Island Ins. Co. v. Hawaiian Foliage & Landscape
| Decision Date | 10 March 1999 |
| Docket Number | No. Civ.97-01084 DAE.,Civ.97-01084 DAE. |
| Citation | 67 F.Supp.2d 1183 |
| Parties | ISLAND INSURANCE COMPANY, LTD., Plaintiff, v. HAWAIIAN FOLIAGE & LANDSCAPE, INC., a Hawaiian Corporation, Kenneth Kate; Oahu Construction Company, Limited, a Hawaii Corporation; United States of America, a Governmental Entity; Seiji Naya; Ray K. Kamikawa; Lorraine H. Akiba; and CB Bancshares, Inc., a Hawaii corporation, Defendants. |
| Court | U.S. District Court — District of Hawaii |
Brian P. Aburano, Pacific Law Group, Honolulu, HI, for Island Insurance Company, Ltd.
Archie T. Ikehara, Herman W.H. Lee, Fujiyama Duffy & Fujiyama, Honolulu, HI, for Oahu Construction Company, Limited, a Hawaii Corporation.
Michael Chun, Office of the United States Attorney, Honolulu, HI, Bernard J. Knight, Jr., U.S. Department of Justice, Washington, DC, for United States of America, a Governmental Entity.
Frances E.H. Lum, Office of the Attorney General — State of Hawaii, Honolulu, HI, for Hawaii, State of, a Governmental Entity.
Myra M. Kaichi, Dept of the Attorney General, State of Hawaii, Honolulu, HI, for Seiji Naya.
Frances E.H. Lum, Department of the Attorney General, Honolulu, HI, Iris M. Kitamura, Michael H. Hosokawa, Department of the Attorney General, Honolulu, HI, for Ray K. Kamikawa.
ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; DENYING DEFENDANT UNITED STATES' MOTION FOR PARTIAL SUMMARY JUDGMENT, AND DENYING DEFENDANTS DIRECTOR OF TAXATION AND DIRECTOR OF LABOR AND INDUSTRIAL RELATIONS' JOINT MOTION FOR PARTIAL SUMMARY JUDGMENT
The court heard the parties' Motions on February 1, 1999. Brian Aburano, Esq., appeared at the hearing on behalf of Plaintiff; Bernard J. Knight, Jr., Esq., appeared at the hearing on behalf of Defendant United States of America; Deputy Attorney General Michael H. Hosokawa appeared at the hearing on behalf of Defendant Director of Taxation for the State of Hawaii; and Deputy Attorney General Frances E.H. Lum appeared at the hearing on behalf of Director of Labor and Industrial Relations for the State of Hawaii. After reviewing the Motions and the supporting and opposing memoranda, the court GRANTS Plaintiff's Motion for Partial Summary Judgment, DENIES Defendant United States' Motion for Partial Summary Judgment and DENIES Defendants Director of Taxation and Director of Labor and Industrial Relations' Joint Motion for Partial Summary Judgment.
This case involves the alleged liability of a surety under a Subcontractor's Performance and Payment Bond for various withholding and similar employment taxes owed to the United States and the State of Hawaii. On December 30, 1992, Defendant Oahu Construction Company, Limited, ("Obligee"), entered into a contract with the City and County of Honolulu to perform work that included construction of the Ewa Villages Golf Course ("Ewa Villages"). On April 26, 1993, Oahu Construction entered into a subcontract (the "Subcontract") with Hawaiian Foliage & Landscape, Inc., ("Principal"), pursuant to which the Principal was required to perform landscaping work at the Ewa Villages project.
On November 22, 1993, Island Insurance Company, Inc. ("Plaintiff") issued a "Sub-contractor's Performance and Payment Bond" ("the Bond"), naming Hawaiian Foliage as the Principal and Oahu Construction as Obligee. Under the Bond, Plaintiff agreed to pay certain obligations incurred by the Principal in the event the Principal failed to perform its contractual duties under the Subcontract.
In the course of performing its responsibilities under the Subcontract, the Principal incurred substantial obligations to other subcontractors, suppliers and creditors. In addition, the Principal incurred debts to the United States, the Director of Taxation and the Director of Labor and Industrial Relations for the State of Hawaii for unpaid withholding and other employment taxes.
