Shigezo Hawaii, Inc. v. Soy to the World Incorporated ( 2022 )

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
30-NOV-2022
08:28 AM
Dkt. 93 MO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAIʻI
SHIGEZO HAWAII, INC., A HAWAII CORPORATION,
Plaintiff-Appellant,
v.
SOY TO THE WORLD INCORPORATED, A HAWAII CORPORATION;
INOC CORPORATION, A HAWAII CORPORATION, dba SOY
TO THE WORLD; EMI YAMADA, dba HANA SOY; MUNEHIRO
YAMADA; YUJI IWATA; YOSHIHIRO WATANABE; FUJIYA
HONPO, INC., A HAWAII CORPORATION; ADAMAYS LLC,
Defendants-Appellees,
and
JOHN DOES 2-20; JANE DOES 1-20; DOE PARTNERSHIPS
1-20; DOE CORPORATIONS 1-20; and DOE GOVERNMENT
ENTITIES 1-20, Defendants
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 08-1-2586)
MEMORANDUM OPINION
(By: Ginoza, Chief Judge, Wadsworth and Nakasone, JJ.)
Plaintiff-Appellant, Shigezo Hawaii, Inc. (Shigezo
Inc.), appeals from the (1) Amended Findings of Fact, Amended
Conclusions of Law and Amended Order (FOFs, COLs and Amended
Order); (2) Order Confirming Defendants Exhibits A-9 and A-10 Are
Received into Evidence Nunc Pro Tunc to the Date of Trial (Order
Receiving Exhibits), both filed on April 20, 2017; and (3) First
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Amended Judgment entered on September 8, 2017 by the Circuit
Court of the First Circuit (Circuit Court).1
On appeal, Shigezo Inc. contends that the Circuit Court
erred on remand by: (1) abusing its discretion and violating
Shigezo Inc.'s due process rights by admitting the witness
declarations in Exhibits A-9 and A-10 nunc pro tunc to the date
of the 2013 trial, in Points of Error (POEs) 1 and 6; (2)
concluding the transfer was not voidable because the transferee
took the tofu-making machinery in good faith and for reasonably
equivalent value, in POEs 2 and 3; and (3) concluding there was
no evidence of the value of the transferred assets and awarding
Shigezo Inc. nominal damages of one dollar, in POEs 4 and 5.2
We hold that the Circuit Court's award of nominal
damages was inconsistent with its determination of $40,000.00 as
the present value of the transfer as of the August 20, 2007 date
of transfer. We thus vacate and remand as to the Circuit Court's
conclusion regarding damages and affirm in all other respects.
I. BACKGROUND
This appeal arises out of the 2017 hearing on remand,
following our 2016 disposition that vacated a judgment and award
of nominal damages on four claims alleging violations of Hawaii
Revised Statutes (HRS) Chapter 651C, Hawaiʻi's Uniform Fraudulent
Transfer Act (HUFTA). See Shigezo Haw., Inc. v. Soy to the World
Inc., et.al., No. CAAP-XX-XXXXXXX, 2016 WL 4542016 (App. Aug. 31,
2016) (SDO) (Shigezo I). Shigezo I was an appeal from a 2013
1
The Honorable Rhonda A. Nishimura presided.
2
We have consolidated, reorganized, and restated the six POEs for
clarity. Shigezo Inc.'s POEs do not comply with Hawai ʻi Rules of Appellate
Procedure (HRAP) Rule 28(b)(4)(iii), which requires an appellant to cite to
the parts of the record where "the alleged error was objected to" or "brought
to the attention of the court." Instead, for each POE, Shigezo repeatedly
states: "This error is raised on appeal." Merely stating that the "error is
raised on appeal" does not comply with the HRAP requirement to cite where in
the record the error was objected to or otherwise preserved below. However,
to the extent the remaining sections of the Opening Brief may provide the
necessary information in the record to enable consideration of the
contentions, we will do so. See Marvin v. Pflueger, 127 Hawaiʻi 490, 496, 280
P.3d 88, 94 (2012) (cleaned up) (upholding policy of hearing cases on the
merits where possible, despite noncompliance with HRAP Rule 28, "where the
remaining sections of the brief provide the necessary information to identify
the party's argument.").
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jury-waived trial that involved an underlying business dispute,
debt collection attempts, and the alleged fraudulent transfer of
business assets, including tofu-making machinery. Id.The underlying business dispute between Shigezo Inc.
and tofu artisan Munehiro Yamada (Yamada), and Yamada's company
INOC Corporation (INOC), led to a 2007 lawsuit filed in Civil No.
07-1-000977, which in turn, resulted in an October 7, 2008
default judgment for Shigezo Inc., in the amount of $141,865.40
against Yamada and INOC. See Shigezo I, 2016 WL 4542016, at *1.
INOC was a Hawaiʻi corporation doing business under the trade
name "Soy to the World," whose officers and directors were Yamada
and his wife Emi Yamada (Mrs. Yamada). Soy to the World
manufactured and sold tofu.
