24-case Notes

• Jurisdiction: Hawaii,United States
• Citation: Vol. 24 No. 01
• Publication year: 2020

24-CASE NOTES

Supreme Court

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Schmidt v. HSC, Inc., No. SCWC-16-0000858, November 8, 2019, (McKenna, J.). The current iteration of the case arose from a separate action, Civil No. 06-1-228, filed on April 7, 2006 in the circuit court by HSC. Following a bench trial on July 1 and 2, 2008, the circuit court concluded the Schmidts did not prove by clear and convincing evidence RFI actually intended to hinder, delay, or defraud any creditors of RFI, and therefore entered judgment in favor of HSC, Richard Henderson, Sr. ("Richard"), and Eleanor RJ. Henderson ("Eleanor") (collectively, "Respondents"). Petitioners appealed unsuccessfully to the ICA. In deciding the Schmidts' appeal, the ICA did not discuss the merits of the Schmidts' challenge to the circuit court's findings and conclusions, but rather concluded that the Schmidts' HUFTA claim should have been dismissed as untimely. After accepting certiorari, the Hawaii Supreme Court determined that the ICA's decision on the statute of limitations provision in Hawaii Revised Statutes § 651 C-9(1) was wrong as a matter of law because the ICA "incorrectly held that the statute of limitations was from the date of the transfer, rather than from the date that Petitioners discovered the fraudulent nature of the transfer." Schmidt II, 136 Hawaii at 510, 319 P.3d at 429. The Hawaii Supreme Court then vacated the ICA's Judgment on Appeal and remanded the case to the ICA. Consequently, the ICA published an opinion that "address[ed] the merits of the Schmidts' challenge to [the] [c]ircuit [c]ourt's rejection of their fraudulent transfers claims, irrespective of whether their claims are or may be barred by the statute of limitations." Schmidt v. HSC, Inc., 136 Hawaii 158, 164, 358 P3d 727, 733 (App. 2015). In sum, the ICA concluded the circuit court erred in dismissing the Schmidts' claims on the merits, as "the facts established by the record in this case . . . prove[d] by clear and convincing evidence that [RFI] actually intended to hinder, delay, or defraud any creditors of [RFI], as required by Haw. Rev. Stat. § 651C-4(a)(1)." 131 Hawaii at 179, 358 P3d at 748. However, because the circuit court did not issue any findings or legal conclusions regarding when the Schmidts discovered, or could reasonably have discovered, the fraudulent nature of the transfers, the ICA remanded the case to the circuit court. After remand, on October 19, 2016, the circuit court issued its Findings of Fact and Conclusions of Law, which concluded the Schmidts' claims were time-barred, as the Schmidts could reasonably have discovered the fraudulent nature of the transfers on or before February 21, 2005, but did not file a complaint until April 7, 2006, past the one-year statute of limitations period for HUFTA claims pursuant to Haw. Rev. Stat. § 651 C-9(1). The circuit court entered Final Judgment on December 6, 2016. The Schmidts appealed, in sum asserting the circuit court clearly erred in determining when they could reasonably have discovered the fraudulent nature of the subject transfers. The ICA rejected the Schmidts' challenge, concluding the circuit court did not err in making findings that "aided in its determination of how and when the fraudulent nature of the subject transfers could reasonably have been discovered by the Schmidts, and we are not left with a definite and firm conviction that, based on all of the evidence, mistakes were made in these findings." Schmidt v. HSC, Inc., No. CAAP-16-0000858, at 3 (App. Nov. 30, 2018) (SDO). Accordingly, the ICA entered a Judgment on Appeal on January 31, 2019 pursuant to its SDO affirming the circuit court's December 6, 2016 Final Judgment and October 19, 2016 Findings of Fact and Conclusions of Law. The Schmidts timely filed an Application for Writ of Certiorari on February 19, 2019 ("Application"), presenting the same three issues they previously argued before the ICA, all related to the date the circuit court determined the Schmidts could reasonably have...