Dist. Council 50 of Int'l Union of Painters & Allied Trades v. Lopez
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The State contracted with a general contractor (Contractor) to complete the renovation of an elementary school. The project required extensive glazing work, specifically, the fabrication and installation of jalousie windows. Contractor held a C-5 specialty license in cabinet, millwork, and carpentry remodeling and repairs, but it did not hold a specialty glazing license. The Department of Commerce and Consumer Affairs' (DCCA) Contractors License Board (Board) determined that Contractor could complete the jalousie window work pursuant to its C-5 license. Specifically, the Board determined that the jalousie window work qualified as "incidental and supplemental" to the remodeling and repair work authorized under Contractor's C-5 license. The circuit court and intermediate court of appeals affirmed. The Supreme Court vacated the judgments of the lower courts, holding that because the Board did not consider the cost and extent of the jalousie window work when determining if that work qualified as "incidental and supplemental" to the project, the Board's interpretation of the "incidental and supplemental" exception was contrary to law and to the primary purpose of the legislation regarding contractor licensing. Remanded.
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Electronically Filed
Supreme Court
SCWC-28762
17-APR-2013
10:48 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o--DISTRICT COUNCIL 50, OF THE INTERNATIONAL UNION OF PAINTERS AND
ALLIED TRADES and ALOHA GLASS SALES & SERVICE, INC.,
Petitioners/Plaintiffs-Appellants,
vs.
KEALI#I S. LOPEZ, in her capacity as Director,
Department of Commerce and Consumer Affairs,
Respondent/Defendant-Appellee.
SCWC-28762
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 28762; CIV. NO. 07-1-0310)
APRIL 17, 2013
NAKAYAMA, ACTING C.J., MCKENNA, J.,
AND CIRCUIT JUDGE SAKAMOTO IN PLACE OF POLLACK, J., RECUSED,
WITH CIRCUIT JUDGE KIM IN PLACE OF RECKTENWALD, C.J., RECUSED,
CONCURRING AND DISSENTING, WITH WHOM CIRCUIT JUDGE TO#OTO#O,
IN PLACE OF ACOBA, J., RECUSED, JOINS
OPINION OF THE COURT BY NAKAYAMA, ACTING C.J.
In 2005, the State of Hawai#i contracted with general
contractor Allied Pacific Builders, Inc. (Allied Pacific) to
complete the renovation of Lanakila Elementary School.
The
project included extensive glazing work, specifically the
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fabrication and installation of 476 jalousie windows.
Allied
Pacific holds a C-5 specialty license in “[c]abinet, millwork,
and carpentry remodeling and repairs,” but it does not hold a
specialty glazing license.
The Department of Commerce and Consumer Affairs’s
(DCCA) Contractors License Board (the Board) concluded that
Allied Pacific could complete the jalousie window work pursuant
to its C-5 license.
The Board determined that the jalousie
window work qualified as “incidental and supplemental” to the
remodeling and repair work authorized under Allied Pacific’s C-5
license.
We hold that because the Board did not consider the
cost and extent of the work when determining if that work
qualified as “incidental and supplemental” to the project, the
Board’s interpretation of the “incidental and supplemental”
exception is contrary to law and contrary to the primary purpose
of the legislation regarding contractor licensing.
I.
A.
BACKGROUND
Factual Background
This case arises from the State of Hawaii’s renovation
project known as “Lanakila Elementary School Renovate and Paint
Various Buildings DAGS Job No. 52-16-5581” (the Project).
2
On
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January 31, 2005,1 the Department of Education (DOE), State of
Hawai#i, and the Department of Accounting and General Services
(DAGS), Public Works Division, issued a Notice to Bidders
(Notice) describing the work involved in the Project.
The Notice
stated:
The work generally consists of replacement of windows, floor
covering, tackboards, whiteboards, electrical light
fixtures, switches, receptacles and cover plates, doors and
door frames, finish hardware, termite damaged wood, gypsum
wallboard partition, sinks and cabinets, re-keying of locks,
interior and exterior painting, cast-in-place concrete,
concrete repairs, concrete masonry, and some minor repair
work.
. . . .
To be eligible to submit a Bid, the Bidder must possess a
valid State of Hawaii Contractor’s license classification B.
Included within the Project was the installation of 476
aluminum jalousie windows, containing approximately 10,390 vinyl
slats.
The Project specifications required that “[f]abrication
and installation of jalousie windows shall be done by skilled and
experienced mechanics to the best standard of the trade and in
accordance with the approved shop drawings.”
Under one estimate,
the window work cost $372,875, representing approximately 20% to
25% of the total project cost.2
This type of window work falls
1
The hearings officer misstated the date of the Notice as March 3,
2005, and this mistake was replicated in the Intermediate Court of Appeals’
(ICA) memorandum opinion. See District Council 50 v. Lopez, No. 28762, 2012
WL 3044105, at *1 (App. July 26, 2012) (mem. op.). The final date for the
submission of bids on the project was March 3, 2005.
2
This estimate was submitted by Petitioner Aloha Glass Sales and
Service, Inc. in a declaration. Though the hearings officer declined to adopt
(continued...)
