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IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---oOo---

________________________________________________________________

THOMAS FRANK SCHMIDT AND LORINNA JHINCIL SCHMIDT,

Petitioners/Plaintiffs-Appellants/Cross-Appellees,

vs.

HSC, INC., A HAWAIʻI CORPORATION; RICHARD HENDERSON, SR.; 

ELEANOR R.J. HENDERSON,

Respondents/Defendants-Appellees/Cross-Appellees/

Cross-Appellants.

________________________________________________________________

SCWC-16-0000858

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS

(CAAP-16-0000858; CIVIL NO. 06-1-228)

NOVEMBER 8, 2019

NAKAYAMA, ACTING C.J., McKENNA, POLLACK, AND WILSON, JJ., AND 

CIRCUIT COURT JUDGE KUBO IN PLACE OF RECKTENWALD, C.J., RECUSED

OPINION OF THE COURT BY McKENNA, J.

Electronically Filed

Supreme Court

SCWC-16-0000858

08-NOV-2019

10:08 AM
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I. Introduction

This case, which concerns $537,000 in excess foreclosure 

sale proceeds, returns to this court for the third time.1 The 

current iteration of the case arises from a separate action, 

Civil No. 06-1-228, filed on April 7, 2006 in the Circuit Court 

of the Third Circuit2 (“circuit court”) by Petitioners/

Plaintiffs-Appellants/Cross-Appellees Thomas Frank Schmidt and 

Lorinna Jhincil Schmidt (collectively, “Schmidts” or 

“Petitioners”) after they obtained a December 21, 2004 final 

judgment against Realty Finance, Inc. (“RFI”) for the excess 

proceeds, but later learned that those same proceeds were 

already transferred, leaving RFI insolvent and essentially 

judgment proof. In their Amended Complaint filed on April 24, 

2006, the Schmidts raised claims pursuant to Hawaiʻi Revised 

Statutes (“HRS”) § 651C-7

3 alleging RFI fraudulently transferred 

the proceeds to the creditors of its parent company, 

 

1 See Schmidt v. HSC, Inc., 131 Hawaiʻi 497, 319 P.3d 416 (2014) (“Schmidt 

II”); Realty Finance, Inc. v. Schmidt, No. 23441 (Haw. Mar. 18, 2004) (mem.) 

(“Schmidt I”).

2 The Honorable Greg K. Nakamura presided.

3 HRS Chapter 651C governs Hawaiʻi’s Uniform Fraudulent Transfer Act 

(“HUFTA”). HRS § 651C-7 provides remedies under HUFTA.

The Schmidts’ Amended Complaint also asserted a claim under HRS § 480-

2, which prohibits “[u]nfair methods of competition and unfair or deceptive 

acts or practices in the conduct of any trade or commerce.” This claim is 

not discussed further as the circuit court had granted Respondents’ Motion 

for Judgment on the Pleadings as to this claim, and it is not the subject of 

the present appeal. See Schmidt v. HSC, Inc., Nos. 29454, 29589, at 5 (App. 

Aug. 30, 2013) (mem.).
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Respondent/Defendant-Appellee/Cross-Appellant HSC, Inc. (“HSC”). 

Following a bench trial on July 1 and 2, 2008, the circuit court 

concluded the Schmidts did not prove by clear and convincing 

evidence RFI actually intended to hinder, delay, or defraud any 

creditors of RFI,4 and therefore entered judgment in favor of 

Respondents/Defendants-Appellees/Cross-Appellants HSC, Richard 

Henderson, Sr. (“Richard”), and Eleanor R.J. Henderson 

(“Eleanor”) (collectively, “Respondents”).

5 

Petitioners appealed unsuccessfully to the Intermediate 

Court of Appeals (“ICA”). In deciding the Schmidts’ appeal, the 

ICA did not discuss the merits of the Schmidts’ challenge to the 

circuit court’s findings and conclusions, but rather concluded 

that the Schmidts’ HUFTA claim should have been dismissed as 

untimely. See Schmidt, mem. op. at 10. 

After accepting certiorari, this court determined that the 

ICA’s decision on the statute of limitations provision in HRS § 

 

4 To be clear, the Schmidts’ Amended Complaint cites only to HRS § 651C7, which provides remedies to creditors under HUFTA. During closing argument 

before the circuit court, the Schmidts clarified that Respondents violated 

HRS § 651C-4(a)(1). See Schmidt II, 131 Hawaiʻi at 500, 319 P.3d at 419. 

Pursuant to the statute, “[a] transfer made or obligation incurred by a 

debtor is fraudulent as to a creditor . . . if the debtor made the transfer 

or incurred the obligation . . . [w]ith actual intent to hinder, delay, or 

defraud any creditor of the debtor . . . .” HRS § 651C-4(a)(1) (emphasis 

added). 

