Auld-Susott v. Galindo
Filing
192
ORDER DENYING PLAINTIFFS' MOTION FOR RELIEF FROM JUDGMENT re 185 - Signed by JUDGE LESLIE E. KOBAYASHI on 12/23/2019. (emt, )
UNITED STATES DISTRICT COURT
DISTRICT OF HAWAII
EVAN AULD-SUSOTT, as Trustee for
(1) IRREVOCABLE LIEF INSURANCE
TRUST OF JOHN L. SUSOTT AND
KATHRYN C. SUSOTT UAD 8/17/1988
AS RESTATED, EXEMPT TRUST FBO
DANIEL C. SUSOTT, and
(2) IRREVOCABLE LIFE INSURANCE
TRUST OF JOHN L. SUSOTT AND
KATHRYN C. SUSOTT UAD 8/17/1988
AS RESTATED, NON-EXEMPT TRUST
FBO DANIEL C. SUSOTT; and
JOHN L. SUSOTT,
CIVIL 16-00450 LEK-WRP
Plaintiffs,
vs.
LAURYN GALINDO,
Defendant.
ORDER DENYING PLAINTIFFS’ MOTION FOR RELIEF FROM JUDGMENT
On July 31, 2019, Plaintiffs Evan Auld-Susott, as
Trustee for (1) Irrevocable Life Insurance Trust of John L.
Susott and Kathryn C. Susott UAD 8/17/1988 as Restated, Exempt
Trust FBO Daniel C. Susott, and (2) Irrevocable Life Insurance
Trust of John L. Susott and Kathryn C. Susott UAD 8/17/1988 as
Restated, Non-Exempt Trust FBO Daniel C. Susott; and John L.
Susott (collectively “Plaintiffs”) filed a Motion for Relief
from Judgment (“Motion”).
[Dkt. no. 185.]
Pursuant to an
August 6, 2019 entering order, Plaintiffs filed a supplemental
memorandum in support of the Motion on August 14, 2019.
nos. 186 (entering order), 187 (suppl. mem.).]
[Dkt.
Defendant Lauryn
Galindo (“Defendant”) filed her memorandum in opposition on
September 3, 2019, and Plaintiffs filed their reply on
September 16, 2019.
[Dkt. nos. 189, 190.]
The Court has
considered the Motion as a non-hearing matter pursuant to Rule
LR7.1(d) of the Local Rules of Practice for the United States
District Court for the District of Hawaii (“Local Rules”).
Plaintiffs’ Motion is hereby denied for the reasons set forth
below.
BACKGROUND
Plaintiffs filed their Complaint on August 10, 2016,
alleging three claims: fraudulent conveyance (“Count I”); unjust
enrichment (“Count II”); and constructive trust (“Count III”).
[Dkt. no. 1 at ¶¶ 19-28.]
A bench trial was held on July 10 and
11, 2018.
[Dkt. nos. 140 (7/10/18 minutes), 142 (7/11/18
minutes).]
The Findings of Fact and Conclusions of Law
(“FOF/COL”) were issued on February 28, 2019.
[Dkt. no. 167.]
Plaintiffs prevailed as to Count I, and Counts II and III were
dismissed for lack of jurisdiction because Plaintiffs had an
adequate remedy at law.
[FOF/COL at 2; id. at 42, ¶¶ 44-45.]
Specifically, this Court ruled that: 1) the 2010 transfer of the
property at issue in this case – an apartment in Princeville,
Hawai`i (“the Property”) – from to Defendant to non-party
2
Daniel C. Susott (“D. Susott” and “the 2010 Transfer”) was
fraudulent under Haw. Rev. Stat. § 651C-4(a)(1); and
2) Plaintiffs were entitled to avoidance of the 2010 Transfer,
to the extent necessary to satisfy their claims against
D. Susott.
[FOF/COL at 6, ¶¶ 4-6; id. at 43, ¶¶ 1-2.]
Both the
2010 Transfer and the quitclaim deed executed by D. Susott on
April 8, 2010 in favor of Defendant (“2010 Quitclaim Deed”) were
declared void.1
[FOF/COL at 6, ¶ 6; id. at 43, ¶¶ 3-4.]
in the Property reverted back to D. Susott.
