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In re Price

United States District Court, D. Hawaii

June 29, 2018

ELIZABETH A. KANE, Trustee, Appellee. THOMAS W. COULSON, Appellant,


          Leslie E. Kobayashi, United States District Judge.

         On August 17, 2017, in In re Price, Bankruptcy No. 16-00036, the bankruptcy court issued its Memorandum of Decision on Motion for Partial Summary Judgment (“Bankruptcy Court's Order”). 575 B.R. 461 (Bankr. D. Hawai`i 2017). Appellant Thomas W. Coulson (“Coulson” or “Appellant”) filed his Notice of Appeal and Statement of Election (“Notice of Appeal”) on August 31, 2017. [Dkt. no. 1.] On October 31, 2017, Appellant filed his opening brief. [Dkt. no. 3.] Appellee Elizabeth A. Kane, Trustee (“Appellee” or “Trustee”) filed her answering brief on December 4, 2017, and Appellant filed his reply brief on December 18, 2017. [Dkt. nos. 7, 9.] This matter came on for hearing on March 12, 2018. Appellant's appeal is denied, and the Bankruptcy Court's Order is affirmed, for the reasons set forth below.


         In the instant appeal, Appellant challenges the Trustee's avoidance of a transfer of $123, 716.23 to him, which occurred less than ninety days before Debtor Richard Allen Price (“Debtor”) filed his bankruptcy petition on January 15, 2016. Price, 575 B.R. at 464. Under 11 U.S.C. § 547(b), the bankruptcy trustee is authorized to avoid certain preferential transfers to creditors made within ninety days before a debtor files his bankruptcy petition.[1] The historical facts of this case are undisputed. Appellant argues reversal is warranted because the relevant transfer occurred at an earlier stage of their dispute, outside the ninety-day preference period.

         In 2002, Appellant terminated his right to purchase certain real property in Honolulu, Hawai`i (“Property”) in favor of Debtor, in exchange for Debtor's written promise that Appellant would receive half of any net profit, if the Property were resold under certain conditions (“Agreement”). Price, 575 B.R. at 463. The Agreement was not recorded at the time. In 2010, Appellant recorded with the Bureau of Conveyances (“BOC”) an Affidavit of Adverse Claim (“Affidavit”) and attached the Agreement as an exhibit. Id. Debtor could not sell the Property because the Affidavit rendered his title unmarketable.[2] Id. at 466. In 2011, Debtor sued Appellant in the Circuit Court of the First Circuit of the State of Hawai`i (“state court”) to invalidate the Agreement and Affidavit. Id. at 463. Appellant counterclaimed seeking specific performance and damages. During the pendency of the litigation, the parties agreed that: 1) Appellant would withdraw the Affidavit so that Debtor could sell the Property; and 2) Debtor would deposit the net proceeds into an escrow account. Id.

         Debtor sold the Property and deposited $122, 635.22, the entirety of the net proceeds, into an escrow account governed by Joint Escrow Instructions (“Escrow Instructions”), which the parties executed March 16, 2012. [Opening Brief, Appellant's Appendix to Opening Brief (Excerpts of the Records) (“Record Appendix”) at COULSON 105-06 (Escrow Instructions).[3] In pertinent part, the Escrow Instructions provided that:

The escrow funds shall only be released upon any one of the following occurrences: (1) receipt by the Escrow Holder of a document signed by both parties directing the Escrow Holder to release the funds; or (2) the receipt by the Escrow Holder of a court order directing the Escrow Holder to release the funds; or (3) no mutual instructions are received by the Escrow Holder by the close of business day on December 3, 2012, after which time the Escrow Holder will release the funds by way of a check to be deposited into a court-supervised account at The First Circuit Court, State of Hawaii. The court-supervised account will be established by appropriate motion or stipulation of the parties no later than December 2, 2012, with the account No. provided to Escrow Holder by December 3, 2012.

[Id.] Later, Debtor obtained a court order transferring the funds to a court-supervised account, which was governed by the same terms as in the Escrow Instructions. Price, 575 B.R. at 463, 467 n.30.

