Kojima v. Grandote International Ltd. Liability Co. (In Re Grandote Country Club Co.) ( 2001 )

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JUN 14 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
In re: GRANDOTE COUNTRY CLUB
COMPANY, LTD., debtor in a foreign
proceeding,
Debtor.
---------------------------------------
HIDEKI KOJIMA, foreign
representative for the estate of
Grandote Country Club Company,
Ltd.; MOUNTAIN INVESTMENT
CORPORATION,
Plaintiffs - Appellants,
No. 99-1127
v.
GRANDOTE INTERNATIONAL
LIMITED LIABILITY COMPANY;
SHIRLEY ZUBAL, in her official
capacity as the Treasurer for Huerfano
County, Colorado; RTV LLC, a
Colorado Limited Liability Company;
DWIGHT A. HARRISON; PAUL D.
HARRISON; RESOLUTION TRUST
CORPORATION, as Receiver for First
Federal Savings and Loan Association
of Estherville and Emmetsburg;
SHIRLEY ZUBAL, in her official
capacity as the Public Trustee of
Huerfano County, Colorado;
TSUKASA YOSHII, also known as
Duke Yoshii; KOICHI HASHIMOTO;
INTERNAL REVENUE SERVICE;
WAHATOYAS, LLC,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 95-B-1863)
Submitted on the briefs.
Brian P. Halloran, Connolly, Halloran & Lofstedt, PC, Louisville, Colorado, for
Plaintiffs-Appellants.
Laura B. Redstone, Ballard, Spahr, Andrews & Ingersoll, LLP, Fredric J. Lewis,
Senn, Lewis & Visciano, PC, and Harry L. Simon, Denver, Colorado, for
Defendants-Appellees.
Dwight A. Harrison and Paul D. Harrison, pro se.
Before SEYMOUR, McKAY, and LUCERO, Circuit Judges.
LUCERO, Circuit Judge.
Plaintiff-appellant Hideki Kojima, trustee for a Japanese entity involved in
bankruptcy proceedings in Japan, seeks to gain title to a golf course located in La
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Veta, Colorado, referred to by the parties as “the property.” 1 To do so, Kojima
attacks the validity of a transfer of ownership of the golf course, claiming it
should be set aside under Japanese bankruptcy law and was fraudulent, as well as
a subsequent tax sale—arguing it was invalid under the Colorado Uniform
Fraudulent Transfer Act, Colo. Rev. Stat. §§ 38-8-101 to 38-8-112 (“CUFTA”).
We affirm the district court’s grant of summary judgment.
I
This case has a tortuous procedural history. For the sake of brevity, we
need not discuss in great detail all of the hearings, motions, and proceedings in
state, bankruptcy, and federal district courts relating to the golf course. Plaintiff-
appellant Kojima is the trustee in a Japanese bankruptcy proceeding concerning
Grandote Country Club, Ltd. (“Grandote Japan”). 2 Originally the property was
owned by Grandote International L.L.C., Dwight Harrison, and Paul Harrison
(collectively “Grandote Colorado”). Grandote Colorado failed to pay Colorado
taxes on the property; in November 1990, the Huerfano County Treasurer offered
for sale tax liens encumbering the property. Because no one bought the tax liens,
tax certificates encumbering the property were “struck off” to the county.
1
This golf course spawned a great deal of litigation, including related
appeals in this Court. Harrison v. Wahatoyas, L.L.C., Nos. 99-1319, 99-1390
(10th Cir. 2001).
2
Kojima has agreed to sell whatever interest he gains in this litigation to
appellant Mountain Investment Corp.
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In March–June 1991, Dwight Harrison sold most of the property to a
Japanese citizen, Koichi Hashimoto, but retained some interests for himself. That
sale included an acknowledgment that taxes on the property were delinquent. In
February 1993, Hashimoto conveyed the property to Grandote Japan, still subject
to the unpaid tax liens.
Dwight Harrison filed for bankruptcy in December 1993 in an apparent
effort to forestall foreclosure on a loan currently held by defendant-appellee
Wahatoyas LLC. That proceeding was dismissed on May 31, 1994. On May 2,
1994, just before the bankruptcy action was dismissed, Grandote Japan conveyed
the property back to Grandote Colorado (“the Japan to Colorado transfer”).