5 Richard was HSC’s president; Eleanor was a director of HSC and 

Richard’s wife. See Schmidt II, 131 Hawaiʻi at 500, 319 P.3d at 419.
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651C-9(1)6 was wrong as a matter of law because the ICA 

“incorrectly held that the statute of limitations r[an] from the 

date of the transfer, rather than from the date that Petitioners 

discovered the fraudulent nature of the transfer.” Schmidt II, 

136 Hawaiʻi at 510, 319 P.3d at 429. This court vacated the 

ICA’s Judgment on Appeal and remanded the case to the ICA. See

131 Hawaiʻi at 512, 319 P.3d at 431. 

Consequently, the ICA published an opinion that 

“address[ed] the merits of the Schmidts’ challenge to [the] 

[c]ircuit [c]ourt’s rejection of their fraudulent transfers 

claims, irrespective of whether their claims are or may be 

barred by the statute of limitations.” Schmidt v. HSC, Inc., 

136 Hawaiʻi 158, 164, 358 P.3d 727, 733 (App. 2015). In sum, the 

 

6 “A cause of action with respect to a fraudulent transfer or obligation 

under this chapter is extinguished unless action is brought . . . [u]nder 

section 651C-4(a)(1), within four years after the transfer was made . . . or

within one year after the transfer or obligation was or could reasonably have 

been discovered by the claimant[.]” HRS § 651C-9(1).

One of the alternative theories presented by the Schmidts as to why 

their HUFTA claims were timely, which this court rejected in Schmidt II, was 

that the limitations period was extended by six years pursuant to the 

doctrine of fraudulent concealment in HRS § 657-20, which they argued applied 

to HUFTA by way of HRS § 651C-10 (“Unless displaced by the provisions of this 

chapter, the principles of . . . fraud . . . supplement its provisions.”). 

See Schmidt II, 131 Hawaiʻi at 510, 319 P.3d at 429. This court noted in 

Schmidt II:

Petitioners do not provide any definition of “fraudulent 

concealment” and therefore do not explain why the facts of 

this case constitute fraudulent concealment under any 

controlling legal standard. Petitioners therefore do not 

make any discernable argument as to why the doctrine of 

fraudulent concealment should apply to the facts of this 

case. Thus, we need not decide this issue.

Id.
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ICA concluded the circuit court erred in dismissing the 

Schmidts’ claims on the merits, as “the facts established by the 

record in this case . . . prove[d] by clear and convincing 

evidence that [RFI] actually intended to hinder, delay, or 

defraud any creditors of [RFI], as required by HRS § 651C4(a)(1).” 131 Hawaiʻi at 179, 358 P.3d at 748. However, because 

the circuit court did not issue any findings or legal 

conclusions regarding when the Schmidts discovered, or could 

reasonably have discovered, the fraudulent nature of the 

transfers, the ICA remanded the case to the circuit court. See

136 Hawaiʻi at 180, 358 P.3d at 749. 

After remand, on October 19, 2016, the circuit court issued 

its Findings of Fact and Conclusions of Law, which concluded the 

Schmidts’ claims were time-barred, as the Schmidts could 

reasonably have discovered the fraudulent nature of the 

transfers on or before February 21, 2005, but did not file a 

complaint until April 7, 2006, past the one-year statute of 

limitations period for HUFTA claims pursuant to HRS § 651C-9(1). 

The circuit court entered Final Judgment on December 6, 2016. 

The Schmidts appealed,7 in sum asserting the circuit court 

clearly erred in determining when they could reasonably have 

 

7 Respondents also cross-appealed regarding their motion for attorneys’ 

fees, which is not an issue before this court on certiorari, and therefore is 

not discussed further.
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discovered the fraudulent nature of the subject transfers.8 The 

ICA rejected the Schmidts’ challenge, concluding the circuit 

court did not err in making findings that “aided in its 

determination of how and when the fraudulent nature of the 

subject transfers could reasonably have been discovered by the 

Schmidts, and we are not left with a definite and firm 

conviction that, based on all of the evidence, mistakes were 

made in these findings.” Schmidt v. HSC, Inc., No. CAAP-16-

0000858, at 3 (App. Nov. 30, 2018) (SDO). Accordingly, the ICA 

entered a Judgment on Appeal on January 31, 2019 pursuant to its 

SDO affirming the circuit court’s December 6, 2016 Final 

Judgment and October 19, 2016 Findings of Fact and Conclusions 

of Law. See Schmidt, SDO at 8. 

The Schmidts timely filed an Application for Writ of 

Certiorari on February 19, 2019 (“Application”), presenting the 

same three issues they previously argued before the ICA, all 

related to the date the circuit court determined the Schmidts 

could reasonably have discovered the fraudulent nature of the 

subject transfers:

Whether the [ICA] gravely erred and the magnitude of such 

error or inconsistency dictates the need for further appeal 

where the ICA affirmed:

 

8 The Schmidts also raised an additional point of error regarding the 

circuit court’s award of costs to Respondents, which is not an issue before 

this court on certiorari, and therefore is not discussed further.
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(1) the circuit court’s findings of fact (“FOF”) nos. 5, 

13, 19, 21, 22 and 23[;]

(2) the circuit court’s conclusions of law (“COL”) nos. 

6, 8, 9 and 10[; and]

(3) the circuit court’s entry of final judgment denying 

[Petitioners’] complaint against the [Respondents].

