Henshaw v. Field (In re Henshaw)
| Decision Date | 22 January 2013 |
| Docket Number | Civil No. 12–00513 JMS/BMK. |
| Citation | 485 B.R. 412 |
| Parties | In re Michael Dylan HENSHAW and Kimberly Henshaw, Debtors. Philip Daniel Henshaw and Barbara Wressel Henshaw, Appellants, v. Dane S. Field, Trustee of the Bankruptcy Estate of Michael Dylan Henshaw and Kimberly Henshaw, Appellee. |
| Court | U.S. District Court — District of Hawaii |
OPINION TEXT STARTS HERE
Philip Daniel Henshaw, San Diego, CA, pro se.
Barbara Wressel Henshaw, San Diego, CA, pro se.
Susan A. Tius, Rush Moore LLP, A Limited Liability Law Partnership, Honolulu, HI, for Appellee.
Barbara L. Franklin, Honokaa, HI, for Michael Dylan Henshaw, Kimberly Henshaw.
ORDER AFFIRMING BANKRUPTCY COURT'S AUGUST 23, 2012 JUDGMENT VESTING TITLE TO REAL PROPERTY (TMK 3–7–6–007–019, C.P.R. Nos. 0001 AND 0002) IN DEBTORS AND DEFENDANTS AS JOINT TENANTS
Appellants Philip Dylan Henshaw and Kimberly Henshaw (“Appellants”) appeal the “Judgement [sic] Vesting Title to Real Property (TMK 3–7–6–007–019, C.P.R. Nos. 0001 and 0002) in Debtors and Defendants as Joint Tenants,” which rendered a final decision on the merits in accordance with the bankruptcy court's July 27, 2012 summary judgment determination in favor of Trustee Dane S. Field (“Trustee”). The bankruptcy court determined that Debtors Michael Dylan Henshaw and Kimberly Henshaw (“Debtors”) held in joint tenancy with Michael Henshaw's parents, Appellants, real properties known as Units A and B of “The Power Farm” condominium project located at 76–971, Hualalai Road, Kailua–Kona, Hawaii 96740 (the “subject properties”). The bankruptcy court further determined that Debtors' subsequent transfer of their interest in the subject properties to Appellants was fraudulent where they did not receive reasonably equivalent value for the transfer.
Appellants argue that summary judgment was granted in error because, among other reasons, Debtors did not significantly contribute to the purchase of the subject properties such that Appellants were the true equitable owners, and consideration was given for Debtors' transfer of their interest to Appellants. Based on the following, the court AFFIRMS the bankruptcy court's decision.
Appellants are the parents of the Debtor Michael Dylan Henshaw, who is married to Debtor Kimberly Henshaw. On or about June 22, 2007, Appellants and Debtors purchased the subject properties for $680,000, with title vested in Appellants and Debtors as joint tenants. Doc. No. 5–1, Appellants' Appendix (“AA”) Ex. 1 at ECF Pages 11–12 of 88 (Deed); Doc. No. 5–2, AA Ex. 6 at ECF Page 40 of 115 (Trustee Concise Statement of Facts (“CSF”) ¶ 1); 1Id. at ECF Pages 65–66 of 115 (Philip Henshaw Decl. ¶ 2).
According to Philip Henshaw, although the deed vested title in Appellants and Debtors as joint tenants, he “paid essentially the entire purchase price, providing $595,149.20 by refinancing my home in San Diego and $83,000 from funds obtained from my retirement accounts.” Doc. No. 5–2, AA Ex. 6 at ECF Page 66 of 115 (Philip Henshaw Decl. ¶ 3).2 In comparison, Debtors contributed only $6,970.20 towards escrow costs. Id. ¶ 4. Philip Henshaw explains that Debtors took title as joint tenants “solely for estate planning purposes, not as an indication of equal equitable ownership.” Id. ¶ 5.
Philip Henshaw further asserts that the long-term plan was for Debtors to eventually purchase the subject properties from Appellants for the full purchase price. Id. ¶ 6. In the meantime, however, they agreed that Debtors would pay Appellants $2,300 per month as rent and Philip Henshaw would “take all the tax benefits,” including the mortgage interest deduction and depreciation, as well as reporting the income from rents. Id. ¶ 7. Shortly after the July 2007 purchase, Debtors fell behind in their rent payments. Id. ¶ 8.
On or about December 26, 2007, Appellants and Debtors jointly took out a mortgage on Unit A of the subject properties to secure a revolving line of credit in the amount of $54,000. Doc. No. 5–2, AA Ex. 6 at ECF Page 41 of 115 (Trustee CSF ¶ 2).
On September 17, 2009, Thomas E. Shockley and Lisa Choquette filed a complaint in the Circuit Court of the Third Circuit of the State of Hawaii, Civ. No. 09–01387K, alleging that Debtors owed them $462,052.67 under a Stock Purchase Agreement, Promissory Note, and Security Agreement, all of which were executed in connection with the Debtor's purchase of the stock of Dive Makai Charters, Inc. Id. ¶ 3.
