NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 20-NOV-2024 08:13 AM Dkt. 48 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
CHUN MEI ZHANG, Plaintiff-Appellee, v. MING YU YOU, Defendant-Appellant
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CASE NO. 1CC161001683)
SUMMARY DISPOSITION ORDER (By: Leonard, Acting Chief Judge, McCullen and Guidry, JJ.)
Defendant-Appellant Ming Yu You (You), appeals from the
June 25, 2021 Final Judgment (Judgment) entered by the Circuit
Court of the First Circuit (Circuit Court), following a
jury-waived trial.1 You also challenges the Circuit Court's
Findings of Fact, Conclusions of Law, and Judgment entered on
March 28, 2019 (FOFs/COLs/Judgment).2
1 Judgment was entered by the Honorable John M. Tonaki. 2 The Honorable James S. Kawashima presided over the trial and entered the FOFs/COLs/Judgment. NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
You raises four points of error on appeal, contending
that the Circuit Court erred: (1) when it found You liable for
unfair trade practices (UDAP) under Hawaii Revised Statutes (HRS)
480-2 (2008); (2) when it found You fraudulently induced
Plaintiff-Appellee Chun Mei Zhang (Zhang) into an agreement to
purchase a restaurant from You; (3) when it awarded $6,250.00 in
attorney's fees to Zhang; and (4) if it awarded $41,053.64 in
attorney's fees to Zhang.
Upon careful review of the record and the briefs submitted by the parties, and having given due consideration to
the arguments advanced and the issues raised by the parties, we
resolve You's points of error as follows:
Zhang's May 5, 2017 First Amended Complaint (Complaint)
included three counts: (1) Intentional Misrepresentation/Fraud
based on You's willful misrepresentation to Zhang that she owned
and operated a Chinese restaurant on December 20, 2015, and You's
subsequent inducement of Zhang into entering a purchase agreement
to buy the restaurant for $25,000 (Fraudulent Inducement to Enter
Contract; Count One); (2) Intentional Misrepresentation/Fraud
based on You's concealment of the fact that You previously sold the unsuccessful restaurant to others, intended to use part of
Zhang's $25,000 payment to rescind that sale, and willfully put
Zhang into a losing position in a bad business whereby Zhang was
caused to incur additional damages (Fraud Causing Additional
Damages; Count Two); and (3) Breach of Contract based on You's
registration and display of a food license under You's name and
2 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
repeated demands to return equipment and tools (Breach of
Contract; Count Three). The Complaint demanded judgment against
You as follows: DEMANDS Therefore, [Zhang] demand judgment against [You] as follows:
1. The sale of business contract is rescinded by the Court order on the reasons of intentional misrepresentation or fraud. 2. [Zhang] should receive the $25000 payment back upon the rescission of sale contract. 3. [Zhang] should be entitled to compensate her loses [sic] of $20000 in the operating the business as the subsequent damage caused by [You].
4. [Zhang] should be entitled to the punitive damages. 5. [Zhang] should be entitled for Court cost and attorney fee.
6. [Zhang] should be entitled for all available interest on damages.
7. In addition, [Zhang] should be entitled for statutorily threefold punitive damage $135,000 ($2500+$2000) [sic] x 3 = $135,0000.
(Emphasis added).
After the three-day bench trial, the Circuit Court
found and concluded, inter alia, that Zhang's claim for
contractual rescission based on fraudulent inducement was
properly brought and sufficiently supported, and that Zhang was
entitled to rescind the purchase contract, be awarded, i.e.
returned, the $25,000 purchase price (in conjunction with an
order for the transfer of any title back to You), along with
prejudgment interest, and reasonable attorney's fees grounded in
assumpsit in an amount up to $6,250.00. The Circuit Court
further found and concluded that Zhang's claim for additional
3 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
post-purchase damages was too speculative and Zhang was not
entitled to an award on damages on the claim.
The Circuit Court then found and concluded that You
committed deceptive acts in the conduct of commerce in violation
of HRS § 480-1 (2008), "including without limitations, (a)
misleading Plaintiff regarding the Restaurant's ownership and
profitability, (b) exploiting [Zhang's] personal history as a
former Shanghai resident and (c) representing [herself] as
trustworthy based on her role as an active community member." Without any award of compensatory damages, the Circuit Court
awarded Zhang, pursuant to HRS § 480-13(b) (2008), treble damages
amounting to $75,000, and reasonable attorney's fees, not limited
to the $6,250.00 authorized by HRS § 607-14 (2016).
