United States District Court, D. 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, Plaintiffs,
LAURYN GALINDO, Defendant.
ORDER GRANTING PLAINTIFFS' MOTION FOR PARTIAL
SUMMARY JUDGMENT AND DENYING DEFENDANT'S MOTION FOR
E. Kobayashi United States District Judge
January 31, 2018, Defendant Lauryn Galindo
(“Defendant”) filed her Motion for Summary
Judgment (“Defendant's Motion”). [Dkt. no.
80.] On April 2, 2018, Plaintiffs Evan Auld-Susott (“E.
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 (“the Trusts”); and John L.
Susott (“J. Susott” and collectively
“Plaintiffs”) filed their memorandum in
opposition, and Defendant filed her reply on April 19, 2018.
[Dkt. nos. 85, 95.] Also on January 31, 2018, Plaintiffs
filed their Motion for Partial Summary Judgment
(“Plaintiffs' Motion”). [Dkt. no. 78.]
Defendant filed her memorandum in opposition on April 12,
2018, and Plaintiffs filed their reply on April 19, 2018.
[Dkt. nos. 92, 94.] These matters came on for hearing on May
21, 2018. On June 12, 2018, an entering order was issued
ruling on Plaintiffs' Motion and Defendant's Motion
(collectively “Motions”). [Dkt. no. 103.] The
instant Order supersedes that ruling. Plaintiffs' Motion
is hereby granted and Defendant's Motion is hereby denied
for the reasons set forth below.
filed their Complaint on August 10, 2016, asserting diversity
jurisdiction. [Dkt. no. 1 at ¶ 5.] Plaintiffs allege:
they are creditors of non-party Daniel C. Susott (“D.
Susott”); D. Susott conveyed certain real property in
Princeville, Hawai`i (“Property”) to Defendant
for no consideration; and the purpose of the conveyance was
to prevent Plaintiffs from recovering the Property to satisfy
debts D. Susott owes to Plaintiffs. [Id. at
¶¶ 8, 15-18.] Plaintiffs assert three claims:
fraudulent conveyance pursuant to Haw. Rev. Stat. §
651C-4(a)(1) (“Count I”); Unjust Enrichment
(“Count II”); and Constructive Trust
(“Count III”). In the instant Motions, the
parties seek partial summary judgment as to whether
Plaintiffs are creditors of D. Susott, and therefore have
standing to pursue their Count I claim against Defendant.
following background facts, set forth by Plaintiffs, are
deemed admitted because they are uncontroverted by
Defendant's concise statement. See Local Rule
LR56.1(g). E. Auld-Susott is suing only in his capacity as
trustee of the Trusts. The Trusts were funded by E.
Auld-Susott's grandparents, non-parties Kathryn C. Susott
and John L. Susott, Sr. [Pltfs.' CSOF at ¶ 2.] J.
Susott, who is suing only in his individual capacity, is E.
Auld-Susott's father. D. Susott is J. Susott's
brother and E. Auld-Susott's uncle. [Id. at
¶ 6.] D. Susott is the income beneficiary of the Trusts,
and E. Auld-Susott is the remainder beneficiary.
[Id. at ¶ 7.] In August 2009, D. Susott became
the trustee of the Trusts, and by November 2009, he had
withdrawn almost all the trust's principal, approximately
$1, 000, 000. [Id. at ¶ 10.] Litigation ensued.
November 13, 2012, the Superior Court of Monterey County,
California (“California state court”) issued an
order: removing D. Susott as trustee; appointing E.
Auld-Susott as successor trustee; surcharging D. Susott $1,
500, 917 for breach of trust and fiduciary duties; and
authorizing E. Auld-Susott, as successor trustee, to take
collection actions against D. Susott (“Surcharge
Order”). [Id. at 13.] In partial
satisfaction of the Surcharge Order, the Trusts levied
against $48, 680.52 in D. Susott's brokerage account on
April 4, 2013, and levied against D. Susott's interest in
the Susott Family Limited Partnership (“SFLP”) on
March 22, 2013. [E. Auld-Susott Decl., Exh. 2 (E.
Auld-Susott's Surcharge Order satisfaction ledger).]
April 17, 2013, E. Auld-Susott filed a Trustee Status Report
with the California state court regarding D. Susott's
balance owing on the Surcharge Order (“Trustee
Report”). [Pltfs.' CSOF, Decl. of Peter Knapman,
Esq. (“Knapman Decl.”), Exh. A (Decl. of E.
Auld-Susott), Exh. A1 (Trustee Report).] The Trusts applied a
thirty percent discount to the value of the SFLP units to
reflect their illiquidity, based on the reasoning of the
Internal Revenue Service's (“IRS”) Revenue
Ruling 93-12. [Id. at 2-3.] D. Susott received
credit for the discounted value of the SFLP units,
i.e., seventy percent of their full value.
[Id. at 3.] On May 15, 2013, also in MP20193, the
California state court questioned the propriety of crediting
D. Susott with only the discounted value of the SFLP units,
but issued no ruling on that issue. [Def.'s Responsive
CSOF, Decl. of Wayson W. S. Wong (“Wong Responsive
Decl.”), Exh. 11 (trans. of 5/15/13 hearing) at 2, 5.]
April 17, 2013, in Susott v. Susott, No. M115348
(“M115348”), the California state court issued J.