3
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within the C-22 specialty license for glaziers.3
See Hawai#i
Administrative Rules (HAR) § 16-77-28(c) (incorporating Exhibit A
into the chapter) (hereinafter HAR § 16-77-28(c), Exhibit A).
The Notice also included detailed instructions
explaining how and why DOE and DAGS required bidders to specify
subcontractors in the bid.
The instructions provided, in
pertinent part:
1. Bidder shall complete the “Joint Contractors or
Subcontractors List”. It is the sole responsibility of the
Bidder to review the requirements of this project and
determine the appropriate specialty Contractor’s licenses
that are required to complete the project. Failure of the
Bidder to provide the correct names, license numbers,
specialty class number, classification description and to
indicate that the specialty Contractor is required for this
project, may cause the bid to be rejected.
2. Bidder agrees the completed listing of Joint Contractors
or Subcontractors is required for the project and that the
Bidder, together with the listed Joint Contractors and
Subcontractors, have all the specialty Contractor’s licenses
to complete the work.
3. Based on the Hawaii Supreme Court’s January 28, 2002
decision in Okada Trucking Co., Ltd. v. Board of Water
Supply, et al., 97 Hawaii 450 (2002), the Bidder as a
2
(...continued)
this estimate in his findings of fact, he referenced it in his conclusions of
law.
3
A C-22 specialty license authorizes “Glazing and tinting
contractor[s]”:
To glaze or tint frames, panels, sash, and doors. To
assemble and install window wall and curtain wall, shower
doors, tub enclosures, mirrors, metal windows and screens,
metal sliding doors, metal jalousies, store front metal and
trim, plastics, tempered glass doors; including items such
as frames and hardware and any allied products not stated
above but affiliated with the glass and glazing industry[.]
Hawai#i Administrative Rules (HAR) § 16-77-28(c) (incorporating Exhibit A into
the chapter) (emphasis added).
4
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General Contractor (‘A’ or ‘B’ license) is prohibited from
undertaking any work solely or as part of a larger project,
which would require the Bidder (‘A’ or ‘B’ General
Contractor) to act as a specialty (‘C’ license) Contractor
in any area in which the Bidder (‘A’ or ‘B’ General
Contractor) has no specialty Contractor’s license. Although
the ‘A’ and ‘B’ Contractor may still bid on and act as the
“Prime Contractor” on an ‘A’ or ‘B’ project (See, HRS
§[]444-7 for the definitions of an “A” and “B” project),
respectively, the ‘A’ and ‘B’ Contractor may only perform
work in the areas in which they have the appropriate
Contractor’s license. The Bidder (‘A’ or ‘B’ General
Contractor) must have the appropriate ‘C’ specialty
Contractor’s licenses either obtained on its own, or
obtained automatically under HAR §[]16-77-32.
On December 20, 2005, DOE and DAGS accepted low bidder
Allied Pacific’s bid on the Project.
Allied Pacific is licensed
as a “B” general building contractor4 and, therefore, holds an
automatic C-5 specialty license.5
4
See HAR § 16-77-32(c) (2004).
HAR § 16-77-32(c) provides:
Licensees who hold the “B” general building contractor
classification shall automatically hold the following
specialty classifications without further examination or
paying additional fees:
(1)
C-5 cabinet, millwork, and carpentry remodeling and
repairs;
(2)
C-6 carpentry framing;
(3)
C-10 scaffolding;
(4)
C-12 drywall;
(5)
C-24 building moving and wrecking;
(6)
C-25 institutional and commercial equipment;
(7)
C-31a cement concrete;
(8)
C-32a wood and vinyl fencing;
(9)
C-42a aluminum and other metal shingles;
(10) C-42b wood shingles and wood shakes.
5
The C-5 license authorizes specialty contractors
[t]o install cabinets, cases, sashes, doors, trims, or
nonbearing partitions that become a permanent part of [sic]
structure, and to remodel or to make repairs to existing
buildings or structures, or both; and to do any other work
which would be incidental and supplemental to the remodeling
or repairing. The repairs, carpentry work, or remodeling
shall include the installation of window shutters, garage
(continued...)
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Allied Pacific’s bid listed a number of subcontractors holding
specialty contractor licenses, but did not list any subcontractor
holding a C-22 glazing and tinting license.
It is undisputed
that Allied Pacific does not possess a C-22 license.
District
Council 50, 2012 WL 3044105, at *3.
B.
Procedural Background
On or about March 24, 2006, District Council 50 of the
International Union of Painters and Allied Trades (DC 50)6 and
Aloha Glass Sales & Service, Inc. (Aloha Glass)7 (collectively,
Petitioners) filed a Petition for Declaratory Ruling (Petition)
with DCCA’s Contractors License Board.
The Board referred the
Petition to the Office of Administrative Hearings for further
proceedings on April 26, 2006.
The Petition was filed pursuant
to Hawai#i Revised Statutes (HRS) § 444-4(9) (1995)8 and HAR §
5
(...continued)
doors, bifold, and shutter doors; and the installation of
manufactured sidings and any other work that would not
involve changes or additions to the building’s or
structure’s basic components such as, but not limited to
foundations, beams, rafters, joists, or any load bearing
members or sections[.]
