In Re Huber

201 B.R. 685 (2013)

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Nature of the Case

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Facts

D has been involved in real estate development and management in the Puget Sound area for over 40 years. D founded United Western Development, Inc. (UWD) with its principal place of business located in Tacoma, Washington. D used it as a vehicle to engage in real estate development. The operation of UWD and D's other businesses are now primarily performed by his eldest son, Kevin D. Huber. Kevin is heavily involved in managing the various Huber-related interests. Many, if not all, of the projects of D were undertaken by him through the use of an entity separate and apart from UWD, such as through a corporation or limited liability company, with the Debtor owning all, or a portion, of the project. D was required on many projects to sign as guarantor in favor of third party lenders, many of them local banks. These appear to be the largest creditors of his bankruptcy. D was in partnership on many of his projects with Robert Terhune, who was also a guarantor of many of the same projects. Several of their joint projects were beginning to unwind due to a lack of capital. D placed ever-increasing pressure on Terhune to become current on monies he believed he was owed. Terhune threatened to set up his own spendthrift trust, D through his counsel made it clear to Terhune that the setting up of such a trust would be fraudulent as to him, as he considered himself a creditor. Many of the outstanding loans related to D were becoming unpayable by D. In 2007 and 2008 the real estate market began to deteriorate due to the collapse of the subprime mortgage market and the implementation of more restrictive lending standards. On August 19, 2008, Kevin emailed attorney Harold Snow, an estate planning attorney, because 'My father has some assets that he would like to protect and shield.' D retained Snow to set up an asset protection trust, called the Donald Huber Family Trust (Trust), which was established on September 23, 2008. D expressed urgency in setting up the Trust. D transferred $10,000 in cash and his ownership or membership interest in over 25 entities into DGH, LLC, an Alaska limited liability company, set up on September 4, 2008, to receive those interests. DGH, LLC, after it was established, was owned 99% by the Trust and 1% by Kevin Huber, its manager. UWD's shares were transferred directly into the Trust and not through DGH LLC. D's residence at 8310 Warren Street in Tacoma were conveyed to an Alaska corporation (8310, LLC) and then into DGH, LLC. The 8310, LLC then leased the residence to the Debtor, and the Trust made the mortgage payments. The corporate assets were transferred in a similar fashion via quit claim deed to an Alaska corporation, then the new entity's interest into DGH, LLC. D received no consideration for the transfers. Prior to the Trust implementation D owned 13 development projects, his residence and the residence of his disabled daughter, interests in several shopping centers, a few corporations, and $3 million dollars in uncollectable receivables. After the Trust was created D owned only a 5% interest in the James Center Professional Plaza, worthless notes and accounts receivable, and a 50% interest in Burnett Highlands, LLC. The ultimate beneficiaries of the Trust, beside D, consisted of his sons Kevin and Dillon, daughters Darby and Neysa, and stepchildren Amber, Seth, Cedar, and Star. The Debtor also has grandchildren that the Trust assists in paying for their educational expenses. The Trust established by D generated $345,248 in discretionary beneficiary income in 2010 and $360,000 in 2009. The total amount paid out from the Trust assets between October 1, 2010, and July 30, 2012, was $571,332.81. From the date of the filing of the chapter 11 petition on February 10, 2011, through July 30, 2012, the amount of the distributions was $406,837.27. D filed for chapter 11 protection on February 10, 2011. Anchor Mutual Savings Bank filed a Motion for Appointment of Chapter 11 Trustee or Conversion to Chapter 7. An examiner was appointed to look into all of D's assets and transfers prior to bankruptcy. The case was converted to chapter 7 and an injunction was entered preventing selected disbursements from the Trust. P moved for summary judgment.