Susott a judgment against D. Susott in the amount of $1, 624,
125.07, which J. Susott filed in Hawai`i state court on
October 24, 2015. [E. Auld-Susott Decl., Exh. 3 (Exemplified
Foreign Judgment (“J. Susott's Judgment”)).]
The document names J. Susott, and no other person or entity,
as the holder of the judgment. [Id.] In M115348,
according to the Summary of Case for Default Prove-up Against
Defendant Daniel C. Susott, filed December 9, 2011, in
California state court, D. Susott had committed financial
elder abuse against his mother. [Wong Responsive Decl., Exh.
10.] The plaintiffs were J. Susott personally, J. Susott in
his capacity as executor of his mother's estate, and J.
Susott in his capacity as trustee of two marital trusts.
August 1, 2016, Plaintiffs, D. Susott, and other persons, not
including Defendant, executed a Settlement Agreement and
Mutual Release of Claims (“Settlement
Agreement”), which covered both MP20193 and M115348.
[Wong Responsive Decl., Exh. 5.] The other parties to the
Settlement Agreement were J. Susott in his capacity as
executor of his mother's estate; J. Susott in his
capacity as trustee of certain trusts; J. Susott in his
capacity as limited partner in the SFLP; and other parties
not relevant to the instant Motions. [Id. at pg. 1.]
Under the Settlement Agreement, D. Susott promised to end
litigation challenging the Surcharge Order and J.
Susott's Judgment, and to disclaim any right to any
Susott Family Trusts or Partnerships, including the Trusts
and the SFLP. [Id. at ¶ 2.] E. Auld-Susott and
J. Susott promised that they would not execute the Surcharge
Order or J. Susott's Judgment against D. Susott's
residence at 3645 Woodlawn Terrace Place. (“D.
Susott's Residence”) for the duration of D.
Susott's natural life. Further, the Trusts promised to
pay D. Susott $30, 000 annually, beginning August 15, 2016.
[Id. at ¶ 3.] The parties generally released
each other from all other claims. [Id. at ¶ 7.]
The Settlement Agreement excludes from the general release
the then-contemplated action to recover the Property, and
further provides that any such action will not seek
affirmative relief or judgment against D. Susott, and that
any recovery will be credited to the Surcharge Order.
[Id. at ¶ 12.] In addition, D. Susott promised
not to challenge Plaintiffs' liens on D. Susott's
Residence, and agreed that those liens are not part of any
partial satisfaction of judgment until D. Susott's
Residence is foreclosed upon. [Id. at ¶ 13.]
deposition testimony taken October 31, 2017, J. Susott stated
D. Susott does not owe J. Susott, personally, any money; the
money is owed to other entities. [Def.'s Concise
Statement of Facts for her Motion (“Def.'s
CSOF”), filed 1/31/18 (dkt. no. 81), Decl. of Wayson W.
S. Wong, Exh. 2 (excerpt of trans. of 8/31/17 deposition of
J. Susott (“J. Susott Depo.”)) at 189.] On
December 7, 2017, that testimony was corrected so that J.
Susott stated: D. Susott “owes money to me as I am
entitled to money from those entities.” [Separate and
Concise Statement of Material Facts in Supp.t of Pltfs.'
Opp. to Def.'s Concise Statement and Motion
(“Pltfs.' Responsive CSOF”), filed 4/2/18
(dkt. no. 86), (Decl. of Peter Knapman, Esq. (“Knapman
Responsive Decl.”), Exh. A (Witness Correction Sheet)
to Federal Rule of Civil Procedure 56(a), a party is entitled
to summary judgment “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” In
determining whether there is a genuine issue of material
fact, a court must view the record in the light most
favorable to the non-moving parties. Crowley v.
Bannister, 734 F.3d 967, 976 (9th Cir. 2013). This
district court has stated:
Summary judgment must be granted against a party that fails
to demonstrate facts to establish what will be an essential
element at trial. See Celotex [Corp. v. Catrett],
477 U.S. [317, ] 323 [(1986)]. A moving party has both the
initial burden of production and the ultimate burden of
persuasion on a motion for summary judgment. Nissan Fire
& Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102
(9th Cir. 2000). The burden initially falls on the moving
party to identify for the court “those portions of the
materials on file that it believes demonstrate the absence of
any genuine issue of material fact.” T.W. Elec.
Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809
F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp.,
477 U.S. at 323). “A fact is material if it could
affect the outcome of the suit under the governing
substantive law.” Miller [v. Glenn Miller Prods.,
Inc.], 454 F.3d [975, ] 987 [(9th Cir. 2006)].
When the moving party fails to carry its initial burden of
production, “the nonmoving party has no obligation to
produce anything.” In such a case, the nonmoving party
may defeat the motion for summary judgment without producing
anything. Nissan Fire, 210 F.3d at 1102-03. On the
other hand, when the moving party meets its initial burden on
a summary judgment motion, the “burden then shifts to
the nonmoving party to establish, beyond the pleadings, that
there is a genuine issue for trial.” Miller,
454 F.3d at 987. This means that the nonmoving party
“must do more than simply show that there is some
metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986) (footnote omitted). The nonmoving
party may not rely on the mere allegations in the pleadings
and instead “must set forth specific facts showing that
there is a genuine issue for trial.” Porter v. Cal.
Dep't of Corr., 419 F.3d 885, 891 (9th Cir. 2005)
(quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 256 (1986)). “A genuine dispute arises if the
evidence is such that a reasonable jury could return a
verdict for the ...