HAR § 16-77-28(c), Exhibit A (emphasis added).
6
DC 50 is a union representing glaziers and glass workers, carpet
and soft tile installers, and drywall finishers.
7
Aloha Glass is a C-22 licensed specialty glazing contractor.
8
HRS § 444-4(9) provides that “[i]n addition to any other powers
and duties authorized by law, the board shall: Issue informal nonbinding
interpretations or declaratory rulings, and conduct contested case
proceedings . . . .”
6
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16-201-48 (1990).9
This statute, and the rule implementing it,
allows the Board to issue declaratory rulings regarding statutes,
rules, and orders governing contractors.
§ 16-201-48.
See HRS § 444-4(9); HAR
Petitioners sought a ruling that “[a] general
building contractor with a B-license cannot engage in work
requiring a C-22 subcontractor license under the general
contractor’s license.”10
9
HAR § 16-201-48 provides that “[t]he department or any interested
person may petition the authority for a declaratory ruling as to the
applicability of any statutory provision or of any rule or order adopted by
the authority to a factual situation.”
10
The Petition raised three additional issues:
2. Where more than 1% of the work under a public works
project requires a C-22 license, a general building
contractor with a B-license cannot perform that work, but
must engage a subcontractor possessing a C-22 subspecialty
license;
3. The State of Hawai#i may not accept bids from a
contractor for a public works contract who has failed to
name each person or firm to be engaged by the bidder as a
subcontractor where it is not in the best interest of the
State and the value of the work to be performed by the joint
contractor or subcontractor is greater than 1% of the total
bid amount; and
4. The bid of the B-licensed contractor described herein
should not have been accepted and the lowest bidder listing
a C-22 specialty subcontractor should have been awarded the
contract.
The Board determined that it did not have jurisdiction over these issues
because they required the Board to interpret HRS § 103D-302(b) (Supp. 2006).
HRS § 103D-302 governed competitive sealed bidding then as it does today. As
specified in HRS § 103D-701(a) (Supp. 2006), only an “actual or prospective
bidder, offeror, or contractor who is aggrieved in connection with the
solicitation or award of a contract may protest to the chief procurement
officer or a designee” under chapter 103D. On appeal, the circuit court held
that “the Board [did] not have expertise in or jurisdiction over HRS § 103D302(b) or chapter 103D in general, thus the Court finds that, for the purposes
of this appeal, it also has no jurisdiction over the Procurement
(continued...)
7
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Petitioners’ argument was based on their interpretation
of HRS §§ 444-9 (1993) and 444-8(c) (1993), and our opinion in
Okada Trucking, 97 Hawai#i 450, 40 P.3d 73 (2002).
HRS § 444-9
contains a broad prohibition against unlicensed work:
No person within the purview of this chapter shall act, or
assume to act, or advertise, as general engineering
contractor, general building contractor, or specialty
contractor without a license previously obtained under and
in compliance with this chapter and the rules and
regulations of the contractors license board.
HRS § 444-8(c) creates a general exception for specialty
contractors to complete work for which they are unlicensed if the
work is “incidental and supplemental” to licensed work:
This section shall not prohibit a specialty contractor from
taking and executing a contract involving the use of two or
more crafts or trades, if the performance of the work in the
crafts or trades, other than in which the specialty
contractor is licensed, is incidental and supplemental to
the performance of work in the craft for which the specialty
contractor is licensed.
(emphasis added).
Petitioners argued that “incidental and
supplemental” must be interpreted narrowly so as not to “‘expand
the scope of work in which a general engineering contractor may
engage.’”
They interpreted Okada Trucking as “explicitly
stat[ing] that neither an ‘A’ nor ‘B’ licensee could engage in
‘incidental and supplemental’ work in trades or crafts in which
it is not licensed.”
10
(...continued)
Code. . . . [T]hus the only issues appropriate for appeal are the decisions of
the Board, which only reached HRS Chapter 444.” Petitioners did not appeal
this determination.
8
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The hearings officer issued his recommendations on
October 26, 2006.
The hearings officer concluded: “The jalousie
window replacement work can be undertaken by a C-22 specialty
contractor, and a C-5 specialty contractor provided that the work
is incidental and supplemental to the renovation work for which
the C-5 contractor is licensed to perform.”
The hearings officer
interpreted Okada Trucking as holding only that a general
building contractor could not perform work for which it was not
licensed.
Therefore, work that falls under the “incidental and
supplemental” provision is licensed and the performance of this
work by a general contractor would not violate Okada Trucking.
In interpreting the terms “incidental and
supplemental,” the hearings officer relied upon the definition
found in HAR § 16-77-34.
This rule defines “incidental and
supplemental” as “‘work in other trades directly related to and
necessary for the completion of the project undertaken by a
licensee pursuant to the scope of the licensee’s license.’”
The hearings officer noted that this definition of “incidental
and supplemental” does not take into consideration the cost or
extent of work.
