and list of pending and completed engagements for calendar years 2011, 2012, 2013 and 2014."¹¹⁴

114 Exhibit 140.

97. By letter dated April 3, 2015, Plaintiffs' counsel informed Debtor's counsel that Debtor still had not produced Cockett & Associates' "financial statements, profit and loss statements, and balance sheets for 2011, 2012 and 2014" and "any accounts payables lists, accounts receivables lists, and list of pending and completed engagements for calendar years 2011, 2012, 2013 and 2014."¹¹⁵ Debtor was asked to turn over the paper files as well as the Quickbooks electronic files.¹¹⁶

115 Exhibit 140.

116 Exhibit 140.

98. Enclosed with a letter dated April 9, 2015, Debtor turned over paper copies of the requested Cockett & Associate Profit & Loss Statements and Balance Sheets, but not the electronic Quickbooks files.¹¹⁷ As evidenced by the April 9, 2015 letter, Debtor also did not turn over paper copies and Quickbooks electronic files of any accounts payables lists, accounts receivables lists, and list of pending and completed engagements for calendar years 2011, 2012, 2013 and 2014.

117 Exhibit 141.

99. Debtor testified that his electronic Quickbooks files would show bills that Cockett & Associates generates for its clients (accounts receivables) and expenses that Cockett & Associates pays.

100. Debtor testified that he turned over his Quickbooks files in electronic format to his attorneys. As of the date of trial, these Quickbooks files had not been turned over to Plaintiffs.

WITNESS CREDIBILITY

101. Debtor's testimony was not as credible as Plaintiffs' testimony.

102. Debtor was able to provide clear statements in his direct testimony by declaration and was able to recall facts on redirect examination, but often could not recollect facts when cross-examined or testified vaguely.

103. Debtor's written direct testimony was at times inconsistent with his oral testimony and the documentary evidence, including his own exhibits.

104. For example, in paragraph 45 of Debtor's Declaration, he testifies that, "It was not part of [Cockett & Associates'] scope of work to review Evans' invoices." At trial, Debtor testified that he understood that that he was to review and certify the amount due to the contractor and issue certificates in such amounts.¹¹⁸ The Architect's Agreement also provides that Debtor was to review and certify the amount due to the contractor and issue certificates of payment in such amounts.¹¹⁹

118 Trial Tr. (5/5/15) at 104:4-7.

119 Exhibit 65 at 2.6.9.1.

105. In his written direct testimony, Debtor testified that the only complaint ever filed against him with RICO was by Plaintiffs.¹²⁰ Jessica Hashimoto testified that before hiring Debtor, she became aware of a complaint against Debtor filed with RICO and she discussed it with him.¹²¹ On cross-examination, Debtor continued to deny that there was a RICO complaint previously filed against him.¹²² In an attempt to refresh his recollection, Debtor was shown a RICO Business and License Complaints History Search printed on 11/8/2004 alleging a complaint against him for aiding and abetting an unlicensed person.¹²³ Despite reviewing the RICO Business and License Complaints History Search, Debtor denied that a previous complaint was filed.¹²⁴ Debtor's testimony on this matter was not credible.

120 Cockett Declaration at ¶5.

121 Trial Tr. (5/5/15) at 28:1-16.

122 Trial Tr. (5/5/15) at 108:9 - 109:17.

123 Id.

124 Id.

106. In his written direct testimony, Debtor states that neither his proposal¹²⁵ nor the Architect's Agreement¹²⁶ contain any terms requiring Cockett & Associates to attend weekly on-site meetings with Plaintiffs during the construction observation phase and, in fact excluded such meetings during the construction observation stage.¹²⁷ Contrary to Debtor's written direct testimony, Debtor's proposal specifically provides for "Periodic site visits (usually once a week)" during the construction observation stage.¹²⁸

125 Exhibit 2004.

126 Exhibit 65.

127 Cockett Declaration at ¶10.

128 Exhibit 2004.

107. In his written direct testimony, Debtor admits that BTB was called for in the Project Plans and also admits that he does not know whether it was installed.¹²⁹ At trial, Debtor testified that he did not observe the application of termite protection.¹³⁰ Both Debtor's written and oral testimony are inconsistent with Debtor's statement to the C&C on November 8, 2010 that, with respect to special inspection Item No. 18 Termite Protection, based on observations during construction, the termite protection was done according to the Project Plans.¹³¹ Further, Debtor did not make the required special inspection report to the Plaintiffs (Owners).

129 Cockett Declaration at ¶26.

130 Trial Tr. (5/5/15) at 143:20-22.

131 Exhibit 2017.

108. In his written direct testimony, Debtor states, with respect to the rock wall warranty, that he has no recollection of advising Plaintiffs to accept it and there was no reason for him to have done so.¹³² However, the documentary evidences establishes that Plaintiffs expressed concern as to the structural integrity of the rock walls to Debtor on the morning of April 29, 2009;¹³³ that Debtor then contacted Evans Construction and "asked [DEE] to draft a letter that assumes responsibility for the wall and any issues in the future due to this deviation from the plans";¹³⁴ and that evening DEE provided to Plaintiffs a "Warranty of Workmanship" for the rock walls.¹³⁵

132 Cockett Declaration at ¶25.a.

133 Exhibit 103.

134 Exhibit 104.

135 Exhibit 102.

109. In Debtor's written direct testimony, he states that Plaintiffs did not begin to express dissatisfaction with various aspects of construction until it was 90% complete. This statement is completely contrary to the evidence.¹³⁶

136 Cockett Declaration at ¶28; Exhibits 26, 29, 36, 98, 104 and 122.

110. In Debtor's written direct testimony, he states that Plaintiffs asked him to add an outside bathroom,¹³⁷ but in an email to Debtor from Plaintiff Jessica Hashimoto, it is clear that she is unaware of the scope what Debtor drew in his plans for the outside bathroom.¹³⁸

137 Cockett Declaration at ¶23.b.

138 Exhibit 114.

111. In Debtor's written direct testimony, he states that the decisions to move the cabana was made prior to his arrival at a meeting and that upon his arrival Plaintiffs handed him a sketch with the new location.¹³⁹ However, at trial, Debtor testified that he came to the site one day and Dennis Hashimoto had the drawing that they had looked at earlier; there was discussion of the merits of moving the cabana, and then Dennis Hashimoto decided to move the cabana.¹⁴⁰

139 Cockett Declaration at ¶23.a.

140 Trial Tr. (5/5/15) at 161:22-162:8.

112. In Debtor's written direct testimony, he states that all handrail changes were done at Plaintiff's requests,¹⁴¹ but in an email to Plaintiff Jessica Hashimoto questioning Debtor about the change, he admits that he was responsible for the change¹⁴².

141 Cockett Declaration at ¶23.g.

142 Exhibit 14.

113. Debtor testified that his computer crashed and that he did not have access to all of his emails to refute Plaintiffs' claims.¹⁴³ This claim of loss of documents that would have been helpful to Debtor is not credible. Debtor previously responded to Plaintiffs First Request for Production of Documents in this adversary proceeding.¹⁴⁴ Nowhere in Debtor's response did Debtor indicate that documents that once existed were no longer available because his computer crashed.¹⁴⁵

143 Trial Tr. (5/5/15) at 156:16-157:20.

144 Exhibit 144.

145 Exhibit 144.

114. Debtor testified that Plaintiffs agreed to many of the changes from the Project Plans that they now complain of.¹⁴⁶ However, Debtor did not produce as evidence to corroborate his testimony any of his architect's field reports or notes. Further, it was Debtor's responsibility as the architect to draft written change orders and written construction change directives if in fact Plaintiffs requested changes to the Project Plans, but none were drafted.