In sum, the Schmidts assert they could not reasonably have 

discovered the fraudulent nature of the transfers until the July 

26, 2005 deposition of Michael Chagami, the chief financial 

officer9 of HSC, during which they learned RFI was insolvent, and 

that therefore their HUFTA claim was timely filed within the 

one-year statute of limitations period.10 

This court accepted the Schmidts’ Application. The ICA 

erred in affirming the circuit court’s October 19, 2016 Findings 

of Fact and Conclusions of Law and December 6, 2016 Final 

Judgment, as the circuit court’s determination that the Schmidts 

“could have reasonably known of the Transfers and their 

fraudulent nature on or before February 21, 2005” contravenes

this court’s ruling in Schmidt II. 

 

9 Although the record sometimes refers to Michael Chagami as HSC’s 

president or treasurer, the circuit court’s Findings of Fact identify him as 

the chief financial officer. 

10 The Schmidts did not argue to the ICA and do not now argue in their 

Application (in contrast to their argument in the alternative in Schmidt II), 

see supra note 6, that a six-year extension to the limitations period 

prescribed in HRS § 651C-9(1) applies due to any “fraudulent concealment” by 

Respondents. 
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II. Background

The following section proceeds with a background based on 

the uncontested findings of fact (“FOF”) of the circuit court 

and cited trial exhibits, followed by a recitation of the 

specific FOFs and conclusions of law (“COL”) specifically 

challenged by the Schmidts, namely FOFs 5, 13, 19, 21, 22, and 

23, and COLs 6, 8, 9, and 10.

A. Factual and Procedural Background

In Realty Finance, Inc. v. Schmidt, Civil No. 97-1235-03,

RFI filed a foreclosure action (the “Foreclosure Case”) in the 

Circuit Court of the First Circuit (“trial court”). An 

interlocutory decree of foreclosure was entered in favor of RFI 

and against the Schmidts. After the Hawaiʻi Supreme Court 

remanded the case in Schmidt I for an accounting of the value of 

the Schmidts’ mortgage debt in light of third-party payments 

that should have been applied, the trial court filed an Order 

dated October 12, 2004 stating RFI owed the Schmidts over 

$537,000. Later, by Order dated November 24, 2004, the trial 

court denied the Schmidts’ motion for prejudgment interest. On 

December 21, 2004, the trial court entered a separate “final 

judgment” in the Foreclosure Case. Later that same day, both 

the Schmidts and Respondents filed Notices of Appeal from the 

trial court’s December 21, 2004 “final judgment,” but the 

appeals were later deemed untimely as the appealable final order 
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in the post-judgment proceeding was the November 24, 2004 Order 

denying the Schmidts’ motion for prejudgment interest. 

Between December 6, 2004 and March 18, 2005, the Schmidts 

made no effort to enforce the final judgment (whether it be the 

final order entered on November 24, 2004 or the “superfluous” 

December 21, 2004 “final judgment”). Additionally, the Schmidts 

did not engage in any formal discovery prior to March 18, 2005.

On March 18, 2005, counsel for the Schmidts met with 

counsel for RFI regarding the Foreclosure Case. At this 

meeting, the Schmidts’ counsel requested of RFI’s counsel copies 

of the following checks (collectively, “Transfers”):

(1) a check dated February 11, 2000, in the amount of 

$78,000, payable to Defendant Eleanor Henderson;

(2) a check dated February 15, 2000, in the amount of 

$119,393.42, payable to Goodsill, Anderson, Quinn, and Stifel;

(3) a check dated February 11, 2000, in the amount of 

$54,399.55, payable to Defendant Richard Henderson;

(4) a check dated March 1, 2000, in the amount of 

$165,058.42, payable to Kamehameha Schools -- Bernice Pauahi

Bishop Estate. 

The Schmidts’ March 21, 2005 request for production encompassed 

a formal request for copies of the Transfers. Thirty days later 

on April 20, 2005, the Schmidts’ counsel received the copies of 

the Transfers, and RFI’s April 22, 2005 response to the 

Schmidts’ request for production stated that the requested 

copies of the Transfers had already been produced.
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On June 29, 2005, the Schmidts noticed the deposition of 

RFI’s chief financial officer, Michael Chagami, as RFI’s Hawaiʻi 

Rules of Civil Procedure (“HRCP”) Rule 30(b)(6)11 designee 

relating to RFI’s finances. The deposition was taken on July 

26, 2005. 

Based on these facts and the following contested FOFs and 

COLs, the circuit court concluded the Schmidts’ HUFTA claim was 

time-barred. 

FOF 5: The Schmidts first noticed the 30(b)(6) deposition 

of RFI on August 25, 2004, approximately 5 months after remand. 

The Schmidts cancelled on September 3, 2004. No other discovery 

was attempted between the March 18, 2004 remand order and October 

12, 2004. 

. . . .

FOF 13: No stay of the judgment was obtained under HRCP 

Rule 62, and the Schmidts therefore could have executed on the 

Judgment after ten days of the entry of the Judgment. See HRCP 

Rule 62(a) (“[N]o execution shall issue upon a judgment nor shall 

proceedings be taken for its enforcement until the expiration of 

10 days after its entry[.]”). 

. . . .

