Kekona v. Abastillas

• Decision Date: 26 September 2006
• Docket Number: No. 24051.,24051.
• Citation: 150 P.3d 823
• Parties: Benjamin Paul KEKONA and Tamae M. Kekona, Plaintiffs-Appellees, Cross-Appellants, Respondents, v. Paz Feng ABASTILLAS, also known as Paz A. Richter, Defendant-Appellant, Cross-Appellee, Respondent-Petitioner, and Robert A. Smith, Attorney at Law, a Law Corporation, Defendant-Appellant, Cross-Appellee, Respondent-Petitioner, and Standard Management, Inc., and Western Surety Company, Defendants-Appellants, Cross-Appellees, Respondents, and Michael Bornemann, M.D., Defendant-Appellant, Cross-Appellee, Petitioner-Respondent, and U.S. Bancorp Mortgage Company, an Oregon Company; John Does 1-10; Doe Corporations 1-10; and Doe Entities 2-10, Defendants.
• Court: Hawaii Supreme Court

150 P.3d 823

Benjamin Paul KEKONA and Tamae M. Kekona, Plaintiffs-Appellees, Cross-Appellants, Respondents, v. Paz Feng ABASTILLAS, also known as Paz A. Richter, Defendant-Appellant, Cross-Appellee, Respondent-Petitioner, and Robert A. Smith, Attorney at Law, a Law Corporation, Defendant-Appellant, Cross-Appellee, Respondent-Petitioner, and Standard Management, Inc., and Western Surety Company, Defendants-Appellants, Cross-Appellees, Respondents, and Michael Bornemann, M.D., Defendant-Appellant, Cross-Appellee, Petitioner-Respondent, and U.S. Bancorp Mortgage Company, an Oregon Company; John Does 1-10; Doe Corporations 1-10; and Doe Entities 2-10, Defendants.

No. 24051.

Supreme Court of Hawai`i.

September 26, 2006.

Peter Van Name Esser and Edward J. Bybee, Honolulu, for petitioner Michael Bornemann, M.D., on the application.

Fred Paul Benco, Honolulu, for respondent Benjamin Paul Kekona and Tamae M. Kekona, on the response.

MOON, C.J., LEVINSON, NAKAYAMA, and DUFFY, JJ., and Circuit Judge LEE in Place of ACOBA, J., recused.

Opinion of the Court by NAKAYAMA, J.

The present matter involves three applications for writs of certiorari filed by Paz Feng Abastillas, a.k.a. Paz A. Richter [hereinafter "Abastillas"], Robert A. Smith [hereinafter "Smith"], and Michael Bornemann, M.D. [hereinafter "Bornemann"]. Abastillas, Smith and Bornemann appeal from the Intermediate Court of Appeals' [hereinafter "ICA"] June 8, 2006 memorandum opinion [hereinafter "the ICA's opinion"] partially affirming and partially vacating the first circuit court's February 26, 2001 "Amended Revised Final Judgment."

We accepted certiorari to address the following arguments presented by Bornemann's application:¹ (1) the ICA gravely erred by permitting a $594,000 award of punitive damages after vacating the only actual damages awarded against him; (2) the ICA gravely erred by rejecting the overwhelming majority view requiring proof of a fraudulent transfer by clear and convincing evidence; (3) the ICA gravely erred by ruling that the Kekonas could obtain both reconveyance and damages for the alleged fraudulent transfers; and (4) the ICA gravely erred by ruling that the legislature's enactment of the Uniform Fraudulent Transfer Act [hereinafter "UFTA"] abrogated this jurisdiction's preferential transfer doctrine.

Based upon the following analysis, we conclude that the ICA erred by holding that a fraudulent transfer may be proved by a "preponderance of the evidence." Accordingly we remand the case for new trial consistent with this opinion.

I. BACKGROUND

On May 25, 1993, Benjamin P. Kekona and Tamae M. Kekona [hereinafter "the Kekonas"] obtained a substantial jury verdict against Abastillas, Smith, and Standard Management, Inc. [hereinafter "SMI"], a corporation wholly owned by Abastillas. On May 26, 1993, a quitclaim deed — transferring Abastillas' interest in real estate described as Unit # 1809, Honolulu Park Place, 1212 Nuuanu Avenue, Honolulu, Hawai`i [hereinafter "the HPP property"] to Bornemann — was recorded at the Bureau of Conveyances [hereinafter "BOC"]. Subsequently, on June 1, 1993, the following two quitclaim deeds were recorded at the BOC: (1) a quitclaim deed transferring the interest of SMI and Robert A. Smith, Attorney at Law, a Law Corporation [hereinafter "RASCORP"] in real estate described as 47-186 Kamehameha Highway, Kaneohe, Hawai`i [hereinafter "the Kaneohe property"] to Abastillas; and (2) a quitclaim deed transferring Abastillas' interest in the Kaneohe property to Bornemann.

On October 13, 1993, the Kekonas filed a complaint alleging, inter alia, that: (1) the aforementioned conveyances were fraudulent, in violation of HRS chapter 651C; (2) Abastillas, Smith, Bornemann, SMI, and RASCORP engaged in a civil conspiracy to commit fraudulent conveyances; and (3) Abastillas and Smith illegally notarized each other's signatures on the instruments executing the aforementioned conveyances.

Following trial,² the jury returned a special verdict form on May 21, 1999.

