Henshaw et al v. Field et al
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 re 1 . Signed by JUDGE J. MICHAEL SEABRIGHT on 1/22/13. (gls, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MICHAEL DYLAN HENSHAW and )
PHILIP DANIEL HENSHAW and
BARBARA WRESSEL HENSHAW, )
DANE S. FIELD, Trustee of the
Bankruptcy Estate of MICHAEL
DYLAN HENSHAW and KIMBERLY )
CIVIL NO. 12-00513 JMS/BMK
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
ORDER AFFIRMING BANKRUPTCY COURT’S AUGUST 23, 2012
JUDGMENT VESTING TITLE TO REAL PROPERTY (TMK 3-7-6-007019, C.P.R. Nos. 0001 AND 0002) IN DEBTORS AND DEFENDANTS AS
Appellants Philip Dylan Henshaw and Kimberly Henshaw
(“Appellants”) appeal the “Judgement [sic] Vesting Title to Real Property (TMK 37-6-007-019, 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
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);1 Id. 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
Where the parties did not dispute a particular fact before the bankruptcy court, the court
cites directly to the Trustee’s CSF.
The Declaration of Debtor Michael Henshaw recites the same basic assertions as in
Philip Henshaw’s Declaration. See Doc. No. 5-2, AA Ex. 6 at ECF Pages 69-71 (Michael
Henshaw Decl.). For ease of reference, the court cites above to Philip Henshaw’s Declaration
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 31, 2009, Debtors and Appellants executed a month-to-month residential
tenancy agreement for Debtors to rent the subject properties for $1,600 per month. See Doc. No.
5-2, AA Ex. 6 at ECF Pages 90-96 of 115.
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 Hawaii
409. 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
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
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 Tenants was 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.
III. STANDARD OF REVIEW
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 party, show that there is no genuine issue as to a
material fact and the moving party is entitled to judgment as a matter of law.” In
re AFI Holding, Inc., 525 F.3d at 702 (citing Fed. R. Civ. P. 56(c)); In re SNTL
Corp., 571 F.3d 826, 834 (9th Cir. 2009).
In relevant part, 11 U.S.C. § 548(a)(1)(B) provides:
The trustee may avoid any transfer . . . of an interest of
the debtor in property . . . that was made or incurred on
or within 2 years before the date of the filing of the
petition, if the debtor voluntarily or involuntarily -...
(B)(i) received less than a reasonably equivalent
value in exchange for such transfer or obligation;
(ii)(I) was insolvent on the date that such transfer
was made or such obligation was incurred, or
became insolvent as a result of such transfer or
obligation . . . .
The bankruptcy court determined that Trustee established each of
these elements as a matter of law. Specifically, the bankruptcy court found that
(1) Debtors, as joint tenants with Appellants, held a fifty percent interest in the
subject properties; (2) Debtors transferred their interest in the subject properties to
Appellants within two years of filing for Chapter 7 bankruptcy; (3) Debtors did not
receive reasonably equivalent value in exchange for the transfer of their interest to
Appellants because any consideration did not constitute “value” as defined by 11
U.S.C. § 548(d)(2); and (4) Debtors were insolvent on the date of their transfer to
Appellants. Doc. No. 6-2, Trustee Appendix Ex. 8, at ECF Pages 2-4 of 7.
Appellants argue that genuine issues of material fact exist as to Debtors’ interest in
the subject properties as well as the consideration Debtors received for the transfer
of their interests to Appellants.4 Based on a de novo review, the court finds no
genuine issue of material fact as to either of these issues.
Debtors’ Interest in the Subject Properties
The June 22, 2007 Deed provides that Debtors and Appellants are
“joint tenants,” which under Hawaii law means that they have equal ownership of
the subject properties. See, e.g., Sawada v. Endo, 57 Haw. 608, 613, 561 P.2d
1291, 1295 (1977) (explaining that “a joint tenant has a specific, albeit undivided,
interest in the property, and if he survives his cotenant he becomes the owner of a
larger interest than he had prior to the death of the other joint tenant”); De Mello v.
De Mello, 24 Haw. 675, 676 (1919) (stating that “possession of one joint tenant, or
tenant in common, is the possession of all, and all are equally entitled to the use
and enjoyment of the property”).
