Hawaiian Financial Services Company Brings Motion for Partial Summary Judgment on Issue of “Reasonably Equivalent Value”
May 21, 2021, District of Hawaii – Finance Factors Limited, a company offering financial services in Hawaii filed its motion for partial summary judgment as to the issue of “reasonably equivalent value” and “value” as applied in Counts I through V of the complaint filed in the bankruptcy case of AGUPLUS, LLC.
Last year, Plaintiffs AGUPLUS, LLC and AGU-V, INC, formerly known as IYO SEIMEN USA, INC. (the “Debtors” or “IYO”) and Hannan Ribiyou Kabushikigaisha filed a lawsuit against Finance Factors Limited ( the “Defendant”) for recovery of alleged “intentional and constructive fraudulent transfers” under Sec. 548 of the Bankruptcy Code and under Haw. Rev. Stat. § 651C-4(a)(1). IYO formerly operated a restaurant located in the Ala Moana Shopping Center. The Plaintiffs also sought to avoid a mortgage allegedly held by Finance Factors as a “fraudulent transfer”, under 11 U.S.C. § 548, and the Hawaii Uniform Fraudulent Transfer Act.
Specifically, Plaintiffs sought to avoid the Finance Factors mortgage that allegedly encumbered certain residential real property in Kahala owned by IYO (the “Kahala Property”), and recorded in the State of Hawaii Bureau of Conveyances. The Finance Factors mortgage allegedly was to secure a line of credit of $1,000,000 in the name of Hisashi Uehara for the benefit of IYO, as a borrower, and was structured so that no funds could be drawn on the line of credit without the signatures of both officers and directors of IYO – Uehara and Grant Kidani (collectively, referred to herein as the “IYO Officers & Directors”).
The Debtors alleged that IYO “did not receive reasonably equivalent value” in exchange for the Finance Factors mortgage. Defendant argued that IYO “received reasonably equivalent value” at the time IYO granted the Finance Factors mortgage, which was recorded “contemporaneously”. That is, in exchange for the $1,000,000 Finance Factors mortgage, IYO received a “dollar-for-dollar value” in the form of the line of $1,000,000 credit that was only accessible to IYO. According to Defendant, because IYO had “dominion over the line of credit”, it was the “transferee” or “recipient” of the value given by Finance Factors.
According to the Debtors, how the IYO Officers & Directors later spent the funds is relevant to the “reasonably equivalent value”. However, Finance Factor argues that the only relevant transfer is the “granting and recording of the Finance Factors mortgage”. Defendant alleges that the Debtors are “conflating” the transfer to Finance Factors (the
lien” of the Finance Factors mortgage) with later transfers of money by the IYO to other nonparties (the payments). Defendant asserts that each of these subsequent transfers was “separate transfers” of IYO’s property, but Finance Factors was “not a transferee” of such transfers. According to Defendant, Finance Factors is only the transferee of the Debtor’s interest in the Kahala Property and was not the transferee concerning any of the draws on the line of credit, and any use of the proceeds by IYO. Defendant further argues that whether or not IYO obtained “reasonably equivalent value” for those subsequent transfers, does not affect the analysis of whether IYO “received reasonably equivalent value” in exchange for the transfer of an interest in the Kahala Property about the Finance Factors’ mortgage.
Accordingly, Defendant alleges that there is “no dispute as to any material fact” on the issues of “reasonably equivalent value” and “value”, and Finance Factors is entitled to judgment as a “matter of law”.
The hearing on Defendant’s motion for partial summary judgment is scheduled for June 25, 2021, at 10:00 AM at Courtroom, 1132 Bishop Street, Suite 250, Honolulu, HI 96813. The case is In re AGUPLUS, LLC, Case Number – 19-01530 in the United States Bankruptcy Court for the District of Hawaii. The law firm of Tsugawa Lau & Muzzi is representing Defendants. O’Connor Playdon Guben & Inouye, LLP is representing the Plaintiffs. Honorable Bankruptcy Judge Robert J. Faris is overseeing the Debtor’s bankruptcy case.