After Shigezo Inc. filed the 2007 lawsuit but prior to
the entry of the 2008 default judgment, Yamada relocated Soy to
the World and its tofu-making machinery to the premises of Fujiya
Honpo, Inc. (Fujiya Inc.). Yamada and Soy to the World obtained
a $40,000.00 loan from Fujiya Inc. director Yuji Iwata
(Transferee Iwata) and Yoshihiro Watanabe (Watanabe); and the
tofu-making machinery was used as collateral for the loan.
In October 2008, Shigezo Inc. attempted to collect its
judgment against Yamada and Soy to the World, and obtained a writ
of execution for property, including the tofu-making machinery.
Shigezo Inc. was unable to levy on the tofu-making machinery
because on October 27, 2008, Transferee Iwata and Watanabe
claimed a right of co-ownership to the tofu-making machinery,
which was then located at the Fujiya Inc. factory.
On December 15, 2008, Shigezo Inc. filed the complaint
in the instant case, Civil No. 08-1-002586, against INOC, Yamada,
Mrs. Yamada, Soy to the World, Transferee Iwata, Fujiya Inc. and
Watanabe,3 alleging HUFTA violations and other claims arising out
of Shigezo Inc.'s debt collection attempts.
3
On December 22, 2009, the Circuit Court entered a default judgment
against Watanabe for failure to plead or defend.
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In 2011, Shigezo Inc. removed the instant case to the
United States Bankruptcy Court of the District of Hawaiʻi
following Yamada's Chapter 7 bankruptcy petition, and a 2012
bankruptcy trial was held on the dischargeability of Shigezo
Inc.'s claims against Yamada. The Bankruptcy Court ruled that
the claims against Yamada were dischargeable, and remanded
Shigezo Inc.'s claims against all other defendants to the Circuit
Court.
Trial was held in 2013, and the Circuit Court
concluded, inter alia, that Shigezo Inc. had proved that the
transfer of the tofu-making machinery was fraudulent under HRS §
651C-4(a)(1);4 however, the Court ruled that the transfer was not
voidable under HRS § 651C-8(a)5 as to Transferee Iwata because
Shigezo Inc. had not disproved Transferee Iwata's defense. The
Circuit Court also ruled that Shigezo Inc. had failed to present
competent evidence of damages on its HUFTA claims and awarded
Shigezo Inc. nominal damages in the amount of one dollar against
INOC. On appeal, we held that the Circuit Court erred by placing
the burden on Shigezo Inc. to disprove Transferee Iwata's
defense, because the burden is on the transferee to prove the
transferee's defense under HRS § 651C-8(a). See Shigezo I, 2016
WL 4542016, at *2. Regarding Shigezo Inc.'s contention that the
Circuit Court erred in stating there was no evidence of the value
of the property conveyed, we noted that the Circuit Court could
4
HRS § 651C-4 (2016), entitled "Transfers fraudulent as to present
and future creditors" provides:
(a) A transfer made or obligation incurred by a debtor is
fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer or
incurred the obligation:
(1) With actual intent to hinder, delay, or defraud
any creditor of the debtor[.]
5
HRS § 651C-8 (2016), entitled "Defenses, liability, and protection
of transferee" provides: "(a) A transfer or obligation is not voidable under
section 651C-4(a)(1) against a person who took in good faith and for a
reasonably equivalent value or against any subsequent transferee or obligee."
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"clarify or modify its 'no evidence' finding" on remand.6 Id. at
*4.
2017 Remand
On remand following Shigezo I, the record reflects that
the parties submitted proposed amended FOFs and COLs. On March
30, 2017, the Circuit Court held a status conference hearing
regarding whether or not the parties intended to stipulate
Exhibit A-9 (Transferee Iwata's Declaration) and Exhibit A-10
(Mrs. Yamada's Declaration) into evidence at the 2013 trial. The
Court ruled, over Shigezo Inc.'s objection, that the parties
intended to admit both declarations as exhibits at trial, and
received the exhibits nunc pro tunc back to the date of trial.
On April 20, 2017, the Circuit Court filed the Order Receiving
Exhibits and the FOFs, COLs and Amended Order. In the FOFs, COLs
and Amended Order, the Circuit Court concluded that Transferee
Iwata met his burden to prove that he was a good faith transferee
of the tofu-making machinery for reasonably equivalent value, and
that the "transfer is not voidable for purposes of Plaintiff
Shigezo's UFTA claims[.]" COL 25. In addition, the Court
concluded that Shigezo Inc. was entitled to nominal damages of
"'One Dollar'" against INOC for failure to provide "'any
competent evidence'" of damages. COL 26.