Punitive damages were denied. Noting that
"[r]escission of contract was legally justified at its formation
on December, 29, 2015," and making related findings and
conclusions, the Circuit Court awarded prejudgment interest on
$25,000 at the statutory rate, for 3.25 years.
Zhang later moved for the dismissal of Count Three and
entry of a final judgment. Court minutes indicate that the
Circuit Court "takes no action" on the motion. The Judgment was
entered thereafter, which included Dismissal of Count Three.
(1) & (2) We first consider You's argument that the
Circuit Court erred in finding that she fraudulently induced
Zhang to purchase the subject restaurant.
4 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
You has not challenged any of the Circuit Court's
Findings of Fact (FOFs), and therefore they are binding upon this
court. See, e.g., Taylor–Rice v. State, 91 Hawai#i 60, 65, 979
P.2d 1086, 1091 (1999). The Circuit Court found, inter alia,
that: 4. In December of 2015, [You] did not actually own the Restaurant, having previously sold it in September of 2015 to Yang Guang Zhu and Wen Fang, a.k.a. Wen De Coito, for $20,000.00. 5. To induce [Zhang] to buy the Restaurant, [You] withheld material facts about the Restaurant's September 2015 sale and its lack of profitability. 6. Instead, during the negotiations for the sale of the Restaurant with [Zhang], [You] acted as though she still owned the Restaurant and claimed that it was profitable, even though it was actually losing money and continued to do so after the sale had closed. . . . .
8. Based on [You's] knowingly false representations, [Zhang] agreed to purchase the Restaurant for $25,000.00 and paid that amount in full to [You] on December 29, 2015[.]
. . . . 41.
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NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 20-NOV-2024 08:13 AM Dkt. 48 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
CHUN MEI ZHANG, Plaintiff-Appellee, v. MING YU YOU, Defendant-Appellant
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CASE NO. 1CC161001683)
SUMMARY DISPOSITION ORDER (By: Leonard, Acting Chief Judge, McCullen and Guidry, JJ.)
Defendant-Appellant Ming Yu You (You), appeals from the
June 25, 2021 Final Judgment (Judgment) entered by the Circuit
Court of the First Circuit (Circuit Court), following a
jury-waived trial.1 You also challenges the Circuit Court's
Findings of Fact, Conclusions of Law, and Judgment entered on
March 28, 2019 (FOFs/COLs/Judgment).2
1 Judgment was entered by the Honorable John M. Tonaki. 2 The Honorable James S. Kawashima presided over the trial and entered the FOFs/COLs/Judgment. NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
You raises four points of error on appeal, contending
that the Circuit Court erred: (1) when it found You liable for
unfair trade practices (UDAP) under Hawaii Revised Statutes (HRS)
480-2 (2008); (2) when it found You fraudulently induced
Plaintiff-Appellee Chun Mei Zhang (Zhang) into an agreement to
purchase a restaurant from You; (3) when it awarded $6,250.00 in
attorney's fees to Zhang; and (4) if it awarded $41,053.64 in
attorney's fees to Zhang.
Upon careful review of the record and the briefs submitted by the parties, and having given due consideration to
the arguments advanced and the issues raised by the parties, we
resolve You's points of error as follows:
Zhang's May 5, 2017 First Amended Complaint (Complaint)
included three counts: (1) Intentional Misrepresentation/Fraud
based on You's willful misrepresentation to Zhang that she owned
and operated a Chinese restaurant on December 20, 2015, and You's
subsequent inducement of Zhang into entering a purchase agreement
to buy the restaurant for $25,000 (Fraudulent Inducement to Enter
Contract; Count One); (2) Intentional Misrepresentation/Fraud
based on You's concealment of the fact that You previously sold the unsuccessful restaurant to others, intended to use part of
Zhang's $25,000 payment to rescind that sale, and willfully put
Zhang into a losing position in a bad business whereby Zhang was
caused to incur additional damages (Fraud Causing Additional
Damages; Count Two); and (3) Breach of Contract based on You's
registration and display of a food license under You's name and
2 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
repeated demands to return equipment and tools (Breach of
Contract; Count Three). The Complaint demanded judgment against
You as follows: DEMANDS Therefore, [Zhang] demand judgment against [You] as follows:
1. The sale of business contract is rescinded by the Court order on the reasons of intentional misrepresentation or fraud. 2. [Zhang] should receive the $25000 payment back upon the rescission of sale contract. 3. [Zhang] should be entitled to compensate her loses [sic] of $20000 in the operating the business as the subsequent damage caused by [You].
