Standard Management, Inc. v. Kekona, No. 22750.

• Citation: 99 Haw. 125,53 P.3d 264
• Decision Date: 28 February 2001
• Docket Number: No. 22750.
• Parties: STANDARD MANAGEMENT, INC., Plaintiff, v. Benjamin Paul KEKONA, Tamae M. Kekona and North Shore Shuttle, Defendants. Benjamin Paul Kekona and Tamae M. Kekona, Third-Party Plaintiff-Appellees, v. Paz F. Abastillas, aka Paz F. Richter, Third-Party Defendant-Appellant, and Robert A. Smith and Dale Moana Gilmartin, Third-Party Defendants.
• Court: Court of Appeals of Hawai'i

53 P.3d 264

99 Haw. 125

STANDARD MANAGEMENT, INC., Plaintiff, v. Benjamin Paul KEKONA, Tamae M. Kekona and North Shore Shuttle, Defendants.

Benjamin Paul Kekona and Tamae M. Kekona, Third-Party Plaintiff-Appellees, v. Paz F. Abastillas, aka Paz F. Richter, Third-Party Defendant-Appellant, and Robert A. Smith and Dale Moana Gilmartin, Third-Party Defendants.

No. 22750.

Intermediate Court of Appeals of Hawaii.

February 28, 2001.

Reconsideration Denied March 21, 2001.

Robert A. Smith, Kaneohe, for third-party defendant-appellant.

Fred Paul Benco, Honolulu, for third-party plaintiffs-appellees.

BURNS, C.J., WATANABE and LIM, JJ.

Opinion of the Court by LIM, J.

Third-Party Defendant-Appellant Paz F. Abastillas aka Paz F. Richter (Abastillas) appeals the first circuit court's August 17, 1999 Final Judgment on Remand as to All Claims and All Parties, and the underlying Amended Stipulation for Dismissal with Prejudice (Amended Stipulation) of even date.

On appeal, Abastillas contends that the circuit court exceeded its jurisdiction in vacating the previous Stipulation For Dismissal With Prejudice of the Third-Party Complaint (the Stipulation), filed on December 10, 1998, and amending the same immediately after vacatur. Abastillas also argues that the circuit court abused its discretion in granting the Third-Party Plaintiffs-Appellees, Tamae M. Kekona and Benjamin Paul Kekona (collectively, the Kekonas), relief under Hawai`i Rules of Civil Procedure (HRCP) Rule 60(b), because "they had no grounds for seeking relief under Rule 60(b)." We disagree with Abastillas' contentions and affirm the judgment, for the following reasons.

I. BACKGROUND.

The Kekonas met and became involved with Abastillas and attorney Robert A. Smith (Smith), Abastillas' employer and "common-law husband," in 1988. That year, Abastillas and Smith began to assist the Kekonas in the sale of their shuttle bus business and, in 1989, the Kekonas agreed to sell their business to buyers introduced to them by Smith.

Whilst Smith drafted the stock sale documents, Abastillas induced the elderly, married couple to enter into a partnership with her corporation, Standard Management, Inc. (SMI), for the purposes of bidding on and operating a tram service at Hanauma Bay. Smith, SMI's legal counsel, drafted the partnership agreement and operating agreement for the new partnership. Almost from the moment they agreed to the partnership with SMI, the Kekonas were plunged into a morass of legal and financial disputes involving Abastillas, SMI and Smith, many of which continue to this day.¹

This appeal is the latest contest in the original litigation between the Kekonas and the Abastillas/Smith/SMI triad that began in 1989, and stems, in part, from this court's decision in Standard Management v. Kekona, No. 18388, 87 Hawai`i 263, 953 P.2d 1361 (Haw.App. Nov. 25, 1997) (mem.).

In 1989, SMI filed suit against the Kekonas, alleging unlawful ouster from the Hanauma Bay tram partnership. The Kekonas counterclaimed against SMI for breach of contract and filed a third-party complaint against Abastillas and Smith that alleged, inter alia, that the Kekonas were fraudulently induced into the partnership by the couple's intentional misrepresentations regarding their business and professional expertise.

In 1993, after a four-week trial, a jury rendered a special verdict in favor of the Kekonas on the complaint, the counterclaim and the third-party complaint.² The jury awarded the Kekonas damages in the total amount of $703,750. The damages included:

(1) $152,500 in special and general damages and attorneys' fees against SMI;

(2) $200,000 in general damages, $25,000 in punitive damages, and $56,250 in attorneys' fees against Abastillas; and

(3) $270,000 in general damages against Smith.

SMI, Abastillas and Smith appealed the Revised Judgment entered upon the jury's verdict.

On November 25, 1997, we issued Standard Management, Inc. v. Kekona, No. 18388, 87 Hawai`i 263, 953 P.2d 1361 (Haw. App. Nov. 25, 1997) (mem.), partly affirming and partly vacating the September 2, 1994 Revised Judgment. In summary, we affirmed the $152,500 in damages and attorneys' fees awarded against SMI and the $25,000 in punitive damages awarded against Abastillas. However, we remanded for a new trial on the issue of general damages against Abastillas for fraud,³ and for a new trial on the negligence claim against Smith. Id. at 27-28.