 

11 HRCP Rule 30(b)(6) states: 

A party may in the party's notice and in a subpoena name as 

the deponent a public or private corporation or a 

partnership or association or governmental agency and 

describe with reasonable particularity the matters on which 

examination is requested. In that event, the organization 

so named shall designate one or more officers, directors, 

or managing agents, or other persons who consent to testify 

on its behalf, and may set forth, for each person 

designated, the matters on which the person will testify. A 

subpoena shall advise a non-party organization of its duty 

to make such a designation. The persons so designated shall 

testify as to matters known or reasonably available to the 

organization. This subdivision (b)(6) does not preclude 

taking a deposition by any other procedure authorized in 

these rules.
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FOF 19: Between March 21, 2005 and April 20, 2005, thirty 

days elapsed prior to the Schmidts receiving the transfer checks. 

This indicates that if the Schmidts had commenced proceedings to 

enforce the judgment in the Foreclosure Case on December 6, 2004, 

then they could have received copies of three or four of the 

checks associated with the Transfers on January 6, 2005. 

. . . .

FOF 21: However, that deposition could be taken any time 

after January 6, 2005, unless doing so was prohibited by a 

protective order. The Schmidts did not produce any evidence of a 

protective order or of any valid reason why the 30(b)(6) 

deposition could have not been taken earlier. 

FOF 22: Generally, 45 days is more than enough time to 

schedule an oral deposition. Affording the Schmidts up to 45 

days to schedule the Rule 30(b)(6) deposition and considering the 

2005 calendar, the Rule 30(b)(6) deposition could have reasonably 

been taken on or before February 21, 2005. 

FOF 23: At minimum, the Schmidts could have reasonably 

known of the Transfers and their fraudulent nature on or before 

February 21, 2005. To summarize, (1) final judgment was entered 

in the Foreclosure Case on November 24, 2004; (2) under HRCP Rule 

62, after ten days passed, the Schmidts could have executed on 

the judgment on the first business day (December 6, 2004); (3) 

the Schmidts actually discovered the Transfer checks on or before 

January 6, 2005; (4) because 45 days is generally more than 

enough time to notice a deposition, the Schmidts could have taken 

the decisive deposition on or before February 21, 2005. Thus, 

the Schmidts reasonably could have known of the existence of the 

Transfers and their fraudulent nature on or before February 21, 

2005. 

. . . .

COL 6: Based on the preponderance of the evidence, the 

Schmidts could reasonably have discovered the existence of the 

Transfers and their fraudulent nature before April 8, 2005. 

. . . .

COL 8: However, as set forth in the above findings, had 

Plaintiffs commenced proceedings to enforce the judgment in the 

Foreclosure Case on December 6, 2004, they could have obtained 

copies of the checks associated with the Transfers in January 

2005, and could have deposed RFI’s representative in January or 

February 2005. 

COL 9: Likewise, had Plaintiffs commenced discovery into 

RFI’s assets any time after the March 18, 2004 Hawaiʻi Supreme 

Court opinion, they would have discovered the fraudulent nature 

of the Transfers prior to April 8, 2005. 
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COL 10: Thus, the Schmidts could have reasonably 

discovered the existence of the Transfers and their fraudulent 

nature more than one year prior to filing their lawsuit, and the 

Schmidts’ action in this case is time-barred under HRS § 651C9(1). 

B. Appeal to the ICA

The Schmidts timely filed a Notice of Appeal to the ICA, 

and presented, in relevant part, three points of error in their

Opening Brief:

A. The trial court committed reversible error in filing 

Findings of Fact (FOF) #s 5, 13, 19, 21, 22 and 23 . . . .

. . . . 

B. The trial court committed reversible error in making 

Conclusions of Law (COL) 6, 8, 9 and 10 . . . .

. . . . 

C. The trial court committed reversible error filing the 

December 6, 2016 final judgment . . . .

The ICA rejected the challenges. With respect to the 

Schmidts’ challenges to the FOFs, the ICA concluded as follows:

“FOFs 5 and 13 are each supported by the record and not clearly 

wrong,” “FOF 19 is [not] inconsistent with FOFs 15–18,” and 

“FOFs 19, 21, 22, and 23 are [not] based on speculation and 

therefore [not] clearly erroneous.” Schmidt, SDO at 3. 

Further, “the [c]ircuit [c]ourt did not err in making findings 

that aided in its determination of how and when the fraudulent 

nature of the Transfers could reasonably have been discovered by 

the Schmidts, and we are not left with a definite and firm 

conviction that, based on all of the evidence, mistakes were 

made in these findings.” Id. 
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With respect to the Schmidts’ challenges to the COLs, the 

ICA concluded as follows: the Schmidts failed to cite to the 

appellate record in support of their arguments and also failed 

to “explain or argue how [such exhibits] are significant with 

respect to the [c]ircuit [c]ourt’s FOFs or COLs regarding the 

Schmidts’ delayed discovery regarding the fraudulent nature of 

the subject transfers and their failure to file their complaint 

within the applicable statute of limitations.” Schmidt, SDO at 

4. Further, based on Hawaiʻi’s jurisprudence regarding the 

“discovery rule” for generic fraud claims -- similar to the 

“discovery rule” in Freitag v. McGhie, 947 P.2d 1186 (Wash. 