Kojima contends the Japan to Colorado transfer was fraudulent.
On July 8, 1994, Wahatoyas purchased the tax certificates for the property
pursuant to a tax sale. Wahatoyas then paid all outstanding taxes, interest, and
costs and, in October 1994, transferred the tax certificates to defendant-appellee
RTV LLC. That same month, RTV applied for issuance of treasurer’s deeds (“the
Tax Deeds”) to the property. (The three-year statutory period for issuance of the
Tax Deeds had just expired.) The county treasurer then issued initial notice of
RTV’s application for the Tax Deeds pursuant to Colorado statutes and, after
much litigation, issued the Tax Deeds to RTV in May 1995. Armed with the Tax
Deeds, in June 1995 RTV brought a forcible entry and detainer action in Colorado
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state court to gain possession of the property. RTV prevailed in that action, with
the state court finding that the Tax Deeds were valid and awarding RTV
possession, a ruling affirmed by the Colorado Court of Appeals. RTV, L.L.C. v.
Grandote Int’l L.L.C., 937 P.2d 768, 770 (Colo. Ct. App. 1996).
Meanwhile, Grandote Japan declared bankruptcy in Japan in July 1994.
Kojima, as trustee for Grandote Japan, filed various legal actions seeking to
prevent the issuance of the Tax Deeds to RTV, which were obviously
unsuccessful. See id. Notably, Kojima filed an ancillary proceeding in
bankruptcy court under 11 U.S.C. § 304. The outcome of that proceeding was an
order authorizing Kojima to pursue whatever litigation he wished to establish his
rights and claims in the property. In re Kojima, 177 B.R. 696, 704 (Bankr. D.
Colo. 1995).
As a result of that order, Kojima brought this suit, seeking to avoid the
Japan to Colorado transfer and the issuance of the Tax Deeds to RTV. The
district court granted summary judgment in favor of defendants, concluding that
Japanese law did not apply to this case, that the Tax Deeds were properly issued,
and that there was no evidence of fraudulent transfer.
II
At the time this appeal was filed, we questioned whether the district court’s
judgment was a final, appealable order because it dismissed some of Kojima’s
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claims without prejudice. See Heimann v. Snead , 133 F.3d 767 (10th Cir. 1998).
The district court subsequently amended its judgment to dismiss all claims with
prejudice, and thus there is no longer any doubt that the judgment is appealable
and that we have jurisdiction under 28 U.S.C. § 1291.
III
“We review the grant or denial of summary judgment de novo, applying the
same legal standard used by the district court . . . .” Kaul v. Stephan, 83 F.3d
1208, 1212 (10th Cir. 1996) (citation omitted). Summary judgment is appropriate
“if the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(c). In reviewing a summary judgment motion, the court
is to view the record “in the light most favorable to the nonmoving party.”
Thournir v. Meyer, 909 F.2d 408, 409 (10th Cir. 1990) (citation omitted). The
purpose of a summary judgment motion, unlike that of a motion to dismiss, is to
determine whether there is evidence to support a party’s factual claims.
Unsupported conclusory allegations thus do not create a genuine issue of fact.
See United States v. Simons, 129 F.3d 1386, 1388–89 (10th Cir. 1997) (citing
Allen v. Muskogee, Okla., 119 F.3d 837, 843–44 (10th Cir. 1997)). To withstand
summary judgment, the nonmoving party “must come forward with ‘specific facts
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showing that there is a genuine issue for trial.’” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56(e)).
A. Choice of Law
Kojima brought this action as an ancillary proceeding under 11 U.S.C.
§ 304 3 pursuant to an order of the bankruptcy court granting Kojima permission to
pursue its claims in federal court. See Kojima, 177 B.R. at 704. The bankruptcy
judge’s opinion discussed, but did not determine, whether Japanese law should be
applied to Kojima’s claims. Id. at 699–703. At summary judgment, the district
court rejected use of Japanese law. Kojima argues that Japanese law should apply
and that under Japanese law the Japan to Colorado transfer is avoidable.