II. STANDARDS OF REVIEW
A. FOFs
We review a trial court's findings of fact under the
clearly erroneous standard. A finding of fact is clearly
6
In Shigezo I, we observed that:
[t]he Circuit Court's adoption of the Bankruptcy Court's
finding that there was "no evidence" of the current value of
the tofu making machine (at the time of transfer) appears
somewhat inconsistent with the Circuit Court's additional
adoption of Iwata's testimony that he accepted the tofu
making machinery as collateral for loaning or advancing
$40,000.00 to [Yamada]/INOC and that he and Watanabe
asserted co-ownership of this machinery when [Yamada]/INOC
was unable to repay the $40,000.00.
2016 WL 4542016 at *4.
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erroneous when, despite evidence to support the finding, the
appellate court is left with the definite and firm
conviction in reviewing the entire evidence that a mistake
has been committed. A finding of fact is also clearly
erroneous when the record lacks substantial evidence to
support the finding .... Hawaiʻi appellate courts review
conclusions of law de novo, under the right/wrong standard.
Schmidt v. HSC, Inc., 145 Hawaiʻi 351, 360, 452 P.3d 348, 357
(2019) (quoting Beneficial Haw., Inc. v. Kida, 96 Hawaiʻi 289,
305, 30 P.3d 895, 911 (2001)).
B. COLs and Mixed Questions
A COL is not binding upon an appellate court and is freely
reviewable for its correctness. This court ordinarily
reviews COLs under the right/wrong standard. Thus, a COL
that is supported by the trial court's FOFs and that
reflects an application of the correct rule of law will not
be overturned. However, a COL that presents mixed questions
of fact and law is reviewed under the clearly erroneous
standard because the court's conclusions are dependent upon
the facts and circumstances of each individual case.
Chun v. Bd. of Trustees of Emps. Retirement Sys. of State of
Haw., 106 Hawaiʻi 416, 430, 106 P.3d 339, 353 (2005) (citations,
internal quotation marks, and brackets omitted) (quoting Allstate
Ins. Co. v. Ponce, 105 Hawaiʻi 445, 453, 99 P.3d 96, 104 (2004)).
III. DISCUSSION
A. POEs 1 and 6, admission of exhibits
POEs 1 and 6 deal with the admission of Transferee
Iwata's and Mrs. Yamada's declarations as Exhibits A-9 and A-10
into the record of the 2013 trial. Shigezo Inc. contends that
its due process rights were violated when the Circuit Court
admitted the two witness declarations nunc pro tunc because: (1)
Shigezo Inc. was denied cross-examination of the witnesses; and
(2) the admission of the declarations contradicted the Circuit
Court's grant of Motion in Limine (MIL) #6, which prevented
Transferee Iwata from testifying regarding the Bill of Sale for
lack of personal knowledge. Shigezo Inc. also argues that its
counsel did not have the "intent" to stipulate to these exhibits.
Shigezo Inc.'s argument that it was denied the right to
cross-examine Transferee Iwata and Mrs. Yamada was not preserved
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below or properly presented on appeal. In the Opening Brief,
Shigezo Inc. did not identify where it objected to, or otherwise
preserved, the issue of the denial of the right to cross-examine
during the 2013 trial, and it is thus waived. See HRAP Rule
28(b)(4); Haw. Ventures, LLC v. Otaka, Inc., 114 Hawaiʻi 438,
480, 164 P.3d 696, 738 (2007) (explaining that an appellate court
"is not obligated to sift through the voluminous record to verify
an appellant's inadequately documented contentions.") (citations
and internal quotation marks omitted). Assuming arguendo it was
preserved, it is nevertheless without merit in light of
unchallenged FOF 34,7 which states: "[b]oth [(Transferee)] Mr.
Iwata and [Mrs.] Yamada were present during the jury-waived trial
on August 20, 2013 for examination by [Shigezo Inc.]'s counsel.
However, except for brief testimony elicited from Mr. Maruko by
[Shigezo Inc.]'s counsel, no other witnesses were called upon to
testify during [Shigezo Inc.]'s case-in-chief." Thus, given that
both Transferee Iwata and Mrs. Yamada were present and available
for examination at the 2013 trial, Shigezo Inc. cannot claim
appellate error where it made no attempt to examine.
We are unable to review Shigezo Inc.'s argument
challenging the admission of Transferee Iwata's declaration based
on the MIL #6 ruling, because no transcript of the MIL hearing is
provided. "[A]ppellant has the burden of furnishing the
appellate court with a sufficient record to positively show the
alleged error." Bettencourt v. Bettencourt, 80 Hawaiʻi 225, 230,
909 P.2d 553, 558 (1995) (quoting Union Building Materials Corp.
v. The Kakaako Corp., 5 Haw.App. 146, 151, 682 P.2d 82, 87
(1984)). Without the transcript from the MIL hearing, we have no
basis upon which to review whether MIL #6 placed limitations on
Transferee Iwata's testimony. See id. at 231, 909 P.2d at 559("Without the transcript of the August 6, 1993 hearing, we have
7
Unchallenged FOFs are binding. See Kelly v. 1250 Oceanside
Partners, 111 Hawaiʻi 205, 227, 140 P.3d 985, 1007 (2006) (citations omitted).