1997), which this court relied on in its analysis in Schmidt II

-- “the statute of limitations begins running when the plaintiff 

knew or should have known of the damage,” and that “[w]hen there 

has been a belated discovery of the cause of action, the issue 

whether the plaintiff exercised reasonable diligence is a 

question of fact for the court or jury to decide.” Schmidt, SDO

at 5–6 (citing Thomas v. Kidani, 126 Hawaiʻi 125, 133, 267 P.3d 

1230, 1238 (2011)). Accordingly, the circuit court did not err 

in the contested COLs because “[t]he circuit court’s finding --

that had the Schmidts conducted a reasonably diligent inquiry in 

aid of execution after obtaining judgment in their favor they 

reasonably would have discovered the fraudulent nature of the 
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Transfers over one year before filing of the complaint in this 

action -- is not clearly erroneous.” Schmidt, SDO at 6.

C. The Current Appeal

The Schmidts present the same three issues they previously 

argued before the ICA, all related to the date the circuit court 

determined the Schmidts reasonably could have discovered the 

fraudulent nature of the Transfers:

Whether the [ICA] gravely erred and the magnitude of such 

error or inconsistency dictates the need for further appeal 

where the ICA affirmed:

(1) the circuit court’s findings of fact (“FOF”) nos. 5, 

13, 19, 21, 22 and 23[;]

(2) the circuit court’s conclusions of law (“COL”) nos. 

6, 8, 9 and 10[; and]

(3) the circuit court’s entry of final judgment denying 

[Petitioners’] complaint against the [Respondents].

In sum, the Schmidts assert they could not reasonably have 

discovered the fraudulent nature of the Transfers until the July 

26, 2005 deposition of HSC’s chief financial officer, Michael 

Chagami, as that was the first time they learned of HSC’s 

insolvency. Using July 26, 2005 as the date when they could 

reasonably have discovered the fraudulent nature of the 

Transfers, the Schmidts argue they were well within the one-year 

statute of limitations period when they filed their HUFTA claim 

on April 7, 2006. 
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The Schmidts appear to make the following specific 

challenges to the circuit court’s FOFs12 and COLs:

FOF 5:13 The Schmidts assert this finding is incomplete 

because the HRCP Rule 30(b)(6) deposition was cancelled “when 

this Court’s award of fees and costs on the earlier appeal was 

paid by [RFI]’s [lawyers’] trust account, so there was nothing 

to discover and at no time did [RFI]’s lawyers ever reveal that 

[RFI] was only a corporate shell.” 

FOF 13:14 The Schmidts also assert this finding is 

incomplete because it is “useless to execute on a judgment when 

a case is on appeal,” and both parties had immediately filed 

appeals following the December 21, 2004 “final judgment,” and 

were unaware that their appeals were untimely until the appeals 

were dismissed by the Hawaiʻi Supreme Court on May 9, 2005. The 

Schmidts appear to suggest that because the Chagami deposition 

occurred on June 29, 2005, not too long after the May 9, 2005 

Order, they had been reasonably diligent in their efforts to 

 

12 For ease of reference, each challenged FOF previously quoted supra

pages 10–12, is repeated in a respective footnote, with formatting and 

citation omitted.

13 FOF 5: The Schmidts first noticed the 30(b)(6) deposition of RFI on 

August 25, 2004, approximately 5 months after remand. The Schmidts cancelled 

on September 3, 2004. No other discovery was attempted between the March 18, 

2004 remand order and October 12, 2004.

14 FOF 13: No stay of the judgment was obtained under HRCP Rule 62, and 

the Schmidts therefore could have executed on the Judgment after ten days of 

the entry of the Judgment. See HRCP Rule 62(a) (“[N]o execution shall issue 

upon a judgment nor shall proceedings be taken for its enforcement until the 

expiration of 10 days after its entry[.]”).
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execute on the Foreclosure Case judgment. The Schmidts also 

assert, without explanation, that FOF 13 is inconsistent with 

FOFs 10,15 11,16 and 15–18.17 They additionally point out that 

they had attempted to execute on the judgment when they filed an 

Ex Parte Motion for Issuance of Execution and Garnishment on the 

Final Judgment dated August 23, 2005, but on September 1, 2005, 

the trial court denied it without prejudice to filing a separate 

action against the proper parties. 

FOF 19:18 The Schmidts assert this finding is speculation 

and that it was “proper to not enforce the appeal judgment out 

 

15 FOF 10: The Schmidts and RFI filed notices of appeal from the December 

21, 2004 Judgment. 

16 FOF 11: On May 9, 2005, the Hawaiʻi Supreme Court entered its Order 

Dismissing Appeal in the Foreclosure Case . . . . 

17 FOF 15: On March 18, 2005, the Schmidts’ counsel met with RFI’s 

counsel in regard to the Foreclosure Case. At that time, the Schmidts’ 

counsel requested that RFI’s counsel provide them copies of the checks 

associated with the four transfers that are the subject of this Fraudulent 

Transfer case. 

FOF 16: On March 21, 2005, in the Foreclosure Case, the Schmidts 

served RFI their [“]First Request for Production . . . .[”] Included in the 

request for production of documents were requests which generally required 

the production of checks associated with the fraudulent transfers that are 

the subject of this action . . . . 

FOF 17: On April 20, 2005, the Schmidts’ counsel received copies of 

three or four of the checks associated with the Transfers from RFI’s counsel. 