146 Cockett Declaration at ¶23.

115. DEE's testimony was not credible.

116. DEE's testimony in his written declaration that Plaintiffs did not begin to express dissatisfaction with various aspects of construction until it was 90% complete is completely contrary to the evidence.¹⁴⁷

147 Evans Dec at ¶9; Exhibits 26, 29, 36, 98, 104 and 122.

117. DEE testified at trial that he acknowledged there were problems with the pool, but he intended to remedy them.¹⁴⁸ Plaintiff Jessica Hashimoto testified that DEE's testimony in court was the first time she heard DEE indicate that he intended to fix the pool. DEE's testimony is inconsistent with Ms. Hashimoto's testimony and with his own words in an email where he states that he has "a pool contractor lined up" who "has inspected the pool and will sign for it."¹⁴⁹ DEE's testimony is also inconsistent with what Debtor reported to Plaintiff Jessica Hashimoto in August of 2010, that DEE assumes the pool is fine, he just needs a licensed person to sign off on it.¹⁵⁰ DEE's testimony on this matter was not credible.

148 Trial Tr. (5/5/15) at 83:3-11.

149 Exhibit 16.

150 Exhibit 21.

118. To bolster DEE's credibility, Debtor submitted DEE's resume.¹⁵¹ In DEE's resume, he indicates that he was the owner of Evans Construction, Inc. from July 2004 - August 2011. DEE claims that Evans Construction, Inc. was sold in 2011.

151 Exhibit 2020.

119. There is no Evans Construction, Inc. DEE owned Evans Construction, LLC.

120. Neither Evans Construction, Inc. (which did not exist), nor Evans Construction, LLC was sold in 2011.¹⁵²

152 Trial Tr. (5/5/15) at 65:22-24.

121. Evans Construction, LLC continued operating into 2012 when two complaints were filed against it and DEE with the State of Hawaii, Department of Commerce and Consumer Affairs' Regulated Industries Complaints Office ("RICO"), which caused RICO to allege that Evans Construction and DEE violated Hawaii Revised Statutes ("HRS") § 444- 17(13)(Willful failure or refusal to prosecute a project or operation to completion with reasonable diligence) and Hawaii Administrative Rules ("HAR") § 16-77-79 (failure to perform work in a workmanlike manner and/or in conformity with trade standards).¹⁵³

153 Exhibit 136.

122. In a settlement with RICO, Evans Construction and DEE agreed to the voluntary revocation of their respective licenses.¹⁵⁴ Evans Construction and DEE also agreed not to renew their respective Hawaii contractors' licenses and to never seek new contractors' licenses in the State of Hawaii in the future.¹⁵⁵

154 Exhibit 136 at 4 ¶1.

155 Exhibit 136 at 4 ¶1.

123. DEE and his wife filed for Chapter 13 bankruptcy in 2012, Case No. 12-02483.¹⁵⁶ In Item 1 on their Statement of Financial Affairs filed on December 19, 2012, DEE and his wife stated their income from employment as $1 for calendar year 2010, $1 for calendar year 2011 and for $1 from January 1, 2012 until December 19, 2012 when those amounts were not true.¹⁵⁷ In Item 2 on their Statement of Financial Affairs filed on December 19, 2012, DEE and his wife state that they have no income other than from employment or operation of business when that was not true, as DEE and his wife had income in 2012 relating to the sale of their real property located at 53-91 Halai Street. Further, on Item 10 on their Statement of Financial Affairs filed on December 19, 2012, DEE and his wife failed to disclose the sale of jointly owned real property located at 53-91 Halai Street that they sold in May of 2012 for $1,285,000, which was encumbered by a mortgage of less than $875,000 at the time.^{158 159}

156 Exhibit 91.

157 Exhibit 91 at p. 75 of 107.

158 Trial Tr. at 72:17-24.

159 The Court takes judicial notice that DEE and his wife filed an Amended Statement of Financial Affairs in their bankruptcy on December 21, 2012 amending (i) Item 1 to report income from employment or operation of business at $223,025 for calendar year 2010, $124,585 for calendar year 2011 and for $47,000 (estimated) from January 1, 2012 until December 19, 2012; (ii) Item 2 to report rental income in 2010 of $8,000, (but did not disclose the income from the sale of the real property located at 53-91 Halai Street); and (iii) Item 10 to disclose the sale of the real property located at 53-91 Halai Street.

124. DEE's testimony appears biased in favor of Debtor. DEE voluntarily provided written direct testimony as a witness on behalf of Debtor in this proceeding in opposition to Plaintiffs' claims against Debtor, contrary DEE's agreement with Plaintiffs to "cooperate with the [Plaintiffs] in pursuit of claims against [Debtor] and [Cockett & Associates], including but not limited to providing documentary evidence and deposition and trial testimony."¹⁶⁰

160 Exhibit 88 at p. 5 at ¶h.

125. Both Debtor and Evans testified that it was Plaintiffs who requested many of the changes from the Project Plans or that the changes from the Project Plans were verbally discussed and approved by the Plaintiffs. This testimony of both witnesses is not credible. Both the Architect's Agreement and the Construction Contract required changes to the Project Plans to be in writing and approved by the Plaintiffs.¹⁶¹ Had Plaintiffs requested changes to the Project Plans, it was Debtor's responsibility and duty to create written change orders or written construction change directives to document any changes to the Project Plans agreed to by Plaintiffs. The absence of written change orders or written construction change directives is evidence that Plaintiffs did not request the changes to the Project Plans complained about in the proceeding. The significance of the absence of documentation of Plaintiffs' approval to deviations from the Project Plans is even greater for the period after September 2009 when Plaintiffs expressed objections to deviations from the Project Plans made by Debtor and/or Evans Construction without Plaintiff's knowledge and approval, as one would expect that Debtor and/or would cause any future deviations from the Project Plans to be documented (even if only to protect themselves).

161 Exhibit 65 at § 2.6.13; and Exhibit 66 at ¶12.

126. The testimony of Plaintiffs and Mr. Yee was clear, detailed and consistent with the documentary evidence. Plaintiffs' testimony and Mr. Yee's testimony was very credible.

II. PLAINTIFFS' PROPOSED CONCLUSIONS OF LAW

To the extent any of the following conclusions of law constitute findings of fact, they are adopted as such.

A. Jurisdiction and Venue

1. The Court has personal jurisdiction over the defendant and jurisdiction of the subject matter. The bankruptcy court has statutory and constitutional power to enter a final judgment. Venue is proper in this district.

B. Standards Relating To Exceptions From Discharge

2. Exceptions to discharge are construed strictly against the creditor and liberally in favor of the debtor. Snoke v. Riso (In re Riso), 978 F.2d 1151, 1154 (9th Cir. 1992).

3. The plaintiff seeking to establish an exception to the discharge bears the burden of proof. Fed. R. Bankr. P. 4005; see also In re Niles, 106 F.3d 1456, 1464-65 (9th Cir. 1997). The plaintiff must meet this burden by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 286 (1991); Turtle Rock Meadows Homeowners Ass'n v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000).

C. Debtor's Debt to Plaintiffs Is Nondischargeable Pursuant to Section 523(a)(2)(A)

Misrepresentations and

4. A chapter 7 discharge does not discharge an individual from any debt for money to the extent that the debtor obtained it by "false pretenses, a false representation, or actual fraud . . . ." 11 U.S.C. § 523(a)(2)(A). Plaintiffs must prove by a preponderance of the evidence the following five elements in order for Debtor's debt to them to be nondischargeable:

(1) misrepresentation, fraudulent omission or deceptive conduct by the debtor;



(2) knowledge of the falsity or deceptiveness of his statement or conduct;



(3) an intent to deceive;



(4) justifiable reliance by the creditor on the debtor's statement or conduct; and



(5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct.

In re Weinberg, 410 B.R. 19, 35 (B.A.P. 9th Cir. 2009).