Based on this definition, the hearings officer
concluded that the jalousie window work was “incidental and
supplemental” to the Project.
Accordingly, the hearings officer
recommended that the Board deny the Petition.
9
On January 22,
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2007, the Board adopted the hearings officer’s recommended
decision as the Board’s final order.
Petitioners appealed to the circuit court.
On
September 12, 2007, the circuit court affirmed the Board’s final
order.11
The circuit court reasoned that it was the Board’s duty
as the finder of fact to determine the scope of licensing and
“there is nothing to prohibit the Board from determining and
interpreting HRS chapter 444 such that jalousie window work
representing 20% to 25% of the total project meets the definition
of incidental and supplemental under HAR § 16-77-34.”
Petitioners thereafter filed a secondary appeal with
the ICA.
On July 26, 2012, the ICA issued its memorandum
opinion.
See District Council 50, 2012 WL 3044105, at *1.
The
ICA held that, because Petitioners did not demonstrate that the
Board’s interpretation of “incidental and supplemental” was
clearly erroneous or inconsistent with the underlying legislative
purpose, the circuit court did not err in affirming the Board’s
final order.
Id. at *5.
Petitioners timely filed an application for writ of
certiorari on October 18, 2012.
This court accepted Petitioners’
application on December 3, 2012 and heard oral argument on
11
The Honorable Eden Elizabeth Hifo presided.
10
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January 17, 2013.
II.
A.
STANDARD OF REVIEW
Secondary Judicial Review of an Administrative Decision
The review of a circuit court’s decision upon its
review of an agency’s decision is a secondary appeal.
Haw.
Teamsters & Allied Workers, Local 966 v. Dep’t of Labor & Indus.
Relations, 110 Hawai#i 259, 265, 132 P.3d 368, 374 (2006).
In a
secondary appeal, “‘Hawaii appellate courts apply the same
standard of review as that applied upon primary review by the
circuit court.’”
AlohaCare v. Ito, 126 Hawai#i 326, 341, 271
P.3d 621, 636 (2012) (quoting Kaiser Found. Health Plan, Inc. v.
Dep’t of Labor & Indus. Relations, 70 Haw. 72, 80, 762 P.2d 796,
800-01 (1988)).
The applicable standard of review for
administrative appeals is set forth in HRS § 91-14(g) (1993),
which provides:
Upon review of the record the court may affirm the decision
of the agency or remand the case with instructions for
further proceedings; or it may reverse or modify the
decision and order if the substantial rights of the
petitioners may have been prejudiced because the
administrative findings, conclusions, decisions, or orders
are:
(1) In violation of constitutional or statutory
provisions; or
(2) In excess of the statutory authority or
jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Clearly erroneous in view of the reliable,
probative, and substantial evidence on the whole
record; or
(6) Arbitrary, capricious, or characterized by abuse
11
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of discretion or clearly unwarranted exercise of
discretion.12
See also AlohaCare, 126 Hawai#i at 341, 271 P.3d at 636 (applying
HRS § 91-14(g) when evaluating a petition seeking a declaratory
ruling under HAR § 16-201-48).
“[U]nder HRS § 91-14(g),
conclusions of law are reviewable under subsections (1), (2), and
(4); questions regarding procedural defects under subsection (3);
findings of fact under subsection (5); and an agency’s exercise
of discretion under subsection (6).”
Del Monte Fresh Produce
(Haw.), Inc. v. Int’l Longshore & Warehouse Union, Local 142, 112
Hawai#i 489, 499, 146 P.3d 1066, 1076 (2006) (alterations in
original) (quoting In re Hawaiian Elec. Co., 81 Hawai#i 459, 465,
918 P.2d 561, 567 (1996)).
“‘An agency’s interpretation of its rule receives
deference unless it is plainly erroneous or inconsistent with the
underlying legislative purpose.’” Haw. Teamsters, 110 Hawai#i at
265, 132 P.3d at 374 (quoting Int’l Bhd. of Elec. Workers v.
Hawaiian Tel. Co., 68 Haw. 316, 322, 713 P.2d 943, 950 (1986)).
The agency’s “interpretation of a statute is a question of law
reviewable de novo.”
Okada Trucking, 97 Hawai#i at 458, 40 P.3d
12
The ICA cited HRS § 103D-710(e) (2011) for a similar standard of
review. District Council 50, 2012 WL 3044105, at *2 (citing Arakaki v. State,
Dep’t of Accounting & Gen. Servs., 87 Hawai#i 147, 149, 952 P.2d 1210, 1212
(1998)). However, HRS § 103D-710(e) is not applicable because, unlike the
petitioner in Arakaki, Petitioners here did not file their petition pursuant
to HRS chapter 103D, the Procurement Code.
12
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at 81.
We have stated that:
When construing a statute, our foremost obligation is
to ascertain and give effect to the intention of the
legislature, which is to be obtained primarily from the
language contained in the statute itself. And we must read
statutory language in the context of the entire statute and
construe it in a manner consistent with its purpose.
When there is doubt, doubleness of meaning, or
indistinctiveness or uncertainty of an expression used in a
statute, an ambiguity exists.
