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Kim v. Field

United States District Court, D. Hawaii

November 27, 2018



          Jill A. Otake United States District Judge.


         Young Hui Kim (“Kim”), Glory of God Presbyterian Church, and Pacific Eagle Realty LLC (collectively “Appellants”) appeal the Order Granting Trustee's Motion for Order Approving Settlement Agreement Regarding Settlement of Claims and Purchase of Property of the Estate, Filed on March 7, 2018 (“Settlement Approval Order”) issued by Bankruptcy Judge Robert J. Faris on April 23, 2018. Dane S. Field, Chapter 7 Trustee (“the Trustee”) and Julia Riihimaki (“Riihimaki”) (collectively “Appellees”) contend the Settlement Approval Order should be affirmed.

         For the reasons stated below, the Court AFFIRMS the Settlement Approval Order.


         Kim, pastor of the Glory of God Presbyterian Church and owner of Pacific Eagle Realty LLC, and Riihimaki have a long history of business and personal dealings together. Kim and Riihimaki sued each other in state court for various causes of action largely stemming from alleged fraudulent real estate transactions. See Adv. Doc. No. 2 at 10.[1] In October 2014, while the litigation between Kim and Riihimaki was still pending, Kim filed for Chapter 7 bankruptcy. Id.; Bk Doc. No. 1. Riihimaki filed an adversary proceeding in Kim's bankruptcy case seeking a determination that certain of the debts and damages alleged in the state court proceeding were non-dischargeable. Adv. Doc. No. 2. Kim filed a counterclaim against Riihimaki in the adversary proceeding (“the Riihimaki Claim”). See Adv. Doc. No. 377. To account for the Riihimaki Claim in her bankruptcy case, Kim amended her bankruptcy schedule to list the Riihimaki Claim, and indicated it was worth $252, 000. See Bk. Doc. No. 53.

         In or around July of 2015, Kim's attorney settled all of the claims in the adversary proceeding with Riihimaki (the “2015 Settlement Agreement”)-both Riihimaki's claims against Kim, and Kim's counterclaim against Riihimaki. See Adv. Doc. No. 245. The substance of the agreement was that Riihimaki would be awarded a judgment against Kim in the amount of $1, 350, 000, with $650, 000 of that award being nondischargeable in Kim's bankruptcy proceeding. See Id. at 5. It also required Kim or her codefendants to make two cash payments of $30, 000 and $28, 450 to Riihimaki. It further stated that the agreement would be subject to review and approval from the Trustee and the bankruptcy court, and that both Kim and Riihimaki would join efforts in seeking to approve the 2015 Settlement Agreement with the bankruptcy court and the Trustee. SER at 491.[2]

         In November of 2015, Riihimaki moved to enforce the 2015 Settlement Agreement. Adv. Doc. No. 83. Kim opposed enforcement of the 2015 Settlement Agreement, disputing that she ever agreed to the settlement and arguing that her attorney settled the claim without her consent. See Adv. Doc. No. 245 at 12. In February 2017, the bankruptcy court found, over Kim's opposition, that Kim was fully aware of the terms of the 2015 Settlement Agreement and had legally consented to it. See Id. Based on that conclusion, the bankruptcy court held that the 2015 Settlement Agreement was valid and enforceable. Id. at 16; Adv. Doc. No. 247 at 2.

         In ruling to enforce the 2015 Settlement Agreement, the bankruptcy court noted that Kim's claims against Riihimaki were “all property of her bankruptcy estate under the exclusive control of the bankruptcy trustee.” Adv. Doc. No. 245 at 15. Thus, the bankruptcy court held that Kim did not have the authority-absent the Trustee's or court's approval-to settle her own claims. Ultimately, the bankruptcy court held that the 2015 Settlement Agreement “is an enforceable contract, ” but would “leave for another day the question whether the conditions to its effectiveness can be satisfied.” Id. at 16.

