Markham v. Markham , 80 Haw. 274 ( 1996 )

WATANABE, Judge,

concurring and dissenting.

I respectfully disagree with the majority’s conclusion in Part II of the opinion that the family court erred in entering its October 15, 1992 Order, nullifying the May 14, 1992 re-cordation of the May 2, 1988 Assignment of Lease and Consent (Assignment), by which Husband and Husband’s mother (Mother) allegedly transferred their leasehold interests in the Kahena Street home (home) to Husband’s daughter (Daughter).

A.

A primary issue at trial was whether and, if so, when Husband and Mother conveyed their interests in the home to Daughter. Clearly, if Husband had validly conveyed his interest in the home to Daughter prior to commencing divorce proceedings, the home would not be part of the marital estate, subject to distribution by the family court. However, if Husband had not conveyed his interest in the home prior to filing the divorce complaint, any subsequent attempt by him to effectuate a conveyance would have constituted a possible fraudulent conveyance of marital property in anticipation of divorce. Pattee v. Pattee, 744 P.2d 658, 660 (Alaska 1987),¹ overruled on other grounds, Nass v. Seaton, 904 P.2d 412 (Alaska 1995); Soldano v. Soldano, 66 A.D.2d 839, 411 N.Y.S.2d 395, 398 (N.Y.App.Div.1978) (conveyance by husband, in anticipation of wife’s action for divorce and to prevent her from recovering alimony, is fraudulent and may be set aside unless purchaser took without notice and for value). See also Uniform Fraudulent Transfer Act, Hawai'i Revised Statutes chapter 651C (1993).² Additionally, any conveyance by Husband after February 24, 1992 would have violated the terms of the family court’s February 24, 1992 Stipulated Order for Pre Decree Relief (Stipulated Order).

B.

It was Husband’s position at trial that he held no ownership interest in the home at the time divorce proceedings commenced because he and Mother had executed the Assignment on May 2, 1988, transferring their leasehold interests in the home to Daughter. To constitute a valid conveyance, however, the Assignment must have been delivered to Daughter, since “[i]t is delivery which gives the instrument force and effect.” Boteilho v. Boteilho, 58 Haw. 40, 44, 564 P.2d 144, 147 (1977); see also Tongas v. Tongas, 76 Hawai'i 19, 868 P.2d 437 (1994) (“[t]o constitute a gift, ... there must be: (1) donative intent; (2) delivery; and (3) acceptance”) (emphasis added).

What amounts to delivery is a question of law, and whether delivery has actually been made is a question of fact. Boteilho, 58 Haw. at 46, 564 P.2d at 148. Delivery of a conveyance document may be actual or constructive, and is deemed complete when the grantor: (1) intends that the document “become presently effective to convey title,” and (2) “by ... words or conduct has relinquished all right of control over the document, reserving no right to recall or to alter it.” Id. ■ While manual transfer of a conveyance document to the grantee is the “best evidence of delivery,” it is not an absolute requirement. Id. Moreover, the “fact of recordation of an instrument constitutes prima facie evidence of delivery, although it is not conclusive evidence thereof.” Id. at 44, n. 1, 564 P.2d 144.

In this case, the record is undisputed that on May 14, 1992, after divorce proceedings had already commenced, Husband recorded at the Bureau of Conveyances the previously unrecorded Assignment. Since the recordation of the Assignment would constitute pri-ma facie evidence of its delivery by Husband to Daughter, I believe that the family court was correct in concluding that Husband’s recordation effectuated a “transferring, encumbering, wasting, or otherwise disposing of any real property” in violation of the Stipulated Order prohibiting such dissipation of the marital estate. Therefore, I disagree with the majority that the family court erred when it declared the recorded Assignment a “nullity and of no effect for purposes of the ... proceeding.”

C.

The majority expresses “no opinion as to the ultimate effect the court should give the Assignment on remand” and states that “any possible defects in the Assignment instrument must be raised and resolved on remand.” Majority opinion at 612.

However, relying on HRS § 502-82 (1993) and HRS § 502-83 (1993), as well as Bottomley v. Hall, 18 Haw. 412 (1907), and Chun Chew Pang v. Chun Chew Kee, 49 Haw. 62, 73, 412 P.2d 326, 332 (1966), the majority states that “under appropriate circumstances a recorded instrument may be submitted as prima facie evidence of the conveyance,” and “a certificate of acknowledgment complete and regular on its face raises a rebuttable presumption that the facts stated therein are true.” Majority opinion at 612.

