493 B.R. 798
Bankr. W.D. Wash.2013Background
- Debtor Donald G. Huber has a long history in Puget Sound real estate development and manages UWD; he founded UWD in 1968 and remains its president.
- In 2008-2009, Huber created the Donald Huber Family Trust (Alaska trust) to protect assets from creditors, with Kevin Huber as key manager and Alaska USA Trust Company among trustees.
- Huber transferred cash and ownership interests in more than 20 entities, plus real estate, into DGH, LLC, which the Trust largely owned, with almost all assets ultimately located in Washington.
- By 2010-2012, the Trust owned most income-producing assets while Huber retained personal use of assets and received substantial discretionary income from the Trust; several pre-petition loans guaranteed by Huber were in default or foreclosed.
- Huber filed Chapter 11 in 2011; trustee/examiner reports and subsequent proceedings focused on pre-petition transfers, asset transfers to the Trust, and debtor’s use of Trust assets post-petition.
- The Court certified summary judgment on multiple grounds: Alaska law applied to validity issues, Washington public policy disfavors self-settled asset protection trusts, and transfers into the Trust were void under RCW 19.36.020; other theories (alter ego, §548(e)(1), UFTA §544(b)(1), and §727) were resolved in part or unresolved as to genuine issues of material fact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of the Trust under choice of law | Alaska law governs trust validity per designation. | Washington has substantial relation and public policy against self-settled trusts; Alaska law should apply per the designation. | Washington law governs; Alaska designation disregarded; RCW 19.36.020 applied to void transfers. |
| Effect of RCW 19.36.020 on transfers to the Trust | Transfers to the Trust are voidable as self-settled transfers under Washington law. | Trust was validly formed under Alaska law despite Washington policy; transfers not voided under Washington. | Transfers into the Trust are void under RCW 19.36.020; summary judgment to Trustee on this point. |
| Fraudulent conveyance under 11 U.S.C. § 548(e)(1) | Transfers to the Trust were with actual intent to hinder, delay, or defraud creditors. | Debtor disputes the claimed intent and asserts genuine factual questions exist. | Summary judgment for Trustee on § 548(e)(1): there is no genuine issue of material fact; actual intent shown. |
| Fraudulent transfer under UFTA and RCW 19.40.041(a) | Badges of fraud show intent to shield assets; transfers to the Trust were to insider and lacked equivalent value. | Debtor denies fraudulent intent; suppression of assets denied or disputed. | Trustee entitled to summary judgment on UFTA claim; seven or more badges of fraud support intent; genuine issues not present. |
| Denial of discharge under 11 U.S.C. § 727(a)(2) and (a)(4) | Trust use and undisclosed loans to UWD show intent to hinder creditors and false oath arguments warrant denial. | Discharge denial requires a showing of intent; evidence insufficient or contested; reliance on counsel not dispositive. | Genuine issues of material fact remain; Trustee not entitled to summary judgment on denial of discharge. |
Key Cases Cited
- Lindsay v. Beneficial Reinsurance Co. (In re Lindsay), 59 F.3d 942 (9th Cir. 1995) (federal choice-of-law rules apply in bankruptcy proceedings)
- Liberty Tool & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.), 277 F.3d 1057 (9th Cir. 2002) (Restatement conflict-of-laws approach followed)
- Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800 (9th Cir. 1994) (badges of fraud and conclusivity of fraud findings)
- Adeeb v. First Beverly Bank (In re Adeeb), 787 F.2d 1339 (9th Cir. 1986) (reliance on counsel may negate fraudulent intent if made in good faith)
- Retz v. Samson (In re Retz), 606 F.3d 1189 (9th Cir. 2010) (liberal construction of § 727(a)(2) favors debtor; intent required for denial is disjunctive)
- Khalil v. Developers Sur. & Indem. Co. (In re Khalil), 379 B.R. 163 (9th Cir. BAP 2007) (fraudulent oath elements and intent considerations in bankruptcy)