United States District Court, D. Hawaii
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, Plaintiffs,
LAURYN GALINDO, Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
E. Kobayashi, United States District Judge
matter came on for a bench trial on on July 10 and 11, 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
(“Trusts”); and John L. Susott (“J.
Susott” and collectively “Plaintiffs”) were
represented by Peter Knapman, Esq. Defendant Lauryn Galindo
(“Defendant”) was represented by Wayson W.S.
Court hereby finds in favor of Plaintiffs and against
Defendant. Specifically, that Plaintiffs are entitled to
judgment on their fraudulent transfer claim, and their claims
for unjust enrichment and constructive trust are hereby
dismissed. Defendant's Motion for Judgment Under FRCP
Rule 52(c) (“Rule 52(c) Motion”), [filed 7/13/18
(dkt. no. 143), ] is hereby denied.
Court, having considered the declarations and evidence
admitted into evidence, the testimony at trial, and the
arguments of counsel, makes the following Findings of Fact
and Conclusions of Law and Decision pursuant to Fed.R.Civ.P.
52. Any finding of fact that should more properly be deemed a
conclusion of law and any conclusion of law that should more
properly be deemed a finding of fact shall be so construed.
April 8, 2010, Daniel C. Susott (“D. Susott”)
transferred certain real property located at 3880 Wyllie
Road, Apartment 6A, Princeville, Hawai`i 96722
(“Property”) by quit claim deed to Defendant.
[Complaint, filed 8/10/16 (dkt. no. 1), at ¶¶ 7,
14.] As a result, Plaintiffs filed the instant legal action
against Defendant. On May 31, 2016, Defendant filed her First
Amended Answer to Complaint Filed August 10, 2016. [Dkt. no.
lawsuit, Plaintiffs assert three claims: fraudulent
conveyance pursuant to the Hawai`i Uniform Fraudulent
Transfer Act (“HUFTA”), Haw. Rev. Stat. §
651C-4(a)(1) (“Count I”); unjust enrichment
(“Count II”); and constructive trust
to trial, two substantive rulings regarding Plaintiffs'
claims were made in this action. First, on April 9, 2018,
this Court issued the Order Denying Defendant's Motion
for Summary Judgment (“4/19/18 Order”) and ruled
that Plaintiffs' release of claims against D. Susott did
not also release their claims against Defendant. [Dkt. no. 91
at 7 (citing Haw. Rev. Stat. §
on June 27, 2018, this Court issued its Order Granting
Plaintiffs' Motion for Partial Summary Judgment and
Denying Defendant's Motion for Summary Judgment
(“6/27/18 Order”) and ruled that both E.
Auld-Susott and J. Susott are creditors of D. Susott under
Haw. Rev. Stat. § 651C-1, and therefore Plaintiffs both
“have standing to pursue their Count I claim against
Defendant.” [Dkt. no. 122 at 17.
trial, the following claims were litigated:
Count I - On April 8, 2010, D. Susott transferred the
Property to Defendant “‘with actual intent to
hinder, delay, or defraud [them in their capacity as]
creditor[s] of [D. Susott].'” [Complaint at ¶
19 (quoting § 651C-4(a)(1)).] Further, Plaintiffs allege
the Complaint is timely because they “first learned of
the fraudulent transfer on March 1, 2016.”
[Id. at ¶ 21 (citing Haw. Rev. Stat. §
Count II - “Defendant knowingly received and accepted
the Property from D. Susott without consideration.”
[Id. at ¶ 24.] Plaintiffs therefore allege
Defendant would be unjustly enriched if she were to retain
Count III - Plaintiffs allege “the circumstances under
which Defendant acquired the Property” require imposing
a constructive trust to “convert Defendant into a
trustee holder of the Property for the benefit of
Plaintiffs.” [Id. at ¶ 27.]
non-jury trial, in lieu of live direct testimony, Plaintiffs
presented the declarations of E. Auld-Susott and J. Susott.
[Dkt. nos. 120, 121.] Defendant likewise presented the
declarations of Defendant, Emerald Starr, and Harvey Cohen.