1. Element 1 - Misrepresentations

5. A misrepresentation may be either express or implied. In re Felton, 197 B.R. 881, 889 (N.D. Cal. 1996) (conduct creating a false pretense or false representation can justify nondischarge under section 523(a)(2)); see also Capital Corporation v. Weinstein, 31 B.R. 804, 809 (Bankr. E.D. N.Y. 1983) ("It is well recognized that silence, or the concealment of a material fact, can be the basis of a false impression which creates a misrepresentation actionable under § 523(a)(2)(A)."). A debtor's misleading conduct intended to convey an inaccurate impression may constitute "false pretenses." Id.; see also In re Webb, 349 B.R. 711, 716 (Bankr. D. Or. 2006) ("'False pretenses' or 'false representation' both involve intentional conduct intended to create and foster a false impression."). A statement that is not necessarily untrue when it is first made may become a misrepresentation when the debtor becomes aware that it is false and yet continues to act as though the statement is still true. Kane v. Torres (In re Torres), 2011 Bankr. LEXIS 384, **12-13 (Bankr. D. Haw. 2011). With respect to Debtor's misrepresentations, this element is met because Debtor made many misrepresentations to Plaintiffs:

• Debtor made false certifications and/or representations that work was completed according to the Project Plans and by appropriately licensed contractors.

• Debtor repeatedly advised Plaintiffs to pay Evans Constructions' invoices, which is a representation that the construction has progressed to the point indicated in the payment request and that to the best of the Debtor's knowledge, information, and belief, the quality of the work is in accordance with the Project Plans.



• On numerous occasions throughout 2009 and 2010, including at a meeting held at the Project site, DEE and Evans Construction represented to Plaintiffs that BTB had been installed, that a vapor barrier had been installed, and that other insect-proofing had been completed. Debtor knew that these statements were false because Plaintiff Jessica Hashimoto called him and discussed the matter with Debtor before their meeting on the subject, and gave him the copy of the Red-X Termite report before the meeting, and let him know that no other area except for the kitchen level was treated.



• Debtor intentionally failed to inform Plaintiffs of the incomplete work and misrepresentations by Evans Construction and DEE. On November 8, 2010, Debtor wrote a letter to the C&C, informing the C&C that Cockett & Associates had performed

special inspection services covering Complete Load Path and Uplift Ties and Termite Protection. However, no special inspection services had been performed, and the structural steel work and termite protection at the Project were defective, incomplete, and not according to the Project Plans at the time of Debtor's letter to C&C and at all other times relevant to this action.



• Debtor failed and refused to contact the structural engineer retained to perform certain special inspections for the Project. Debtor first misrepresented to Plaintiffs that he had contacted the structural engineer with regard to beginning inspections, when he had in fact failed to do so. The structural engineer was not contacted until the Project was nearly complete, preventing key inspections from going forward that would have resulted in the discovery of defective and deficient work before it was concealed by walls, floors and ceilings.



• During construction of the Project, DEE and Evans Construction and their agents and employees caused injury to Plaintiffs' real property in the form of subsidence, erosion, and

increased threat of flooding and landslide, and Debtor intentionally failed to inform Plaintiffs of the injury.

6. All of these actions constitute misrepresentations, even those actions for which Debtor did not expressly misrepresent a condition or action, because Debtor's conduct was intended to create and foster a false impression - that Debtor's observations were that the Project was in conformance with the Project Plans and Hawaii law, even though this was not the case.

2. Element 1 - Omissions

7. A claim for relief based on a fraudulent omission must allege facts that, if proven, demonstrate that the defendant had a duty to disclose the omitted information. See Citibank (South Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1089 (9th Cir. 1996) (stating that an omission can be fraudulent and actionable under § 523(a)(2)(A) when the debtor had a duty to disclose the omitted facts). Here, Debtor had a duty to disclose both under the Architect's Agreement and by virtue of Debtor's fiduciary duties to Plaintiffs as their agent.

8. Debtor fraudulently omitted to tell Plaintiffs of the status of the Project and other conduct of Evans Construction (and then tried to cover up the unauthorized substitution of materials and nonconforming work) in violation of his duty to disclose. Among other things, these fraudulent omissions include the following:

• Debtor failed to disclose to Plaintiffs the unauthorized substitution of materials and nonconforming work.



• Debtor failed to disclose to Plaintiffs that DEE and Evans Construction, without authorization or approval, deviated from the materials and methods of construction specified in the Project Plans.



• Debtor failed to disclose to Plaintiffs DEE and Evans Construction's use of unlicensed contractors and performance of work themselves on an unlicensed basis.

9. All of these actions constitute fraudulent omissions, because Debtor had a duty to disclose and report to Plaintiffs, which he did not do. See Barnes v. Belice (In re Belice), 461 B.R. 564, 580 (B.A.P. 9^th Cir. 2011) ("A claim for relief based on a fraudulent omission must allege facts that, if proven, demonstrate that the defendant had a duty to disclose the omitted information.") (citations omitted).

3. Element 2

10. In order to satisfy element 2, Plaintiffs must prove that "'a false representation has been made without belief in its truth or recklessly, careless of whether it is true or false.'" Castro v. Han (In re Han), 2013 U.S. Dist. LEXIS 94918, at *7 (C.D. Cal. July 8, 2013) (quoting In re Kong, 239 B.R. 815, 826-27 (B.A.P. 9th Cir. 1999) (emphasis added)). "This reckless disregard for the truth of a representation can also be expressed as "'reckless indifference to his actual circumstances.'" Id. (quoting Kong, 239 B.R. at 826 (citing In re Anastas, 94 F.3d 1280, 1286 (9th Cir. 1996))).

a. Misrepresentations

11. Here, Debtor was retained by Plaintiffs to, among other things, observe the construction of the work, including to "endeavor to guard the Owner against defects and deficiencies in the Work." Debtor indicates that he made at least weekly site visits to the Project and went to the Project in order to answer questions of DEE, Evans Construction and/or Plaintiffs. For many of these misrepresentations, Debtor admits that he specifically authorized changes to the Project Plans, yet failed to inform Plaintiffs. Debtor only informed Plaintiffs about changes when Plaintiffs approached Debtor about them. At best, Debtor's misrepresentations were simply in reckless disregard of the truth -- as the observer of construction and as Plaintiffs' agent, Debtor either knew or should have known that these representations were untrue. As such, either Debtor knew that these representations were false at the time he made them, or made these representations or failed to disclose information to Debtor in reckless disregard of the truth.

b. Omissions

12. The circumstances of the Project, including substituted materials and deviations from the Project Plans, were not only something that Debtor would have necessarily observed, but also something that Debtor himself approved without authorization from Plaintiffs. Based on Debtor's statements and his assistance to Evans Construction in ignoring and/or covering up the Project defects and deficiencies and use of unlicensed specialty contractors, it can be inferred that Debtor knew of the falsity of his statements and/or omissions.

4. Element 3

13. With respect to element 3, "[s]ince a debtor will rarely admit to his fraudulent intentions, a creditor must rely on circumstantial evidence to infer an intention to deceive." Han, 2013 U.S. Dist. LEXIS at 94918, at *10 (citing In re Eashai, 87 F.3d 1082, 1090 (9th Cir. 1996)). "A court may infer intent to deceive from a false representation." Id. (citation omitted). Debtor's intent to deceive can be established by Debtor's reckless disregard for the truth. Han, 2013 U.S. Dist. LEXIS at 94918, at *10-11 (citing In re Gertsch, 237 B.R. 160, 167-68 (B.A.P. 9th Cir. 1999) ("[I]ntent to deceive can be inferred from the totality of the circumstances, including reckless disregard for the truth.")). Here, Debtor made many misrepresentations about the Project and fraudulently failed to tell Plaintiffs of the significant defects and deficiencies set forth above throughout the course of the Project. Debtor assured Plaintiffs that the Project was going according to the Project Plans, together with Debtor's instructions to Plaintiffs to pay Evans Construction for substandard work, substituted materials, items that were removed from the Project Plans without a credit, and work performed by unlicensed specialty contractors constituted a pattern of falsity sufficient to find fraudulent intent. Skinner v. Huggins (In re Skinner), 2014 Bankr. LEXIS 4984, *26 (B.A.P. 9^th Cir. 2014) ("The bankruptcy court may find fraudulent intent where there has been a pattern of falsity or from a debtor's reckless indifference to or disregard for the truth of a representation.") (citations omitted); In re Thomas, 2013 Bankr. LEXIS 5408 at *15 (Bankr. D. Colo. Dec. 27, 2013) (continuing false statements demonstrate intent to deceive).

