Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. BC289808. William Fahey, Judge. Affirmed.
Law Offices of Phillip Schlosberg and Phillip Schlosberg; Benedon & Serlin, Douglas G. Benedon and Gerald M. Serlin for Defendants and Appellants.
Rosen & Associates, Robert C. Rosen, John B. Wallace, and David Paul Bleistein for Plaintiffs and Respondents.
CHAVEZ, J.
George Frangie, Mary Lou Frangie, and Tom Donovan (collectively “appellants”) appeal from a judgment entered after a bench trial in an action to set aside a fraudulent conveyance. We affirm the judgment.
CONTENTIONS
Appellants contend that, in assessing the value of the property at issue, the trial court erroneously disregarded the balance due on one of the liens on the property, known as the GM partners lien. The specific errors appellants recite in connection with the trial court’s findings regarding this lien are (1) that the validity of the GM partners lien was not pled or litigated and therefore should not have been adjudicated; (2) that, because the trial court did address the validity of the lien, GM partners was an indispensable party to the litigation; and (3) that the trial court erroneously imposed the burden of proving the validity of the GM partners lien on appellant George Frangie.
Appellants further contend that the conveyance was not voidable because (1) respondents Iris Investors Limited Partnership and Iris Investors Group, LLC (collectively “respondent”) failed to establish the essential element of injury; and (2) appellant Donovan was a good faith purchaser for reasonably equivalent value.
Finally, appellants contend that the trial court erroneously set aside the Frangie’s conveyance of their personal property in addition to setting aside the conveyance of real property.
BACKGROUND
1. Iris v. Frangie (Frangie I)
In 1999, the founder of respondent (then known as Iris Limited Partnership) was arrested for operating the partnership as a “ponzi scheme.” Appellant George Frangie was appointed chairman of respondent by the other investors, and thereafter controlled the funds of the approximately 300 investors.
In January 2001, respondent filed a lawsuit against appellants George and Mary Lou Frangie and other defendants for an accounting and damages, alleging that the defendants had misappropriated approximately $900,000 of respondent’s funds. Judgment was entered against appellant George Frangie on January 7, 2003, in the amount of $792,534.16.
2. The Sale of the Frangie Residence to Donovan
The Frangies were owners of a home they had built, located at 22650 La Quilla Drive in Chatsworth (the residence). Title to the residence was held by George and Mary Lou Frangie as cotrustees of the Frangie Family Trust.
George Frangie first met Donovan in 1995 or 1996. Mr. Frangie subsequently hired Donovan to manage his automobile dealership franchise, San Luis Nissan BMW. Mr. Frangie also invested $5,000 in an internet business set up by Donovan to buy and restore used airplanes. The investment did not yield any income. In 2000, the bank foreclosed on Mr. Frangie’s automobile dealership. After the foreclosure sale, Mr. Frangie testified that he saw Donovan about once a year. Donovan testified that he considered Mr. Frangie “a friend.” In 2002, Mr. Frangie mentioned to Donovan that he could no longer afford the residence, and Donovan expressed interest in purchasing it.
In October 2002, after the lawsuit in Frangie I had been pending for over 18 months, and shortly before judgment was entered against them, the Frangies purported to convey the residence in Chatsworth to Donovan. At the time, the residence was encumbered with two liens. The first was a deed of trust to Washington Mutual for $1,785,000 dated March 29, 2002. The second was a deed of trust held by GM partners in the amount of $456,232 recorded on April 22, 2002.
GM partners is a group of approximately 15 of Mr. Frangie’s family members and friends who had also invested in Iris Limited Partnership. Mr. Frangie testified that he prepared the deed of trust in favor of GM partners because he had encouraged these people to invest in Iris Limited Partnership, and felt a commitment to help them recover their investment. No monthly payments were due on the GM partners trust deed, nor was there a due date by which it had to be paid.