FOF 18: On April 22, 2005, RFI’s counsel signed the [“]Response to 

Defendants[’] . . . First Request for Production . . . .[”] . . . RFI 

indicated that it had already produced copies of checks relating to the 

Transfers to the Schmidts. 

18 FOF 19: Between March 21, 2005 and April 20, 2005, thirty days elapsed 

prior to the Schmidts receiving the transfer checks. This indicates that if 

the Schmidts had commenced proceedings to enforce the judgment in the 

Foreclosure Case on December 6, 2004, then they could have received copies of 

three or four of the checks associated with the Transfers on January 6, 2005.
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of respect for the appellate process.” They reiterate that the 

circuit court erred in using November 24, 2004 to calculate the 

date the Schmidts could have executed on the final judgment, as 

the “final judgment” did not issue until December 21, 2004, and 

so any execution and garnishment “would be premature and also

[the] Schmidts needed to know what assets to execute upon or 

garnish.” 

FOF 21:19 The Schmidts contend this finding is erroneous 

because the deposition could not have taken place because there 

were pending appeals before the Hawaiʻi Supreme Court until those 

appeals were dismissed on May 9, 2005. They argue that they 

therefore “acted reasonably in delaying that until they knew 

what assets to execute upon or garnish after the appeal was 

dismissed. That process was begun by seeking documentary 

evidence in early 2005 proving Schmidt acted reasonably in 

delaying attempting collection on the judgment.” 

FOF 22:20 The Schmidts assert this finding is based upon an 

erroneous analysis and speculation that forty-five days is 

sufficient time to schedule a deposition, and without any record 

 

19 FOF 21: However, that deposition could be taken any time after January 

6, 2005, unless doing so was prohibited by a protective order. The Schmidts 

did not produce any evidence of a protective order or of any valid reason why 

the 30(b)(6) deposition could have not been taken earlier.

20 Generally, 45 days is more than enough time to schedule an oral 

deposition. Affording the Schmidts up to 45 days to schedule the Rule 

30(b)(6) deposition and considering the 2005 calendar, the Rule 30(b)(6) 

deposition could have reasonably been taken on or before February 21, 2005.
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evidence supporting this finding. They argue that considering 

the amount of time this case spent in the trial and appellate 

levels, waiting four months out of respect for the appellate 

process was not unreasonable. 

FOF 23:21 The Schmidts repeat that the circuit court erred 

in stating the final judgment issued on November 24, 2004 

instead of December 21, 2004. They argue that FOF 23 is 

speculation and contrary to the evidence, and repeat arguments 

made with respect to the prior contested FOFs. In sum, the 

Schmidts assert they could not have conducted any discovery 

prior to December 21, 2004, because such discovery would have 

been impermissible prejudgment discovery. The Schmidts 

emphasize that the fraudulent nature of the Transfers was not 

discovered until the Chagami deposition on July 26, 2005. They 

state they were diligent in conducting “early discovery” when 

they obtained check copies on April 20, 2005 and learned of the 

payees at that time, and they concede that “at the earliest,” 

 

21 FOF 23: At minimum, the Schmidts could have reasonably known of the 

Transfers and their fraudulent nature on or before February 21, 2005. To 

summarize, (1) final judgment was entered in the Foreclosure Case on November 

24, 2004; (2) under HRCP Rule 62, after ten days passed, the Schmidts could 

have executed on the judgment on the first business day (December 6, 2004); 

(3) the Schmidts actually discovered the Transfer checks on or before January 

6, 2005; (4) because 45 days is generally more than enough time to notice a 

deposition, the Schmidts could have taken the decisive deposition on or 

before February 21, 2005. Thus, the Schmidts reasonably could have known of

the existence of the Transfers and their fraudulent nature on or before 

February 21, 2005. 
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the statute of limitations period began running on April 20, 

2005. 

The Schmidts’ challenge to COLs 6, 8, 9, and 10 are 

premised on the same arguments they presented with respect to 

FOF 23. That is, that they did not discover the fraudulent 

nature of the Transfers until July 26, 2005 at the conclusion of 

the Chagami deposition. Given the long history of litigation, 

and the length of time the case was on appeal, the Schmidts 

argue that noticing a deposition in “9-12 months is a reasonable 

period of time, not 45 days.” According to the Schmidts, “the 

inquiry about whether [they] acted diligently starts on May 9, 

2005 when this Court dismissed both appeals in the [Foreclosure] 

Case,” and that therefore, their HUFTA claim is not time-barred. 

In response, Respondents provide a timeline of events

highlighting how the Schmidts “sat idle, making no effective 

effort to inquire into RFI’s financial condition or otherwise 

obtain information relating to collection of RFI’s debt.” 

However, in addition to explaining the correctness of the ICA’s 

decision, Respondents also raise an argument previously raised 

to the ICA, which the ICA chose not to address in its SDO: the 

Schmidts lost standing to pursue their HUFTA claim because the 

underlying judgment awarding them the $537,000 in surplus 

foreclosure proceeds “lapsed in 2014 and . . . was vacated . . . 
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in July 2016 pursuant to HRS § 657-5.[22]” Respondents argue 

that without an outstanding judgment, the Schmidts’ fraudulent 

transfer claims are now moot. 