         After the bankruptcy court determined in the adversary proceeding that the 2015 Settlement Agreement was valid and enforceable, but subject to court and Trustee approval, the Trustee entered into a new settlement agreement that again resolved the Riihimaki Claim (the “2018 Settlement Agreement”). Although it is unclear whether the parties knew this at the time, they now concede that the claims against Riihimaki settled by the Trustee in the 2018 Settlement Agreement are the same claims that were already settled in the 2015 Settlement Agreement. See Appellants' Br. at 3 (“The Riihimaki Claim was articulated in the Counterclaim . . . in Adversary Proceeding No. 15-90001.”); Appellants' Reply Br. at 6 (“[T]he Counterclaim . . . is the claim being settled[.]”); Adv. Doc. No. 388 (dismissing the Riihimaki Claim with prejudice under both the 2015 Settlement Agreement and the 2018 Settlement Agreement). The 2018 Settlement Agreement, negotiated by the Trustee, relinquishes any of Kim's claims against Riihimaki for the following consideration: (1) Riihimaki pays the estate $15, 000; (2) Riihimaki files an amended proof of claim, reducing her proof of claim against Kim's bankruptcy estate to a $1, 360, 000 unsecured claim; and (3) Riihimaki releases her Notice of Pendency of Action (“NOPA”) previously recorded against one of Kim's properties. See Bk. Doc. No. 251 at 13.

         On March 7, 2018, the Trustee sought approval of the 2018 Settlement Agreement, and Kim objected on the grounds that the Trustee's motion did not provide sufficient evidence that the settlement was fair and equitable. See Bk. Doc. No. 251, 256. The Trustee filed a reply on April 2, 2018. Bk. Doc. No. 257. Oral argument was held on April 9, 2018. ER[3] at 190-95. Judge Faris presided over both the bankruptcy case and adversary proceeding, and as such, was familiar with the parties and their contentions. He approved the 2018 Settlement Agreement orally. ER at 192-93. The Settlement Approval Order was issued on April 23, 2018. Bk. Doc. No. 266. Kim timely filed this appeal on May 7, 2018.


         A district court sitting in appellate jurisdiction over a bankruptcy court's order under 28 U.S.C. § 158(a)(1) applies the same legal standard as a federal court of appeals. In re Crystal Props. Ltd., 268 F.3d 743, 755 (9th Cir. 2001). This generally requires that a district court review a bankruptcy court's findings of fact for clear error and its conclusions of law de novo. See In re Kimura, 969 F.2d 806, 810 (9th Cir. 1992). When reviewing a bankruptcy court's order approving a settlement, however, district courts review the order for an abuse of discretion. See In re Debbie Reynolds Hotel & Casino, Inc., 255 F.3d 1061, 1065 (9th Cir. 2001); In re A & C Props., 784 F.2d 1377, 1380 (9th Cir. 1986).


         A. Appellees' Requests for Judicial Notice

         Before addressing the merits of the appeal, the Court first addresses Appellees' requests for judicial notice. Appellees request that the Court take judicial notice of (1) a NOPA recorded against one of Kim's properties by appellee Riihimaki; and (2) two documents filed in the underlying bankruptcy case that were not designated by the parties to be included in the record on appeal. Appellee Trustee's Br. at 3 n.2, 7 n.3; Appellee Riihimaki's Br. at 18 n.9. Appellants did not object to the requests for judicial notice. The Court addresses these requests in turn.

         Under Federal Rule of Evidence 201, a court may take judicial notice of facts that can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned. Courts must take judicial notice “if a party requests it and the court is supplied with the necessary information.” Fed.R.Evid. 201(c)(2). On appeal, courts will generally not take judicial notice of documents that were not before the lower court. See U.S. ex Rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992); In re Brown & Cole Stores, LLC, 375 B.R. 873, 876 n.5 (B.A.P. 9th Cir. 2007).

         First, regarding the request that the Court take notice of the NOPA, the NOPA does not appear to have ever been before the bankruptcy court in the underlying proceeding. The copy of the NOPA submitted with Appellee's filing was not a version that was ever filed in the bankruptcy court, and the parties do not identify where in the underlying bankruptcy proceeding the NOPA was filed. Normally, a reviewing court “will not supplement the record on appeal with material not considered by the trial court.” Daly-Murphy v. Winston, 837 F.2d 348, 351 (9th Cir. 1987). Therefore, the Court declines to take judicial notice of the NOPA.

         Second, Appellees request that this Court take judicial notice of two related documents filed in the bankruptcy court-documents 59 and 60.[4] These two documents were part of the bankruptcy court's record and their accuracy cannot reasonably be questioned.[5] Therefore, the Court takes judicial notice of them.

         Although the Court takes judicial notice of these documents, the Court notes that their relevance to this appeal is minimal at best. Bankruptcy document 59 is the Trustee's request for an examination of Kim, including interrogatories and requests for production of documents, under Federal Rule of Bankruptcy Procedure 2004. Bankruptcy document 60 is merely the bankruptcy court's order granting the motion. Neither document contains Kim's answers to the interrogatories and document requests propounded. Moreover, the relevant interrogatories, as well as Kim's answers to the ...

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