H&H Investment v. Chung CA4/2

I. FACTUAL AND PROCEDURAL BACKGROUND2

HHI is a closely-held corporation, formed in 1991, the only substantial assets of

which are a golf course property and the related golf business. HHI has four owners,

each with a 25 percent share: Hsieh and his wife, and Ho and his wife. Hsieh is married

to Ho’s older sister, so Hsieh and Ho are brothers-in-law. The other party to this appeal,

Chung, is married to one of Hsieh’s sons, and has lived together in the same house with

her in-laws (Hsieh and his wife) since her marriage—27 years as of the time of trial in

this case.

HHI purchased the golf course property from a third party in 1991, a purchase that

was financed in part by a loan from the seller in the amount of $4.5 million. In 1994,

Hsieh arranged for HHI to refinance the loan, utilizing a series of transactions. First,

Tonical Investments, Ltd. (Tonical), an entity controlled by Hsieh, borrowed $4.5 million

from a bank, BNP Paribas (BNP). This loan was secured with collateral provided by the

Hsieh and Ho families. Tonical then loaned the $4.5 million to Chung—this loan was not

secured by any collateral, and indeed only scantily documented with a one page,

handwritten…