In construing an ambiguous statute, “the meaning of
the ambiguous words may be sought by examining the context,
with which the ambiguous words, phrases, and sentences may
be compared, in order to ascertain their true meaning.” HRS
§ 1-15(1) (1993). Moreover, the courts may resort to
extrinsic aids in determining legislative intent. One
avenue is the use of legislative history as an interpretive
tool.
Gray v. Admin. Dir. of the Court, 84 Hawai#i 138, 148, 931 P.2d
580, 590 (1997) (internal brackets, ellipses, and footnote
omitted) (quoting State v. Toyomura, 80 Hawai#i 8, 18-19, 904
P.2d 893, 903-04 (1995)).
III.
DISCUSSION
A.
The Board’s decision was not inconsistent with our opinion
in Okada Trucking
Petitioners have repeatedly argued that the Board’s
broad definition of “incidental and supplemental” would, if
upheld, “eviscerate” and “emasculate” this court’s opinion in
Okada Trucking.
They quote Okada Trucking for the principal that
“‘if a particular project for which a general engineering
contractor has obtained a contract requires work in a specialty
classification in which it is not licensed to operate . . . the
13
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general engineering contractor cannot, pursuant to HRS § 444-9,
undertake to perform that specialty work itself.’”
Under
Petitioners’ interpretation, the Board’s definition of
“incidental and supplemental” violates Okada Trucking by allowing
general contractors to perform all specialty work that is related
to and necessary for the completion of a project, regardless of
whether the general contractor holds the requisite specialty
licenses.
However, Petitioners fail to appreciate the
significant factual differences between Okada Trucking and this
case and the specificity of our holding in Okada Trucking.
Okada Trucking involved a contract for an “A” general
engineering contractor to construct a booster station for the
City and County of Honolulu Board of Water Supply (“BWS”).
Hawai#i at 452, 40 P.3d at 75.
97
It was uncontested that the
contract included plumbing work requiring a C-37 specialty
contracting license.
Id. at 452-53, 40 P.3d at 75-76.
BWS
awarded the contract to low bidder Inter Island Environmental
Systems, Inc. (Inter Island), despite the fact that its bid did
not “disclose the name of and the nature and scope of work to be
performed by a C-37 licensed plumbing subcontractor.”
Id. at
453, 40 P.3d at 76.
Okada Trucking Co., Ltd. (Okada Trucking), the second
lowest bidder on the contract, protested the award of the
14
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contract to Inter Island.
Id. at 453-54, 40 P.3d at 76-77.
The
DCCA hearings officer concluded that “it was not in the BWS’s or
the public’s best interests to have waived the disclosure
requirement” and therefore it was unlawful to do so.
Id. at 455,
40 P.3d at 78.
The ICA vacated the hearings officer’s decision,
holding that Inter Island was not required to list a C-37
licensed subcontractor in its bid or retain a C-37 licensed
subcontractor to complete the specialty plumbing work.
Id. at
457, 40 P.3d at 80.
This court accepted Okada Trucking’s application for
writ of certiorari.
Id. at 451, 40 P.3d at 74.
We held that the
ICA erred in holding that Inter Island could complete the
specialty plumbing work under its general contracting licenses.
Id. at 457, 40 P.3d at 80.
We concluded that “pursuant to HRS §
444-9, a general engineering or 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.”13
13
We remanded the case to the ICA to consider the points of error
that Inter Island raised on appeal from the hearings officer’s decision.
Okada Trucking, 97 Hawai#i at 462, 40 P.3d at 85. The ICA dismissed the
appeal as moot due to Okada Trucking’s completion of the original contract.
Okada Trucking Co., Ltd. v. Bd. of Water Supply, No. 22956, 2002 WL 32056914,
at *1 (App. Apr. 29, 2002)(Order Dismissing Appeal). We granted the
subsequent application for writ of certiorari and held that Inter Island’s
(continued...)
15
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Id. at 462, 40 P.3d at 85 (emphasis in original).
We discussed the implications of the “incidental and
supplemental” provision of HRS § 444-8(c), and the limiting
provision of HRS § 444-9, in a footnote:
The foregoing provisions, to the extent that they permit a
specialty contractor to engage in “incidental and
supplemental” work in trades or crafts in which it is not
licensed do not similarly expand the scope of work in which
a general engineering contractor may engage. Rather, as to
general engineering contractors, HRS §§ 444-8 and 444-9, as
well as HAR §§ 16-77-32 through 16-77-34, expressly
constrain them from engaging in any operations for which
they are not duly licensed.
More importantly, however, in the present matter, no party
has ever contended that Inter Island could undertake the
plumbing work required by the project because that work was
“incidental and supplemental” to work that Inter Island was
duly licensed to undertake. Inasmuch as we are not factfinders and given that the hearings officer expressly found
that the project required work in the C–37 plumbing
classification, the ICA erred in construing the foregoing
provisions to support its holding that the project in the
present matter did not require specialized plumbing work
that Inter Island was not duly licensed to undertake.
Id. at 461-62 n.16, 40 P.3d at 84-85 n.16 (emphasis added).