The parties’ dispute centers on whether extrinsic evidence is
admissible to vary the plain terms of the June 22, 2007 Deed. Trustee argues that
this dispute is governed by Midkiff v. Castle & Cooke, Inc., 45 Haw. 409, 368 P.2d
887 (1962), which adopted the parol evidence rule in construing a deed. In
Appellants also argue that the bankruptcy court erred in failing to address whether the
transfer was a preferential transfer pursuant to 11 U.S.C. § 547(b). Doc. No. 5, Appellants’ Br.
at 13. The court rejects this argument -- Trustee did not bring a claim pursuant to § 547(b) and
thus any arguments regarding preferential transfers are irrelevant.
comparison, Appellants argue that the court should follow Fukunaga v. Fukunaga,
8 Haw. App. 273, 800 P.2d 618 (1990), which allowed extrinsic evidence as to the
joint tenants’ true relationship. Although both these cases are helpful, neither of
them answers the question presented in this action -- i.e., whether a joint tenant of a
debtor may present evidence to contradict the plain terms of the deed where the
bankruptcy trustee seeks the property for the benefit of the bankruptcy estate.
For example, Midkiff outlined basic rules of deed interpretation in
resolving a deed dispute between the grantor and the successor-in-interest to the
grantee. Midkiff explained that a deed should be construed in accordance with the
intent of the parties, as determined from the language of the deed and considering
all provisions. Midkiff, 45 Haw. at 415, 368 P.2d at 891. Midkiff further explained
that where there is no ambiguity in the language used, “the parol evidence rule
applies[, and] extrinsic evidence of the surrounding facts and circumstances
existing prior to, contemporaneously with and subsequent to the execution of the
deed . . . is not competent to contradict, defeat, modify or otherwise vary the
meaning or legal effect of the deed.” Id. at 421, 368 P.2d at 894 (citations
omitted). Although these basic principles are helpful for general deed
interpretation, Midkiff does not address any exceptions to the parol evidence rule
and its facts are not analogous to this case.
Nor is Fukunaga directly on point. Fukunaga involved a partition
action between two parties (and feuding family members) that were listed on a
deed as joint tenants. Fukunaga authorized the defendant to present extrinsic
evidence establishing that the plaintiff was included on the deed because he was a
surety to help secure a mortgage and that he otherwise had no real interest in the
property. Fukunaga, 8 Haw. App. at 275-77, 800 P.2d at 620-21. In allowing this
evidence, Fukunaga rejected the plaintiff’s argument that the parol evidence rule
applied, reasoning that the parol evidence rule “does not operate to exclude
evidence as to the true relationship between the parties on one side of a written
agreement [because] that relationship is collateral to the written instrument.” Id. at
282, 800 P.2d at 623 (quoting Lee v. Kimura, 2 Haw. App. 538, 542, 634 P.2d
1043, 1046 (1981)). Rather, this dispute was “between two of the Grantees,” and
any agreement between the grantees as to “who are the true owners of the Property
and who has a security interest, despite being named a joint tenant in the deed,
does not affect the deed at all.” Id.
Fukunaga is certainly helpful in establishing that in interpreting a
deed, exceptions to the parol evidence rule exist under appropriate circumstances.
But the court rejects Appellants’ argument that Fukunaga is directly analogous to
this case. Specifically, Appellants argue that this case is similar to Fukunaga
because like Fukunaga, this case is essentially between two joint tenants -Appellants and Trustee, who under bankruptcy law stands in the shoes of the
Debtor. Doc. No. 5, Appellants’ Br. at 5-6. But in fact, this is not a dispute
between two joint tenants.
Although Appellants correctly state the general maxim of bankruptcy
law that a trustee stands in the shoes of a debtor, see In re Maunakea, 448 B.R.
252, 266 (D. Haw. 2011), the court does not apply such statement literally to the
relationship between Trustee and Debtors. Rather, when Debtors filed for Chapter
7 bankruptcy, all of their assets became the property of the bankruptcy estate. See
11 U.S.C. § 541(a)(1). The Chapter 7 trustee then administers that estate, not only
as a representative or “in the shoes” of Debtors, but as both a legal representative
and fiduciary of the estate. The impartial trustee must act in the best interests of
the creditors and the bankruptcy estate, not solely Debtors. Thus, his “primary job
is to marshal and sell assets, so that those assets can be distributed to the estate’s
creditors and then close the estate.” In re AFI Holding, Inc., 530 F.3d 832, 845
(9th Cir. 2008) (citing In re Joseph, 208 B.R. 55, 60 (B.A.P. 9th Cir. 1997)). Thus,
unlike Fukunaga where at issue was a collateral agreement between two joint
tenants, Appellants seek to present evidence to change the plain terms of the June
22, 2007 Deed as against Trustee, who was not a party to the June 22, 2007 Deed
or Debtors’ subsequent transfer of their interests to Appellants.
