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Auld-Susott v. Galindo

United States District Court, D. Hawaii

December 23, 2019

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,
v.
LAURYN GALINDO, Defendant.

          ORDER DENYING PLAINTIFFS' MOTION FOR RELIEF FROM JUDGMENT

          Leslie E. Kobayashi United States District Judge

         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. [Dkt. nos. 186 (entering order), 187 (suppl. mem.).] 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 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.] Title in the Property reverted back to D. Susott. [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.] Defendant's appeal is still pending before the Ninth Circuit. 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 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.” [Mem. in Supp. of Motion at 2.] 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.

         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:

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) any other reason that justifies relief.

         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. ...

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