In the purported purchase and sale agreement, Donovan agreed to assume the Washington Mutual loan of $1,785,000, assume the GM partners lien of $456,232, and give the Frangies $50,000 in cash. However, there was no evidence that Donovan ever formally assumed the Washington Mutual loan, and Washington Mutual continued to mail mortgage statements to Mr. Frangie. Indeed, Donovan testified that he did not apply to Washington Mutual to assume the loan, nor did he inform Washington Mutual that he had purchased the residence. In addition, the trial court found that the $50,000 purportedly paid by Donovan to the Frangies was never deposited into the Frangies’ bank account or into escrow.
As amended in escrow, the purchase agreement provided that Donovan would lease back the residence to the Frangies for a period of 12 months and that the Frangies would pay $5,000 per month to Donovan in rent. During this period, Donovan would live in the guest house. The Frangies also agreed to sell Donovan the furnishings and other personal property in the residence which Donovan would purchase through “an offset against rents due under the real property lease” resulting from the lease back provision in the real estate sale agreement.
3. This Lawsuit to Set Aside the Sale of the Residence
In February 2003, after having received a judgment in Frangie I for $792,534.16, respondent sued appellants (Frangie II) to set aside the sale of the residence as a fraudulent transfer. Following a bench trial, the trial court issued a statement of decision setting aside the sale and awarding punitive damages against appellants.
The trial court found that the Frangie-Donovan transfer presented many of the factors to be considered in determining actual fraud as set forth in the Uniform Fraudulent Transfer Act (Civ. Code, § 3439 et seq.; see Civ. Code, § 3439.04, subd. (b).) Specifically, the trial court found that Mr. Frangie and Donovan were “insiders” as to each other, since Donovan was a “long-time business associate of Mr. Frangie.” Further, the transfer was made while Frangie I was pending. In addition, the Frangies did not receive “reasonably equivalent” consideration for the property. The court expressed “serious doubt” as to whether the $50,000 was actually paid, and noted that there was no evidence that Donovan assumed the Washington Mutual loan. The court concluded that there was “no proof that there was any consideration paid to the Frangies by Donovan.” The court also noted its belief that the “so-called GM Partners’ ‘debt’” was not a genuine obligation.
The Uniform Fraudulent Transfers Act protects unsecured creditors injured by transfers of assets that impede them in the collection of their claims. (Mejia v. Reed (2003) 31 Cal.4th 657, 664.)
Appellants objected to the statement of decision on various grounds, including the trial court’s failure to make a finding on the value of the residence at the time of the purported sale. The trial court then amended its statement of decision to delete the award of punitive damages and to state that the value of the residence at the time of the purported sale was at least $2.2 million.
Judgment was entered for respondent against appellants. The court set aside the sale of both the residence and the household furnishings, and enjoined appellants from selling or encumbering the residence. The court awarded respondent its costs and interest on the underlying judgment. The court further authorized the appointment of a receiver to sell the house and furniture in order to satisfy the judgment in favor of respondent in Frangie I.
On October 27, 2005, the trial court approved the sale of the residence for $3.2 million. The court further ordered any funds remaining after the Washington Mutual trust deed was paid off to be held in an interest bearing account and not distributed without further order of the court.
Appellants filed timely notices of appeal on November 14, 2005.
DISCUSSION
I. The GM Partners Lien
Appellants’ first challenges to the trial court’s decision involve the trial court’s statement that it gave “no weight to the so-called GM Partners’ ‘debt.’” At trial, the Frangies had produced a deed of trust on the residence in favor of GM partners in the amount of $456,232, recorded on April 22, 2002 – after the Frangie I lawsuit had been pending for over a year. According to Mr. Frangie, GM partners is a group of approximately 15 of his family members and friends who had also invested in Iris Limited Partnership. Specifically, the trial court found that Mr. Frangie’s “inability to clearly explain this debt indicates it was not a genuine obligation, but was instead a device to attempt to further encumber [the residence] so as to decrease its value.”
Appellants challenge the trial court’s decision to give no weight to this debt on several grounds. First, they argue that, because the validity of the GM partners’ debt was never pled or litigated, the trial court was without authority to disregard it. Second, they argue that, because the trial court did address the validity of the GM partners’ debt, GM partners was an indispensable party to the litigation. And finally, they argue that the certified copy of the GM partners lien, which was introduced into evidence, created a rebuttable presumption of the lien’s validity, thus it was respondent’s burden to rebut the presumption. Therefore, the trial court erroneously placed the burden on Frangie to “clearly explain” the debt.