Although Midkiff and Fukunaga do not resolve the parties’ dispute, In
re Teranis, 128 F.3d 469 (7th Cir. 1997), addressed the same basic issue presented
before this court. At issue in In re Teranis was whether the debtor (Teranis) had an
interest in a condominium she held in joint tenancy with her mother (Zarins) such
that the bankruptcy trustee had authority to sell the condominium. In opposing the
sale, Zarins argued that despite the language of the deed stating that the
condominium was held as a joint tenancy, she was the sole owner and that the
applicable state law (Wisconsin) allowed her to rebut the presumption of equal
ownership. Id. at 471-72. Rejecting this argument, In re Teranis explained that the
cases relied upon by Zarins -- Jezo v. Jezo, 127 N.W.2d 246 (Wis. 1964) (“Jezo
I”), and Jezo v. Jezo, 129 N.W.2d 195 (Wis. 1964) (“Jezo II”) -- “address only the
rights inter sese of cotenants. They do not deal with the rights of creditors of one
or more of the cotenants.” Id. at 472. Rather, In re Teranis reasoned that third
parties such as creditors and the bankruptcy trustee must be allowed to rely on the
plain terms of a deed:
We agree with the district court that, if Jezo I were
applied in voluntary bankruptcy cases, “debtors could
shield from creditors assets received as gifts because they
did not contribute to their acquisition.” Memo. Op. at 4.
This is exactly what Teranis attempts to do with the
condominium. Even though her name is on the deed as
owner, Teranis wants to claim that the property is a gift,
and, moreover, a future gift, so that it cannot be taken by
her creditors. Despite Zarins’ argument to the contrary, it
does not matter whether she did or did not intend to give
one half of the condominium to Teranis at the signing of
the deed or all of it at her, Zarins’, death; the fact remains
that Teranis’ name is on the deed now.
Third parties, be they prospective buyers or
creditors, cannot be expected to investigate the
possibility of unequal ownership, as Jezo II made clear;
they can rely upon the face of the deed indicating that
each joint tenant has an equal interest in the property.
[The bankruptcy trustee] relied on the deed to ascertain
Teranis’ ownership of the condominium. The district
court did not err in finding that Teranis is a coequal
owner of the condominium.
Id.; see also In re Kasparek, 426 B.R. 332, 343-44 (B.A.P. 10th Cir. 2010)
(holding that even if the non-debtor/joint tenant owned the entire equitable interest
in the property at issue, the trustee stood in the shoes of a hypothetical bona fide
purchaser such that the plain terms of the deed stating that debtor was a joint tenant
controlled); In re Crawford, 454 B.R. 262, 272 (Bankr. D. Mass. 2011) (rejecting
argument that joint tenancy was anything other than equal ownership of real
The court finds In re Teranis persuasive -- if third parties such as
creditors cannot rely on the face of a deed, then any assets held in joint tenancy
will require investigation. It is for this very reason that “creditors are entitled to
rely ‘on the face of the deed,’” regardless of whatever the equitable interests may
be between the joint tenants. See In re Risler, 443 B.R. 508, 510 (Bankr. W.D.
Wis. 2010) (quoting In re Teranis, 128 F.3d at 472). Indeed, especially in the
bankruptcy context, allowing extrinsic evidence would open the door to collusion
given that joint tenants’ interests will often be aligned to shield assets from the
bankruptcy trustee and/or creditors. The parol evidence rule is designed to prevent
this type of possible fraud -- the “rule discourages interested witnesses to a contract
from committing fraud, perjury, or unintentional invention by making statements
that the contract did not actually represent the agreement of the parties.”5
Brinderson-Newberg Joint Venture v. Pac. Erectors, Inc., 971 F.2d 272, 277 (9th
Cir. 1992); see, e.g., In re Uni-Rty Corp., 191 B.R. 595, 597 (Bankr. S.D.N.Y.
1996) (explaining that the parol evidence rule is “based upon an assumed intention
of the parties, evidenced by an unambiguous written contract, to protect themselves
from the uncertainties of oral testimony, infirmity of the memory and death of
witnesses and to prevent fraud and perjury”).