This
text clarifies that the “incidental and supplemental” provision
applies only to specialty contractors and not to general “A” or
“B” contractors.
However, we also qualified this conclusion by
stating that the most important factor in our determination that
13
(...continued)
question fell within an exception to the mootness doctrine “because it
involves a matter of public concern and is capable of repetition yet evading
review.” Okada Trucking Co., Ltd. v. Bd. of Water Supply, 99 Hawai#i 191,
192, 53 P.3d 799, 800 (2002) (Okada Trucking II). On remand, the ICA held
that, although Inter Island’s bid was non-responsive because it did not list a
C-37 licensed subcontractor, BWS was authorized to waive this de minimis
violation and accept Inter Island’s bid. Okada Trucking Co., Ltd. v. Bd. of
Water Supply, 101 Hawai#i 68, 76-80, 62 P.3d 631, 639-43 (App. 2002).
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a C-37 specialty contractor was required to complete the
specialty plumbing work was the parties’ uncontested admission of
this fact.
Id.
Both Okada Trucking and the present application
consider under what circumstances a general contractor is
required to subcontract with a contractor holding a “C” specialty
contracting license.
However, the cases differ in two
significant aspects.
First, in Okada Trucking, the parties
conceded that the work could only be completed by a contractor
holding a specialty license that Inter Island did not possess.
Here, however, the Board concluded, and Allied Pacific has
consistently maintained, that Allied Pacific may complete the
specialty window work under its C-5 license.
Second, neither
party in Okada Trucking argued that Inter Island could complete
the specialty work because it was “incidental and supplemental”
to the licensed work.
Whereas here, the Board specifically held
that Allied Pacific could complete the jalousie window work under
the “incidental and supplemental” provision in its automatic C-5
specialty license.
Okada Trucking’s holding dictates only that a general
contractor may not engage in work requiring a specialty license
that the general contractor does not hold.
97 Hawai#i at 462, 40 P.3d at 85.
17
See Okada Trucking,
We did not foreclose the
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possibility of a specialty contractor completing work falling
outside of their specialty license if that work was incidental
and supplemental to licensed work, as provided for by HRS § 4448(c).
Here, the Board concluded that the jalousie window work
qualified as “incidental and supplemental” to Allied Pacific’s C5 specialty license.
Therefore, pursuant to the Board’s
interpretation, the jalousie window work could be completed under
the C-5 specialty license, and did not require a C-22 specialty
glaziers license.
The Board’s decision was based on Allied
Pacific’s status as a C-5 specialty license holder, and not its
status as a general “B” contractor.
Because the Board determined
that Allied Pacific could complete the jalousie window work under
its C-5 specialty license, its conclusion did not violate our
holding in Okada Trucking.
B.
The Board’s interpretation of the “incidental and
supplemental” provision is plainly erroneous and inconsistent
with the underlying legislative purpose
In this case, the Board interpreted the “incidental and
supplemental” provision in HRS § 444-8(c), the “incidental and
supplemental” provision in the C-5 specialty license at HAR § 1677-28(c), Exhibit A, and the definition of “incidental and
supplemental” contained in HAR § 16-77-34.
Statutory
interpretations are reviewed de novo and the “agency’s
interpretations of its rules receives deference unless it is
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plainly erroneous or inconsistent with the underlying legislative
purpose.”
Haw. Teamsters, 110 Hawai#i at 265, 132 P.3d at 374.
“Although judicial deference to agency expertise is generally
accorded where the interpretation and application of broad or
ambiguous statutory language by an administrative tribunal are
subject to review, this deference is constrained by our
obligation to honor the clear meaning of a statute, as revealed
by its language, purpose, and history.”
Morgan v. Planning
Dep’t, Cnty. of Kaua#i, 104 Hawai#i 173, 180, 86 P.3d 982, 989
(2004).
Because the Board’s interpretation of its rules was
plainly erroneous and contrary to the clear meaning of the
statute, it is not entitled to deference.
1.
The Board’s interpretation of “incidental and
supplemental” was plainly erroneous under HRS § 444-8(c)
In their application for writ of certiorari,
Petitioners argue that the ICA erred in deferring to the Board’s
interpretation of the “incidental and supplemental” provision of
HRS § 444-8(c) and that the Board’s interpretation was clearly
erroneous, contrary to law, and arbitrary and capricious.
Because “incidental” and “supplemental” are common words,
Petitioners look to the dictionary to find their “ordinary and
customary meanings” and the dictionary yields definitions of
“incidental” and “supplemental” which, when combined, form:
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“something ‘minor’ added to the whole.”
They argue that the
Board’s holding “that the statutory terms ‘incidental and
supplemental’ have nothing to do with ‘the extent or cost of the
work’” is contradictory to the ordinary meaning of the words.
Petitioners conclude that if “incidental and supplemental” are
defined as “necessary and indispensable,” as stated in HAR § 1677-34, “the exception swallows the rule”: a specialty contractor
licensed to complete work making up 1% of the project could
complete the remaining 99% of the work under this interpretation
of the “incidental and supplemental” provision.