I disagree that the Assignment document should be accorded a presumption of validity in this case. Contrary to the express terms of the original lease between The Trustees of the Estate of Bernice Pauahi Bishop (Bishop Estate), as lessors, and Husband, Mother, and Daughter, as lessees, Husband, Mother, and Daughter never obtained Bishop Estate’s consent to the Assignment. Additionally, despite the fact that on February 16, 1988, Husband, Mother, and Daughter had already purchased from Bishop Estate, on agreement of sale, the fee simple interest in the home, Husband never assigned/conveyed his fee simple interest in the home to Daughter by the May 2, 1988 Assignment document.

Since Husband is claiming that the Assignment effectuated a valid conveyance of his interest in the home to Daughter, the burden should rest with him to prove the validity of the conveyance. Gabaig v. Gabaig, 717 P.2d at 841.

D.

Notwithstanding the foregoing, since the family court’s Stipulated Order specifically allowed Husband to offer proof at trial that “he owns no interest of any kind or nature in the aforesaid property,” Record on Appeal (R.A.), vol. 1, at 209, I believe that Husband should have been allowed to introduce' the unrecorded Assignment into evidence at the trial below and to offer proof that the unrecorded Assignment effectuated a valid conveyance of Husband’s interests in the home to Daughter. I therefore do not agree with the majority that the October 15, 1992 Order was in error because it applied the Stipulated Order retrospectively and resulted in inconsistent application.

1 . In Pattee v. Pattee, 744 P.2d 658 (Alaska 1987), the wife filed for divorce on December 26, 1984. Five days later, the husband secretly executed a contract selling his interest in a tavern to his brother for $54,500, less than fair market value, payable by an unsecured, non-transferable promissory note due over a ten-year term. The contract was not recorded and not disclosed to the wife or the divorce court until June 1985. Meanwhile, the husband continued to work at the tavern and took partnership draws of more than $3,000 per month through April 1985. Thereafter, he quit work, became a community college student, lived with his sister rent-free, and received an allowance of $1,000 per month, plus his tuition expenses, from his mother.

The Supreme Court of Alaska held that the sale by husband of his interest in the tavern was a void fraudulent conveyance. Relying on Gabaig v. Gabaig, 717 P.2d 835 (Alaska 1986), the court identified eight 'badges of fraud,” which may provide circumstantial evidence of a fraudulent conveyance:

inadequate consideration; transfer in anticipation of an impending suit; insolvency of the transferor; failure to record; a transfer encompassing substantially all of the transferor’s property; a transfer completely depleting the transferor's property; and the relationship between the parties to the sale.

744 P.2d at 660. In this case, several of the Gabaig indicia of fraud appear to be present: (1) Daughter does not appear to have paid any consideration for the May 2, 1988 Assignment of Lease and Consent (Assignment); (2) Husband failed to list any real property assets in his Asset and Debt Statement, Record on Appeal, vol. 2 at 7, claiming that the Assignment effectuated a complete transfer of all his real property interests; (3) Husband did not record the Assignment until after Husband and Wife commenced divorce proceedings; (4) Husband recorded the Assignment even though neither he nor Mother obtained Bishop Estate's requisite consent to the Assignment; and (5) the Assignment transaction, which appears to be a gift by Husband to Daughter, took place between close relatives.

2 . Under the Uniform Fraudulent Transfer Act, Hawai'i Revised Statutes (HRS) chapter 651C, factors that may be considered in determining whether a conveyance was made with actual intent to hinder, delay, or defraud any present or future creditor of a debtor include whether:

(1) The transfer or obligation was to an insider;

(2) The debtor had retained possession or control of the property transferred after the transfer;

(3) The transfer or obligation was disclosed or concealed;

(4) Before the transfer was made or obligation was incurred, the debtor was sued or threatened with suit;

(5) The transfer was of substantially all the debtor’s assets;

(6) The debtor had absconded;

(7) The debtor had removed or concealed assets;

(8) The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

(9) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

(10) The transfer had occurred shortly before or shortly after a substantial debt was incurred; and

(11) The debtor had transferred the essential assets of the business to a lienor who had transferred the assets to an insider of the debtor.

HRS § 651C-4 (1993). In addition to the indicia of fraud discussed in footnote 1, the record reveals that after executing the alleged Assignment, Husband continued to retain possession or control of the home, and as the trial judge found, continued to hold himself out to third parties as the owner of the home.