In further opposition, Appellants argue that the court should follow
The court does not suggest that Appellants and Debtors in this action are misleading
the court. But this case certainly displays the problem created if parol evidence is permitted -both Appellants and Debtors assert that an oral agreement existed, and Trustee would have no
way of rebutting these assertions except for the plain language of the Deed. Although
Appellants argue that their and Debtors’ interests are not unified because sale of the subject
properties may be used to pay off nondischargeable debts, both clearly assert that Appellants, not
Debtors, hold the “real” title to the property. In fact, Debtor Michael Henshaw (an attorney)
argued the appeal on behalf of Appellants at the January 15, 2013 hearing, further demonstrating
a unitary interest between Appellants and Debtors.
Traders Travel International, Inc. v. Howser, 69 Haw. 609, 753 P.2d 244 (1988),
and In re Lull, 2011 WL 6941487 (D. Haw. Dec. 30, 2011), which both allowed
parties to establish the equitable ownership of a joint bank account and of stock
ownership, respectively. Doc. No. 5, Appellants’ Br. at 8-9. As is apparent from
these cases, however, neither of them addresses a joint tenancy of real property
created through a recorded deed, and neither of them suggests a different result in
this action. For example, in Howser, a creditor sought to garnish a debtor’s bank
account he held with his wife. Howser adopted the rule “that the debtor
presumptively holds the entire joint bank account but may disprove this
supposition to establish his or her actual equitable interest.” 69 Haw. at 615, 753
P.2d at 248. Hawaii courts have not applied this same presumption to real
property, and courts in other jurisdictions have soundly rejected application of this
rule in the context of real property. See In re Kasparek, 426 B.R. at 342 (rejecting
application of rebuttable presumption, and instead holding that “a recorded deed
that is unambiguous on its face establishes record ownership”); In re Crawford,
454 B.R. at 272 (“Kamphaus cites no authority for the proposition that the interests
of joint tenants can be unequal, and the Court is aware of none.”).
In re Lull is even further afield from the facts of this case. At issue in
In re Lull was whether the appellant had an “insider” relationship with the debtor
such that the bankruptcy trustee could recover the debtor’s transfers of assets to the
appellant. 2011 WL 6941487, at *1. The bankruptcy court determined that the
appellant was an insider because the appellant and his wife jointly owned a 25%
interest in the debtor’s company. On appeal, In re Lull reversed, finding that the
bankruptcy trustee had not established how this interest was held between the
appellant and his wife where the agreements were silent on the issue and did not
use any terms of art such as “joint tenancy.” Id. at *9-10. In other words, In re
Lull did not involve interpretation of contract creating a joint tenancy, and is
therefore unhelpful in determining the issues presented in this appeal.
In sum, the court finds that the parol evidence rule applies to the June
22, 2007 Deed to prevent admission of extrinsic evidence suggesting that the
subject properties were held in anything other than a joint tenancy. Application of
this rule in this action makes common sense -- third parties, including the Trustee,
must be able to rely on the terms of a recorded deed. Further, the caselaw cited by
Appellants suggests no exception to the parol evidence rule that would apply under
these circumstances.6 Although, as the bankruptcy court stated, this may be a “sad
Appellants also argue that parol evidence is permissible in light of Hawaii Rule of
Evidence 304(c)(1), which provides that clear and convincing proof may rebut the presumption
that “the owner of legal title to property is presumed to be the owner of full beneficial title.”
Rule 304(c)(1) is a general rule of evidence; it does not undermine Midkiff and the parol
evidence rule preventing extrinsic evidence to challenge an unambiguous deed. Indeed,
Appellants cite no caselaw applying such rule in this context.
and painful” situation, the court AFFIRMS the bankruptcy court’s summary
judgment determination that the June 22, 2007 Deed created a joint tenancy
between Debtors and Appellants such that Debtors were fifty percent owners of the
Consideration Paid by Debtors for their Interest in the Subject
The undisputed facts establish that at the time of Debtors’ transfer of
their interest to Appellants, 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). Taking into consideration the
$54,000 mortgage on the subject properties, see id. ¶ 2, the net value of the subject
properties to Appellants and Debtors as of December 30, 2009 was $520,000,
meaning that Debtors’ interest in the subject properties transferred to Appellants
was worth $260,000.