Title
[FOF/COL at 43,
¶ 4.]
The Judgment in a Civil Case (“Judgment”) was issued
on March 1, 2019, and Defendant filed her Notice of Appeal on
March 23, 2019.
[Dkt. nos. 168, 175.]
still pending before the Ninth Circuit.
Defendant’s appeal is
Plaintiffs did not
appeal the Judgment.
On March 5, 2019, D. Susott executed a Quitclaim Deed
conveying the Property to Defendant (“March 2019 Quitclaim
Deed”).
[Motion, Decl. of Peter Knapman, Esq. (“Knapman
Decl.”), Exh. 1.2]
D. Susott also executed another Quitclaim
1
The 2010 Quitclaim Deed was recorded in the State of
Hawai`i Bureau of Conveyances (“BOC”) on April 26, 2010 as
Document Number 2010-056095. [FOF/COL at 43, ¶ 3.]
2
The March 2019 Quitclaim Deed was recorded in the BOC on
March 6, 2019, as Document Number A-70040724. [Knapman Decl.,
Exh. 1 at i.]
3
Deed conveying the Property to Defendant on April 25, 2019
(“April 2019 Quitclaim Deed”).
[Id., Exh. 2.3]
Plaintiffs argue
the 2019 Transfer was “in blatant disregard for” the rulings in
this case, and the 2019 Transfer “defeat[s] plaintiffs’ ability
to pursue recovery of this asset.”
2.]
[Mem. in Supp. of Motion at
Plaintiffs therefore ask this Court to issue an inclination
stating that, if the Ninth Circuit remands the case to allow
this Court to rule on the Motion, this Court will grant
Plaintiffs’ requested relief and amend the FOF/COL because of
the 2019 Transfer.
Plaintiffs ultimately seek the following
relief: 1) reversal of the portion of the FOF/COL dismissing
Count III for lack of jurisdiction; and 2) amendment of the
FOF/COL to grant judgment in favor Plaintiffs and against
Defendant as to Count III and to impose a constructive trust on
the Property.
3
The April 2019 Quitclaim Deed was recorded in the [Knapman
Decl., Exh. 1 at i.] According to Defendant, D. Susott executed
two Quitclaim Deeds because he was not sure whether the 2019
Quitclaim Deed would be effective, since the parties’ time to
appeal the Judgment had not yet expired. [Mem. in Opp. at 6
n.4.] D. Susott executed the April 2019 Quitclaim Deed “[t]o
ensure that a transfer occurred at a time when D[.] Susott held
title in accordance with the March 1, 2019 Judgment.” [Id.]
The March 2019 Quitclaim Deed and the April 2019 Quitclaim Deed
will be referred to collectively as “the 2019 Quitclaim Deeds,”
and the 2019 transfer of the property from D. Susott to
Defendant, regardless of which of the 2019 Quitclaim Deeds
effectuated the transfer, will be referred to as “the 2019
Transfer.”
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Defendant argues: the rulings in this case did not
preclude D. Susott from executing a new transfer of the Property
to her; and the 2019 Transfer was supported by new consideration
from her, separate from the consideration given for the 2010
Transfer.
[Mem. in Opp. at 6.]
Defendant provides a
declaration by D. Susott, dated March 4, 2019, stating he
believes the voiding of the 2010 Transfer was erroneous and
exposes him to liability to Defendant for the amounts Defendant
paid him in the 2010 Transfer.
[Mem. in Opp., Decl. of Daniel
C. Susott (“3/4/19 D. Susott Decl.”) at ¶ 6.]
D. Susott agrees
that Defendant incurred at least $400,000 in damages as a result
of the dispute regarding the validity of the 2010 Transfer.
[Id. at ¶ 9.]
He states Defendant’s release of her claims
against him for those damages was the consideration for the 2019
Transfer.
[Id.]
Defendant argues that, to the extent
Plaintiffs assert the 2019 Transfer was an attempt to defraud
D. Susott’s creditors, Plaintiffs must litigate that issue in a
new case, not through a Fed. R. Civ. P. 60 motion in the instant
case.