Section 304 allows proceedings to be brought in the United States “to
function in aid of a [bankruptcy] proceeding pending in a foreign court.” Id. at
700 (citation omitted). Applying principles of “comity,” such proceedings may
utilize foreign law to recover property located in the United States when
application of foreign law will “best assure an economical and expeditious
administration” of the bankruptcy estate. 11 U.S.C. § 304(c).
In determining whether to apply Japanese law, we discern two competing
values. On one hand are principles of comity, which favor application of
3
Judge Brooks discussed the nature and purposes of § 304 ancillary
proceedings in his thorough opinion. See Kojima, 177 B.R. at 699–701.
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Japanese law. On the other are the interests of the locality where the property is
located, which favor application of United States/Colorado law. In support of
comity and applying Japanese law, Kojima cites Philadelphia Gear Corp. v.
Philadelphia Gear de Mexico, S.A., 44 F.3d 187 (3d Cir. 1994). In that case, the
Third Circuit announced a policy favoring application of a foreign state’s laws:
In general, “[u]nder the principle of international comity, a domestic
court normally will give effect to executive, legislative, and judicial
acts of a foreign nation.” More specifically, we have stated that
“[c]omity should be withheld only when its acceptance would be
contrary or prejudicial to the interest of the nation called upon to
give it effect.”
Id. at 191 (citations omitted); see also In re Hourani, 180 B.R. 58, 64 (Bankr.
S.D.N.Y. 1995) (“[T]his nation’s preparedness to grant deference to the laws and
proceedings of other nations is considerable.”). The bankruptcy judge’s analysis
in the earlier ancillary proceeding in this case also lends support to Kojima’s
argument. He concluded that Japanese bankruptcy law is “consonant with and
complementary to the principal features which govern the United States’
Bankruptcy Code.” Kojima, 177 B.R. at 702.
Despite these arguments for applying Japanese law, we agree with the
district court that under the facts of this case, Colorado law is the appropriate law
to apply in resolving Kojima’s claims. Most importantly, the fact that the only
asset at issue is real property favors application of local law. A Second Circuit
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opinion explains why local law should be applied to resolve disputes involving
real property.
Property interests have an independent legal source, antecedent to the
distributive rules of bankruptcy administration, that determines in the
first instance the interests of claimant parties in particular property.
It logically follows that before a particular property may be turned
over pursuant to § 304(b)(2), a bankruptcy court should apply local
law to determine whether the debtor has a valid ownership interest in
that property when the issue is properly posed by an adverse
claimant.
In Re Koreag, Controle et Revision S.A., 961 F.2d 341, 349 (2d Cir. 1992); see
also In re Spanish Cay Co., 161 B.R. 715, 725 (Bankr. S.D. Fla. 1993) (“[A] basic
tenet of international law [is that] real property should be governed by the laws of
the country in which the property is located.”).
Moreover, both federal and state choice of law principles favor application
of the “law of the jurisdiction having the greatest interest in the litigation,” In Re
Koreag, 961 F.2d at 350, or the law of the jurisdiction with the “most significant
relationship” to the transaction at issue, Wood Bros. Homes, Inc. v. Walker
Adjustment Bureau, 601 P.2d 1369, 1372 (Colo. 1979). Without question,
Colorado has the greatest interest in the litigation: the property is located in
Colorado, the tax sale was conducted for failure to pay Colorado taxes, most of
the agreements related to the property were executed in Colorado, and there has
been extensive litigation in Colorado courts to determine the owner of the
property. See, e.g., RTV, 937 P.2d at 768.
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B. The Colorado Uniform Fraudulent Transfer Act (“CUFTA”)
Kojima seeks to avoid the transfer of the property pursuant to the Tax
Deeds, claiming that their issuance to RTV violates CUFTA. Kojima’s brief on
this point is, to put it delicately, opaque; Kojima seems to argue that the transfer
by Tax Deeds violates CUFTA merely because it constitutes a transfer made by a
“debtor” (i.e., Grandote Colorado) at a time a “creditor” (i.e., Kojima) had a
claim to the property. (Appellants’ Br. at 17 (citing Colo. Rev. Stat. §§ 38-8-105,
38-8-106).) To run afoul of CUFTA, a transfer must involve “actual intent to
hinder, delay, or defraud any creditor” or must have been made for less than
“reasonably equivalent value.” Colo. Rev. Stat. § 38-8-105(1)(a), (b). Although
never directly stating this, Kojima appears to rely on both grounds.