[Dkt. nos. 123, 124, 126.] However, because Defendant filed
all of her declarations after the court-ordered deadline for
filing these declarations, this Court ruled it would consider
none of them at trial. [Minutes, filed 7/2/18 (dkt. no.
125).] On July 9, 2018, this Court issued its Order Granting
in Part and Denying in Part Defendant's Motion for
Reconsideration of this Court's Ruling that She May Not
Call Any Witnesses at Trial (“7/9/18 Order”).
[Dkt. no. 136. The 7/9/18 Order permits only
Defendant's declaration (“Galindo
Declaration”) to be considered as direct examination
testimony presented by Defendant at the trial. 2018 WL
3350363, at *3.
non-jury trial commenced on July 10, 2018 with E.
Auld-Susott, J. Susott and Defendant all testifying live on
cross-examination. Plaintiffs' Exhibits 2, 7-8, 10-16,
18-19, 21, 26-29, 31, 34, 38-40, and 42-43 were received into
evidence, and Defendant's Exhibits E, AA, BB, CC, EE, FF,
GG, SS, RR, TT, and YY Exhibits RR and TT were admitted.
26, 2018, Plaintiffs and Defendant both filed written closing
arguments. [Dkt. nos. 147, 148.] On August 13, 2018,
Defendant filed her Rebuttal to Plaintiffs' Closing
Argument, and on August 17, 2018, Plaintiffs filed their
Rebuttal to Defendant Lauryn Galindo's Closing Argument.
[Dkt. nos. 162, 163.]
parties' request, on August 10, 2018, leave was granted
to file post-trial proposed findings of fact and conclusions
of law. [Dkt. no. 160.] On August 17, 2018 and August 24,
2018, respectively, Defendant filed her Posttrial Proposed
Findings of Fact and Conclusions of Law, and Plaintiffs filed
their Post-Trial Submission of Proposed Findings of Fact and
Conclusions of Law. [Dkt. nos. 164, 165.] On August 27, 2018,
Defendant filed her Objections to Plaintiffs' Post-Trial
Submission of Findings of Fact and Conclusions of Law. [Dkt.
Court makes the following findings of fact based on the
declarations, trial testimony, and exhibits submitted by the
Auld-Susott is a citizen of the State of California.
Susott is a citizen of the State of California.
Defendant is a citizen of the State of Hawai`i.
Property at issue in this action is the real property located
at 3880 Wyllie Road, Apartment 6A, Princeville HI 96722, TMK
(4) 5-4-005-018 CPR 0020. [Exh. 24, Apartment Deed dated
March 6, 2007 (“Exh. 24”).]
Susott took title to the Property by deed executed March 6,
2007. [Id.] Galindo testified the purchase price was
April 8, 2010, D. Susott executed a quitclaim deed
transferring title to the Property to Defendant
(“Quitclaim Deed” and “the
Transfer”). [Exh. C, California All-Purpose
Acknowledgment dated April 8, 2010 (“Exh. C”);
Exh. 30, Quitclaim Deed filed April 26, 2010 (“Exh.
Susott and D. Susott are brothers. [E. Auld-Susott Decl. at
Auld-Susott is J. Susott's son. D. Susott is E.
Auld-Susott's uncle. [Id.]
Non-party Kathryn C. Susott (“K. Susott”) is J.
Susott and D. Susott's mother, and E. Auld-Susott's
Susott died in February 2009. Her life insurance proceeds
funded the Trusts. [Id. at ¶¶ 11-13.]
Susott is the income beneficiary of the Trusts and was the
original trustee of the Trusts. E. Auld-Susott and his sister
are remainder beneficiaries of the Trusts, and E. Auld-Susott
is the successor trustee of the Trusts. [Id. at
October 26, 2009, D. Susott instructed that the Trusts'
brokerage account issue payment totaling $350, 000 to
“Wells Fargo Home Mortgage, ” and these payments
were applied to pay off the remaining balance of a mortgage
loan which was secured by the Property. [Exh. 23, Letter from
Daniel C. Susott MD, MPH to Adrian Antonio dated October 26,
2009 (“Exh. 23”); E. Auld-Susott Decl. at ¶
39 (identifying the payment as coming from the Trusts'
November 2, 2009, D. Susott had removed nearly all of the
Trusts' principal, which was about $1, 000, 000. [E.