For the reasons set forth below, we reject appellants’ claims regarding the GM partners lien.
A. The Trial Court Did Not Determine the Validity of the GM Partners Lien
Before addressing appellants’ specific claims, it is important to note exactly what the trial court did. The court received evidence regarding the encumbrances on the residence, mainly in support of Donovan’s affirmative defense that there was no equity in the property. The trial court rejected this affirmative defense, explaining that it gave no weight to appellants’ evidence that a valid lien in favor of GM partners existed.
Citing Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75 (Mehrtash), appellants argued that respondent could not prove it was injured by the fraudulent conveyance of the residence because the value of the heavily encumbered property could not provide any net recovery for respondent in the event that the transfer was set aside. (Id. at pp. 79, 81-82.)
Although the trial court weighed appellants’ evidence regarding the GM partners lien, it did not adjudicate the validity of the GM partners lien. In fact, respondent points out that the validity of the GM partners lien is the subject of a pending lawsuit filed by the receiver appointed by the trial court (Donell v. GM Partners (Super. Ct. L.A. County, No. BC 343988)). By ordering that any funds remaining after the sale of the residence be held in an interest bearing account until further order of the court, the trial court adequately protected the potential interests of GM partners in the event that its lien on the residence is found to be valid.
The trial court’s decision to give no weight to the evidence of the GM partners lien was based on its judgment as to the credibility of that evidence. The credibility determination was necessary to the court’s factual conclusion regarding the amount of equity in the property. We therefore review this decision under the substantial evidence standard.
B. Substantial Evidence Supports the Trial Court’s Decision to Give No Weight to the Evidence of the GM Partners Lien
It is not the appellate court’s place to reweigh the evidence or pass on the credibility of the witnesses. If there is any substantial evidence to support the trial court’s finding, taking into account all inferences which the court might reasonably have drawn to support its determinations, its finding is conclusive. (Goodman v. Community S. & L. Assn. (1966) 246 Cal.App.2d 13, 22-23.) Our review of the court’s factual determination is thus limited to the question of whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the trier of fact. (Clark v. Pullins (1959) 171 Cal.App.2d 703, 708.)
We find that substantial evidence supported the trial court’s decision to give no weight to the evidence of the GM partners lien in determining whether the residence was so heavily encumbered that it would not yield any recovery to respondent. First, we note that the GM partners lien was recorded during the pendency of Frangie I, which renders it suspect. Second, Mr. Frangie admitted that the beneficiaries of the GM partners lien were 15 of his family and friends. Further, no monthly payments were due on the GM partners trust deed, nor was there a due date by which it had to be paid. And finally, the trial court specifically noted its suspicion of the real estate documents produced by Mr. Frangie, stating “[t]his Court concludes that Mr. Frangie is a clever manipulator who has extensive experience with real estate transactions and their related paperwork. He used these attributes to spend substantial time and effort in generating documents which initially appear to be legitimate but, on closer inspection, are fraudulent.” Given the evidence available regarding the GM partners lien, we find that there was ample support for the trial court’s decision.
Mr. Frangie testified that he was in the title business from 1976 to 1997, and managed a title company from 1987 to 1997. He also testified that he was personally involved in the sale of 12 to 15 real properties.
C. Appellants’ Claims Regarding the GM Partners Lien Lack Merit
Our review of the precise actions of the trial court in this matter disposes of appellants’ contentions regarding the GM partners lien. Appellants’ first argument is that the validity of the lien was never pled or litigated. We agree. The trial court did not declare the lien invalid and took no action against the potential rights of GM partners. The validity of the lien is the subject of current litigation, and the interest of GM partners is protected because the funds remaining after the sale of the residence may not be disturbed until further court order. However, as set forth above, the trial court’s decision to give no weight to appellants’ evidence regarding the GM partners lien in determining that there was equity in the residence was amply supported by the record.