5. Element 4

14. Element 4 is satisfied because Plaintiffs relied on Debtor's representations that the Project was being built according to the Project Plans, that Evans Construction was using licensed specialty contractors (or were otherwise conforming to the law regarding contractors), and that Debtor was, in fact, observing construction, acting in the best interest of Plaintiffs, and endeavoring to guard Plaintiffs against defects and deficiencies in the work. "Reliance need not reach a level of 'reasonableness' to establish nondischargeability under § 523(a)(2)(A), but must still be justifiable." Han, 2013 U.S. Dist. LEXIS at 94918, at *11 (citing Field v. Mans, 516 U.S. 59, 73-76 (1995)). "'[A] person is justified in relying on a representation of fact although he might have ascertained the falsity of the representation had he made an investigation.'" Id. (quoting Field, 516 U.S. at 70 (internal quotation marks omitted)). The inquiry regarding the justifiable standard focuses on "whether the falsity of the representation was or should have been readily apparent to the individual to whom it was made." Beneficial Cal., Inc. v. Brown (In re Brown), 217 B.R. 857, 863 (Bankr. S.D. Cal. 1998). Here, Plaintiffs' reliance on Debtor's representations was justified because Debtor was retained to observe construction and was expected to have expertise in doing so and because Debtor was in a fiduciary relationship with Plaintiffs. While Plaintiffs did find some defects and deficiencies on their own, so many more defects and deficiencies, such as the structural deficiencies and use of unlicensed specialty contractors, would not have been readily apparent to Plaintiffs. In fact, because of Debtor's silence, inaction and, in some instances, cover up of some of these defects and deficiencies, Plaintiff did not find out about many significant defects and deficiencies until much later.

15. With respect to satisfying Element 4 regarding the Debtor's fraudulent omissions, as stated above, Plaintiffs' reliance on Debtor was entirely justified. Moreover, with respect to omissions, the issue becomes one of materiality of the omission. Plaintiffs must prove that the undisclosed facts were material:

[W]here a creditor argues that a debt is nondischargeable under § 523(a)(2)(A) because the debtor committed fraud by intentionally failing to disclose material facts, the creditor must prove "that the debtor concealed facts and that the facts concealed were material." [In re Evans, 181 B.R. 508, 514 (Bankr. S.D. Cal. 1995)] ("[S]ilence, or the concealment of a material fact, can be the basis of a false impression which creates a misrepresentation under § 523(a)(2)(A)"); accord In re Howarter, 114 B.R. 682, 684-85 n.2 (9th Cir. 1990). The concealment "must be sufficiently material to have caused the plaintiff to act in a manner that he would not have done had he known the truth." In re Dunston, 146 B.R. 269, 275 (D. Colo.1992). If "a reasonable . . . [investor] would attach importance to the alleged omissions in determining his course of action," such concealed facts qualify as material. In re Evans, 181 B.R. at 515. Thus, in a concealment action, "[m]ateriality rather than reliance becomes the decisive element of causation" because it would be impossible to analyze justifiable reliance as "it is not possible to rely on facts which have been concealed." Id. at 515, n.7.

Kelly v. J.A.W. Land & Trading, LLC (In re Kelly), 499 B.R. 844, 858 (S.D. Cal. 2013) (internal citations omitted). Here, Debtor's omissions related to the very heart of Debtor's obligations to disclose -- Debtor fraudulently omitted to tell Plaintiffs of the status of the Project, including the known defects and deficiencies and other wrongful conduct of Evans Construction, and then ignored and tried, in some instances, to cover up the unauthorized substitution of materials and nonconforming work. Plaintiffs would not have acted as they did - continuing with the Project and continuing to pay Evans Construction almost the entire contract price while allowing the Project to be constructed in an unsafe and unworkmanlike manner and, in some circumstances, by unlicensed contractors - if Debtor had told them what he was duty-bound to disclose. A reasonable homeowner would also have attached importance to these omissions. Accordingly, this element is also met.

6. Element 5

16. The trial as to Element 5, the issue of damages proximately caused by Debtor's fraud, has been bifurcated from this trial. At such trial, Plaintiffs will demonstrate that Element 5 is satisfied because Plaintiffs' damages were proximately caused by their reliance on Debtor's statements, omissions and fraudulent scheme.

Actual Fraud

17. Further, in addition to Debtor's fraudulent misrepresentations and fraudulent omissions, Debtor's conduct also constitutes actual fraud:

Actual fraud, by definition, consists of any deceit, artifice, trick or design involving direct and active operation of the mind, used to circumvent and cheat another—something said, done or omitted with the design of perpetrating what is known to be a cheat or deception. [Citibank (South Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1089 (9th Cir. 1996)], citing, RecoverEdge, L.P., v. Pentecost, 44 F.3d 1284, 1293 (5th Cir. 1996) (citing 3 Collier on Bankruptcy ¶ 523.08[5] (Lawrence P. King et al. eds., 14th ed. 1994).

Vacarro v. Krafka (In re Krafka), 2012 Bankr. LEXIS 4351, 22-23 (Bankr. C.D. Cal. Sept. 18, 2012).

18. Debtor's actions clearly evidence an intent to cheat Plaintiffs. Debtor repeatedly favored Evans Construction over his principals and resulted in Plaintiffs paying Evans Construction more than they should have; Evans Construction having to expend less money than it was obligated to; and Plaintiffs receiving less value than they should have. Debtor's actions also benefitted Debtor, as they helped keep Evans Construction in business so that Debtor's other clients would not be subject to delay, expense, and warranty issues if Evans Construction failed, keeping Debtor in the good graces of his other clients.

19. Debtor's debt, in an amount to be determined in a trial on damages, is nondischargeable pursuant to § 523(a)(2)(A).

D. Debtors' Debt to Plaintiffs Is Not Dischargeable Pursuant to Section 523(a)(6).

20. Plaintiffs also contend that their claims against the Debtor are not dischargeable under 11 U.S.C. § 523(a)(6), which provides that the chapter 7 discharge "does not discharge an individual debtor for any debt . . . for willful and malicious injury by the debtor to another entity or to the property of another entity."

21. In order to prevail under Count II, nondischargeability under § 523(a)(6), Plaintiffs must prove by a preponderance of the evidence both willful and malicious injury. See Carrillo v. Su (In re Su), 290 F.3d 1140, 1146-47 (9th Cir. 2002). The malicious injury requirement is separate from the willful injury requirement. Albarran v. New Form, Inc. (In re Barboza), 545 F.3d 702, 706 (9^th Cir. 2008).

22. Generally, an injury due to breach of contract—even an intentional breach—is not held nondischargeable under § 523(a)(6) "unless accompanied by willful and malicious tortious conduct." Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1205 (9th Cir. 2001); Lockerby v. Sierra, 535 F.3d 1038, 1040-42 (9th Cir. 2008)). Bankruptcy courts look to state law to determine whether acts constitute tortious conduct. Lockerby, 535 F.3d at 1041 (citing Jercich, 238 F.3d at 1206) (emphasis added).

