Opinion ID: 2796489
Heading Depth: 2
Heading Rank: 3

Heading: The Third Trial and Subsequent Appeal to the ICA

Text: The third trial began in late December of 2007.10 On the first day of trial, the Kekonas called Bornemann as a witness to establish the circumstances surrounding the various deeds that he had signed to acquire the Kâne#ohe and HPP properties. In regard to the Kâne#ohe property, Bornemann asserted that he had loaned Abastillas in excess of $300,000, and that Abastillas had deeded him the Kâne#ohe property when it became clear that she would be unable to pay all of her creditors. In regard to the HPP property, a rental condominium, Bornemann asserted that he had paid part of the down payment on the property and that he had also paid off a substantial portion of the mortgage, a fact that was supported by exhibits he introduced into evidence. Bornemann asserted that all of these transactions began well before the Kekonas won their judgment against Abastillas and Smith, and that he had no knowledge of that judgment at the time of the challenged transactions. To rebut Bornemann’s assertions, counsel for the Kekonas called various witnesses to establish that Bornemann’s loans to the Kekonas were concocted post-hoc as part of a 10 The Honorable Victoria S. Marks presided. 8  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  conspiracy to shelter assets from the Kekonas’ judgment. Tax expert John Candon (Candon) explained that real estate depreciation allowances provide rental property owners substantial income tax deductions and that the IRS requires individuals to take such deductions. Candon opined that Bornemann’s federal tax returns did not reflect ownership of either the Kâne#ohe property or HPP property prior to the Kekonas’ 1993 judgment. The Kekonas also introduced evidence that Bornemann attempted to cover up his role in the conspiracy by filing a sham lawsuit against Abastillas and Smith in September of 2000. Counsel for the Kekonas noted that this lawsuit was later dismissed for failure to prosecute. Finally, counsel for the Kekonas impeached Bornemann’s credibility through extensive adverse examination. For example, Bornemann testified that he loaned Abastillas tens of thousands of dollars but that he had no idea what the money was going to be used for, whether Abastillas had provided promissory notes, whether he had charged interest, or whether Abastillas had repaid those loans. Bornemann testified that Abastillas called him and asked for $126,000 one week before the original jury returned its verdict but that he couldn’t recall what she planned to use the money for or if he had even asked. Bornemann testified that when he discovered that Abastillas had lost her lawsuit with the Kekonas, he accepted a hasty transfer of the Kâne#ohe property 9  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  without escrow, title investigation, or inquiry into the legal significance of a quitclaim deed, simply because he trusted Abastillas. Most strikingly, Bornemann admitted that after he received and reviewed the Kekonas’ fraudulent transfer lawsuit, he re-executed confirmatory deeds to the property without consulting an attorney to determine the legality of his continued actions. The Kekonas used these examples to establish a primary theme, that Bornemann’s claimed ignorance reflected “a serious problem with accepting responsibility for his actions.” With respect to punitive damages, counsel for the Kekonas asked Mrs. Kekona what justified her request for a $2,000,000 award. She explained: “One million for me and one million for my husband. . . . [W]e need to have Dr. Bornemann punished. We need to have that so that he does not ever again . . . conspire to withhold property and prevent people from collecting on their judgments and, uh, causing people so much agony.” Counsel continued: Q: Mrs. Kekona, are there any monetary reasons why you’re asking for one million for Ben and one million for you? A: The mon – yes, there is. For this case alone, which is not including this instant case, we owe in lawyers fees $600,000 plus 20 percent . . . of whatever judgment we win, if any. Mrs. Kekona also testified about the impact that years of litigation and the inability to recover on the original judgment had on her and on her husband: Q: Mrs. Kekona, did you ever get to retire to Hilo in –- A: We went back and forth to Hilo, but, uh, we lost our 10  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  home. Q: How did you lose your homes? . . . . A: We lost our home, first the one on Volcano was $79,000, and then our dream retirement home in Hilo we lost. Uh, it was a three bedroom, one and a half acre home, and we were planning to retire there. But we had to use that to pay Mr. Eggers. Q: So you had to use -- A: And not only that. We spent so many of our retirement years –- instead of enjoying our retirement we were spending it in court in litigation and all these problems. Q: Did you eventually have to move back, yourself, back to Honolulu? A: Yes. After my husband passed away . . . . Bornemann’s counsel cross-examined Mrs. Kekona regarding attorney’s fees as follows: Q: I’d like to talk to you a minute about the attorney’s fees. Okay? A: Yes. Q: Do you [have] any bills, lawyer’s fees? A: We certainly do. Q: Where are they? A: Where are they? Q: Yes. A: I don’t have them with me, but we have it at home. Q: Hmm. And do you have any checks or any other indications of payments you’ve made? A: Yes, we do. Q: Where is that? A: We paid that every month. Q: Where are they? A: At home. . . . . 