Appellants’ second argument is that, because GM partners’ interest was affected by the trial court’s decision, GM partners was an indispensable party to the litigation. As explained above, GM partners was not affected by the trial court’s decision. The trial court protected GM partners’ interest by ordering that the funds remaining from the sale be held until further notice. GM partners’ interest will be adjudicated in currently pending litigation to which GM partners is a named party. (Donell v. GM Partners (Super. Ct. L.A. County, No. BC 343988).)
Finally, in contrast to appellants’ contention, the trial court did not erroneously impose the burden of proving the validity of the GM partners lien on appellants. Again, the trial court did not determine the validity of the lien. Instead, it determined that appellants’ evidence regarding the existence of the lien lacked credibility. On that issue, we may not substitute our judgment for that of the trial court, but may only review the record for a determination of whether the trial court’s decision is supported by substantial evidence. (Goodman v. Community S. & L. Assn., supra, 246 Cal.App.2d at pp. 22-23.) As discussed above, our review of the record shows substantial support for the trial court’s decision.
Appellants’ citation to Evidence Code sections 602 and 1600 which, read together, suggest that Mr. Frangie’s introduction into evidence of a certified copy of the GM partners lien created a rebuttable presumption of its validity, does not convince us otherwise. Respondent adequately rebutted the presumption through its examination of the nature and timing of the lien as well as the identity of the lienholders.
II. Substantial Evidence Supports the Trial Court’s Finding That Respondent Was Injured By the Fraudulent Conveyance
Under the Uniform Fraudulent Transfer Act, a creditor can set aside a fraudulent transfer of an asset by alleging actual fraud (Civ. Code, § 3439.04, subd. (a)) or constructive fraud (Civ. Code, § 3439.05.). Regardless of whether a creditor establishes actual fraud, constructive fraud, or both, a fraudulent transfer of assets may be attacked only by one who is injured by the transfer. (Mehrtash, supra, 93 Cal.App.4th at p. 80.) Appellants argue that, because the residence was encumbered in an amount exceeding its fair market value at the time of the sale, respondent failed to show such injury.
In support of their argument, appellants rely heavily on Mehrtash. In Mehrtash, the plaintiff, a creditor of her former husband’s delinquent spousal support order, brought an action against her former husband to set aside an allegedly fraudulent conveyance by him of his former home to his stepsons. The Court of Appeal determined that the former husband’s motion for judgment was properly granted because the plaintiff had produced no evidence that the value of the heavily mortgaged property could support any net recovery for the plaintiff in the event the conveyance was set aside. Therefore, the plaintiff had failed to prove that she was injured by the conveyance. (Mehrtash, supra, 93 Cal.App.4th at pp. 79, 81-82.)
Appellants attempt to draw a parallel to the fraudulent transfer of the Frangie residence. They explain that, pursuant to the trial court’s amended statement of decision, the value of the residence at the time of the sale was “at least $2.2 million as of October 2002.” Using a value of $2.2 million as a starting point, appellants explain that, because the Washington Mutual lien encumbered the property in the amount of $1,785,000, the GM partners lien encumbered the property in the amount of $456,232, and the Frangies had a homestead exemption in the amount of $75,000, the property’s value was -$116,232. Because the property had a negative value, appellants reason, respondent could not prove that the fraudulent transfer caused respondent any injury.
Appellants fail to discuss the standard of review for this issue. In reviewing the trial court’s finding that respondent was injured by the fraudulent transfer of the residence, we seek to determine only whether there is any substantial evidence, contradicted or uncontradicted, which supports the conclusion reached by the trier of fact. (Clark v. Pullins, supra, 171 Cal.App.2d at p. 708.)
As discussed above, substantial evidence supported the trial court’s decision to give “no weight to the so-called GM Partners’ ‘debt.’” The lien, which had no due date and under which no payments were due, was undertaken by Mr. Frangie during the pendency of Frangie I and was a purported debt to 15 close friends and family members. This evidence supported the trial court’s decision to decline to consider it in evaluating the value of the residence. In reviewing the value of the residence without considering the GM partners debt, even under appellants’ calculation, the property would have had a value in October 2002 of $340,000.