23. "A 'willful' injury is a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." Id. (quoting Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998)). Injury caused by recklessness or negligence does not constitute "willful injury." Geiger, 523 U.S. at 60. The injury itself must be "deliberate or intentional." Id. The willful injury requirement is met when the debtor has a subjective intent to inflict injury or believes the injury is substantially certain to result from the conduct.

24. Circumstantial evidence can support a finding of "willfulness" under § 523(a)(6). The court can infer the requisite intention from the nature, extent, and circumstances of the injury. Nahman v. Jacks (In re Jacks), 266 B.R. 728, 742 (B.A.P. 9th Cir. 2001) ("[S]ubjective intent may be gleaned from objective factors.").

25. A "malicious act" is (1) a wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done without just cause or excuse. Albarran, 545 F.3d at 706. "Malice may be inferred from the nature of the wrongful act" if it is first established that the act was willful. Ormsby, 591 F.3d at 1207.

26. Debtor's conduct was not only a breach of the Architect's Agreement, but also constituted tortious conduct under Hawaii law.

27. Here, the tortious conduct includes breaches of fiduciary duties.

28. Sections 2.6.2, 2.6.4, 2.6.5 and 2.6.8 of the Architect's Agreement impose on Debtor fiduciary duties to act on behalf of the Plaintiffs.

29. Hawaii law clearly establishes that Debtor owed Plaintiffs fiduciary duties that arose out of Debtor's obligation to Plaintiffs to act on behalf of Plaintiffs while observing the construction of the Project. See Cho Mark Oriental Food v. K & K Int'l, 73 Haw. 509, 515, 836 P.2d 1057, 1061 (1992) (an agency relationship may be created by an express agreement between the parties, wherein that the principal has delegated authority that the agent has accepted and that authorizes the agent to do certain acts); Restatement (Second) of Agency § 405 (1958) ("(2) An agent is subject to liability to the principal if, having a duty to appoint or to supervise other agents, he has violated his duty through lack of care or otherwise in the appointment or supervision, and harm thereby results to the principal in a foreseeable manner. He is also subject to liability if he directs, permits, or otherwise takes part in the improper conduct of other agents.") (emphasis added).

30. The Hawaii Administrative Rules¹⁶² governing engineers, architects, land surveyors and landscape architects also recognizes an agency or trustee relationship between an architect and the client:

162 Hawaii law is consistent with other jurisdictions that have found architects to owe their clients fiduciary duties. See Hammel v. Roadway Package Sys., 1997 U.S. App. LEXIS 21209, *4 (9^th Cir. 1997) ("Oregon courts recognize a fiduciary relationship between clients and their lawyers, physicians, architects, insurers and other parties who, because of special knowledge or control over their client's financial interests, have a duty to act in their client's best interest."); Canton Lutheran Church v. Sovik, Mathre, Sathrum & Quanbeck, 507 F. Supp. 873, 878 (D.S.D. 1981) ("The nature of this relationship between an architect employed to furnish plans and superintend construction and his employer ... is one of trust and confidence. . . . an architect-employer relationship under South Dakota law is a fiduciary relationship; particularly where, as in the instant case, the architect agreed to guard the plaintiff against defects and deficiencies in the work of the contractor through general supervision of the construction work.") (emphasis added); Palmer v. Brown, 127 Cal. App. 2d 44, 59 (Cal. App. 1954) (An architect owes to his client a fiduciary duty of loyalty and good faith."); and Barmat v. John & Jane Doe Partners A-D, 747 P.2d 1218, 1222 (Ariz. 1987) ("as a matter of public policy, attorneys, accountants, and other professionals owe special duties to their clients, and breaches of those duties are generally recognized as torts.").

§16-115-10 Misconduct in the practice. Misconduct in the practice of the profession of engineering, architecture, land surveying, or landscape architecture means without limitation the following:
(1) Acting for licensee's client , or employer, in matters otherwise than as a faithful agent or trustee , or accepting any remuneration other than the licensee's stated recompense for services rendered;
. . .

(5) Misrepresentation, deceit, fraud, gross negligence, and other offenses relating to misconduct of the licensee's practice.



HAR § 16-115-10 (emphasis added).

31. As agent for Plaintiffs, Debtor owed Plaintiffs fiduciary duties. Wolfer v. Mutual Life Ins. Co., 3 Haw. App. 65, 77, 641 P.2d 1349, 1357 (Haw. Ct. App. 1982) ("The relationship of principal and agent is confidential and fiduciary, binding the agent to the exercise of utmost good faith."). The fact that these duties arose out of the Architect's Agreement is not relevant; a breach of a fiduciary duty is still a tort. See Cho Mark Oriental Food; TSA Int'l Ltd. v. Shimizu Corp., 92 Hawai'i at 264, 990 P.2d at 734 (breach of fiduciary duty sounds in tort).

32. Hawaii courts recognize that "an agent's fiduciary duty, which carries with it the duty of full, fair, complete, and timely disclosure of material facts, is among the most important obligations in our legal system." Han v. Yang, 84 Hawaii 162, 173, 931 P.2d 604 (Haw. Ct. App. 1997). "An agent must make the fullest disclosure of all material facts which might affect his principal's decision-making." Pollack v. Lytle, 120 Cal. App. 3d 931, 940 (1981). "[A]n agent is subject to a duty to use reasonable efforts to give his principal information which is relevant to affairs entrusted to him and which, as the agent has notice, the principal would desire to have." Property House, Inc. v. Kelley, 68 Haw. 371, 377, 715 P.2d 805 (1986).

33. An agent has a duty of loyalty. As stated in TV Events & Mktg. v. AMCON Distrib. Co., 526 F. Supp. 2d 1118, 1126 (D. Haw. 2007):

An agent owes his principal a fiduciary duty, which includes a duty of loyalty. The Restatement (Second) of Agency § 387 (1958) provides, " Unless otherwise agreed , an agent is subject to a duty to his principal to act solely for the benefit of the principal in all matters connected with his agency ." Williston on Contracts states,



The primary obligation imposed on an agent by the fiduciary duty of loyalty is to avoid self-dealing with regard to the business of the principal. . . . The fiduciary duty of loyalty is not limited to cases of blatant self-dealing, but also requires a fiduciary to avoid any position where his or her own interests or those of any other person whom he or she has undertaken to represent may conflict with interests of the principal. 19 Richard A. Lord, Williston on Contracts § 54:28 (4th ed. 1990).

(Emphasis added); see also Eckard Brandes, Inc. v. Riley, 338 F.3d 1082 (9^th Cir. 2003) (an employee, as an agent, owes his employer a duty of loyalty). An agent is also "subject to a duty not to act or agree to act during the period of his agency for persons whose interest conflict with those of the principal in matters in which the agent is employed." Restatement (Second) of Agency § 394.

34. Debtor breached these duties by failing to disclose numerous defects, deficiencies, and deviations from the Project Plans; engaging in actions that benefitted DEE and himself rather than Plaintiffs; covering up certain of the defects, deficiencies, and deviations from the Project Plans by making untrue or inaccurate representations to the City and County of Honolulu, all of which were to the detriment of Plaintiffs. In his supervisory role, Debtor could have (and should have) rejected nonconforming work; could have (and should have) caused DEE and Evans Construction to follow the law by retaining licensed specialty contractors and by rejecting work performed on an unlicensed basis; could have (and should have) issued change orders when DEE and Evans Construction made changes or used cheaper materials than what were called for in the Project Plans to appropriately credit Plaintiffs and could have (and should have) rejected payment requests from Evans Construction. Instead, Debtor engaged in behavior that breached his (i) duty to give information to Plaintiffs; and (ii) duty of loyalty by preferring DEE and Evans Construction (and enriching DEE and Evans Construction) instead of Plaintiffs and/or by preferring DEE and Evans Construction as an indirect method of preferring himself and his other projects with DEE and Evans Construction.