No matter its exact form, Kojima’s argument is premised on the theory that
the transfer of the property by the Tax Deeds was made from Grandote Colorado
to RTV. We rejected that theory in Weinman v. Simons (In re Slack-Horner
Foundries Co.), 971 F.2d 577, 580 (10th Cir. 1992). Weinman held that “[t]he
failure to pay taxes due results in a forfeiture of the original owner’s interest in
the property, by operation of law, to the state, which then grants title to the
property to the holder of the lien free and clear of any other claims.” Id. at 581(emphasis added). Indeed, Colorado law is settled, acquisition of real property by
tax deeds provides
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virgin title to the property, erasing all former interest in the land
. . . . [A] tax title from its very nature has nothing to do with the
previous chain of title and does not in any way connect itself with it.
It breaks up all previous titles. . . . By whatever means [Grandote
Japan and Kojima] claimed to have acquired the land, they lost it
when a treasurer’s deed issued in accordance with the law.
Hartley v. Ruybal, 414 P.2d 114, 117 (Colo. 1966); 4 see also Harrison v. Everett,
308 P.2d 216, 219 (Colo. 1957) (“The issuance of a valid treasurer’s deed created
a virgin title erasing all former interests in the land.”). Under Weinman and
Hartley, the Tax Deeds transfer was made by the state of Colorado (free of all
prior interests), not by Grandote Colorado, and thus there was no transfer by a
“debtor,” which is required to violate CUFTA.
Kojima seeks to distinguish Weinman on the ground that the case was
decided under a federal bankruptcy statute, 11 U.S.C. § 548, rather than CUFTA.
However, the language of § 548 and the relevant portions of CUFTA are quite
similar. Compare 11 U.S.C. § 548(a)(1)(A), (B) (stating that a trustee may avoid
transfers made “with actual intent to hinder, delay, or defraud” or for which the
debtor “received less than a reasonably equivalent value”), with Colo. Rev. Stat.
§ 38-8-105(1)(a), (b) (stating that a transfer is fraudulent if it was made “[w]ith
actual intent to hinder, delay, or defraud any creditor” or if the debtor received
4
Hartley’s holding is premised on the validity of the tax deeds themselves.
In prior litigation, the Colorado Court of Appeals upheld the validity of the Tax
Deeds, concluding that RTV held proper title. See RTV, 937 P.2d at 770.
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less than “reasonably equivalent value”). Because this language is nearly
identical, the holding of Weinman logically applies to the situation in this case.
Kojima’s CUFTA claim fails for another reason. A transfer is not
fraudulent under CUFTA where an asset is acquired for “a reasonably equivalent
value” through a “regularly conducted, non-collusive sale, foreclosing on assets
subject to a lien.” Colo. Rev. Stat. § 38-8-104(2). In BFP v. Resolution Trust
Corp., 511 U.S. 531, 545 (1994), the Supreme Court held that a mortgage
foreclosure sale constitutes a transfer for “reasonably equivalent value,” even if
the purchase price was below market value, as long as there is no evidence of
collusion. Although BFP did not address a tax sale, see id. at 537 n.3, which is
how the property in this case was transferred, BFP has been extended to the tax
sale context. See, e.g., T.F. Stone Co. v. Harper (In re T.F. Stone Co.), 72 F.3d
466, 468–69 (5th Cir. 1995); Russell-Polk v. Bradley (In re Russell-Polk), 200
B.R. 218, 220–22 (Bankr. E.D. Mo. 1996); Golden v. Mercer County Tax Claim
Bureau (In re Golden), 190 B.R. 52, 58 (Bankr. W.D. Pa. 1995); Hollar v. Myers
(In re Hollar), 184 B.R. 243, 252 (Bankr. M.D.N.C. 1995); Lord v. Neumann (In
re Lord), 179 B.R. 429, 432–35 (Bankr. E.D. Pa. 1995); McGrath v. Simon (In re
McGrath), 170 B.R. 78, 82 (Bankr. D.N.J. 1994).