In addition, the trial court’s indication that the property was worth “at least” $2.2 million suggests that the trial court believed the value may have been more. This implicit finding was supported by the testimony of respondent’s expert witness that, in October 2002, the value of the residence was between $2.3 million and $2.5 million. In addition, Mr. Frangie had represented the value of the property at $2.5 million on a schedule of real estate which he signed on November 7, 1997. This evidence also supported the conclusion that there was equity in the residence in October 2002, and therefore also supports the trial court’s finding that respondent was injured by the fraudulent conveyance.
III. Substantial Evidence Supports the Trial Court’s Finding That Donovan Was Not a Good Faith Purchaser for Reasonably Equivalent Value
A transfer is not voidable under the Uniform Fraudulent Transfer Act against a person who (1) “took in good faith” and (2) took “for a reasonably equivalent value.” (Civ Code, § 3439.08, subd. (a).) Appellants argue that because Donovan satisfies both requirements of this statute, the transfer of the residence is not voidable.
The trial court rejected this argument. As to the question of whether Donovan was a good faith purchaser, the court stated that Donovan, as “a close friend and long-time business associate of Mr. Frangie,” was an “insider.” The court also pointed out that “the Frangies retained possession and control of the main house and its furniture, while relegating the so-called ‘purchaser’ (Donovan) to the guest house.” In addition, the court noted that the transfer was made while Frangie I was ongoing, the purchase and sale agreement having been signed on “the second day of trial in the underlying case.” The transfer amounted to essentially all of the Frangies’ remaining assets.
The court further found that “the Frangies did not obtain ‘reasonably equivalent’ consideration for the property.” The court expressed “serious doubts” as to whether Donovan even paid the $50,000 he claimed to have paid. Further, “and unlike in the ordinary sale of a home, the Frangies did not have their debt to Washington Mutual paid off by the purchaser.” In sum, the court concluded that “there is no proof that there was any consideration paid to the Frangies by Donovan.”
Again, our role is not to substitute our judgment for that of the trial court. We may only determine whether any substantial evidence, contradicted or uncontradicted, supports the trial court’s findings. In particular, we recognize that the trial court had a better opportunity to judge the credibility of the witnesses, and “to the extent that [the trial court’s findings] rest upon an evaluation of credibility, [they] should be regarded as conclusive on appeal.” (In re Fries’ Estate (1965) 238 Cal.App.2d 558, 561.)
Each of the trial court’s findings regarding its evaluation of the exception found in Civil Code section 3439.08, subdivision (a) is supported in the record.
Donovan and Mr. Frangie both testified to the history of their relationship. Mr. Frangie described Donovan as a “friend” who had worked for the automobile dealership which Mr. Frangie had owned. Donovan’s position had been vice president of the company that owned the dealership. In addition, Mr. Frangie and Donovan had been coplaintiffs in a lawsuit against their former attorneys, and there was at least one promissory note that Mr. Frangie and Donovan had cosigned in connection with the dealership. In addition, Mr. Frangie had invested $5,000 for a 50 percent interest in an online aircraft sales business started by Mr. Donovan, which never yielded a profit. Donovan testified to the same business relationships, and indicated that he saw Mr. Frangie socially after the failure of the car dealership. This evidence sufficiently suggested the “insider” relationship which the trial court concluded existed between Mr. Frangie and Donovan. Given the suspicious circumstances surrounding the sale, including the lengthy lease back and questionable consideration, the court was free to infer that Donovan “collude[d] with the debtor or otherwise actively participate[d] in the fraudulent scheme.” (Lewis v. Superior Court (1994) 30 Cal.App.4th 1850, 1858-1859.) While Donovan testified that he had no knowledge of any pending lawsuit or claims against Mr. Frangie by respondent, the trial court was free to give little weight to that testimony.