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no basis upon which to review the family court's imposition of
sanctions, which we therefore leave undisturbed.").
Shigezo Inc.'s remaining argument that its counsel did
not intend to stipulate to the exhibits is also without merit,
where the record reflects counsel's agreement to stipulate in an
email,8 and the Circuit Court so found, as follows:
IT IS HEREBY ORDERED, ADJUDGED AND DECREED that
the Declaration of Yuji Iwata as Direct Testimony and
Declaration of Emi Yamada as Direct Testimony , both
filed on August 5, 2013, two (2) weeks before trial
held on August 20, 2013, were intended to be admitted
as direct testimony and were not prejudicial to
[Shigezo Inc.] as it was provided the opportunity to
cross-examine the witnesses at trial, who they chose
not to examine. This Order hereby clarifies the record,
confirming that the Court did receive into evidence
Exhibit A-9 Declaration of Yuji Iwata As Direct
Testimony, filed August 5, 2013, as well as Exhibit
A-10 Declaration of Emi Yamada As Direct Testimony ,
filed August 5, 2013 nunc pro tunc to the date of trial.
(Bolding added). In light of this record, the Circuit Court's
factual finding that Shigezo Inc.'s counsel did intend to
stipulate to the exhibits is not clearly erroneous. See Schmidt,
145 Hawaiʻi at 360, 452 P.3d at 357 (A FOF is clearly erroneous
if the record "lacks substantial evidence to support the
finding," or "despite evidence to support the finding, the
appellate court is left with the definite and firm conviction in
reviewing the entire evidence that a mistake has been
committed.") (citations omitted).
"The admission of evidence lies within the discretion
of the trial court, and the court's decision will be overturned
only where there has been a clear abuse of discretion. Abuse of
discretion is shown when the court's decision clearly exceeded
8
Within the submissions for the March 30, 2017 hearing was a July
25, 2013 email chain between the parties' counsels, in which Shigezo's counsel
stated: "As to trial testimony, I would like to stipulate Emi Yamada and Yuji
Iwata's testimony as exhibits." The Circuit Court agreed with Defendants-
Appellees' counsel that the email discussed stipulating to other Exhibits A-4,
A-5, A-6, A-7, and A-8 and that the next exhibits in order were the subject
declarations in Exhibits A-9 and A-10, and thus there was "[n]o undue
prejudice, no surprise."
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the bounds of reason or disregarded principles of law." Myers v.
S. Seas Corp., 10 Haw.App. 331, 350, 871 P.2d 1235, 1244 (1992)
(citations omitted). We conclude that the Circuit Court did not
abuse its discretion in admitting the declarations in Exhibits A-
9 and A-10. See id.B. POEs 2 and 3, applicability of HRS § 651C-8(a)
transferee defense
In POEs 2 and 3, Shigezo Inc. contends that the Circuit
Court erroneously concluded that Transferee Iwata took the tofu-
making machinery in good faith and for reasonably equivalent
value. The POEs specifically refer to "¶ 7" and "¶ 20" in the
FOFs, COLS and Amended Order.9 Shigezo argues that based on what
9
"¶ 7" appears to refer to COL 7, and "¶ 20" to COL 20 in the FOFs,
COLs and Amended Order. These COLs state:
7. As to what constitutes "good faith", this court
examines what [Transferee] Iwata "knew or should have known"
from an objective standpoint as of August 20, 2007, in or
around the time of the conveyance or transfer of the
tofu-making machine and equipment, memorializing the same in
the Bill of Sale and Warranty:
• The $40,000.00 investment/loan by and between Mr.
Yamada/INOC and Mr. Iwata/Fujiya Honpo was for a
legitimate business purpose. . . . Mr. Iwata and Mr.
Watanabe invested in Mr. Yamada's business due to "his
personality, his craftsmanship" as a tofu artisan in
manufacturing tofu products and their desire to expand
the market of Soy to the World's tofu products.
• Mr. Iwata was aware that the parties had exchanged the
Bill of Sale and Warranty dated 8/20/2007, which
document intended to memorialize the investment/loan
by Mr. Iwata and Mr. Watanabe, such that the
tofu-making machinery and equipment represented
collateral for their loan/investment, Mr. Iwata and
Mr. Watanabe being co-owners. The Bill of Sale and
Warranty served a legitimate business purpose.
• Due to Mr. Yamada's difficulties in meeting his rent
obligations at the Manoa Market Place, he relocated
his tofu-making operations to Fujiya's premises since
the rent was lower, which Mr. Iwata permitted,
desirous of Mr. Yamada being successful in his
business of manufacturing tofu. . . . Mr. Iwata's
allowance of this relocation served a legitimate
business purpose. Mr. Iwata allowing Mr. Yamada to
continue his tofu-making operations on Fujiya's
premises served a legitimate business purpose.
(continued...)
