Court Opinion

ID: 4702557
Source: CourtListenerOpinion
Date Created: 2021-07-09 20:02:48.087452+00
Date Added: 2024-06-11T08:06:25.666825
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JUL 9 2021
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

EVAN AULD-SUSOTT, as Trustee for (1)            No.    19-15537
Irrevocable Life Insurance Trust of John L.
Susott and Kathryn C. Susott UAD                D.C. No.
8/17/1988 as Restated, Exempt Trust FBO         1:16-cv-00450-LEK-RLP
Daniel C. Susott, and (2) Irrevocable Life
Insurance Trust of John L. Susott and
Kathryn C. Susott UAD 8/17/1988 as              MEMORANDUM*
Restated, Non-Exempt Trust FBO Daniel C.
Susott; JOHN L. SUSOTT,

                Plaintiffs-Appellees,

 v.

LAURYN GALINDO,

                Defendant-Appellant.

                   Appeal from the United States District Court
                              for the District of Hawaii
                   Leslie E. Kobayashi, District Judge, Presiding

                              Submitted July 7, 2021**
                                 Honolulu, Hawaii

Before: NGUYEN, OWENS, and FRIEDLAND, Circuit Judges.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      In 2010, Daniel Susott transferred a property in Princeville, Hawaii to his

close friend Lauryn Galindo for little or no consideration. Plaintiffs Evan Auld-

Susott and John Susott1 sued Galindo, seeking to void the transfer as a fraudulent

attempt by Daniel to evade debts he owed them. The district court found that the

transfer was fraudulent and voided it pursuant to the Hawaii Uniform Fraudulent

Transfer Act (“HUFTA”). Galindo appealed, and we have jurisdiction pursuant to

28 U.S.C. § 1291.

      Although she does not contest whether the transfer was fraudulent, Galindo

asserts that the district court should have entered judgment in her favor on two

threshold grounds. First, she argues that Plaintiffs have no remedy under HUFTA

because they are not “creditors” within the meaning of the statute. See Haw. Rev.

Stat. § 651C-7 (providing remedies only for creditors). Second, she argues that

Plaintiffs brought this suit after the expiration of the statute of limitations. See id.

§ 651C-9(1). We reject both arguments and affirm the district court’s judgment.

      1. Plaintiffs contend that they are Daniel’s creditors because two California

state courts have entered judgments in their favor against Daniel, which remain

unsatisfied. Galindo, however, cites a subsequent settlement agreement between

Plaintiffs and Daniel that, according to her, extinguished those judgment debts by

      1
        Evan is a Plaintiff solely in his capacity as a trustee for two family trusts,
while John is a Plaintiff solely in his individual capacity.

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precluding Plaintiffs from seeking any relief from Daniel.

      The unambiguous language of the settlement agreement refutes Galindo’s

interpretation. The agreement explicitly preserves Plaintiffs’ right to bring a

lawsuit about the Princeville property and provides that any resulting judgment

“shall be credited to the respective [California state court] case judgments against

Daniel.” This language unambiguously confirms that the agreement preserves

Plaintiffs’ status as creditors for the debts arising from the California state court

judgments, at least to the extent of any recovery in this case. Adopting Galindo’s

interpretation of the contract would render this clause superfluous and nonsensical,

which we must avoid. See Cal. Civ. Code § 1641 (“The whole of a contract is to

be taken together, so as to give effect to every part, if reasonably practicable[.]”);

see also, e.g., In re Tobacco Cases I, 111 Cal. Rptr. 3d 313, 318 (Ct. App. 2010).

We therefore affirm the district court’s conclusion that the settlement agreement

did not extinguish Daniel’s judgment debts.2

      2. Galindo further argues that John, in his individual capacity, is not a

      2
        Because the plain language of the settlement agreement is unambiguous,
we need not consider the statements made by Plaintiffs that Galindo offers to
support her contrary interpretation. See Cal. Civ. Code § 1639. Even if we did
consider extrinsic evidence, however, our conclusion would remain the same. In
context, the statements on which Galindo relies clearly reflect Plaintiffs’ consistent
understanding that the agreement preserves their right to pursue relief in this
action.

                                           3
proper plaintiff. She interprets various record evidence3 as stating that John’s

judgment debt is held only by a trust and not by John as an individual. We express

no view on this interpretation of the record because, as the district court explained,

whether Galindo is correct does not affect the outcome.

       John is the beneficiary of the trust Galindo believes holds the relevant

judgment debt. A trust “divid[es] legal and equitable interest in the trust property”

between the trust itself and the beneficiary, respectively. Coon v. City & County of

Honolulu, 47 P.3d 348, 375 (Haw. 2002). As the trust beneficiary, John holds an

equitable interest in the judgment debt, even if the trust itself holds the entire legal

interest in that debt.

       That equitable interest is sufficient to preserve John’s right to sue. As the

district court held, HUFTA expressly recognizes that a creditor’s right to payment

may be legal or equitable. Haw. Rev. Stat. § 651C-1 (defining a creditor’s “claim”

as any “right to payment, whether or not the right is . . . legal, [or] equitable”).

Thus, even assuming that the trust is the sole holder of the debt, John remains a

“creditor” because he has an equitable right to payment.4

       3. The district court correctly held that Plaintiffs’ suit is timely. HUFTA

permits suit within one year of a creditor’s discovery of the fraudulent nature of a

       3
         Galindo’s motion to supplement the record on appeal (Dkt. 42) is granted.
       4
         Given this holding, we have no occasion to resolve Galindo’s challenges to
the district court’s evidentiary rulings.

                                            4
transfer. Schmidt v. HSC, Inc., 319 P.3d 416, 427 (Haw. 2014); see also Haw.

Rev. Stat. § 651C-9(1). “[A]ctual knowledge of the fraud is inferred if the

aggrieved party, through the exercise of due diligence, could have discovered it.”

Schmidt v. HSC, Inc., 452 P.3d 348, 358 (Haw. 2019) (citation and alteration

omitted). Whether a plaintiff exercised reasonable diligence is a question of fact.

See id. at 354, 357 (explaining that the Hawaii intermediate appellate court so held,

and that this decision “accurately discusse[d] the current jurisprudence” regarding

the statute of limitations). After a bench trial, the district court found “that

Plaintiffs acted with reasonable diligence.” The record evidence supports this

finding.

      Nonetheless, Galindo highlights Evan’s earlier “suspicions” about the

transfer of the Princeville property. Citing a single case from the Hawaii Supreme

Court, she argues that these “suspicions” triggered a duty to investigate, which

caused the one-year deadline to expire before Plaintiffs filed this suit. See Ass’n of

Apartment Owners of Newtown Meadows ex rel. Bd. of Dirs. v. Venture 15, Inc.,

167 P.3d 225, 274 (Haw. 2007). That case, however, only confirms that the

evaluation of a party’s diligence is entrusted to the factfinder. See id. at 273-74.

While Evan’s “suspicions” might be relevant to whether he acted with reasonable

diligence, see id. at 274, they do not demonstrate that the district court’s factual

                                            5
findings are clearly erroneous. Accordingly, we affirm the district court’s

conclusion that this suit was timely.

      AFFIRMED.

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