The Schmidts timely replied that “Respondents’ cases about 

mootness are misleading, useless, and illusory because this is 

not a collection on the original judgment but a new statutory 

[H]UFTA claim . . . .” They contend “Respondents are trying to 

divert the court’s attention from the correct focus . . . . 

There is no way that [the] Schmidts could have known of the 

fraudulent nature of the transfers by RFI on or before February 

21, 2005.” 

III. Standard of Review

We review a trial court’s findings of fact under the 

clearly erroneous standard. A finding of fact is clearly 

erroneous when, despite evidence to support the finding, 

the appellate court is left with the definite and firm 

conviction in reviewing the entire evidence that a mistake 

has been committed. A finding of fact is also clearly 

erroneous when the record lacks substantial evidence to 

support the finding . . . . Hawaiʻi appellate courts review 

conclusions of law de novo, under the right/wrong standard. 

Beneficial Hawaii, Inc. v. Kida, 96 Hawaiʻi 289, 305, 30 P.3d 

895, 911 (2001) (internal quotation marks, brackets, and 

citations omitted); see also Chun v. Bd. of Trs. of the Emps.’ 

 

22 HRS § 657-5 states:

Unless an extension is granted, every judgment and decree 

of any court of the State shall be presumed to be paid and 

discharged at the expiration of ten years after the 

judgment or decree was rendered. No action shall be 

commenced after the expiration of ten years from the date a 

judgment or decree was rendered or extended . . . . 
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Ret. Sys. of the State of Hawaiʻi, 106 Hawaiʻi 416, 430, 106 P.3d 

339, 353 (2005). 

IV. Discussion

A. This court does not address the effect of the vacatur of 

the Foreclosure Case judgment.

As a preliminary matter, Respondents argue that the 

Schmidts lack standing to continue this appeal regarding their 

2006 HUFTA claims because the December 21, 2014 Foreclosure Case 

judgment became satisfied as a matter of law in 2014.23 As noted 

by Respondents, however, the circuit court has not addressed the 

issue and the ICA did not address the issue because it ruled in 

Respondents’ favor on alternative grounds. In addition, this 

court recently clarified that “[i]n Hawaiʻi state courts, 

standing is a prudential consideration regarding the proper --

and properly limited -- role of courts in a democratic society 

and is not an issue of subject matter jurisdiction, as it is in 

federal courts.” Tax Foundation v. State, 144 Hawaiʻi 175, 188, 

439 P.3d 127, 140 (2019) (internal quotation marks omitted). 

Because (1) the issue is not one of subject matter jurisdiction, 

(2) is not an issue adequately briefed on certiorari, (3) has 

not been addressed by the circuit court or the ICA, and (4) this 

 

23 In Realty Finance, Inc. v. Schmidt, No. CAAP-16-0000536 (App. May 14, 

2019) (SDO), cert. denied, SCWC-16-536 (Haw. Aug. 14, 2019), the ICA affirmed 

the Circuit Court of the First Circuit’s July 7, 2016, vacatur of the 

December 21, 2014 Foreclosure Case judgment because the Schmidts failed to 

renew it within ten years per HRS § 657-5 (2016). Realty Finance, SDO at 2-

3.
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court is vacating and remanding to the circuit court, this court

declines to address the issue at this time. 

B. The Schmidts timely raised their HUFTA claims.

The crux of the Schmidts’ challenge on certiorari is that 

the ICA erred in affirming the circuit court’s ruling as to

“when [the] Schmidts discovered or should have discovered . . . 

the fraudulent nature of the transfers.” 

The ICA’s SDO accurately discusses the current 

jurisprudence regarding the “discovery rule” associated with HRS 

§ 651C-9 and similar UFTA statutes. See Schmidt, SDO at 5–6. 

Namely, this court ruled in Schmidt II that the limitations 

period in HRS § 651C-9(1) refers to when “a fraudulent transfer, 

and not simply a transfer” “was or could reasonably have been 

discovered by the claimant.” Schmidt II, 131 Hawaiʻi at 507, 319 

P.3d at 426 (citing HRS § 651C-9(1)) (emphasis in original). In 

Schmidt II, this court concluded the interpretations by the 

Hawaiʻi federal bankruptcy court and the Washington Supreme Court 

regarding relevant UFTA provisions were consistent with the 

Hawaiʻi legislature’s purpose behind HUFTA. See Schmidt II, 131 

Hawaiʻi at 506–07, 319 P.3d at 425–26 (citing In re Maui Indus. 

Loan & Fin. Co., 454 B.R. 133, 137 (Bankr. D. Hawaiʻi 2011); 

Freitag, 947 P.2d at 1189). Thus, to be consistent with the 

premise that it would be “legally absurd and unjust to interpret 

the discovery rule to preclude claims under the UFTA if 
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plaintiffs were never aware they held a potential claim,” 

Schmidt II, 131 Hawaiʻi at 508, 319 P.3d at 427, “actual 

knowledge of the fraud [is] inferred if the aggrieved party, 

through the exercise of due diligence, could have discovered 

it.” Freitag, 947 P.2d at 1189 (emphasis added). 