4. [Zhang] should be entitled to the punitive damages. 5. [Zhang] should be entitled for Court cost and attorney fee.
6. [Zhang] should be entitled for all available interest on damages.
7. In addition, [Zhang] should be entitled for statutorily threefold punitive damage $135,000 ($2500+$2000) [sic] x 3 = $135,0000.
(Emphasis added).
After the three-day bench trial, the Circuit Court
found and concluded, inter alia, that Zhang's claim for
contractual rescission based on fraudulent inducement was
properly brought and sufficiently supported, and that Zhang was
entitled to rescind the purchase contract, be awarded, i.e.
returned, the $25,000 purchase price (in conjunction with an
order for the transfer of any title back to You), along with
prejudgment interest, and reasonable attorney's fees grounded in
assumpsit in an amount up to $6,250.00. The Circuit Court
further found and concluded that Zhang's claim for additional
3 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
post-purchase damages was too speculative and Zhang was not
entitled to an award on damages on the claim.
The Circuit Court then found and concluded that You
committed deceptive acts in the conduct of commerce in violation
of HRS § 480-1 (2008), "including without limitations, (a)
misleading Plaintiff regarding the Restaurant's ownership and
profitability, (b) exploiting [Zhang's] personal history as a
former Shanghai resident and (c) representing [herself] as
trustworthy based on her role as an active community member." Without any award of compensatory damages, the Circuit Court
awarded Zhang, pursuant to HRS § 480-13(b) (2008), treble damages
amounting to $75,000, and reasonable attorney's fees, not limited
to the $6,250.00 authorized by HRS § 607-14 (2016).
Punitive damages were denied. Noting that
"[r]escission of contract was legally justified at its formation
on December, 29, 2015," and making related findings and
conclusions, the Circuit Court awarded prejudgment interest on
$25,000 at the statutory rate, for 3.25 years.
Zhang later moved for the dismissal of Count Three and
entry of a final judgment. Court minutes indicate that the
Circuit Court "takes no action" on the motion. The Judgment was
entered thereafter, which included Dismissal of Count Three.
(1) & (2) We first consider You's argument that the
Circuit Court erred in finding that she fraudulently induced
Zhang to purchase the subject restaurant.
4 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
You has not challenged any of the Circuit Court's
Findings of Fact (FOFs), and therefore they are binding upon this
court. See, e.g., Taylor–Rice v. State, 91 Hawai#i 60, 65, 979
P.2d 1086, 1091 (1999). The Circuit Court found, inter alia,
that: 4. In December of 2015, [You] did not actually own the Restaurant, having previously sold it in September of 2015 to Yang Guang Zhu and Wen Fang, a.k.a. Wen De Coito, for $20,000.00. 5. To induce [Zhang] to buy the Restaurant, [You] withheld material facts about the Restaurant's September 2015 sale and its lack of profitability. 6. Instead, during the negotiations for the sale of the Restaurant with [Zhang], [You] acted as though she still owned the Restaurant and claimed that it was profitable, even though it was actually losing money and continued to do so after the sale had closed. . . . .
8. Based on [You's] knowingly false representations, [Zhang] agreed to purchase the Restaurant for $25,000.00 and paid that amount in full to [You] on December 29, 2015[.]
. . . . 41. Had [Zhang] known that [You] did not own the Restaurant on December 20 and 21, 2015, [Zhang] would not have purchased the Restaurant; [Zhang] would have wanted to meet the real owner to find out why the Restaurant was for sale.
In light of the Circuit Court's unchallenged FOFs, including the above, we conclude that the Circuit Court was not
wrong in finding that You fraudulently induced Zhang to purchase
the subject restaurant. Nor did the Circuit Court err in
concluding that Zhang was entitled to rescission of contract,
with You ordered to return the $25,000 to Zhang, and Zhang
ordered to transfer any "title" to the restaurant back to You.