Auld-Susott Decl. at ¶ 20.]
January 26, 2011, E. Auld-Susott filed In re: ILIT of
Susott, No. MP 20193 (“MP20193”), in the
Superior Court of Monterey County, State of California
(“California state court”), in which he demanded
D. Susott provide a financial accounting for the Trusts.
December 9, 2011, J. Susott filed Susott v. Susott,
No. M115348 (“M115348”), in the California state
court, in which he alleged D. Susott committed elder abuse
against their mother. [Exh. EE, Complaint filed September 25,
2012, (“Exh. EE”).]
November 13, 2012, in MP20193, the California state court
issued an order: removing D. Susott as trustee of the Trusts;
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”). [Exh. 29, Order After
Hearing on Petition for Removing and Surcharging Trustee;
Appointment of a Successor Trustee and for Attorneys Fees and
Costs, filed with the Bureau of Conveyances on November 17,
2014 (“Exh. 29”).]
Pursuant to the Surcharge Order and since November 13, 2013,
E. Auld-Susott has attempted to recover assets from D. Susott
to satisfy the Surcharge Order. E. Auld-Susott performed an
accounting of the amount recovered and the amount still owed
to the Trusts pursuant to the Surcharge Order. [E.
Auld-Susott Decl. at ¶¶ 28-29.] As of June 26,
2018, the amount D. Susott owes the Trusts is $841, 407.68.
[Id. at ¶ 30.]
Surcharge Order has not been fully satisfied. [Id.]
April 17, 2013, in M115348, the California state court issued
J. Susott a judgment against D. Susott in the amount of $1,
624, 125.07. On October 24, 2015, J. Susott filed a copy of
the judgment issued in M115348 in Hawai`i state court
pursuant to the Uniform Enforcement of Foreign Judgments Act,
Haw. Rev. Stat. Chapter 636C (“J. Susott's
Judgment”). [Exh. 35, Exemplified Foreign Judgment
Susott has not received full payment from D. Susott for the
amount owed on J. Susott's Judgment. [J. Susott Decl. at
¶¶ 15-17; E. Auld-Susott Decl. at ¶¶
Court finds that J. Susott's Judgment has not been fully
D. Susott's Actual Intent and the Badges of
Susott did not testify at trial.
Court finds, by clear and convincing evidence, that D. Susott
made the Transfer with actual intent to hinder, delay, or
defraud Plaintiffs, in their capacity as creditors, to
recover the Property to satisfy debts D. Susott owed to
Plaintiffs. This finding is based on considering the eleven
badges of fraud and other evidence of D. Susott's actual
Whether the Transfer Was to an Insider
Defendant refers to D. Susott as her “hanai
brother” and D. Susott refers to her as his
“hanai sister.” Defendant considers herself to be
K. Susott's “hanai daughter.” [Galindo Decl.
at ¶ 4.]
“The Hawaiian word ‘hanai' is translated as
adopted or foster child, and is sometimes used to refer to an
informal (rather than legally binding) adoptive
relationship.” Munguia v. Grelyn of Maui, LLC,
Civ. No. 09-00058 HG-BMK, 2011 WL 1364026, at *1 n.1 (D.
Hawai`i Apr. 8, 2011) (citing Hawaiian Dictionary:
Revised and Enlarged Edition 57 (Mary Kawena Pukui &
Samuel H. Elbert eds., 1986)).
Defendant became friends with D. Susott in 1983. [Galindo
Decl. at ¶ 3.] Defendant and D. Susott have had a
“close relationship” for “many years”
and show “affection, concern, and caring for each other
as close friends.” [Id. at ¶ 59.]
Defendant and D. Susott have engaged in numerous,
undocumented, highly informal, and high-value financial
transactions. These transactions include:
a. D. Susott's 2007 purchase of the Property
-D. Susott took out a mortgage on the Property
(“Mortgage”), and borrowed money from E.
Auld-Susott to provide the down payment required to obtain
the Mortgage. [Id. at ¶ 28.]
b. The Transfer -Defendant and D.