On or about December 30, 2009, Debtors transferred their interests in the subject properties to Appellants as joint tenants via quitclaim deed. Id. ¶ 4. The Quitclaim Deed indicates that no conveyance tax was paid on the transfers. Id. ¶ 5. According to Philip Henshaw, he requested this change in record ownership so that he could refinance the mortgage loan on the subject properties, and that he was not aware of Debtors' legal proceeding. Doc. No. 5–2, AA Ex. 6 at ECF Page 66 of 115 (Philip Henshaw Decl. ¶¶ 9–11). Philip Henshaw further asserts that in exchange for the Quitclaim Deed, he agreed to lower Debtors' rent to $1,600 per month and to allow Debtors to pay the back rent ($16,000) at a later date. Id. ¶ 13.3 As of December 30, 2009 (the date of the transfer), the taxed assessed values of Units A and B of the subject properties were $228,700 and $345,300 respectively. Doc. No. 5–2, AA Ex. 6 at ECF Page 41 of 115 (Trustee CSF ¶ 8).
On March 29, 2011, Debtors filed for bankruptcy protection under Chapter 7 of the Bankruptcy Code. Id. ¶ 7. Debtors' bankruptcy petition lists their assets as $538,408.51 and liabilities at $1,037,994.18. Id. ¶ 9.
On December 13, 2011, Trustee filed a Complaint against Appellants asserting that Debtors' transfer of their joint interest in the subject properties was fraudulent in violation of 11 U.S.C. §§ 544(b) and 548(a)(1), and Hawaii Revised Statutes § 651C–4(a). The Complaint asks the bankruptcy court to void the transfer from Debtors to Appellants, and to award Trustee, for benefit of the bankruptcy estate, the co-ownership interests transferred.
On May 22, 2012, Trustee filed his Motion for Summary Judgment, asserting that no genuine issue of material fact exists that Debtors and Appellants held the subject properties as joint tenants, and that Debtors fraudulently transferred their interest in the subject properties to Appellants on December 30, 2009. On July 12, 2012, Appellants filed an Opposition arguing, among other things, that Debtors were not true joint tenants because they did not contribute significantly to the purchase price, and that Debtors received consideration in exchange for transferring the property to Appellants. On July 20, 2012, Trustee filed a Reply.
At the July 27, 2012 hearing, U.S. Bankruptcy Judge Robert J. Faris explained that Trustee was entitled to summary judgment:
I'm going to grant the motion for summary judgment. The deed said it was joint tenancy. That has a clear legal meaning. It has to be 50–50. That's the only legal way you can have a joint tenancy. There's a rule called the Parol Evidence Rule, which says that when you have an unambiguous legal document you can't admit evidence to contradict what that document clearly says and this document clearly said joint tenancy. The Hawaii case on point is Midkiff v. Castle & Cooke, 45 Haw. 409 [368 P.2d 887 (1962) ]. So I hold that the property was held as joint tenants and the debtors did have a 50 percent interest in it.
On the question of value, in order to completely stop the avoidance of the transfer you'd have to show that the value given was reasonably equivalent to the value of the 50 percent interest in the property and that's just not the case. Whether a value was given can't possibly add up to anything near the $260,000 mark for the value of the debtors['] half interest in the property.
It's also not clear that value was given as defined. The purpose of the value requirement is to see whether the debtor's estate was depleted. In other words, whether the debtor is left off, at the end of the day, with less than the debtor had before to pay creditors. And I don't think there was value given using that definition.
The unpaid rent as of the date of the transfer apparently wasn't forgiven. There was just an agreement not to collect on it right now. That really didn't give any monetary benefit to the other creditors. The agreement to give a new month-to-month lease at a discounted rent didn't really benefit other creditors either. So I don't think that reasonably equivalent value was given in this case.
So it's a sad and painful situation, but the law says that this transfer should be set aside.
Doc. No. 5–2, AA Ex. 5 at ECF Pages 16–17 of 115 (July 27, 2012 Hearing Transcript).
On August 23, 2012, the bankruptcy court entered its Order granting Plaintiff's Motion for Summary Judgment, finding no genuine issue of material fact that Debtors were joint tenants of the subject properties and that the transfer of their interest to Appellants was a fraudulent conveyance under 11 U.S.C. § 548(a)(1) such that Trustee is entitled to void the transfer. Doc. No. 6–2, Trustee Appendix Ex. 8, at ECF Pages 2–4 of 7. On August 24, 2012, Judgment Vesting Title to Real Property in Debtors and Defendants and Joint Tenantswas entered. Doc. No. 5–1, AA Ex. 3 at ECF Pages 82–84 of 88.
Appellants filed their notice of appeal on September 6, 2012, and filed their Opening Brief on November 19, 2012. Trustee filed an Answering Brief on December 6, 2012, and Appellants filed their Reply on December 26, 2012. A hearing was held on January 15, 2013.
The court must review de novo the bankruptcy court's decision on summary judgment. In re Sabban, 600 F.3d 1219, 1221–22 (9th Cir.2010); In re AFI Holding, Inc., 525 F.3d 700, 702 (9th Cir.2008). “Summary judgment is to be granted if the pleadings and supporting documents, viewed in the light most favorable to the non-moving p...
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