485 B.R. 412
D. Haw.2013Background
- Appellants are the Debtor Michael Dylan Henshaw’s parents; title to Units A and B of The Power Farm condominiums was held by Appellants and Debtors as joint tenants when purchased for $680,000 on June 22, 2007.
- Philip Henshaw financed most of the purchase, while Debtors contributed minimal funds; deed stated joint tenancy.
- Debtors’ transfer of their 50% interest to Appellants occurred December 30, 2009 via quitclaim deed and was not accompanied by conveyance tax.
- Appellants reduced Debtors’ rent to $1,600/month and postponed back rent as part of the transfer consideration.
- Debtors filed for Chapter 7 bankruptcy on March 29, 2011; Trustee sued December 13, 2011 to void the transfer under 11 U.S.C. § 548(a)(1).
- Bankruptcy court granted summary judgment on July 27, 2012; the order was affirmed by the district court on August 23, 2012, vesting title in Debtors and Appellants as joint tenants; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the June 22, 2007 Deed created a joint tenancy with equal interests. | Trustee argued the deed unambiguously created a 50-50 joint tenancy. | Henshaws argued extrinsic evidence could show unequal ownership. | Affirmed: deed control; joint tenancy found; parol evidence barred. |
| Whether Debtors received reasonably equivalent value for transferring their interest. | Trustee contends Debtors received less than reasonably equivalent value. | Henshaws contend value existed via rent relief and deferred back rent. | Affirmed: value not reasonably equivalent; reliefs were amorphous and insufficient. |
| Whether Debtors were insolvent at the time of transfer for § 548(a)(1)(B) purposes. | Trustee contends Debtors were insolvent when transfer occurred within two years of filing. | Henshaws dispute insolvency characterization. | Affirmed: insolvency established for § 548 purposes. |
| Whether extrinsic evidence is admissible to contradict a deed in bankruptcy context. | Trustee relies on face of deed; extrinsic evidence not allowed to defeat unambiguous deed. | Henshaws urge exception based on parol evidence or case law permitting extrinsic proof. | Affirmed: parol evidence rule applies; no exception applicable here. |
Key Cases Cited
- Midkiff v. Castle & Cooke, Inc., 45 Haw. 409 (Haw. 1962) (parol evidence rule applies to unambiguous deeds unless exceptions apply)
- Fukunaga v. Fukunaga, 8 Haw.App. 273 (Haw. App. 1990) (extrinsic evidence may reveal true relationship between joint tenants in some contexts)
- In re Teranis, 128 F.3d 469 (7th Cir. 1997) (creditors may rely on deed’s face; third-party interests cannot defeat the deed)
- In re Risler, 443 B.R. 508 (Bankr.W.D. Wis. 2010) (recognizes reliance on deed’s face and limits extrinsic evidence in creditor context)
- In re Kasparek, 426 B.R. 332 (B.A.P. 10th Cir. 2010) (trustee stands in position of bona fide purchaser; deed controls)
- In re Crawford, 454 B.R. 262 (Bankr.D. Mass. 2011) (joint tenancy interests treated as equal ownership; parol evidence not controlling)
- In re AFI Holding, Inc., 530 F.3d 832 (9th Cir. 2008) (trustee duties; deference to estate creditors; parol evidence limitation)