Appellants argue that Debtors received reasonably equivalent value in
exchange for their interest in the subject properties -- in exchange, Appellants
granted Debtors a new month-to-month rental agreement for the subject properties
at $1,600 per month (as opposed to the $2,300 per month they had previously
agreed to), and agreed to not immediately collect on back rent.7 Viewing the facts
in a light most favorable to Appellants, the court disagrees that these benefits to
Debtors come anywhere close to reasonably equivalent value for Debtors’ interest
in the subject properties.
“Value” is defined as “property, or satisfaction or securing of a
present or antecedent debt of the debtor, but does not include an unperformed
promise to furnish support to the debtor or to a relative of the debtor.” 11 U.S.C.
§ 548(d)(2)(A); see also In re Roosevelt, 220 F.3d 1032, 1039 (9th Cir. 2000)
(“For the purposes of 11 U.S.C. § 548, ‘value’ means property.”). Although the
court may determine “value” based on both direct and indirect benefits received,
the value of the benefit must be tangible and quantifiable. See In re TriGem Am.
Corp., 431 B.R. 855, 868 (Bankr. C.D. Cal. 2010) (explaining that once a
bankruptcy trustee “makes a prima facie showing that no sufficient direct benefit
was received in the transaction, it is the defendants’ burden to prove sufficient
indirect benefit that is tangible and concrete”); In re Richards & Conover Steel,
Co., 267 B.R. 602, 614 (B.A.P. 8th Cir. 2001) (“The party claiming to have
Appellants also argue that Debtors received value because they had previously agreed
to purchase the subject properties by paying Appellants the full purchase price of $680,000. See
Doc. No. 7, Appellants’ Reply at 7. This argument runs contrary to the court’s determination
that Debtors held the subject properties with Appellants as joint tenants, and in any event such
oral agreement would violate the Statute of Frauds.
delivered value must quantify it.”); In re TOUSA, Inc., 408 B.R. 434, 438 (Bankr.
S.D. Fla. 2009) (explaining that value must be “tangible, concrete, and quantified
with reasonable precision”).
Viewing the facts in a light most favorable to Appellants, any value in
what Debtors received -- a decrease in monthly rent and Appellants’ agreement not
to seek back rent for the time being -- comes nowhere close to “reasonably
equivalent value” for their interest in the subject properties worth $260,000. And
Appellants do not even attempt to quantify this consideration, leaving the court to
guess as to the possible value Debtors received. See Matsushita Elec. Indus. Co. v.
Zenith Radio, 475 U.S. 574, 586-87 (1986) (“When the moving party has carried
its burden under Rule 56[(a)] its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts [and] come forward with
specific facts showing that there is a genuine issue for trial.” (citation and internal
quotation signals omitted)).
Indeed, viewing the consideration on its face, the court is at a loss to
give it any value. As to the back rent, Appellants did not forgive Debtors this
amount, but merely agreed not to immediately collect. Doc. No. 5-2, AA Ex. 6 at
ECF Page 66 of 115 (Philip Henshaw Decl. ¶ 13). Further, Appellants’ agreement
to reduce Debtors’ rent was embodied in a month-to-month lease, meaning that
Debtors were assured a lowered rent for at most only two months (the lease calls
for a 45-day cancellation notice). See Doc. No. 5-2, AA Ex. 6 at ECF Pages 90-96
of 115. Appellants apparently recognize that if Debtors are found to be joint
tenants, this consideration is not reasonably equivalent value -- at the July 27, 2012
hearing before the bankruptcy court, Appellants admitted that this consideration
does not come anywhere close to the $260,000 value of Debtors’ interest in the
subject properties. Doc. No. 5-2, AA Ex. 5 at ECF Page 11 of 115, (“THE
COURT: -- is there any way the value given gets close to the $260,000 mark?
MR. MICHAEL HENSHAW: Well, probably not, Your Honor.”).
In sum, while Appellants’ agreements to lower the monthly rent and
not immediately seek the back rent certainly provided Debtors some comfort and
relief, this relief was wholly amorphous and speculative and therefore did not
constitute “value” as contemplated by 11 U.S.C. § 548(d)(2)(A). As a result, the
court AFFIRMS the bankruptcy court’s summary judgment determination that
Debtors did not receive reasonably equivalent value for the transfer of their interest
in the subject properties.
Based on the above, the court AFFIRMS the bankruptcy court’s
Judgement 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.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, January 22, 2013.
/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge
Henshaw et al. v. Field, Civ. No. 12-00513 JMS/BMK, 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