On March 18, 1998, the circuit court set the trial on remand for the week of November 30, 1998. Before trial started, however, the parties agreed to settle. The Kekonas agreed to accept $6,000 from Smith and $3,000 from Abastillas.

To settle the negligence claim against Smith, the Kekonas filed their Third-Party Plaintiffs Kekonas' Acceptance of Third-Party Defendant Robert A. Smith's Offer of Judgment. However, in their case against Abastillas, the Kekonas agreed to enter into the Stipulation, upon receipt of the $3,000 settlement payment.⁴ The stipulation, in its entirety, read as follows:

COME NOW the parties hereto, by and through their respective counsel, and hereby stipulate, pursuant to Rule 41(a)(1)(B)⁵ of the Hawaii Rules of Civil Procedure, that the Third-Party Complaint of BENJAMIN PAUL KEKONA and TAMAE M. KEKONA against PAZ F. ABASTILLAS, a/k/a PAZ F. RICHTER, is hereby dismissed with prejudice. Counsel for all parties appearing in this action have signed this Stipulation for Dismissal With Prejudice.

(Emphases and footnote added.)

The parties filed the Stipulation on December 10, 1998. The filing did not include the terms of the settlement agreement. However, the parties did read the terms of the settlement agreement into the record at a proceeding held on December 2, 1998:

[the Kekonas attorney, Fred Paul Benco (Benco)]: The third-party plaintiffs will receive the sum of $3,000 from third-party defendant Abastillas on or by December 25th, 1998 in exchange for a dismissal with prejudice which will be signed by the attorneys and submitted to the Court. If the monies are not received by that time, then a judgment will enter in favor of the Kekonas against Ms. Abastillas for the $3,000.

A few weeks after the signing of the Stipulation, the Kekonas learned that Abastillas, through Smith, was claiming that the settlement encompassed the $25,000 punitive damages award we had affirmed on appeal. This was especially surprising to the Kekonas, given their understanding that the Stipulation settled only their general damages claim against Abastillas. Hence, in this appeal, the Kekonas maintain that it was never intended that they relinquish their $25,000 punitive damages judgment. In contrast, Abastillas claims "that she intended just the opposite: she was willing to settle only if that claim was given up through a Rule 41 stipulation for dismissal with prejudice."

On February 2, 1999, the Kekonas filed their Motion to Vacate Stipulation for Dismissal and/or for New Entry of Dismissal Nunc Pro Tunc and/or for Other Appropriate Relief (the Motion to Vacate). They brought the motion under various subsections of HRCP Rule 60(b), including subsection (6). In support of the motion, Benco, swore in his affidavit that

at the very outset of the December 2nd meeting in chambers, I reiterated that this settlement discussion only concerned the issue of "general damages" due to the Kekonas, and my clients did not intend to and would not broaden the discussion into a settlement of the earlier judgments. Attorney Geshell [Abastillas' trial attorney] again agreed, expressly stating that he "was hired only to try or settle this general damages claim, or what I would term a special damages claim," or words to that effect.

Further, during the hearing on the Motion to Vacate, Benco stated that

there was no discussion of the $25,000 punitive damages, nor was that part of the bargain for consideration in the Court's chambers. And, in fact, that's borne out almost conclusively by the fact that if Miss Abastillas didn't pay the $3,000 by Christmas day of '98, then the judgment for $3,000 would enter.

Why not, Your Honor, a judgment for $28,000? I think that is almost conclusive of what our argument is here.

While the declaration of Abastillas' trial attorney, Richard Steven Geshell (Geshell),⁶ regarding the settlement discussion in chambers may be construed as a contradiction of Benco's sworn statement,⁷ Geshell did not dispute Benco's statement that the $25,000 in punitive damages was never discussed, let alone made a part of the bargain. Instead, in her memorandum opposing the Motion to Vacate, and at the hearing on the motion, Abastillas relied primarily upon the premise that the Stipulation, by dismissing the third-party complaint against her, had the legal effect of disposing of both the remanded general damages issue and the affirmed punitive damages judgment. Consequently, Abastillas opposed the Motion to Vacate on several grounds:

(1) The Court lacks jurisdiction to enforce, modify, or rescind the settlement where the case has been dismissed with prejudice; (2) Kekonas have not established any grounds for the relief sought under Hawaii Rules of Civil Procedure (HRCP) Rule 60(b)(1), (3), (5), and/or (6); (3) Kekonas' authorities are distinguishable; (4) The settlement agreement has been fully performed; (5) Kekonas cannot obtain relief under HRCP Rule 60(b)(6) where they also seek relief under HRCP Rule 60(b)(1-5); and (6) where the dismissal is final, Kekonas have not shown extraordinary circumstances preventing them from appealing the dismissal with prejudice.

Both sides filed extensive briefs on the Motion to Vacate. Both sides presented oral argument at the March 3, 1999 hearing on the motion. After reviewing the briefs and hearing the parties' arguments, the circuit court orally granted the motion. The circuit court explained the rationale for its ruling, as follows:

All right. The Court is going to use as its base for its ruling, . . . the Intermediate

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