In re Fan, Bankruptcy No. 85-00424
| Decision Date | 24 September 1991 |
| Docket Number | Bankruptcy No. 85-00424,Adv. No. 90-0097. |
| Citation | 132 BR 430 |
| Court | U.S. Bankruptcy Court — District of Hawaii |
| Parties | In re George A. FAN and Joanna Z. Fan, Debtors. Wyman W.C. LAI, Trustee of the Estate of George A. Fan and Joanna Z. Fan, Plaintiffs, v. Gerald ZANE, Defendant. |
Susan Tius, Honolulu, Hawaii, for trustee.
Sharon Shanley, Honolulu, Hawaii, for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW RE: PLAINTIFF'S COUNTER MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
On April 16, 1991, Defendant Gerald Zane filed a Motion for Summary Judgment in this adversary case. On June 12, 1991, Plaintiff Wyman W.C. Lai, Trustee of the Estate of George A. Fan and Joanna Z. Fan, filed a Counter-Motion for Summary Judgment. A hearing on both Motions was held on June 28, 1991 before the undersigned Judge. Thereafter, on July 18, 1991, the Court issued its oral ruling.
The Court, having reviewed the motions and memoranda, having heard oral argument of counsel and, having reviewed the records and files in this action, now makes the following Findings of Fact and Conclusions of Law.
1. When Debtors filed their voluntary petition for bankruptcy under chapter 11 of the Bankruptcy Code on September 11, 1985, Debtor George Fan ("Debtor G. Fan") owned a 25% interest in the fee simple property underlying the Matlock Hale Condominium ("Property"). This 25% interest in the Property was not listed in the Statement of Affairs of Debtors and Debtors-in-Possession Engaged in Business, or the two amendments and supplement to the Statement filed by the Debtors.
2. On October 5, 1987, the Chapter 11 case was converted to Chapter 7 of the Bankruptcy Code. The Debtors' Final Report and Account did not mention that during the Chapter 11 proceedings, Debtor G. Fan's 25% interest in the Property was transferred to Defendant Gerald Zane ("Zane").
3. After conversion to Chapter 7, Plaintiff Trustee Wyman Lai ("Trustee"), his attorney, Susan Tius ("Tius"), and his CPA Michelle Tucker, tried to obtain financial and other information concerning the Estate and its assets and liabilities. However, they received no cooperation from the Debtors or from the Debtors' accountant.
4. On February 13, 1989, the Trustee filed an Ex Parte Motion for an Order directing the Debtors to cooperate with the Trustee in preparing fiduciary tax returns, which Motion was granted by Order dated February 15, 1989. On February 16, 1989, Tius sent a copy of the February 15, 1989 Order to Thomas Wong, Esq., who was then the attorney for the Debtors, requesting financial and tax information sought by the Trustee's CPA.
5. On March 3, 1989, Mr. Wong sent Tius a list of certain property that had been transferred during the Chapter 11 proceedings. However, the list did not include the transfer of the 25% interest of Debtor G. Fan to Zane.
6. Despite the February 15, 1989 Order, the Debtors and their tax accountant did not provide complete tax returns, including the K-1 schedules, to the Trustee, his attorney, or his CPA.
7. On May 11, 1989, Tius wrote to Jeffrey C. Wilk, Esq., who succeeded Mr. Wong as counsel for the Debtors, requesting information specifically concerning the Matlock Properties partnership, but the requested information was never received.
8. Because of failure on the part of Debtors, their attorneys, and their accountants to cooperate, the Trustee filed a Motion to Dismiss the bankruptcy case on February 1, 1989. The Court denied the motion and ruled that the Trustee should attempt to complete the case.
9. On August 8, 1990, after about 300 hours of work, the Internal Revenue Service ("IRS") informed Tius about a possible fraudulent transfer of property to Zane for less than market value. Tius attempted to question Zane and demanded return of the property and proceeds received from the property. Tius received no response to her demand. Therefore, on October 22, 1990, the Trustee filed the instant Complaint.
10. Zane is the brother of Debtor Joanna Fan and the brother-in-law of Debtor G. Fan. During the Chapter 11 proceedings while the Debtor was in possession, Debtor G. Fan filed an application to transfer his 25% interest in the Property to Zane. The Application states that Zane would purchase the Property by way of a payment of $10,500.00 and an offset of an alleged debt of $68,000.00. The Application provided an opportunity for a hearing, but no hearing was held.
11. This Court finds that the Application was deceptive. The Application did not mention that Zane was Debtor G. Fan's brother-in-law and that the transfer was of a 25% interest in real property. The Application failed to disclose that the property interest had a fair market value of approximately $157,000.00. And, the Application failed to state that the $68,000.00 was to offset a pre-petition debt.
12. The Court did not authorize the transfer to Zane for less than market value. The true facts were concealed and the Court could not authorize what was not disclosed. In addition, the Debtors failed to furnish information to the Trustee in an effort to protect their relative, Zane. Since Zane is a merchant marine, he was often away from Hawaii and could not be readily examined by the Trustee.
13. To the extent that these Findings of Fact constitute Conclusions of Law, they shall be so deemed.
1. This action was brought under 11 U.S.C. Section 549 to avoid a post-petition transfer. Although 11 U.S.C. § 549(d) contains a two-year statute of limitations, under certain circumstances the statute may be tolled where inequitable conduct exists. In this case, the creditors and the Court were deceived by the Application. Had the Court and the creditors known that the transfer to Zane involved a transfer to a relative at far less than fair market value, with an offset for an alleged prepetition debt, the Court and the creditors would...
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