11  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  Q: The hundred thousand dollars that you said you’ve actually paid, is there any of that amount that you can identify as money that was expended for attorney’s fees just against Dr. Bornemann. A: No, I don’t think so. In closing argument to the jury, the Kekonas requested compensation “for a 14 year journey through the Court system.” Counsel stressed the length of the conspiracy and Bornemann’s unwillingness to take responsibility for his own actions as factors supporting a $2,000,000 punitive damages request: How long does this conspiracy to defraud go on? It goes on until 1999, when Dr. Bornemann, who that year had adjusted gross income of . . . 279,000 dollars, allows the [Kâne#ohe] property to go in foreclosure. . . . Why? Because Smith and Abastillas were still living there. Were they paying rent? And if so, then Dr. Bornemann was keeping it. If they were not paying rent, why do we not see any letters going to the tenants saying hey, you’re not paying the rent. I can’t make my mortgage payments. The scam continued in [1999]. And remember, he said that well, his attorney told him to do it. Dr. Bornemann has a serious problem with accepting responsibility for his actions. And that’s a graphic example. And we come to the year 2000. Dr. Bornemann sues Abastillas and Smith. Why, this was a shocker. He says all kinds of stink things about him in that lawsuit. And he admits that that attorney told him well, this is to separate you out from Paz and Smith because oh, they’ve caused you a lot of problems. At the same time, Miss Abastillas is still going up to his house. Does that sound like a bona fide lawsuit? Or does it sound like a setup, a fraud, a shibai, something to mislead other people? And what happens to that lawsuit after it’s filed. It’s dismissed for failure to prosecute. And Dr. Bornemann again says that’s my attorney’s fault. Counsel also focused on the Kekonas’ financial vulnerability and on their advanced age in support of a substantial punitive award. He stated: Mr. Kekona dies nine years into this case. He couldn’t see it through the end. Paz and Smith lived in that property for years and years following the filing of this lawsuit. Do you remember for probably for the most part they lived 12  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  rent free. . . . . You know, you get a judgment after four years of litigation. It’s so exhaustive that the attorney decides to take a sabbatical. How exhausting must that have been? Bill Eggers, the attorney, took a sabbatical after it was over. So the Kekonas wanted to collect a mere 191,000. They had to give their attorney two homes on the Big Island in payment of his fees. So they weren’t even getting back everything they lost. When they went to collect, they found interference of the first order. It was put there by Mr. Smith, Miss Abastillas, with their get-along, go-along accomplice, Dr. Bornemann. Counsel also noted that Bornemann’s net worth exceeded $2.25 million dollars. Counsel explained that Bornemann attempted to take advantage of the Kekonas’ vulnerability by engaging in a war of attrition: “I think it’s because of his money. But he didn’t care. He could defeat this by use of his money and resources.” Counsel concluded by discussing what he described as Bornemann’s misuse of the judicial system: I want to talk about respect for the law, respect for legal procedures. I have always felt this case is slightly misnomered in that it should be called interference with court procedures. . . . . There is no respect for the legal processes shown in this case. He didn’t respect it when he received the lawsuit. He went right ahead and signed more deeds. He didn’t respect it years later when his attorney filed . . . a shibai lawsuit against Paz and Smith. . . . I think this jury should keep in mind that as well educated as Dr. Bornemann is, everybody in America should have respect for the law. And I think that’s the point that this jury must make in this case. Unfortunately, the way we do it here is money. And that is why Mrs. Kekona personally and on behalf of her husband’s estate respectfully asks for the damages that we talked about earlier. At the close of trial, the jury found by clear and convincing evidence that the transfer of the Kâne#ohe property 13  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  was fraudulent. However, the jury found that the Kekonas failed to establish by clear and convincing evidence that the transfer of the HPP property was fraudulent. The jury awarded the Kekonas $253,000 in special damages to compensate for the interest that had accrued on the Kekonas’ initial $191,000 judgment.11 The jury also imposed $1,642,857.13 in punitive damages. Bornemann filed a post-trial motion to amend judgment on the grounds that the punitive damages award was grossly excessive and that attorney’s fees should have been apportioned. The circuit court denied Bornemann’s motion and entered final judgment. Bornemann timely appealed to the ICA on February 28, 2008. On appeal, Bornemann argued that the punitive damages award was grossly excessive and in violation of his rights under the Fourteenth Amendment. Bornemann also argued that the $253,000 special damages award constituted double recovery. The ICA agreed, concluding that a punitive award of $250,000 was sufficient to punish Bornemann. Accordingly, the ICA vacated the punitive damages award and ordered the circuit court to provide the Kekonas with the option to remit $1,392,857.10 in punitive damages or proceed to a fourth jury trial. The ICA also vacated the $253,000 special damages award. The Kekonas timely filed an application for writ of certiorari requesting this court’s review of the punitive damages 11 HRS § 478-3 (1986) provides: “Interest at the rate of ten per cent a year, and no more, shall be allowed on any judgment recovered before any court in the State, in any civil suit.” 14  FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER  award.