STANDARD
Plaintiffs bring the Motion pursuant to Rule 60(b)(3),
(5), and (6).
[Motion at 2-3.]
Rule 60(b) states, in pertinent
part:
5
On motion and just terms, the court may relieve a
party or its legal representative from a final
judgment, order, or proceeding for the following
reasons:
. . . .
(3) fraud (whether previously called
intrinsic or extrinsic), misrepresentation,
or misconduct by an opposing party;
. . . .
(5) the judgment has been satisfied,
released, or discharged; it is based on an
earlier judgment that has been reversed or
vacated; or applying it prospectively is no
longer equitable; or
(6)
relief.
any other reason that justifies
Any motion brought pursuant to Rule 60(b) “must be made within a
reasonable time,” but a Rule 60(b)(3) motion must be brought “no
more than a year after the entry of the judgment.”
Fed. R. Civ.
P. 60(c).
To prevail on a motion filed pursuant to
Fed. R. Civ. P. 60(b)(3), the moving party must
prove by clear and convincing evidence that the
judgment was obtained through fraud,
misrepresentation, or other misconduct and that
the conduct complained of prevented the losing
party from fully and fairly presenting its side
of the case. Casey v. Albertson’s Inc., 362 F.3d
1254, 1260 (9th Cir. 2004). . . .
Lauro v. Dep’t of Pub. Safety, CIV. NO. 12-00637 DKW-RT, 2019 WL
6534118, at *4 (D. Hawai`i Dec. 4, 2019).
“Federal Rule of
Civil Procedure 60(b)(3) requires that fraud not be discoverable
by due diligence before or during the proceedings.”
6
Casey, 362
F.3d at 1260 (alterations, quotation marks, and citation
omitted).
Rufo v. Inmates of Suffolk County Jail, 502 U.S.
367 (1992) provides for “a general, flexible
standard for all petitions brought under the
equity provision of Rule 60(b)(5).” Bellevue
Manor Assoc. v. United States, 165 F.3d 1249,
1255 (9th Cir. 1999). A Rule 60(b) motion to
modify a court order should be granted when there
has been “a significant change either in factual
conditions or in law.” Rufo, 502 U.S. at 384;
see Horne v. Flores, [557 U.S. 433,] 129 S. Ct.
2579, 2597 (2009).
Sakuma v. Ass’n of Condo. Owners of Tropics at Waikele, Civil
No. 08-00502 HG-KSC, 2012 WL 299899, at *3 (D. Hawai`i Jan. 31,
2012), aff’d (9th Cir. May 15, 2012).
Rule 60(b)(6)[ is] the “catchall provision” that
applies when the reason for granting relief is
not covered by any of the other reasons set forth
in Rule 60 . . . . See United States v.
Washington, 394 F.3d 1152, 1157 (9th Cir. 2005),
overruled on other grounds, 593 F.3d 790 (9th
Cir. 2010). Rule 60(b)(6) “has been used
sparingly as an equitable remedy to prevent
manifest injustice and is to be utilized only
where extraordinary circumstances prevented a
party from taking timely action to prevent or
correct an erroneous judgment.” Id. (internal
quotation marks omitted).
Lauro, 2019 WL 6534118, at *4.
DISCUSSION
I.
Authority to Consider the Motion
The filing of a notice of appeal “divests the district
court of its control over those aspects of the case involved in
the appeal.”
Rodriguez v. Cty. of Los Angeles, 891 F.3d 776,
7
790 (9th Cir. 2018) (citation and quotation marks omitted)).
However, Fed. R. Civ. P. 62.1 states:
(a) Relief Pending Appeal. If a timely
motion is made for relief that the court lacks
authority to grant because of an appeal that has
been docketed and is pending, the court may:
(1)
defer considering the motion;
(2)
deny the motion; or
(3) state either that it would grant
the motion if the court of appeals remands
for that purpose or that the motion raises
a substantial issue.
(b) Notice to the Court of Appeals. The
movant must promptly notify the circuit clerk
under Federal Rule of Appellate Procedure 12.1 if
the district court states that it would grant the
motion or that the motion raises a substantial
issue.