Injuries

a. Substitution of Materials and Elimination of Items Resulting in Damages to Plaintiffs Due to Overpaying Under the Construction Contract

35. Among other things, Debtor authorized substitution of and/or failed to reject cheaper, lesser quality or inferior materials for the trellis and the eaves, and of cedar with untreated Douglas fir as the soffit material throughout exterior of house; authorized that structural steel beams be welded instead of bolted, and used the wrong connectors and notched steel beam(s) without Plaintiffs' knowledge or a credit to Plaintiffs. Among other things, Debtor authorized elimination of seventy linear feet of the rock wall (and only added 38 feet); removed all path and stairs moss rock wall references on construction plans; and deleted strip drains from the entry lanai and lower level lanai by the pool without a credit to Plaintiffs.

36. Under the Construction Contract, Plaintiffs paid a specific amount to have construction of the Project comply and be in conformity with the Project Plans. Because of the substitution of inferior or substandard materials and elimination of certain items from what was actually constructed, without a credit to Plaintiffs, Plaintiffs sustained a specific injury.

37. In Brown v. Sumpter, 2004 Bankr. LEXIS 2596 (Bankr. S.D. Iowa 2004), a nondischargeability action against a contractor debtor pursuant to § 523(a)(6), the court found that the debtor willfully and maliciously injured the plaintiff when the debtor intentionally used substandard materials in constructing the frame and the roof of plaintiff's home; intentionally cut corners and employed methods that debtor knew would produce a structure that did not meet construction code regulations or the expectations of the plaintiff. Similarly, here, Debtor did not reject the various substitutions with substandard materials or nonconformities with the Project Plans and did not obtain credits for Plaintiffs for the lesser value he caused them to receive.

38. Debtor committed a willful injury with respect to this category of claims inasmuch as the injury (the conversion of the difference between the amount of the item paid for and the value of the item actually received) was deliberate or intentional, as Debtor was aware of what his Project Plans called for and deliberately allowed for the substitutions or eliminations of cost items from the Construction Contract without causing a credit to Plaintiffs. Because the Debtor "is presumed to know the natural consequences of his actions", Ormsby, 591 F.3d at 1206, through Debtor's intentional actions, money that should have been refunded to Plaintiffs through a credit was retained by Evans Construction, Debtor's intent to cause the injury or the substantial certainty that injury will occur, has been proven.

39. These injuries were also malicious injuries inasmuch as (i) Debtor wrongfully authorized or failed to reject substitutions or deletions of items from the Project Plans without the consent or knowledge of Plaintiffs, the principals to whom Debtor owed a duty of loyalty; (ii) such actions were done by Debtor intentionally; (iii) such actions necessarily caused Plaintiffs injury, because, as stated above, money that should have been refunded to Plaintiffs through a credit were retained by Evans Construction, and had Debtor not authorized these substitutions or deletions or had Debtor created a change order for these changes with a credit to Plaintiffs, this injury would not have occurred; (iv) these authorizations for substitutions and/or deletion and/or failure to reject nonconforming work were done by Debtor without just cause or excuse. Put simply, Debtor cheated (or caused cheating) Plaintiffs out of a substantial amount of money.

b. Injuries Where the Potential Damage to Plaintiffs Was Discussed at the Project Plan Stage

40. Willful injury. For this category of injuries, Plaintiffs and Debtor discussed and agreed specifically at the beginning of the design process the possible injury for deviating from the Project Plans, and Plaintiffs and Debtor specifically identified the injury to Plaintiffs that they wanted to avoid. These items are: (i) the location of the electrical box; (ii) the use of the Monier roof tiles; (iii) use of cedar wood for the trellis, and (iv) the location of the plumbing/sewer line. Respectively, when drawing up the Project Plans, (i) Plaintiffs stated emphatically that they wanted the electrical box in a protected corner of the house, so that it would not be subject to the brunt of salt from ocean winds; (ii) Plaintiffs stated that they wanted to use Monier roof tiles, which Plaintiffs are familiar with, as that brand of tiles are on their current house, and which are very sturdy and do not crumble or crack like other roof tiles; (iii) Plaintiffs stated that they wanted to use cedar wood for the trellis, because it lasts longer and is insect resistant; and (iv) Plaintiffs stated that they wanted to bury the plumbing/sewer lines down the embankment in order to retain the natural slope. Debtor agreed and incorporated these items into the Project Plans. Then Debtor made unilateral changes to all of these items, or approved changes without Plaintiffs' permission or failed to reject such nonconforming work, which was never credited to Plaintiffs and the natural consequence of which was harm to Plaintiffs.

41. The resulting injuries were as Plaintiffs predicted (and specifically identified for Debtor). With respect to the electrical box, Debtor moved the location of the electrical box to an unprotected area of the house in order to save money that would have been spent placing it in the correct location. The inevitable injury is that the salt air has already corroded the electrical box, which needs to be replaced. With respect to the trellis, Debtor knew or should have known that Evans Construction was substituting materials and not using cedar, but did nothing. The resulting injury is that the trellis is weathering prematurely and is vulnerable to insect damage. With respect to the roof tiles, Debtor allowed Evans Construction to use a different roof tile that is an inferior product and did not reject the clay tiles. And inevitably, the roof tiles are cracking and need to be replaced in total. With respect to the plumbing/sewer lines, even after Plaintiff Dennis Hashimoto told Evans Construction's plumbing contractor (in front of Debtor) to move the plumbing/sewer lines from the incorrect location where they were simply laying downhill, unburied, Debtor did not reject Evans Construction's deficient work in covering the plumbing/sewer lines under some boulders. The inevitable injury is that the lines buried under large rocks are near impossible to get access to, and the "clean out" of the sewer line cannot be accessed.

42. Malicious injury. Here, the wrongful act is the repeated disregard of Debtor's duty to Plaintiffs in order to make things cheaper and easier for Evans Construction. All of these actions were done by Debtor intentionally and, as stated above, necessarily caused injuries, often the very injuries predicted and sought to be avoided by Plaintiffs. There was no just cause or excuse for Debtor's actions. Debtor has tried to argue that these changes did not change the overall design of the Project, yet that is not true. Plaintiffs gave a considerable amount of thought to the design of their home, and any excuse by Debtor that the overall look is the same (even though Debtor's unilateral changes were for Evans Construction's benefit only and harmed Plaintiffs significantly) does not constitute "just cause or excuse" for Debtor's actions.

c. Injuries Flowing From Unlicensed Contractors

43. Willful injury. As Plaintiffs' agent, Debtor had a duty to inform Plaintiffs of any violation of the Construction Contract. The Construction Contract required that Evans Construction "shall comply with all laws and regulations bearing on the conduct of the work",¹⁶³ which necessarily includes the requirement that certain construction items (i.e., the swimming pool, the flooring, the rock wall, etc.) be constructed by the appropriately licensed contractors. When Plaintiffs entered into the Construction Contract with Evans Construction, the price Plaintiffs agreed to pay was made with the representation that Evans Construction would follow "all laws and regulations bearing on the conduct of the work", including obtaining and paying for as part of the contract price paid to Evans Construction any specialty contractors that were required to perform the work detailed in the Project Plans. Plaintiffs engaged Debtor to observe construction to assure that, among other things, Evans Construction was following the law and relied on Debtor to inform them if something was amiss.