HRS chapter 444 (1993 & Supp. 2012) governs the
regulation of contractors.14
It divides contractors into three
classifications: general engineering, general building, and
specialty.
HRS § 444-7 (1993).
Generally, contractors may only
perform work for which they are properly licensed.
14
See HRS §
HRS § 444-1 (1993) defines a “contractor” as:
any person who by oneself or through others offers to
undertake, or holds oneself out as being able to undertake,
or does undertake to alter, add to, subtract from, improve,
enhance, or beautify any realty or construct, alter, repair,
add to, subtract from, improve, move, wreck, or demolish any
building, highway, road railroad, excavation, or other
structure, project development, or improvement, or do any
part thereof, including the erection of scaffolding or other
structures or works in connection therewith.
“Contractor” includes a subcontractor, a specialty
contractor, and any person, general engineering, general
building, or specialty contractor who performs any of the
activities listed in the previous paragraph directly or
indirectly for the federal government.
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444-8(a) (1993) (“The contractors license board may adopt rules
and regulations necessary to effect the classification of
contractors . . . and may limit the field and scope of the
operations of a licensed contractor to those in which the
contractor is classified and qualified to engage . . . .”).
However, HRS § 444-8(c) creates an exception for specialty
contractors to perform “incidental and supplemental” work outside
of their licensed area of expertise:
This section shall not prohibit a specialty contractor from
taking and executing a contract involving the use of two or
more crafts or trades, if the performance of the work in the
crafts or trades, other than in which the specialty
contractor is licensed, is incidental and supplemental to
the performance of work in the craft for which the specialty
contractor is licensed.
(emphasis added).
In interpreting the HRS § 444-8(c) exception for
specialty contractors to complete unlicensed “incidental and
supplemental” work, we must give effect to the plain and obvious
meaning of the language.
See Leslie v. Bd. of Appeals of Cnty.
of Haw., 109 Hawai#i 384, 393, 126 P.3d 1071, 1080 (2006).
To
determine the ordinary meaning of terms not statutorily defined,
we may use “legal or other well accepted dictionaries.”
Id.
“Incidental” is defined as: “[s]ubordinate to something of
greater importance; having a minor role.”
830 (9th ed. 2009).
Black’s Law Dictionary
“Supplemental” is defined as: “supplying
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something additional; adding what is lacking.”
Id. at 1577.
Therefore, the ordinary meaning of “incidental and supplemental”
is “subordinate to something of greater importance and supplying
something additional.”
Applying the ordinary meaning of “incidental and
supplemental” to HRS § 444-8(c), it is apparent that the
legislature meant to provide specialty contractors with a limited
ability to perform work outside of their licensed specialty area.
However, the “incidental and supplemental” work must not make up
the majority of the project, and must instead be “subordinate”
and in addition to licensed work “of greater importance.”
Under DCCA’s rules implementing HRS chapter 444, a “B”
general contractor such as Allied Pacific may not “undertake a
contract unless it requires more than two unrelated building
trades or crafts or unless the general building contractor holds
the specialty license to undertake the contract.
Work performed
which is incidental and supplemental to one contractor
classification shall not be considered as unrelated trades or
crafts.”
HAR § 16-77-33(b) (emphasis added).
“B” general building contractors automatically hold
several specialty contracting licenses, including the C-5
cabinet, millwork, and carpentry remodeling and repairs license.
HAR § 16-77-32(c).
The C-5 specialty license is the only
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specialty license that specifically provides for contractors to
perform “incidental and supplemental” work outside of their
licensed specialties.
See HAR § 16-77-28(c), Exhibit A.
The C-5
license allows the licensee “[t]o install cabinets, cases,
sashes, doors, trims, or nonbearing partitions that become a
permanent part of [sic] structure, and to remodel or to make
repairs to existing buildings or structures, or both; and to do
any other work which would be incidental and supplemental to the
remodeling or repairing.”
added).
HAR § 16-77-28(c), Exhibit A (emphasis
DCCA’s rules define “incidental and supplemental” as any
“work in other trades directly related to and necessary for the
completion of the project.”
HAR § 16-77-34.
The Board’s interpretation of the rules provides no
limitation on the amount of specialty work that may be completed
as incidental and supplemental to C-5 licensed work.
See id.
For remodeling and repair projects falling under the purview of a
“B” general building contractor, the contractor may complete
various types of work pursuant to its automatic C-5 specialty
license.
Under the Board’s interpretation, if the contractor is
qualified to complete some of the work under the C-5 license, the
contractor may complete any other work that is “related to and
necessary for the completion of the project.”
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By statute, the Board is required to “[a]dopt, amend,
or repeal such rules as it may deem proper fully to effectuate”
HRS chapter 444.
HRS § 444-4(2).
Therefore, the “incidental and
supplemental” exception in the C-5 license must be interpreted in
accord with the language of HRS § 444-8(c).
While HRS § 444-8(c)
created a narrow exception for unlicensed work that is
“subordinate to something of greater importance and supplying
something additional,” the Board’s expansive interpretation of
the “incidental and supplemental” exception creates a loophole
for C-5 contractors to complete unlimited amounts of specialty
work for which they do not hold the requisite specialty licenses.