Susott agreed to a purchase price of $350, 000 for the
Property but, due to the close nature of their friendship, no
agreement was finalized as to how payment would be made.
[Id. at ¶ 57.]
c. Defendant's informal recording of alleged
payments she made in consideration for the
Transfer -Defendant contends that she made
numerous payments toward the purchase price for the Property
without documentation or acknowledgment of these payments.
[Id. at ¶ 46.]
d. Not documenting a loan of $188,
000 - Defendant contends she loaned D. Susott
$188, 000 for Bali, Indonesia investments in the early 2000s
and this loan was not documented due to the mutual trust
between them. [Id. at ¶ 68.]
e. Forgetting about a $60, 000 documented
loan -Defendant contends that she loaned D.
Susott $60, 000 for which D. Susott executed a loan agreement
on June 5, 2001 and never repaid but Defendant never sought
to collect repayment. [Id. at ¶ 76; Exh. 31
the time of the Transfer, Defendant and D. Susott were close
friends and regarded each other as family.
court finds by clear and convincing evidence that, at the
time of the Transfer, Defendant was an insider with respect
to D. Susott.
This factor weighs in favor of finding that D. Susott made
the Transfer with actual fraudulent intent.
Whether D. Susott Retained Possession or Control of the
Both before and after the Transfer, Defendant resided at the
Property. [Galindo Decl. at ¶ 26.]
Before and after the Transfer, D. Susott resided at the
property located on Woodlawn Drive in Honolulu, Hawai`i
(“Woodlawn Property”). [E. Auld-Susott Decl. at
¶ 32; Galindo Decl. at ¶ 34.]
Susott never resided at the Property. [Galindo Decl. at
Since purchasing the Property on March 6, 2007, D. Susott
expected and received financial or other contribution from
Defendant in exchange for her residing at the Property, and
D. Susott alone held a mortgage loan for the Property.
[Id. at ¶ 28; Exh. 28 at 1-2.]
Court finds by clear and convincing evidence that that D.
Susott possessed and controlled the Property after he
purchased it on March 6, 2007. This factor weighs in favor of
finding a fraudulent transfer, and is probative of whether D.
Susott made the transfer of the property to Defendant with
the actual intent of defrauding Plaintiffs and allowing
Defendant to retain the benefit of the Property without
paying reasonable consideration.
Whether the Transfer was Disclosed or
July 6, 2009, E. Auld-Susott emailed D. Susott to inquire
about the Susott Family Limited Partnership
(“SFLP”) purchasing the Property from D. Susott.
In reply, D. Susott stated via email on July 9, 2009 that
Defendant was trying to purchase the Property. [Exh. 40.]
April 26, 2010, the Quitclaim Deed was recorded. [Exh. 30.]
The transfer of title was publicly disclosed by this
Court finds by clear and convincing evidence that D. Susott
informed Plaintiffs as of July 9, 2009 that Defendant was
intending to purchase the Property. This factor weighs in
against finding a fraudulent transfer.
Whether D. Susott Was Sued or Threatened With Suit Before
He Made the Transfer
related to M115348
Susott believed that, from 1995 until K. Susott's death
in 2009, D. Susott committed wrongful acts against their
mother, including physical abuse, taking things of value, and
inappropriately influencing her to provide him gifts. [J.
Susott Decl. at ¶¶ 9-10.]
Susott told D. Susott on numerous occasions that he was
potentially going to be sued for his actions against their
mother. [Id. at ¶ 13.]
October 18, 2009, J. Susott emailed E. Auld-Susott a letter
that J. Susott was considering sending to D. Susott
(“10/18/09 Email”). [Exh. 2.] The 10/18/09 Email
discussed allegations that D. Susott financially abused their
mother, stole a three-carat diamond ring by removing it their
mother's finger, judged D. Susott's character and
recent conduct, and threatened to sue D. Susott.
Susott testified that he sent the 10/18/09 Email to D.
Susott, and discussed its contents with D. Susott.
preponderance of the evidence establishes that, at the time
of the Transfer, D. Susott was aware from discussions with J.
Susott and the 10/18/09 Email that serious allegations had
been made against him and that legal action against him ...