You also argues that the Circuit Court erred in
awarding treble damages and additional attorney's fees pursuant
5 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
to HRS § 480-13, primarily arguing that the Complaint did not
properly allege a UDAP claim. Even assuming, arguendo, that the
Complaint sufficiently made out a UDAP claim, as noted above, the
Circuit Court's unchallenged FOFs expressly find that Zhang was
not entitled to any damages award for losses she may have
incurred after purchasing the restaurant from You.
With respect to You's fraudulent inducement of Zhang to
purchase the restaurant, the remedy awarded by the Circuit Court
was rescission of the sales contract – You was ordered to return the purchase money of $25,000 to Zhang, and Zhang was ordered to
transfer any "title" to the restaurant back to You – not an award
of damages. As the Hawai#i Supreme Court has held, "[t]he result
of rescission is to return both parties to the status quo ante,
i.e., each side is to be restored to the property and legal
attributes that it enjoyed before the contract was entered and
performed." Exotics Hawaii-Kona Inc. v. E.I. Du Pont De Nemours
& Co., 116 Hawai#i 277, 288, 172 P.3d 1021, 1032 (2007). Zhang
unequivocally sought, and was granted, the remedy of rescission,
and she did not bring forward evidence supporting an award of any
damages sustained as a result of a UDAP violation, as reflected
in the Circuit Court's FOFs/COLs/Judgment. The Circuit Court did
not award any compensatory damages to Zhang based on a UDAP
claim.
The Hawai#i Supreme Court has held: To establish a prima facie case for a UDAP claim, [a plaintiff] must establish "(1) either that the defendant violated the UDAP statute (or that its actions are deemed to violate the UDAP statute by another statute), (2) that the consumer was injured as a result of the violation, and (3)
6 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
the amount of damages sustained as a result of the UDAP violation."
Lima v. Deutsche Bank National Trust Co., 149 Hawai#i 457, 464-
65, 494 P.3d 1190, 1197-98 (2021) (quoting Kawakami v. Kahala
Hotel Investors, LLC, 142 Hawai#i 507, 519, 421 P.3d 1277, 1289
(2018)) (emphasis added).
The court in Lima emphasized that a plaintiff "must
establish compensatory damages" to prevail on a UDAP claim. Id.
at 465, 494 P3d 1190 at 1198 ("where a tort claim requires a
plaintiff to 'separately establish damages,' the plaintiff cannot simply infer damages based upon the alleged tort -- i.e., nominal
damages") (citation omitted). Here, the Circuit Court declined
to award damages to Zhang based on a UDAP claim. The rescission
of a contract for fraud in the inducement is not a damages award.
Hong v. Kong, 5 Haw. App. 174, 181, 683 P.2d 833, 840 (1984).
Thus, we conclude that the Circuit Court erred in trebling the
amount of money ordered returned to Zhang as a rescissionary
remedy and invoking HRS § 480-13(b) as basis for awarding
attorney's fees in excess of the amount permitted under the assumpsit statute.
(3) & (4) You argues that attorney's fees should not
have been awarded to Zhang, either under HRS § 607-14 or HRS
§ 480-13(b). Because we conclude that Zhang did not establish
all of the elements necessary for relief under UDAP, we conclude
that the Circuit Court erred in awarding attorney's fees in the
amount of $41,053.65. However, You's argument that the
attorney's fees awarded in the amount of $6,250.00 are
7 NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
unsupported by proper authority is without merit. The Circuit
Court properly found and concluded that contractual rescission is
in the nature of assumpsit and that Zhang was entitled to
reasonable attorney's fees up to $6,250.00 pursuant to HRS § 607-
14.
For these reasons, we vacate the Circuit Court's June
25, 2021 Judgment and March 28, 2019 FOFs/COLs/Judgment to the
extent that the Circuit Court awarded treble damages and
attorney's fees in excess of $6,250.00; we otherwise affirm. This case is remanded to the Circuit Court for entry of an
amended judgment consistent with this Summary Disposition Order.
DATED: Honolulu, Hawai#i, November 20, 2024.
On the briefs: /s/ Katherine G. Leonard Scot Stuart Brower, Acting Chief Judge for Defendant-Appellant. /s/ Sonja M.P. McCullen Wen Shen Gao, Associate Judge for Plaintiff-Appellee. /s/ Kimberly T. Guidry Associate Judge