We are aware that courts have not been unanimous in extending BFP to the
tax sale context, with this circuit’s Bankruptcy Appellate Panel among those
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refusing to apply BFP to a transfer made by a tax sale. See Sherman v. Rose (In
re Sherman), 223 B.R. 555, 558–59 (B.A.P. 10th Cir. 1998). Nevertheless, the
decisive factor in determining whether a transfer pursuant to a tax sale constitutes
“reasonably equivalent value” is a state’s procedure for tax sales, in particular,
statutes requiring that tax sales take place publicly under a competitive bidding
procedure. See id. at 559 (refusing to extend BFP to a tax sale conducted under
Wyoming statutes that “do not permit a public sale with competitive bidding”).
RTV acquired the property through a regularly conducted tax sale under Colorado
law subject to a competitive bidding procedure. See Colo. Rev. Stat. §§ 39-11-
101, 39-11-108. Kojima has not alleged that the tax sale in this case was
conducted in violation of Colorado law. We thus conclude that the tax sale at
issue constitutes transfer for “reasonably equivalent value” under CUFTA.
C. Fraud
Kojima argues that the Japan to Colorado transfer was fraudulent because
the only person with authority to execute the conveyance, Noriyuki Hoshi, did not
do so. In response to this claim, Grandote Colorado submitted an affidavit from
Dwight Harrison in which he recited the events surrounding the conveyance:
10. After considerable communication between Hashimoto and me I
met Hashimoto in Japan and we entered into [a] memorandum on
May 2, 1994. The memorandum correctly states the purpose of the
conveyance of the property to Grandote [Colorado]. Also present
during the meeting were Defendant Duke Yoshii (the interpreter) and
Noriyuki Hoshi who was introduced to me as the person with
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authority to execute the deed referred to in the memorandum.
11. Immediately after signing the memorandum, Hashimoto, Yoshii,
Hoshi and I traveled to the U.S. Consulate in Fukuoka, Japan to
accomplish the execution of the deed conveying the property to
Grandote [Colorado].
12. At the Consulate we were ushered into a large conference room
where we were introduced to Donald Y. Yamamoto Counsel for the
United States. Mr. Yamamoto was known to Yoshii who introduced
us and explained the purpose of our meeting to Mr. Yamamoto. Mr.
Yamamoto asked for identification. I saw Hoshi give Mr. Yamamoto
his passport and recognized it as a Japanese passport but did not
personally compare the passport picture with Hoshi’s face. Mr.
Yamamoto examined Hoshi’s passport. We then proceeded to a table
to sign the deeds. Hoshi said that his first name had been misspelled
on the prepared deed and asked Mr. Yamamoto to correct it, which
Mr. Yamamoto himself did on a typewriter. The deeds were signed
and notarized by Mr. Yamamoto.
(Appellant’s App. at 36–37.)
The district court concluded that in light of this affidavit there was no
genuine dispute of material fact because Kojima presented no evidence other than
the allegations in his complaint. Kojima argues that his complaint is verified, and
“[v]erification of a complaint converts [it] . . . to an affidavit suitable for use in
opposing a motion for summary judgment.” (Appellant’s Reply Br. at 10.)
Although a verified complaint may have evidentiary value, this is only true “if the
facts asserted are within the pleader’s personal knowledge.” Jaxon v. Circle K
Corp., 773 F.2d 1138, 1139 n.1 (10th Cir. 1985). Kojima’s complaint, which is
verified only by Kojima himself, contains only a hearsay allegation regarding
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Hoshi’s identity: “Mr. Hoshi confirms that he did not execute the General
Warranty Deed.” (Appellant’s App. at 251 ¶ 110.) Because Kojima never
submitted any non-hearsay evidence controverting Harrison’s affidavit, the
district court was correct to rule that Kojima failed to support his allegation with
“competent Rule 56 evidence.” (Id. at 37.)
IV
The judgment of the district court is AFFIRMED.
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