Nothing Criminal in Breaching a Contract
State v. Atwood
(HSC June 3, 2013)
Background. Terrance Atwood was indicted with one
count of theft in the first degree. HRS § 708-830.5. The prosecution presented
an indictment before the grand jury. Witnesses testified that Atwood entered
into a contract to remodel a bathroom in a Kihei home in exchange for $89,394.
Atwood went to work. In the middle of the job, the homeowner learned that
Atwood was not a licensed contractor, but nonetheless kept him on the job
because he had already paid him. However, due to a dispute over the purchasing
of certain materials, the homeowner fired Atwood before the job was finished
and another contractor finished the job. The grand jury returned a true bill
alleging theft in the first degree and an unlicensed activity charge (a
misdemeanor). HRS § 436B-27.
Atwood
moved to dismiss the indictment on the grounds that there was no probable cause
to sustain the charge. He argued that the prosecution failed to prove that
there was no evidence showing that Atwood had no intention of fulfilling his
part of the contract. The prosecution countered that Atwood’s conduct
constituted “deception” under the theft statute. The circuit court denied the
motion, but permitted Atwood to proceed on an interlocutory appeal. The ICA
affirmed. Atwood petitioned for certiorari.
The Offense of Theft by Deception
Requires Proof of Deception.
“A person commits the offense of theft in the first degree if the person
commits theft . . . [o]f property or services, the value of which exceeds
$20,000.” HRS § 708-830.5(1)(a). Theft arises when “[a] person obtains, or
exerts control over, the property of another by deception with the intent to
deprive the other of the property.” HRS § 708-830. There are five different ways to “deprive”
another. HRS § 708-800.
“Deception” Requires more than
Nonperformance. The HSC reviewed
the theft statute and its definitions and observed that the commentary
addressed contractual obligations. “With respect to contractual obligations, a
present intent not to perform would constitute deception, although mere breach
at some future time, without such present intent, would not.” HRS § 708-833
cmt. The HSC also looked to courts from other jurisdictions and agreed that the
indictment required probable cause that Atwood had the intent to “deprive”
through nonperformance. See Smith v. State, 665 So.2d 1002, 1003
(Ala. Crim. App. 1995); Commonwealth v. Layaou, 405 A.2d 500, 501 (Pa.
Super. 1979); State v. Jackson, 765 N.W.2d 541, 542-44 (S.D. 2009).
Here,
the HSC held that Atwood spent considerable time in attempting to meet his contractual
duties. Although the quality of his work may have been lacking, he did spent
time and effort in exchange for the fees. Moreover, it appeared that he tried
to finish the bathroom job, but could not because he was fired by the
complainant. This is not proof of intentional nonperformance. Accordingly,
there was no proof of an intent to “deprive” the owner.
No Evidence of Value Either. Another essential element to theft is
value. Theft in the first degree requires proof that the property or services
at issue exceeded a value of $20,000. HRS § 708-830.5(1)(a). According to the
HSC, there was no evidence of the value of the property or services. The
contract required the owner to pay Atwood over a period of several months in
exchange for the benefit of the remodeled bathroom. The record failed to show
the value of the remodeling work actually performed by Atwood from May 2006
through February 2007—the period in which Atwood was on the job working for his
pay.
The
prosecution tried to get around this by presenting several theories to get to
$20K. First, the prosecution argued that the owner would have never hired Atwood
in the first place had it not been for Atwood’s representation that he was a
licensed contractor. The HSC disagreed that this was the kind of value
contemplated by the theft statute. This is not evidence of deprived property or
services. The prosecution then argued that the $38K paid to another contractor
to finish the job should count. Again, the HSC disagreed. The amount paid to
the replacement contractor was immaterial. In the end, all amounts paid to
Atwood show that it was in exchange for the actual work done in the bathroom. There
was no evidence of value.
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