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Transferee Iwata knew or should have known at the time of the
transfer on October 28, 2008 (not August 20, 2007, as the Circuit
Court found), the tofu-making machinery was transferred in bad
faith; and assuming arguendo the transfer date was August 20,
2007, there was no consideration for the $40,000.00 and no
security interest created for the transfer.
HRS § 651C-8(a) "provides the transferee with a defense
to the voiding of a fraudulent transfer if the transferee can
show that he or she took the property in good faith and for a
reasonably equivalent value." Shigezo I, 2016 WL 4542016, at *2.
In determining whether the transferee received the transfer in
good faith under HRS § 651C-8, courts look to what the transferee
"objectively knew or should have known," instead of examining
what the transferee actually knew from a subjective standpoint.
In re Agric. Res. and Tech. Group, Inc., 916 F.2d 528, 535-36
(9th Cir. 1990) (internal quotation marks omitted).
Shigezo Inc. argues that the Circuit Court erroneously
concluded that August 20, 2007 was the "transfer" date, because
"substantial evidence show[ed] that October 28, 2008 is the date
of transfer . . . ." In support, Shigezo Inc. points to
Transferee Iwata's bankruptcy trial testimony, and argues that
9
(...continued)
• At some point in time, Mr. Iwata became aware of
problems between Mr. Yamada/INOC and Shigezo, but not
the specifics, testifying that, "I didn't want to get
involved in what's going on between Shigezo and Mr.
Yamada . . . . But I didn't even know that this was
all going on, and it really puzzles me that I got
involved in - in this like this."
• Mr. Iwata scolded Mr. Yamada when Mr. Yamada attempted
to discuss the litigation between himself and Shigezo,
such as to prevent any further discussion.
. . . .
20. The Intermediate Court of Appeals in issuing
its Summary Disposition Order filed August 31, 2016,
remanded to this court specifically to address the
following: "Iwata, the transferee of the tofu making
machinery, to prove that he had taken the transferred
property in good faith and for a reasonably equivalent
value". This court answers in the affirmative.
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Transferee Iwata "was evasive and vague in answering whether the
receipt of the tofu machinery constituted a transfer of ownership
or acquisition of collateral." Shigezo Inc. also cites portions
of Transferee Iwata's testimony that support an October 28, 2008
transfer date as "consistent with YAMADA's testimony, that the
ownership of the machine was transferred in or around 2008."
Shigezo Inc. claims that "[b]ased on the erroneously entered
finding that the machinery was collateral for the loan since
2007, the conclusions of law entered on that basis were
incorrect." Shigezo Inc. also argues that Transferee Iwata had
no security interest in the tofu-making machinery "because his
interest was never perfected" as required "under Article 9 of the
UCC to constitute security for debt."10
The Circuit Court's factual determination that August
20, 2007 was the date of transfer is supported by substantial
evidence and not clearly erroneous. See Schmidt, 145 Hawaiʻi at
360, 452 P.3d at 357. Unchallenged COL 3 concluded: "[t]he
transfer of the tofu-making machinery, equipment and supplies
occurred in or around August 20, 2007 when the Bill of Sale was
executed."11 The August 20, 2007 Bill of Sale and Warranty
"acknowledg[ed] an agreement by and between Mr. Yamada/INOC and
[Transferee] Iwata/Fujiya [Inc.] and Mr. Watanabe whereby Mr.
Yamada accepted $40,000 (from [Transferee] Iwata/Fujiya [Inc.]
and other valuable consideration (from Mr. Watanabe), and in
exchange, fully transferred and conveyed to them all soy milk
machinery and equipment owned by INOC Corporation." COL 13.
Transferee Iwata subsequently issued two checks totaling
$40,000.00. FOF 5, COL 13. The first check of $25,000.00 was
issued on May 30, 2008, and the second check of $15,000.00 was
10
As to this argument based on the Uniform Commercial Code ( UCC),
there are no record references indicating whether this argument was raised
below, and if so, whether the Circuit Court rejected it. This argument is
waived, and we do not address it. See HRAP Rule 28(b)(4) and (7).
11
Unchallenged COLs are binding. See Amfac, Inc. v. Waikiki
Beachcomber Inv. Co., 74 Haw. 85, 125, 839 P.2d 10, 31 (1992).
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issued on June 15, 2008 -- both before the entry of the October
6, 2008 judgment. FOF 5.
COL 7, which Shigezo Inc. challenges, details the
evidence indicating what Transferee Iwata "'knew or should have
known'" as of August 20, 2007, the date of the Bill of Sale, and
concludes that the $40,000 loan from Transferee Iwata "was for a
legitimate business purpose." The Circuit Court concluded in COL
8 that there was no indication that Transferee Iwata knew or
should have known of any fraud, and that Transferee Iwata had a
"'good faith' belief that his acceptance of the tofu-making
machine . . . and equipment, and his subsequent assertion of his
physical ownership rights in the tofu-making machine was not
intended to delay or defraud Plaintiff Shigezo." COL 10.