(c) Remand. The district court may decide
the motion if the court of appeals remands for
that purpose.
Plaintiffs’ Motion is timely because they filed it
within one year of the entry of the Judgment, and within a
reasonable time after the filing of the 2019 Quitclaim Deeds.
This Court lacks authority to grant the ultimate relief sought
in the Motion because of Defendant’s pending appeal before the
Ninth Circuit.
Plaintiffs ask this Court to issue an order,
pursuant to Rule 62.1(a)(3), stating this Court would grant the
Motion if the Ninth Circuit remands the case.
Motion at 6.]
[Mem. in Supp. of
If the Ninth Circuit remands the case, Plaintiffs
8
ask that this Court order the relief sought in the Motion.
at 10.]
[Id.
Pursuant to Rule 62.1(a)(3), this Court has the
authority to consider Plaintiffs’ request for an order stating
it would grant the Motion if the case is remanded from the Ninth
Circuit.
II.
Rule 60(b)(3)
Plaintiffs seek relief pursuant to Rule 60(b)(3)
because they allege the 2019 Transfer was an “identical
fraudulent transfer” of the Property.
at 9.]
[Mem. in Supp. of Motion
This alleged fraud is not the type of fraud that can
support Rule 60(b)(3) relief.
Plaintiffs could only obtain
Rule 60(b)(3) relief if the alleged fraud prevented them from
“fully and fairly presenting [their] side of the case.”
Lauro, 2019 WL 6534118, at *4.
See
In other words, the 2019
Transfer cannot be the basis of Rule 60(b)(3) relief to
Plaintiffs because it did not affect Plaintiffs’ presentation of
their case at trial, and Plaintiffs could not have discovered it
prior to, or during, the trial.
See Casey, 362 F.3d at 1260.
Thus, even if the Ninth Circuit remanded the case to allow a
ruling on the Motion, this Court would not grant Plaintiffs’
request for Rule 60(b)(3) relief.
III. Rule 60(b)(5)
Plaintiffs rely on the portion of Rule 60(b)(5) that
allows post-judgment relief if “applying [the judgment]
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prospectively is no longer equitable.”
Motion at 8.
See Mem. in Supp. of
They assert the 2019 Transfer constitutes “a
significant change . . . in factual conditions.”
See Rufo, 502
U.S. at 384; Mem. in Supp. of Motion at 8 (citing Horne, 557
U.S. at 447).
In most cases, in order for a party to obtain
Rule 60(b)(5) relief, the party must establish that the changed
circumstances are such that continued enforcement of the
Judgment would be “‘detrimental to the public interest.’”
See
Horne, 557 U.S. at 447 (quoting Rufo v. Inmates of Suffolk
County Jail, 502 U.S. 367, 384 (1992)).
The transfer of the Property back to Defendant is a
arguably a significant change in circumstances.
However, the
instant case is not a form of “institutional reform litigation,”
where Rule 60(b)(5) relief “serves a particularly important
function” because of the length of time involved and frequent
federalism concerns.
See Horne, 557 U.S. at 447 (citation and
quotation marks omitted).
The continuing effect of the Judgment
would not affect the public interest.
The Ninth Circuit has
also recognized that Rule 60(b)(5) relief
“may be warranted when changed factual conditions
make compliance with the decree substantially
more onerous. . . . Modification is also
appropriate when a decree proves to be unworkable
because of unforeseen obstacles . . . .” [Rufo,
502 U.S. at 384, 112 S. Ct. 748] (citations
omitted). In addition, an order must be modified
if compliance becomes legally impermissible. Id.
at 388, 112 S. Ct. 748. Relief from a court
10
order should not be granted, however, simply
because a party finds “it is no longer convenient
to live with the terms” of the order. Id. at
383, 112 S. Ct. 748.
S.E.C. v. Coldicutt, 258 F.3d 939, 942 (9th Cir. 2001).
The
decree of the FOF/COL and the Judgment was to void the 2010
Transfer, and that has occurred.
The 2019 Transfer is a
separate, albeit similar, transfer.