What was not fully discussed by the ICA, however, is the 

rationale behind this court’s holding in Schmidt II. Although 

not expressly stated in Schmidt II, that the statute of 

limitations begins to run when the fraudulent nature of the 

transfer is discovered or reasonably discoverable, as opposed to 

when a creditor discovered the transfer, is “more protective of 

innocent creditors.” Schmidt II, 131 Hawaiʻi at 506, 319 P.3d at 

425 (citation omitted). This means that the date by which the 

fraudulent nature of a transfer is discovered or discoverable 

should be later than the date by which the transfer alone is 

discovered. Indeed, the purpose of HUFTA 

would be undermined if the one year period began once plaintiffs 

discovered the existence of a transfer, even if they were unaware 

of its fraudulent nature. Under that interpretation, plaintiffs 

would lose the right to pursue a remedy in court for fraudulently 

incurred injuries even though they could not have become aware of

the existence of their claims.

Schmidt II, 131 Hawaiʻi at 508, 319 P.3d at 427. 

Cases from other jurisdictions are in accord. Construing 

Ohio’s version of the Uniform Fraudulent Transfer Act (“UFTA”), 

the Sixth Circuit Court of Appeals stated:
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The Ohio UFTA's overall purpose is to discourage fraud and 

provide aggrieved creditors with a means to recover assets 

wrongfully placed beyond their reach. Accordingly, to 

require a claimant to bring suit within one year of 

discovering a transfer, without having discovered facts 

that would put the claimant on notice as to the transfer's 

fraudulent nature, would be to interpret § 1336.09(A) in a 

manner that is directly at odds with the animating purpose 

of the UFTA.

In re Fair Finance, 834 F.3d 651, 674 (6th Cir. 2016); see also

Official Comm. of Unsecured Creditors of Great Lakes Quick Lube 

LP v. Theisen, 920 N.W.2d 356, 365 (Wis. App. 2018) (“statute of 

limitations [begins to run] from the point at which the claimant 

discovers or reasonably could have discovered the fraudulent 

nature of the transfer”).

The purpose of HUFTA would be further undermined if 

creditors are expected to “reasonably discover” the fraudulent 

nature of a transfer even before they actually uncover the 

existence of the transfer. Yet, that is the upshot of the 

circuit court’s October 19, 2016 FOFs and COLs. When considered 

in their entirety, it is apparent that the circuit court agreed 

with the Schmidts that they discovered the fraudulent nature of 

the Transfers at the Chagami deposition on July 26, 2005. 

However, by finding that the Schmidts could have “reasonably 

discovered” the fraudulent nature of the Transfers by February 

21, 2005 -- well in advance of the Chagami deposition and, more 

importantly, prior to March 18, 2005, when the Schmidts had 

actually discovered the mere existence of the Transfers when 

HSC’s counsel produced a February 2000 bank statement to the 
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Schmidts -- the circuit court necessarily found that the 

Schmidts could (and should) have discovered both the existence 

and fraudulent nature of the Transfers prior to February 21, 

2005. Such a determination contravenes this court’s statutory 

interpretation of HRS § 651C-9(1) and discussion of HUFTA’s 

purpose in Schmidt II. Accordingly, the circuit court erred as 

a matter of law when it determined that the Schmidts could have 

reasonably discovered the fraudulent nature of the Transfers by 

February 21, 2005, and the ICA erred in affirming the circuit 

court in this regard. 

Here, the Schmidts did not discover the existence of the 

Transfers until March 18, 2005, and discovered the fraudulent 

nature of the Transfers shortly thereafter on July 26, 2005.24 

The circuit court made no finding that the Schmidts did not act 

diligently during this four-month period. Indeed, the record 

shows the opposite. On March 21, 2005, prior to the dismissal 

of the Foreclosure Case appeals, the Schmidts made a formal 

request for production, and on April 20, 2005, the Schmidts 

received copies of the checks evidencing the Transfers. Within 

about two months, on June 29, 2005, the Schmidts noticed the 

deposition of RFI’s chief financial officer, Michael Chagami, as 

 

24 Although the Schmidts concede that “they reasonably discovered the 

insider transfers and their fraudulent nature . . . at the earliest on April 

20, 2005 when they got copies of the front and back of the four checks 

showing the payees,” the circuit court found that the Schmidts discovered the 

fraudulent nature of the Transfers on July 26, 2005, and this court does not 

disturb that finding.
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RFI’s HRCP Rule 30(b)(6) designee relating to RFI’s finances, 

and the deposition was taken on July 26, 2005. Such steps 

undoubtedly demonstrated “reasonable” due diligence. 

Based on the foregoing, this court concludes that the 

statute of limitations for the Schmidts’ HUFTA claim did not 

begin until July 26, 2005, and therefore the Schmidts timely 

raised their HUFTA claims. 

V. Conclusion

For the foregoing reasons, this court vacates the ICA’s 

January 31, 2019 Judgment on Appeal and the circuit court’s 

December 6, 2016 Final Judgment and remands this case to the 

circuit court for further proceedings consistent with this 

opinion.

R. Steven Geshell /s/ Paula A. Nakayama

for petitioner

/s/ Sabrina S. McKenna

Paul Alston

for respondents /s/ Richard W. Pollack 

/s/ Michael D. Wilson

/s/ Edward H. Kubo, Jr.