It is for the trial judge as fact-finder to assess the
credibility of witnesses and to resolve all questions of
fact; the judge may accept or reject any witness's testimony
in whole or in part . . . . An appellate court will not
pass upon the trial judge's decisions with respect to the
credibility of witnesses and the weight of the evidence,
because this is the province of the trial judge.
Porter v. Hu, 116 Hawaiʻi 42, 59-60, 169 P.3d 994, 1011-12 (App.
2007) (quoting State v. Eastman, 81 Hawaiʻi 131, 139, 913 P.2d
57, 65 (1996)). Shigezo Inc.'s arguments are based on its
contrary view of the evidence and credibility of witnesses, and
are unavailing. See id. It was properly within the Circuit
Court's province in the COLs referenced supra, to weigh the
evidence and assess credibility to determine factual questions
such as the date of transfer, and whether a transferee knew or
should have known of fraud. See id. The Circuit Court's
findings and mixed FOF/COL determinations in COLs 7 and 20 as to
the date of transfer and whether the transferee defense under HRS
§ 651C-8(a) was proved, are supported by substantial evidence,
and are not clearly erroneous. See Schmidt, 145 Hawaiʻi at 360,
452 P.3d at 357; Chun, 106 Hawaiʻi at 430, 106 P.3d at 353.
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C. POEs 4 and 5, valuation of damages
In POEs 4 and 5, Shigezo Inc. contends that the Circuit
Court erroneously concluded in the FOFs, COLs and Amended Order
that there was "no evidence of the value of the transferred
assets" and erroneously awarded nominal damages of one dollar,
"despite evidence to the contrary that assets were transferred in
bad faith and not for a reasonably sufficient value." The POEs
fail to identify any FOFs or COLs that Shigezo Inc. challenges.
See HRAP Rule 28(b)(4). In the Argument section of the Opening
Brief, however, Shigezo Inc. challenges "COL [sic] #14" which
appears to be an erroneous reference to FOF 14; "COL #17"; "FOF
#31"; "COL [sic] #13, 16, #17, 19, 22, 23, 24," which appear to
be erroneous references to FOFs 13, 16, 17, 19, 22-24; and "COL
#18." See Marvin, 127 Hawaiʻi at 496, 280 P.3d at 94. The gist
of Shigezo Inc.'s arguments as to the above FOFs and COLs, is
that the Circuit Court's nominal damages award was based on
erroneous findings regarding the value of INOC's tangible and
intangible assets, which were, as Shigezo Inc. contends, at least
$97,000.0012 or at least $40,000.00 in the alternative. As to
Shigezo Inc.'s remaining arguments regarding valuation of other
assets such as the "goodwill" of the Soy to the World business,
Yamada's valuation of INOC as "approximately $400,000" or
"approximately $350,000," and the total value of INOC's assets as
$146,350 based on the 2006 Soy to the World Inventory List, the
Circuit Court was entitled to reject these valuations as the
trier of fact, based on its assessment of the credibility and
weight of the evidence. See Porter, 116 Hawaiʻi at 59-60, 169
P.3d at 1011-12.
We address Shigezo Inc.'s contention that the damages
should have been at least $40,000.00, which has merit. Shigezo
Inc. argues that the Circuit Court "erred when it entered the
12
Neither the Opening Brief nor the single record reference provided
for the $97,000.00 figure explains how Shigezo, Inc. arrives at this amount.
The record reference lists page 313, "JT-6," which is a Stipulated joint trial
exhibit entitled "Soy to the World Main Inventory List[.]" The total listed
for all the items on the list is "146350 Dollars[.]" There is no reference to
a $97,000.00 amount. We do not address the $97,000.00 figure or any argument
based on it. See HRAP Rule 28(b)(7).
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amended judgment awarding [Shigezo Inc.] nominal damages in the
amount of one dollar based on 'there being devoid [sic] any
competent evidence.'" The "devoid" of "competent evidence"
quoted language is from COL 26, which is not among the COLs that
Shigezo Inc. specifically challenges. COL 26 states:
26. Nonetheless, as this court previously stated
in its February 12, 2014 FOF, COL and Order, where
"[Shigezo Inc.] has proven that Defendant Yamada and/or
Defendant INOC engaged in certain actions, to wit, that
steps were taken intended to hinder, delay defeat [sic]
Shigezo's attempts to collect on the 10/6/08 Judgment,
but there is devoid [sic] any competent evidence of
Shigezo's damages, [Shigezo Inc.] is only entitled to
nominal damages." "And in defining nominal damages, the
court awards Plaintiff the sum of One Dollar." See, e.g.[,]
Uyemura v. Wick[,] 57 Haw. 102, 551 P.2d 171 (1976);
Minatoya v. Mousel[,] 2 Haw. App. 1, 625 P.2d 378 (1981).