The trial court’s finding that Donovan did not give reasonably equivalent consideration in exchange for the residence was also supported by the record. While Mr. Frangie testified that Donovan “assumed” the Washington Mutual loan, he admitted that Washington Mutual continued to send the mortgage statements to Mr. Frangie’s mail box – a post office box in Chatsworth, California – and stated that he was unaware of whether Donovan attempted to formally assume the Washington Mutual loan. While the Frangies had agreed to “lease back” the property for 12 months, Mr. Frangie testified that Donovan gave him rent concessions for six months as well as giving him a check for $5,000 and Mrs. Frangie a check for $5,000 because they had arranged for a film shoot at the residence. Finally, while Mr. Frangie produced a “Non-Negotiable Purchaser Copy” of a $50,000 cashiers check supposedly paid to him by Donovan, no copy of the actual cashier’s check with an endorsement or proof of payment by the bank was ever introduced into evidence. In addition, no evidence of a deposit of $50,000 into a bank account of the Frangies, or a deposit into escrow, was ever introduced.
Based on the evidence summarized above, we conclude that the trial court’s determination that Donovan was not a good faith purchaser for value is supported by substantial evidence.
IV. The Trial Court Did Not Err in Setting Aside the Frangies’ Sale of Their Personal Property
The trial court’s decision reflects its implicit finding that the fraudulent transfer was a joint real estate and personal property transfer. As amended during escrow, the sale of the residence to Donovan provided that the Frangies also agreed to sell Donovan the furnishings and other personal property in the residence in exchange for rent concessions during the lease back period. In concluding that the Uniform Fraudulent Transfer Act, Civil Code section 3439.04, subdivision (a)(2)(B) had been violated, the trial court stated: “the Frangies did not receive reasonably equivalent value in exchange for the home and furniture and they believed or reasonably should have believed that they would incur a debt (an adverse judgment) beyond their ability to pay as it came due.” Thus, the trial court set aside both the transfer of the residence and the “purported sale of the furniture.”
Appellants objected to the trial court’s statement of decision, in part because of the trial court’s failure to address the legal basis for an order regarding the transfer of personal property when respondent had made no request in its pleadings for such an order. The trial court addressed this objection by declaring: “Plaintiff’s complaint will be deemed amended according to proof to allege the fraudulent transfer of the furniture listed on Exhibit 21.” The court supported its action with citation to Burrows v. Burrows (1936) 18 Cal.App.2d 275, 279 (“the trial court is invested with discretionary power to permit and even to order that the pleadings of the parties be amended at any stage of the trial . . . to make such pleadings conform to the proofs”), as well as Code of Civil Procedure section 470 (providing that, where there is an immaterial variance in the pleadings, “the court may direct the fact to be found according to the evidence, or may order an immediate amendment, without costs”).
Appellants contend that the trial court’s decision to set aside the sale of personal property was erroneous for several reasons. First, they claim that the validity of the sale of personal property was neither raised in the pleadings nor litigated at trial. Second, they claim that the Frangies’ personal property was exempt under nonbankruptcy law and therefore was not an “asset” under the Uniform Fraudulent Transfer Act. And finally, they contend that the sale of personal property was not voidable against Donovan because he was a good faith purchaser for reasonably equivalent value.
A. The Furniture Sale Was an Issue at Trial
Preliminarily, we find that substantial evidence supports the trial court’s implicit conclusion that the sale of the residence and the sale of personal property were not two distinct sales but were in fact one transaction. Evidence supporting the trial court’s decision includes the fact that the personal property sale was included in the sale of the residence during the escrow period and that the consideration for the personal property came in the form of six months of rent forgiveness on the lease back provision. In addition, Mr. Frangie provided testimony regarding the furniture sale, in which he admitted that the provision allowing for rental of the residence was entered at “roughly the same time” as the agreement to sell his furnishings to Donovan and that the consideration was to be paid in rent concessions for the first six months following the close of escrow. Because the sale of personal property was not a distinct transaction, appellants cannot now claim that it was not at issue at trial. The trial court properly considered the personal property sale and amended the pleadings to conform to proof.