163 Exhibit 66 at ¶3.

44. For this category, Debtor's conduct constituted willful injury because Debtor knew that Evans Construction was using unlicensed specialty contractors or that Evan Construction was performing work for which it was not properly licensed. However, rather than "endeavor[ing] to guard the [Plaintiffs] against defects and deficiencies in the Work" by fully informing Plaintiffs of the circumstances and the dangers and likelihood that the resulting work would not be in conformity with the Building Code and would likely to be substandard,¹⁶⁴ Debtor simply said nothing; did not reject Evans Construction's work; and instructed Plaintiffs to pay for this substandard work. This resulted in significant financial harm to Plaintiffs because large portions of the unlicensed work were substandard and defective and must be corrected, which damages were a natural consequence of Debtor's failure to reject nonconforming work; Debtor's failure to warn Plaintiffs of the unlicensed work and the consequences if such work was allowed to continue. Additionally, Plaintiffs paid for the required specialty contractors as part of the Construction Contract price, and by Evans Construction having either unlicensed subcontractors for its own unlicensed workers perform the work rather than having licensed specialty contractors perform the work, Plaintiffs paid much more under the Construction Contract than they should have.

164 One example of this involved the installation of the hardwood floors. Installation of flooring requires a specialty license, C-21. At one point, Ms. Hashimoto was present when Debtor was observing the hardwood flooring that Evans Construction was installing at the Project. Debtor told DEE that Debtor had cringed when he saw Evans Constructions' workers nailing and gluing the hardwood flooring at a different project that Debtor and Evans Construction were working on together (the Holzman project), because nailing and gluing hardwood flooring from the top of the floor is not the proper way to install that kind of flooring. Notwithstanding that Debtor knew that Evans Construction was not properly installing the hardwood flooring and told DEE so, and notwithstanding that Evans Construction did not have the requisite specialty contractor's license for installing flooring, Debtor did not inform Plaintiffs of these matters and or that Plaintiffs should cause the installation of the flooring using this method to cease. Plaintiffs' hardwood floors have nails that show on the top of the floor, due to Debtor's allowing Evans Construction to continue, and without the appropriate specialty license, to use this improper method of installation.

45. The injury was a "willful injury" because the financial injuries to Plaintiffs, and, in particular, not getting what they paid for under the Construction Contract, was substantially certain to result from Debtor's conduct of not informing Plaintiffs that the work was not being performed by appropriately licensed specialty contractors. If Debtor had told Plaintiffs that licensed specialty contractors were not being used where required, Debtor knew (based on Plaintiffs' prior insistence that Debtor and Evans Construction do the work correctly and according to the Project Plans when they became aware of a discrepancy) that Plaintiffs would stop the work and insist that specialty contractors be used where required. Thus, Debtor knew that if he remained quiet and insisted that Evans Construction be paid for the unlicensed work, Plaintiffs would be injured.

46. Malicious Injury. As stated above, a malicious injury "(1) requires a wrongful act; (2) done intentionally; (3) which necessarily causes injury; and (4) is done without just cause or excuse." Jercich, 238 F.3d at 1209 (9th Cir. 2001). Here, the wrongful act is Debtor's disregard of his fiduciary duties to keep Plaintiffs informed that Evans Construction was using unlicensed contractors; his duty to reject work that did not conform to the Construction Contract and his duty to recommend to the Plaintiffs that they should stop work on the Project and not pay Evans Construction for this unlicensed work. Instead, Debtor did not, and instructed Plaintiffs to pay Evans Construction for work that was shoddy, illegal, and of much less value than what Plaintiffs had paid for. These actions were wrongful, inasmuch as they were breaches of Debtor's fiduciary duties to Plaintiffs.

47. Further, Hawaii law prohibited Evans Construction, as a "B: general building contractor" from acting as a specialty contractor, except in those classifications that its holds a license. Okada Trucking Co. v. Bd. of Water Supply, 97 Hawai'i 450, 461 (2002); HRS § 444-9 ¹⁶⁵; HAR § 16-77-33 ("Limitation of classifications. (a) A licensee classified as . . . . a 'B' general building contractor shall not act, assume to act, or advertise as a specialty contractor except in the specialty classifications which the licensee holds."). "[P]ursuant to HRS § 444-9, a . . . building contractor is prohibited from undertaking any work, solely or as part of a larger project, that would require it to act as a specialty contractor in an area in which the general contractor was not licensed to operate." Okada Trucking, 97 Hawai'i at 462. Thus, to the extent that the Project required work classified as C-13 (electrical); C-21 (flooring); C-27 (landscaping); C-31b (stone masonry); C-37 (plumbing); C-37c (vacuum and air systems); or C-49 (swimming pool) specialty work, Evans Construction, which does not hold these C-class specialty licenses, could not undertake to act in that area. Id. Debtor's actions violated important public policy of the State of Hawaii by facilitating (aiding and abetting) Evans Construction's violation of the law:

165 The legislative intent of the contractor's licensing laws is "to protect the general public against dishonest, fraudulent, unskilled or unqualified contractors." Sen. Stand. Comm. Rep. 629 (1957); House Stand. Comm. Rep. 618 (1957). The Department of Commerce and Consumer Affairs provides the following information as part of the Application for Contractor's License (Entity):

Briefly, the requirements for a license are:

1) Registration with the Business Registration Division;
2) Have a good reputation for honesty, truthfulness, financial integrity and fair dealing;
3) Have liability and workers' compensation insurance; and
4) Have in your employ a licensed individual who is designated Responsible Managing Employee (RME).

§ 444-9.3. Aiding or abetting.



Aiding or abetting an unlicensed person to evade this chapter or knowingly combining or conspiring with an unlicensed person, or allowing one's license to be used by an unlicensed person, or acting as agent or partner or associate, or otherwise, of an unlicensed person, with the intent to evade this chapter, shall be a misdemeanor and may subject the licensee to additional discipline by the board.

48. Debtor's actions were also intentional, even if not necessarily done with spite towards Plaintiffs. See Grange Mut. Cas. Co. v. Chapman (In re Chapman), 228 B.R. 899, 909 (Bankr. N.D. Ohio 1998) ("There is no requirement that the person act with ill will, spite, or animosity toward the injured party."). Debtor's actions also necessarily caused injuries to Plaintiffs in the form of unintentional relinquishment of Plaintiffs' rights, because when work is done by unlicensed contractors, there are inescapable consequences:

• the Plaintiffs' homeowners' insurance will not cover problems with work done by unlicensed contractors (for example, if one of the deficient rock walls collapses and causes damage to a neighbor's property or injures someone, the Plaintiffs would need to pay out of pocket for the damage);

• the Plaintiffs would not have the ability to pursue a claim against the unlicensed contractors from the Contractors Recovery Fund, see HRS § 444-26(a); and



• the Plaintiffs did not have someone perform work on their home who the Contractors License Board had required to demonstrate had a "good reputation for honestly, truthfulness, financial integrity and fair dealing," to submit tax clearances, proof of insurance, and other required qualifications.

49. Debtor's conduct was done without just cause and excuse.

d. Injuries Flowing From Debtor's Failure to Assure That Inspections Were Done (And Debtor's Cover Up of Such Failures)

50. Willful injury. As Plaintiffs' agent, Debtor had a fiduciary duty to inform Plaintiffs of any deviations from the Project Plans and the Construction Contract. The Construction Contract required that Evans Construction "shall comply with all laws and regulations bearing on the conduct of the work",¹⁶⁶ which necessarily includes that the Project be habitable and able to obtain a certificate of occupancy from the City and County. The City and County cannot issue a certificate of occupancy for the Project until it receives proof that special inspections for Items 1, 4, 7, and 16 have been satisfactorily completed, and that special inspection for Item No. 13 - Special Grading, Excavation and Filling - has been satisfactorily completed. As stated above, Mr. Yee was retained to perform the following special inspections for the Project:

166 Exhibit 66 at ¶3.

Item 1 - Concrete

Item 4 - Reinforcing Steel

Item 7 - Structural Masonry

Item 16 - Sheathed Shear Walls and Diaphragms

Item 17 - Complete Load Path and Uplift Ties¹⁶⁷

167 Yee Declaration at ¶4.

127. Mr. Yee was never contacted by either Debtor or Evans Construction and informed that the Project was ready for special inspection.¹⁶⁸ When Plaintiff Jessica Hashimoto asked Debtor to call Mr. Yee regarding the special inspections, Debtor told Ms. Hashimoto that he intentionally chose not to contact Mr. Yee because Debtor believed that Mr. Yee would slow things down. Mr. Yee was contacted by Ms. Hashimoto in early 2010 to inspect the Project.¹⁶⁹ When Mr. Yee was finally contacted, he was unable to perform special inspection Item Nos. 1, 4, 7, 16, and 17 because all the walls, ceilings, and floors had been closed and he could not observe whether the work complied with the Project Plans or the Building Code. Id. at ¶7. At the site, Debtor informed Mr. Yee that he was going to perform all of the special inspections for which Mr. Yee had been hired (Item Nos. 1, 4, 7, 16, and 17), because he had observed construction of the Project.¹⁷⁰

168 Yee Declaration at ¶ 6.

169 Yee Declaration at ¶¶ 6, 8.

170 Yee Rebuttal Declaration at ¶10.

51. Later, in November 2010, after the Notice of Violation was issued, Debtor submitted a form to the City and County, stating that Debtor had conducted the special inspections for Item Nos. 17 and 18 (termite inspection). Neither inspection was actually done, and Debtor's representations that he "[o]bserve[d] the work assigned for conformance with approved design drawings and specifications" are clearly false, inasmuch as neither the requirements for Item No. 17 nor Item No. 18 were completed in conformance with approved plans and specifications and the applicable workmanship provisions of the Building Code.¹⁷¹ Debtor's conduct in refusing to contact Mr. Yee at the time Mr. Yee was able to observe and perform the special inspection for Item Nos. 1, 4, 7, 16, and 17 because it would "slow things down" was done for the benefit of Debtor and Evans Construction, and was not done for the benefit of Plaintiffs, even though Debtor owed a duty of loyalty to Plaintiffs. The evidence establishes that Debtor knew that Evans Construction had not performed the work correctly (e.g., had not placed and installed the steel beams as per the Project Plans such that they did not meet minimum structural code requirements) and Debtor allowed the walls, ceiling, and floor to be closed to hide the deficient construction and did not contact Mr. Yee so that Evans Construction would not have to fix the steel beams. The only inference that can be drawn from Debtor's conduct is that he sought to protect Evans Construction from the cost of fixing the deficient construction. Similar to the installation of the hardwood floors, when Debtor knew that the floors were being incorrectly installed and that such poor installation would cause injury to Plaintiffs, Debtor did not reject the deficient work, but instead instructed Plaintiffs to pay Evans Construction.

171 Yee Declaration at ¶¶10-13; Jessica Declaration at ¶61.

52. Here, Debtor willfully injured Plaintiffs by: (i) submitting a falsified special inspection form to the City to cover up the lack of inspections and deviations from the Project Plans, the lack of BTB, and the incorrectly installed, placed, and notched steel beams, thereby detracting from Plaintiffs' claims against Evans Construction and DEE (which claims were advancing towards litigation at that point in time); (ii) refusing to contact Mr. Yee to perform the inspections and not advising Plaintiffs to stop construction until the inspections were done, making it impossible for Plaintiffs to obtain a certificate of occupancy for the Project without significant cost to reopen walls, ceilings, and floors., and (iii) covering up the failure to call Mr. Yee b informing Mr. Yee that Debtor would do all of the inspections for which Mr. Yee was retained.¹⁷² Debtor is presumed to know the natural consequences of his actions, Ormsby, 591 F.3d at 1206, and these injuries are the natural consequences of Debtor's actions.

172 Revised Ordinances of Honolulu 16-1.1 (adopting International Building Code and International Residential Code for One- and Two Family Dwellings) at sections 110.1 and 110.2, and 1704.
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53. Malicious injury. Here, all of the elements of malicious injury are met: (i) Debtor did not contact Mr. Yee to perform necessary inspections in order to rush the job and Debtor later covered up issues with the incorrectly installed, placed, and notched steel beams, in violation of his duty of loyalty to Plaintiffs; (ii) Debtor intentionally did not contact Mr. Yee and intentionally submitted falsified representations to the City and County; (iii) Debtor's actions necessarily caused injury, because had Debtor advised Plaintiffs to stop construction until the special inspections could be performed, Mr. Yee would have identified the deficient work, and Plaintiffs would have required Evans Construction to fix it; as such, Debtor's actions necessarily resulted in the injuries to Plaintiffs; and (iv) Debtor's actions were done without just cause or excuse, inasmuch as Debtor's statement that Evans Construction was responsible for contacting Mr. Yee does not excuse Debtor from supervising construction.

54. In Furuto v. Lewenilovo, Adv. Pro. No. 12-90002, this Court found a debt nondischargeable pursuant to § 523(a)(6) for willful and malicious injury when a tenant of real property, who contractually agreed to do all repairs, improvements, and maintenance in exchange for a reduced rental amount, committed the tort of waste by (i) cutting drain pipes that directed wastewater, including sewage, to a cesspool so that they dumped the wastewater on the surface of the plaintiff/landlord's property; and (ii) modifying a conventional shower stall in order to create a wheelchair accessible shower stall, but not creating a sill around the shower or sufficient slope to direct the shower water into the drain.

55. In Furuto, the defendant opposed a finding that his conduct was malicious because he "did the best he could do" with the repairs and improvements. This Court rejected the asserted "cause or excuse"; concluding that the defendant could have solved the wastewater problem by having the cesspool pumped more frequently; and that "he could have created a 'wheelchair accessible' shower that drained properly and did not spread the shower water into adjoining rooms." Id. at 11.

56. Although not specifically raised by Debtor, like in Furuto, an argument that the Debtor did the best that he could in carrying out his fiduciary duties is insufficient. Plaintiffs would have been spared significant harm, years of delay, and great cost if Debtor had even minimally kept the Plaintiffs informed about the progress and quality of the portion of the Work completed; "endeavor[ed] to guard the [Plaintiffs] against defects and deficiencies in the Work[;]" and acted loyally in his dealings with the Plaintiffs, including reviewing and certifying Evans Construction's applications for payment.

57. The amount of Plaintiffs' damages was not the subject of this trial.

58. Debtor's debt, in an amount to be determined in a trial on damages, is nondischargeable pursuant to § 523(a)(6).

E. Debtor Should Be Denied a Discharge Pursuant to Section 727(a)(3)

59. 11 U.S.C. § 727(a)(3) provides in relevant part:

(a) The court shall grant the debtor a discharge, unless--



. . . .



(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such

act or failure to act was justified under all of the circumstances of the case[.]

60. Debtor did not turn the requested Cockett & Associate Profit & Loss Statements and Balance Sheets in electronic Quickbooks files and has therefore concealed the same.

61. Debtor also did not turn over paper copies and Quickbooks electronic files of any accounts payables lists, accounts receivables lists, and list of pending and completed engagements for calendar years 2011, 2012, 2013 and 2014 and has therefore concealed the same.

62. Debtor's asserted justification against Plaintiff's claim is that he turned over the electronic information to his attorney.

63. Debtor shall be denied a discharge pursuant to § 727(a)(3) unless within 15 days of the entry of these findings of fact and conclusions of law, Debtor shall turnover to Plaintiffs the Cockett & Associates' Quickbooks files in electronic format for the period January 1, 2011 through December 31, 2013 and file a declaration demonstrating compliance with this Court's ruling.

Dated: Honolulu, Hawaii, June 12, 2015.

/s/ Christopher J. Muzzi

CHRISTOPHER J. MUZZI

Attorney for Plaintiffs

DENNIS HASHIMOTO and JESSICA HASHIMOTO