Although we may treat unchallenged COLs as binding, a COL is also
"freely reviewable for its correctness." Allstate Ins. Co., 105
Hawaiʻi at 453, 99 P.3d at 104; Amfac, Inc., 74 Haw. at 125, 839
P.2d at 31. Accordingly, we review Shigezo Inc.'s contention
that it "should recover at the least, $40,000 . . . evidenced by
[Transferee] IWATA's acceptance of the machine as collateral for
the loan."
In Shigezo I, we noted that Shigezo Inc. demonstrated
its "prima facie entitlement to the remedy of avoidance of the
transfer by establishing under HRS § 651C-4(a)(1) that the
transfer was fraudulent." 2016 WL 4542016, at *2 (citing HRS §
651C-7(a)(1993)).13 HRS § 651C-8(b) sets forth the liability and
judgment amount for a voidable transfer as follows:
(b) Except as otherwise provided in this section, to the
extent a transfer is voidable in an action by a creditor
under section 651C-7(a)(1), the creditor may recover
judgment for the value of the asset transferred , as adjusted
under subsection (c), or the amount necessary to satisfy the
13
HRS § 651C-7(a) (2016), entitled "Remedies of creditors," provides
for the remedy of avoidance as follows:
(a) In an action for relief against a transfer or obligation under this
chapter, a creditor, subject to the limitations provided in section
651C-8, may obtain:
(1) Avoidance of the transfer or obligation to the extent
necessary to satisfy the creditor's claim . . . .
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creditor's claim, whichever is less. The judgment may be
entered against:
(1) The first transferee of the asset or the person
for whose benefit the transfer was made; or
. . . .
(c) If the judgment under subsection (b) is based upon the
value of the asset transferred, the judgment must be for an
amount equal to the value of the asset at the time of the
transfer, subject to adjustment as the equities may require .
(Emphases added). Under HRS § 651C-8(b)(1), a creditor such as
Shigezo Inc. may recover judgment for "the value of the asset
transferred" against the "person for whose benefit the transfer
was made" -- which is INOC, the debtor and entity listed on the
Bill of Sale. See Citizens Nat. Bank of Tx. v. NXS Const., Inc.,
387 S.W.3d 74, 84-85 (Tex. Ct. App. 2012) ("The person for whose
benefit the transfer was made may include the actual debtor or
someone attempting to avoid a debt.").14 Subsection (c)
prescribes that if a judgment is based on the value of the
14
In Citizens Nat. Bank of Tx., the court construed Texas's parallel
UFTA provision, Texas Business and Commerce Code § 24.009, which is identical
to HRS § 651C-8.
HUFTA is modeled after the Uniform Fraudulent Transfer Act of 1984
(Model UFTA), and HRS § 651C-8(a) is virtually identical to the language of
the corresponding section 8(a) in the Model UFTA. See Shigezo I, 2016 WL
4541016 at *3 n.8. The Model UFTA section 8 provides in pertinent part:
(b) Except as otherwise provided in this section, to the
extent a transfer is voidable in an action by a creditor
under [section 651C-7(a)(1)], the creditor may recover
judgment for the value of the asset transferred, as adjusted
under subsection (c), or the amount necessary to satisfy the
creditor's claim, whichever is less. The judgment may be
entered against:
(1) The first transferee of the asset or the person
for whose benefit the transfer was made; or
. . . .
(c) If the judgment under subsection (b) is based upon the
value of the asset transferred, the judgment must be for an
amount equal to the value of the asset at the time of the
transfer, subject to adjustment as the equities may require.
Unif. Fraudulent Transfer Act § 8 (1984). In interpreting HRS Chapter 651C,
we may thus look to other states that have also adopted the Model UFTA. See
Schmidt, 145 Hawaiʻi at 361, 452 P.3d at 358 (considering case law from Ohio,
which has also adopted the Model UFTA, in determining when the statute of
limitations begins to run under HRS § 651C-9(1)).
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transferred asset, the judgment amount for a fraudulent transfer
must be the "value of the asset at the time of the transfer,
subject to adjustment as the equities may require." As applied
to this case, under HRS § 651C-8(b) and (c), Shigezo Inc. may
recover the value of the asset transferred in "an amount equal to
the value of the asset at the time of the transfer[.]" HRS §
651C-8(c) (emphasis added).
Here, the Circuit Court determined the "present value"
of the transferred asset under HRS § 651C-3 in COLs 14 and 15 as
of the August 20, 2007 date of transfer, as follows:
14. "Value" as defined under HRS§ 651C-3 states in
relevant part:
(c) A transfer is made for present value if the
exchange between the debtor and the transferee is
intended by them to be contemporaneous and is in
fact substantially contemporaneous.
15. The Bill of Sale and Warranty dated 8/20/2007 and
the checks issued by Mr. Iwata to Mr. Yamada/INOC totaling
$40,000 was roughly equivalent in value to the $40,000 value
of the tofu-making machine described on INOC's inventory
sheet as the "Soy milk Deaerator Ministar." Mr. Maruko for
Plaintiff Shigezo never disputed the monetary value of the
"Soy milk Deaerator Ministar". Hence, the Bill of Sale and
Warranty and the checks was a "transfer ... made for present
value ... [and] the exchange between Mr. Yamada and the
transferee Mr. Iwata/Fujiya Honpo was intended by them to be
contemporaneous or substantially contemporaneous .
