Endo was at fault in a car accident with the Sawada
sisters, and was found liable for about $25k.
He had no liability insurance.
Endo and his wife were owners, by tenancy in entirety
of a house. After the accident, they conveyed the property to their sons,
but continued to live there.
Endo did not reserve a life estate.
After the judgment, Endo' wife died.
Obviously, Endo was attempting to hide the asset so it
couldn't be seized by Sawada.
Hiding assets from creditors by giving them away prior
to a tort judgment is a fraudulent conveyance, and is a criminal
act.
Sawada was unable to get the $25k from Endo, so sued to
have the conveyance set aside and seize the property.
Sawada argued that the judgment made them defacto
creditors of Mr. Endo. That means they effectively held a lien on his
property. Endo's actions in giving his property away so it couldn't be
seized amounted to fraud.
The Trial Court found for Endo and refused to set aside
the conveyance. Sawada appealed.
The Appellate Court affirmed.
The Appellate Court found that under Hawaii law, a
husband and wife do not have separate divisible interests in property
held in a tenancy in entirety.
Mr. and Mrs. Endo did not individually own anything, the
house was owned by both of them.
For example, Mr. Endo could not take out a mortgage on
the property without Mrs. Endo's permission. If it were a joint
tenancy, Mr. Endo could take out a mortgage on his interest in the
property.
Since Mr. Endo didn't technically have an individual
interest in the house, there was nothing that was subject to the claims
of Mr. Endo's creditors.
Endo couldn't sell the house or give it away without
his wife's permission, so therefore he could never have it taken from
him without his wife's permission.
Therefore, since Sawada could never seize the property, it
was not fraud for the Endos to give it away.
In a dissent it was argued that this was not fair to the
Sawadas, and that Mr. and Mrs. Endo each owned half the property and that
Mr. Endo's interest was severable from Mrs. Endo's.
That's the way it is under New Jersey State law.
The basic rule is that an estate by the entirety is
not subject to the claims of the creditors of one of the spouses during
their joint lives.
You can't go after the assets of a spouse for debts
incurred by the other spouse.
Except the IRS. The IRS ignores this rule.
If the property had been held under a joint tenancy,
then each Endo would own an equal interest and that interest could be
seized by a creditor (turning it into a tenancy in common).
If Mrs. Edno had died prior to judgment (and the property
hadn't been given to their sons), the entire property would revert to Mr.
Endo's exclusive ownership, and it could have been seized by Sawada.