The Board’s refusal to consider cost and extent of work when
determining whether that work qualifies as “incidental and
supplemental” is plainly erroneous in light of the clear meaning
of HRS § 444-8(c).
2.
The Board’s interpretation of “incidental and
supplemental” is inconsistent with the Legislature’s underlying
purpose
Petitioners argue that the Board’s definition of
“incidental and supplemental” is “without meaning or substance
and fails to carry out the Legislature’s ‘manifest purpose.’”
They also argue that no deference is accorded to agency
interpretations that contravene the legislative purpose.
They go
so far as to argue that “[t]o allow a general contractor to
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perform any specialty work so long as it is ‘directly related to
and necessary for’ a project regardless of the ‘extent’ or ‘cost’
of that specialty work would render all specialty licensing laws
meaningless.”
The purpose behind contractor licensing laws in Hawai#i
is to “protect the general public against dishonest, fraudulent,
unskillful or unqualified contractors.”
Jones v. Phillipson, 92
Hawai#i 117, 125, 987 P.2d 1015, 1023 (App. 1999) (quoting 1957
Haw. Sess. L. Act 305, at 358-67).
In accordance with this
principal, the stated purpose of HRS chapter 444 is “the
protection of the general public.”
Okada Trucking, 97 Hawai#i at
459, 40 P.3d at 82 (quoting HRS § 444-4(2) (Supp. 2000)).
The
legislature has stated that HRS chapter 444 was “enacted, in
part, to ensure the health and safety of the public by requiring
that contractors possess a minimum level of expertise, experience
and training.”
Jones, 92 Hawai#i at 125, 987 P.2d at 1023
(emphasis omitted) (quoting Hse. Stand. Comm. Rep. No. 727-96, in
1996 House Journal, at 1309).
In furtherance of the purpose of HRS chapter 444, the
Board must “adopt such rules as it deems proper fully to
implement its authority and to enforce the provisions of HRS ch.
444 and the rules adopted pursuant thereto.”
Okada Trucking, 97
Hawai#i at 459, 40 P.3d at 82 (citing HRS §§ 444-4(2), (3), and
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(4)).
To protect public health and safety, the Board’s rules
must ensure that fully qualified contractors are completing all
major work involved in a particular project.
The Board’s broad definition of “incidental and
supplemental” allows C-5 specialty contractors to complete
substantial amounts of work for which they are unlicensed.
A C-5
contractor may not possess the minimum level of expertise,
experience, and training to complete this unlicensed work.
If
such work is poorly completed, it could present a grave risk to
public health and safety.
Because the Board’s interpretation of
“incidental and supplemental” contravenes the manifest
legislative purpose of the statute, it is entitled to no
deference.15
In creating the “incidental and supplemental” provision
in HRS § 444-8(c), the legislature crafted an exception for the
15
Though neither party has raised the issue of mootness, it is the
duty of the court “to decide actual controversies . . . and not to give
opinions upon moot questions.” Wong v. Bd. of Regents, Univ. of Haw., 62 Haw.
391, 394, 616 P.2d 201, 204 (1980). A case is moot if “the question to be
determined is abstract and does not rest on existing facts or rights.” CARL
Corp. v. State, Dep’t of Educ., 93 Hawai#i 155, 164, 997 P.2d 567, 576 (2000).
Although the record is silent, the Project, which began in 2006, was likely
completed several years ago. Therefore, Petitioners’ question regarding
whether a general “B” contractor could complete the Project’s jalousie window
work under a C-5 license is most likely moot. However, this court has
“repeatedly recognized an exception to the mootness doctrine in cases
involving questions that affect the public interest and are ‘capable of
repetition yet evading review.’” Okada Trucking II, 99 Hawai#i at 196, 53 P.3d
at 799 (quoting CARL Corp., 93 Hawai#i at 165, 997 P.2d at 577). Because
Petitioners’ question regarding the scope of a general “B” license is a matter
of public concern that will likely arise in the future and become moot before
it can receive appellate review, it qualifies for the mootness exception.
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completion of limited amounts of unlicensed work.
This exception
must be interpreted narrowly to preserve the statute’s
overarching purpose of protecting public safety by insuring that
work is completed by fully competent contractors.
In order to
comply with this statutory provision, and the overall purpose of
HRS chapter 444, the “incidental and supplemental” exception to
the C-5 license must be similarly limited.
By allowing C-5
specialty contractors to complete all work related to and
necessary for the completion of a renovation project, regardless
of cost and extent, the Board is contravening the express purpose
of HRS chapter 444.
IV.
CONCLUSION
For the foregoing reasons, we vacate the ICA’s judgment
and the circuit court’s judgment and remand to the Board to
reconsider whether the jalousie window work qualified as
“incidental and supplemental” to the Project in light of the cost
and extent of work involved.
Michael A. Lilly
and Valerie M. Kato
for petitioners
/s/ Paula A. Nakayama
Lei S. Fukumura,
Deborah Day Emerson
and Rodney J. Tam
for respondent
/s/ Karl K. Sakamoto
/s/ Sabrina S. McKenna
27
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