         On July 24, 2012, the state court granted summary judgment in favor of Appellant on his counterclaim against Debtor, and ruled Debtor was liable to Appellant for “damages ‘in an amount to be proven.'” Id. at 463 (footnote omitted). Later, the

state court entered a minute order on January 30, 2015, determining that [Appellant] was entitled to recover $362, 884.84.
On November 20, 2015, the state court entered a Final Judgment in the amount of $423, 601.17 and directed the clerk of the state court to pay to [Appellant] the funds deposited with the clerk in partial satisfaction of the judgment. For reasons that the record does not explain, the clerk did not immediately comply with this directive. The state court entered an amended final judgment on January 4, 2016. On January 7, 2016, the clerk disbursed $123, 716.23 to [Appellant] in partial repayment of the state court judgment.

Id. at 463-64 (footnotes omitted).

         The bankruptcy court ruled the Trustee was entitled to recover the $123, 716.23 because the relevant transfer occurred within the ninety-day preference period - either when the state court entered its final judgment or when the clerk disbursed the funds. Price, 575 B.R. at 467. In the instant appeal, Appellant argues the bankruptcy court erred because the relevant transfer occurred either: 1) when he filed his Affidavit with the BOC in 2010; 2) when the net proceeds were deposited in the escrow account; 3) when the net proceeds were deposited in the court-supervised account; or 4) when the state court issued its Minute Order on January 15, 2015.


         This Court has stated:

This court reviews a bankruptcy court's findings of fact for clear error and its conclusions of law de novo. See In re Kimura (United States v. Battley), 969 F.2d 806, 810 (9th Cir. 1992) (“The Court reviews the bankruptcy court's findings of fact under the clearly erroneous standard and its conclusions of law de novo.”). The court “must accept the Bankruptcy Court's findings of fact, unless the court is left with the definite and firm conviction that a mistake has been committed. Mixed questions of law and fact are reviewed de novo.” In re JTS Corp., 617 F.3d 1102, 1109 (9th Cir. 2010) (quotation marks and citations omitted).

In re Lee, CIVIL NO. 15-00278 SOM/RLP, 2015 WL 7274035, at *1 (D. Hawai`i Nov. 17, 2015). The United States Supreme Court has stated:

[a] finding is ‘clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. This standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently. The reviewing court oversteps the bounds of its duty under Fed.R.Civ.P. 52(a) if it undertakes to duplicate the role of the lower court. In applying the clearly erroneous standard . . ., [reviewing] courts must constantly have in mind that their function is not to decided factual issues de novo. If the [lower] court's account of the evidence is plausible in light of the record viewed in its entirety, the [reviewing court] may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous.
Anderson v. City of Bessemer, 470 U.S. 564, 573-74 (1985) (some alterations in Anderson) (citations and some internal quotation marks omitted). The standards described in Anderson apply when a district court reviews the factual findings of a bankruptcy court. See, e.g., Ingram v. Burchard, 482 B.R. 313, 322 (N.D. Cal. 2012); In re Daewoo Motor Am., Inc., 471 B.R. 721, 732 (C.D. Cal. 2012), aff'd, 554 Fed.Appx. 638 (9th Cir. 2014); In re Folsom, Civil No. 10CV2440 L(NLS), 2011 WL 3489681, at *1 (S.D. Cal Aug. 8, 2011), aff'd sub nom., Folsom v. Davis, 513 Fed.Appx. 651 (9th Cir. 2013).

Sebetich v. Woods, CIVIL 15-00233 LEK-BMK, 2016 WL 8710426, at *4-5 (D. Hawai`i Jan. 29, 2016) (alterations in Sebetich).


         This appeal turns on whether the relevant transfer of the Debtor's property interest occurred within the ninety-day preference period.[4] For purposes of an avoidance action under § 547(b), “property of the debtor” does not include “‘[p]roperty in which the debtor holds . . . only legal title and not an equitable interest.'” Begier v. Internal Revenue Serv.,496 U.S. 53, 59 (1990) (quoting 11 U.S.C. ยง 541(d)). ...

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