(Emphases added). Thus, the "value of the asset at the time of
the transfer" on August 20, 2007 between Yamada/INOC and
Transferee Iwata was $40,000.00. HRS § 651C-8(c). COL 15's
determination regarding the value of the transferred tofu-making
machinery at the time of the August 20, 2007 transfer is
inconsistent with the ultimate damages conclusion in COL 26 that
there was no "competent evidence" of damages. See id.
The Circuit Court's findings and conclusions suggest
that the Circuit Court focused on the lack of evidence of value
at other time frames such as the 2008 writ of execution and the
2013 trial, rather than at the time of the August 20, 2007 date
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of transfer. See FOF 34 and COL 24.15 It appears that the focus
on these events, rather than the August 20, 2007 date of
transfer, led the Circuit Court to conclude in COL 26 that the
record was "devoid" of "any competent evidence" of damages. The
ultimate conclusion that no damages were proved and the
corresponding award of one dollar in nominal damages is in
conflict with HRS § 651C-8(c), which requires that the amount of
the creditor's judgment be based on the "value of the asset at
the time of the transfer, subject to adjustment as the equities
may require."
For these reasons, we are left with a "definite and
firm conviction" that a mistake was committed when the Circuit
Court concluded that there was no competent evidence of Shigezo
Inc.'s damages from the fraudulent transfer of the tofu-making
15
In this regard, FOF 34 and COL 24 state:
34. However, other than the 12/13/06 Soy to the World
Inventory List, no exhibits or testimony were proffered by
Plaintiff Shigezo as evidence of the present "value" of the
tofu-making machine imported from Japan, at the time of
these proceedings in August, 2013. No exhibits or testimony
were proffered by Plaintiff Shigezo as evidence of the
present "value" of the other equipment and/or supplies that
Plaintiff sought to levy through execution of its writ. No
testimony or exhibits were even proffered by Plaintiff
Shigezo during the August 20, 2013 jury-waived trial as to
whether and what machinery, equipment and/or supplies were
physically on Fujiya's premises at the time Plaintiff
Shigezo executed its writ upon Mr. Iwata/Fujiya Honpo in or
around October 23, 2008. No evidence was elicited during
Plaintiff Shigezo's case-in-chief as to the process in
manufacturing soy-based products. Both Mr. Iwata and Ms.
Yamada were present during the jury-waived trial on August
20, 2013 for examination by Plaintiff's counsel. However,
except for brief testimony elicited from Mr. Maruko by
Plaintiff's counsel, no other witnesses were called upon to
testify during Plaintiff's case-in-chief.
. . . .
24. In addition, no evidence was offered as to the
current value of the other tofu-making equipment or other
materials that were previously relocated from Soy to the
World's premises in the Manoa Marketplace by Mr. Yamada to
Fujiya Honpo's premises still in Mr. Iwata's possession at
the time Plaintiff Shigezo's [sic] served its writ upon Mr.
Iwata. (Judge Faris also arriving at a similar conclusion of
law.) [sic] Therefore, this court is unable to void the
transfer of any other tofu-making equipment or materials.
(Emphases added).
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machinery on August 20, 2007. Schmidt, 145 Hawaiʻi at 360, 452
P.3d at 357. We thus conclude that COL 26, which was a mixed FOF
and COL citing a lack of evidence of damages and awarding one
dollar in nominal damages in favor of Shigezo Inc. and against
INOC, was clearly erroneous. See id.; Chun, 106 Hawaiʻi at 430,
106 P.3d at 353.
IV. CONCLUSION
For the foregoing reasons, we affirm the Circuit Court
of the First Circuit's April 20, 2017 Order Confirming Defendants
Exhibits A-9 and A-10 Are Received into Evidence Nunc Pro Tunc to
the Date of Trial; we vacate the Circuit Court's Conclusion of
Law 26 in the April 20, 2017 Amended Findings of Fact, Amended
Conclusions of Law and Amended Order, but affirm in all other
respects. We also vacate the September 8, 2017 First Amended
Judgment, and remand this case for further proceedings consistent
with this Opinion.
DATED: Honolulu, Hawaiʻi, November 30, 2022.
On the briefs:
/s/ Lisa M. Ginoza
Junsuke Aaron Otsuka, Chief Judge
(Otsuka & Associates),
for Plaintiff-Appellant. /s/ Clyde J. Wadsworth
Associate Judge
Grant K. Kidani,
(Kidani Law Center), /s/ Karen T. Nakasone
for Defendants-Appellees, Associate Judge
Soy to the World
Incorporation, a Hawaii
Corporation, Emi Yamada,
Fujiya Honpo, Inc., a Hawaii
Corporation, and Yuji Iwata.
18