Voiding the 2010 Transfer
has not become “substantially more onerous,” “unworkable because
of unforeseen obstacles,” nor “legally impermissible.”
Rufo, 502 U.S. at 384.
See
While Plaintiffs hoped to recover the
value of the Property from D. Susott in order to satisfy their
claims against them, the FOF/COL and the Judgment did not
specifically order D. Susott to use the Property to satisfy
those claims.
Plaintiffs merely “find[] it is no longer
convenient to live with the terms of the” FOF/COL and the
Judgment, and that is not a proper ground for Rule 60(b)(5)
relief.
See id. at 383.
Thus, even if the Ninth Circuit
remanded the case for a ruling on the merits of the Motion, this
Court would not grant Plaintiffs’ request for Rule 60(b)(5)
relief.
IV.
Rule 60(b)(6)
Finally, Plaintiffs seek relief under the “catchall
provision.”
2017).
See Ybarra v. Filson, 869 F.3d 1016, 1023 (9th Cir.
Like Rule 60(b)(3), Rule 60(b)(6) focuses upon
11
addressing circumstances that occurred while the proceedings
were originally pending.
See, e.g., Henson v. Fid. Nat’l Fin.,
Inc., 943 F.3d 434, 443–44 (9th Cir. 2019) (“a movant seeking
relief under Rule 60(b)(6) must show extraordinary circumstances
justifying the reopening of a final judgment” (brackets,
citation, and internal quotation marks omitted) (emphasis
added)); Lal v. California, 610 F.3d 518, 524 (9th Cir. 2010)
(“To receive relief under Rule 60(b)(6), a party must
demonstrate extraordinary circumstances which prevented or
rendered him unable to prosecute his case.” (brackets, citation,
and internal quotation marks omitted) (emphasis added));
Washington, 394 F.3d at 1157 (9th Cir. 2005) (stating
Rule 60(b)(6) “is to be utilized only where extraordinary
circumstances prevented a party from taking timely action to
prevent or correct an erroneous judgment” (emphasis added)).
The Motion does not ask this Court to reopen the Judgment so
that the parties can relitigate issues related to the 2010
Transfer.
The 2019 Transfer does not affect the ruling that the
2010 Transfer was fraudulent or the ruling that voiding the 2010
Transfer was the appropriate remedy for that fraud.
Nor did the
2019 Transfer prevent or hinder Plaintiffs from prosecuting
their challenge to the 2010 Transfer.
Thus, the 2019 Transfer
is not a proper ground for Rule 60(b)(6) relief.
12
Even if Rule 60(b)(6) allows courts to grant relief
based on events that occur after the entry of judgment, cf.
Henson, 943 F.3d at 443 (stating Rule 60(b)(6) “gives the
district court power to vacate judgments whenever such action is
appropriate to accomplish justice” (emphasis added) (citation
and quotation marks omitted)), this Court would not find that
the 2019 Transfer constitutes extraordinary circumstances
warranting Rule 60(b)(6) relief because Plaintiffs can challenge
the 2019 Transfer in a separate action.
Thus, even if the Ninth
Circuit remanded the case for a ruling on the merits of the
Motion, this Court would not grant Plaintiffs’ request for
Rule 60(b)(5) relief.
In short, while Defendant’s actions are reprehensible
and not condoned, this Court cannot grant Plaintiffs relief
under Rule 60.
A separate action for injunctive relief may
possibly be a different story.
Having concluded that Plaintiffs are not entitled to
relief under either Rule 60(b)(3), (5), or (6), this Court
denies the Motion, pursuant to the authority granted in
Rule 62.1(a)(2).
CONCLUSION
On the basis of the foregoing, Plaintiffs’ Motion for
Relief from Judgment, filed July 31, 2019, is HEREBY DENIED.
IT IS SO ORDERED.
13
DATED AT HONOLULU, HAWAI`I, December 23, 2019.
EVAN AULD-SUSOTT, ETC., ET AL. VS. LAURYN GALINDO; CV 16-00450
LEK-WRP; ORDER DENYING PLAINTIFFS’ MOTION FOR RELIEF FROM
JUDGMENT
14
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