With respect to the Kekonas' fraudulent conveyance claim, the jury made the following findings by a preponderance of the evidence: (1) Abastillas, RASCORP, and SMI transferred the Kaneohe property with the actual intent of hindering, delaying or defrauding the Kekonas; (2) Bornemann did not receive the Kaneohe property in good faith and for reasonably equivalent value; (3) Abastillas transferred the HPP property with the actual intent of hindering, delaying or defrauding the Kekonas; and (4) Bornemann did not receive the HPP property in good faith and for reasonably equivalent value. In connection with the fraudulent transfers of the Kaneohe property, the jury assessed the following damages: (1) $29,064.00 in special damages and $17,436.00 in general damages against Abastillas; (2) $6,000.00 in special damages and $3,600.00 in general damages against RASCORP; and (3) $156,564.00 in special damages and $93,936.00 in general damages against SMI. In connection with the fraudulent transfer of the HPP property, the jury assessed $15,128.00 in special damages and $9,076.00 in general damages against Abastillas.

With respect to the Kekonas' conspiracy claim, the jury found, by clear and convincing evidence, that (1) Abastillas, Smith, RASCORP, SMI and Bornemann conspired to fraudulently transfer the Kaneohe property, and (2) Abastillas, Smith, and Bornemann conspired to fraudulently transfer the HPP property. The jury assessed $100,000 against Abastillas, Smith, RASCORP, SMI and Bornemann, jointly and severally, in connection with their conspiracy to fraudulently transfer the Kaneohe property. The jury assessed another $100,000 against Abastillas, Smith, and Bornemann, jointly and severally, in connection with their conspiracy to fraudulently transfer the HPP property.

With respect to the Kekonas' illegal notarization claim, the jury found, by a preponderance of the evidence, that Abastillas and Smith engaged in official misconduct relating to the acknowledgment of deeds to the Kaneohe and HPP properties. The jury assessed the following damages: (1) $95,500.00 in special damages and $57,300.00 in general damages against Abastillas; and (2) $95,500.00 in special damages and $57,300.00 in general damages against Smith.

Finally, the jury found that Abastillas, Smith, RASCORP, SMI, and Bornemann were each liable for $250,000.00 in punitive damages.

On July 12, 1999, the circuit court filed a judgment reflecting the damages awarded in the May 21, 1999 special verdict form. The judgment also "vacated, cancelled and set aside as fraudulent and of no force or effect" the following deeds: (1) that certain quitclaim deed dated May 14, 1992 and recorded in the BOC as Document No. 93-084805 on May 26, 1993, pertaining to the HPP property; (2) that certain quitclaim deed dated June 9, 1992 and filed with the Assistant Registrar of the Land Court of the State of Hawai`i as Document No. 2029945 on June 1, 1993, noted on Transfer Certificate of Title No. 342,305, pertaining to the Kaneohe property; (3) that certain quitclaim deed dated May 27, 1993 and filed with the Assistant Registrar of the Land Court of the State of Hawai`i as Document No. 2029946 on June 1, 1993, noted on Transfer Certificates of Title No. 342,305 and/or 414,762, pertaining to the Kaneohe property; (4) that certain confirmatory quitclaim deed dated October 25, 1993 and filed with the Assistant Registrar of the Land Court of the State of Hawaii as Document No. 2080638 on October 27, 1993, noted on Transfer Certificates of Title No. 342,305, 424,555, and/or 417,762, pertaining to the Kaneohe property; and (5) that certain quitclaim deed dated October 25, 1993 and filed with the Assistant Registrar of the Land Court of the State of Hawai`i as Document No. 2080639 on October 27, 1993, noted on Transfer Certificates of Title No. 424,555 and/or 424,556, pertaining to the Kaneohe property.

On July 22, 1999, Abastillas, Smith, RASCORP, and SMI filed motions for a new trial, to vacate the judgment, and for judgment notwithstanding the verdict. Bornemann also filed a motion for new a trial on July 22, 1999.

The circuit court denied the motions filed by Abastillas, Smith, RASCORP, and SMI on September 2, 1999.

On October 6, 1999, the circuit court filed an order denying Bornemann's motion for a new trial. However, despite denying Bornemann's motion, the court concluded that the jury's award of punitive damages was excessive and ordered a new trial to determine a more appropriate amount:

1. The motion for a new trial be and is hereby denied.

2. The motion to eliminate and/or reduce the amount awarded as conspiracy damages be and is hereby denied.

3. The motion to eliminate punitive damages assessed against [Bornemann] is denied. However, the Court finds that the punitive damages assessed against [Bornemann] in the amount of $250,000.00 was excessive and hereby reduces the amount of punitive damages to $75,000.00.

4. There shall be a new trial solely on the question of punitive damages awarded to [the Kekonas] against [Bornemann] unless, within seven (7) calendar days after service of a copy of this Order on [the Kekonas'] attorney, [the Kekonas] file with the clerk of the court a written consent to reduce the verdict to $75,000.00 for punitive damages awarded to [the Kekonas] against [Bornemann].

Following the new trial,³ the jury found Bornemann liable for $594,000.00 in punitive damages. The circuit court thereafter filed a "Revised Final Judgment" on November 30, 2000, and an "Amended Revised Final Judgment" on February 26, 2001.

The ensuing appeals and cross-appeal, which were assigned to the ICA, presented the following points of error:

1. Abastillas, SMI, Smith, RASCORP, and Dr. Bornemann contend that the circuit court reversibly erred by instructing the jury that fraudulent transfers could be proven by a preponderance of the evidence. They contend that clear and convincing evidence should...