Hawaiian Foliage eventually defaulted on the Subcontract. Pursuant to the Bond, Plaintiff paid selected obligations on behalf of the Principal. Plaintiff has refused to pay the Principal's tax debts, however, disputing its obligation to do so under the Bond. On August 19, 1997, Plaintiff filed its Complaint. In Count Two of the Complaint, Plaintiff sought a judgment declaring that it was not liable under the Bond for employment taxes owed by the Principal to the Governments of the State of Hawaii and the United States. On October 31, 1997, Defendant United States ("U.S.") filed a counterclaim against Plaintiff, demanding the unpaid withholding, employment security and excise taxes owed to the United States by the Principal for work performed under the Subcontract. Defendants Director of Taxation ("DOT") and Director of Labor and Industrial Relations ("DLIR") for the State of Hawaii have filed similar counterclaims.1 All parties now move for Partial Summary Judgment with respect to this issue.
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be entered when:
... the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
The moving party has the initial burden of "identifying for the court those portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986)). The movant must be able to show "the absence of a material and triable issue of fact," Richards v. Neilsen Freight Lines, 810 F.2d 898, 902 (9th Cir.1987), although it need not necessarily advance affidavits or similar materials to negate the existence of an issue on which the nonmoving party will bear the burden of proof at trial. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. But cf., id., at 328, 106 S.Ct. 2548 (White, J., concurring).
If the moving party meets its burden, then the opposing party may not defeat a motion for summary judgment in the absence of any significant probative evidence tending to support his legal theory. Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270, 282 (9th Cir.1979). The opposing party cannot stand on his pleadings, nor can he simply assert that he will be able to discredit the movant's evidence at trial. See T.W. Elec., 809 F.2d at 630. Similarly, legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). Moreover, "if the factual context makes the nonmoving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987), (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)) (original emphasis).
The standard for a grant of summary judgment reflects the standard governing the grant of a directed verdict. See Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1289 (9th Cir.1987) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Thus, the question is whether "reasonable minds could differ as to the import of the evidence." Eisenberg, 815 F.2d at 1289.
However, when "direct evidence" produced by the moving party conflicts with "direct evidence" produced by the party opposing summary judgment, "the judge must assume the truth of the evidence set forth by the nonmoving party with respect to that fact." T.W. Elec., 809 F.2d at 631. Also, inferences from the facts must be drawn in the light most favorable to the nonmoving party. Id. These inferences may be drawn both from underlying facts that are not in dispute, as well as from disputed facts which the judge is required to resolve in favor of the nonmoving party. Id.
This case requires the court to determine whether a surety is liable under a bond it issued for unpaid taxes owed by the principal. Federal courts look to state law to construe common law surety contracts. Mai Steel Serv., Inc. v. Blake Constr. Co., 981 F.2d 414, 421 (9th Cir. 1992) (). In construing contractors' bonds, Hawaii law applies traditional principles of contract interpretation. See Van Dusen v. G.S. Shima Contracting, Inc., 4 Haw.App. 261, 664 P.2d 753, 754 (1983). Under traditional contract principles, "the terms of a contract should be interpreted according to their plain, ordinary and accepted use in common speech, unless the contract indicates a different meaning." Pancakes of Hawaii, Inc. v. Pomare Properties Corp., 85 Hawai`i 300, 944 P.2d 97, 102 (1997) (internal citations and quotation marks omitted).
The two contracts at issue in this case are the Bond and the Subcontract. The Bond identifies Hawaiian Foliage as the Principal and Plaintiff as the surety. It further provides that Plaintiff is liable to Oahu Construction, as Obligee, on behalf of Hawaiian Foliage. If the Principal fails to meet its obligations under the Subcontract, Plaintiff's duties under the Bond are triggered:
NOW, THEREFORE, if the said Principal shall duly and truly perform and complete said subcontract and pay for all materials used in the performance of same and shall hold the said Obligee free and harmless from and against all claims for any and all labor and materials used in the performance of said subcontract, which may or shall arise by reason of the failure of the said Principal to furnish, deliver and pay for any and all labor and...
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