Sawada v. Endo
561 P.2d 1291 (1977)

  • 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.