The cases cited by appellants do not convince us otherwise. Appellants cite Lewis v. South San Francisco Yellow Cab Co. (1949) 93 Cal.App.2d 849, 853, for the proposition that a party is not entitled to a cause of action not pleaded, even if disclosed by the evidence. In Lewis, “an entirely separate set of facts constituting an entirely different cause of action from that pleaded” came to light during the trial. (Id. at p. 852.) Here, in contrast, the facts revealed only that the fraudulent transfer at issue consisted of more than just the sale of the residence – it included the sale of the home furnishings as well. Tri-Delta Engineering, Inc. v. Insurance Co. of North America (1978) 80 Cal.App.3d 752 is similarly unpersuasive. There, the theory the respondent proposed in order to justify the verdict was “never the subject of jury instructions or ever treated as within the scope of the issues.” (Id. at p. 760.) Here, as we have discussed, the furniture transaction was an inextricable part of the fraudulent transfer of the residence and was well within the scope of the issues. Yost v. Hillcrest Motor Co. (1963) 215 Cal.App.2d 108 is also distinguishable because the appellant had “objected continuously” to the interjection of the new issue and its requests for a continuance to address the issue were denied. (Id. at pp. 110-111.) Such was not the case here, where appellants were aware of the evidence regarding the furniture sale and made no objection to the introduction of that evidence. Appellants could not reasonably have objected that the furniture sale was outside the scope of the issues.
Appellants admit that their sole objection regarding the furniture sale was to the trial court’s statement of decision.
B. Exemption for Household Furnishings
Appellants’ next argument is that the personal property was exempt under nonbankruptcy law and therefore could not be considered an asset under the Uniform Fraudulent Transfer Act. In support of their position, appellants first cite the Uniform Fraudulent Transfer Act, which defines “asset,” in relevant part, as “property of a debtor, but the term does not include, the following: [¶] . . . [¶] (2) Property to the extent it is generally exempt under nonbankruptcy law.” (Civ. Code, § 3439.01, subd. (a)(2).) Appellants then cite Code of Civil Procedure, section 704.020, which provides that
“(a) Household furnishings, appliances, provisions, wearing apparel, and other personal effects are exempt in the following cases:
“(1) If ordinarily and reasonably necessary to, and personally used or procured for use by, the judgment debtor and members of the judgment debtor’s family at the judgment debtor’s principal place of residence.”
However, as respondent points out, the fact that an item of personal property is also a household good does not render it automatically exempt. Code of Civil Procedure section 704.020, subdivision (b) provides:
“(b) In determining whether an item of property is ‘ordinarily and reasonably necessary’ under subdivision (a), the court shall take into account both of the following:
“(1) The extent to which the particular type of item is ordinarily found in a household.
“(2) Whether the particular item has extraordinary value as compared to the value of items of the same type found in other households.”
We note that the bill of sale describing the personal property sold to Donovan included, among other things, a piano, two computers, two printers, a treadmill, a recumbent bike, a Stairmaster, flower pots, a vase, and a pool table. While we find it questionable whether such items should be considered exempt under Code of Civil Procedure section 704.020, we find that we need not address this question. Even if the furniture sale could be considered a separate transaction – which it cannot – the furniture sale is void for lack of consideration. The sale of the residence has been set aside. Therefore the lease back provision is invalid. Indeed, because Donovan was not the legal owner of the residence, he had no authority to lease the property to the Frangies or charge rent. As a result, the purported consideration for the furniture, which was to come in the form of rent forgiveness, is nonexistent. The trial court did not err in setting aside this transaction, which is void under basic contract principles for lack of consideration.
The bill of sale for the furniture states: “Tom Donovan, . . . purchaser of this furniture, does herein agree to accept this furniture as full and complete payment for the rents due for the first six months of the real property lease for the residence located at 22650 La Quilla Drive, Chatsworth, Ca 91311.” While the total estimated value of the furniture is set forth as $30,000, the agreement does not provide that any money would change hands, only that the Frangies were transferring their “title, interest and rights” to the furniture as “an offset against rents due under the real property lease” resulting from the fraudulent conveyance of the residence.
Because we have found that the sale of the residence has been properly set aside, Donovan received no consideration for the furniture, and we need not address appellants’ argument that Donovan was a good faith purchaser for reasonably equivalent value. Donovan had no authority to charge rent to the Frangies, thus he had no authority to forgive such rent. He therefore gave the Frangies no consideration for the furniture and cannot be considered to have provided “reasonably equivalent value.”
DISPOSITION
The judgment is affirmed. Appellants shall pay the costs of appeal.
We concur:BOREN, P. J., ASHMANN-GERST, J.