Opinion
C082467
06-01-2018
LUKE ANTHONY PAUL LUMINA, Plaintiff and Appellant, v. LEONARD J. UMINA et al., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. PC20140399)
This appeal arises against a backdrop of more than a decade of litigation between an elderly father and his son. In one chapter of this extended saga, the father, Luke Anthony Paul Lumina, secured a jury verdict against the son, Leonard J. Umina, and the son's wife, Vicki A. Umina for unjust enrichment and was awarded money damages in the amount of $229,500.
To avoid confusion with the parties' last names, we will identify them by their first names. --------
Approximately two months prior to the retrial of the other causes, Leonard transferred to Vicki his interest in a residence owned jointly with her. He and his wife also owned two adjoining 10-acre lots, each with a value in excess of the judgment. Luke has recorded a lien for $229,500 against all three properties. The residence is otherwise unencumbered. Leonard and Vicki acknowledge the residence was subject to Luke's judgment lien before Leonard conveyed his interest to Vicki and remained so thereafter. Leonard owned other substantial assets in Arizona and Massachusetts.
Luke could have easily executed on his abstract of judgment for $229,500, but chose to bring the underlying action in which he claims Leonard's transfer to Vicki of his interest in their residence was a fraudulent attempt to evade payment of the judgment for unjust enrichment. The sole issue we must resolve is whether Luke, a judgment creditor, was injured by the purported fraudulent transfer. The trial court found Luke has not sustained the requisite injury and granted judgment in favor of Leonard and Vicki. (Code Civ. Proc., § 631.8.) We affirm. Luke and Leonard's respective motions to take judicial notice are granted.
FACTUAL BACKGROUND
In 2008 a jury awarded Luke $229,500 against Leonard for unjust enrichment and other causes of action. Leonard sought, and was granted, a partial new trial but the unjust enrichment verdict was unaffected. Approximately two months prior to the retrial, Leonard transferred his interest in his residence on Lesara Court in El Dorado Hills to his wife, Vicki. He and his wife also owned two adjoining 10-acre lots, each with a value of $300,000. Luke recorded a lien for $229,500 against all three properties. The residence is otherwise unencumbered. Leonard and Vicki testified that they understood the Lesara Court residence was subject to Luke's judgment lien both before and after Leonard conveyed his interest to Vicki. Nor were these properties all of Leonard's assets. He owned a home and bank accounts in Arizona, a host of private securities, and was part owner of a newspaper in Massachusetts.
Leonard and Vicki testified and denied any intent to avoid collection of the judgment. The trial court found much of their testimony incredible. But whether or not either or both of them intended to defraud Luke or sought to hinder or delay his collection on the judgment is immaterial if Luke is unable to establish he was injured by the allegedly fraudulent conveyance.
The trial court concluded: "Plaintiff's claim his 'injury' from the transfer is established because he is elderly (in his late 80's) and his lifestyle has been hindered by this litigation is not persuasive. It appears from the evidence that Plaintiff has had the ability to secure satisfaction of his judgment by levying against the bordering two parcels but for some unexplained reason has failed to do so. Moreover, it is undisputed that Plaintiff has a recorded lien or abstract of judgment for $229,500 affecting all three properties. Defendants also stipulated in open court on the record that the judgment is a community property debt and that the Lesara Court property is subject to the judgment lien even after the transfer. Thus, any interest in the Lesara Court property acquired by Vicki[ ] Umina from Leonard as a result of the June 2010 transfer is acquired subject to the judgment lien. Accordingly, the property has not been placed out of Plaintiff's reach. [Citations.] [¶] Therefore, Plaintiff has failed to establish a claim under [Civil Code] section 3439.04 because he has failed to establish he has been injured by the transfer."
The court dismissed Luke's complaint for fraudulent transfer for failure of proof. Code of Civil Procedure section 631.8 authorizes a court to grant a defendant's motion for an involuntary dismissal of some or all of the plaintiff's causes of action when an essential element of the action has not been proven by the close of the plaintiff's case. (Heap v. General Motors Corp. (1977) 66 Cal.App.3d 824, 829.) Leonard appeals in pro. per. Vicki also appeals, but is represented by counsel.
DISCUSSION
A defrauded creditor may, pursuant to the Uniform Fraudulent Transfer Act (UFTA), reach property in the hands of a transferee. (Fidelity National Title Ins. Co. v. Schroeder (2009) 179 Cal.App.4th 834, 840 (Fidelity).) "A fraudulent conveyance under the UFTA involves ' "a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim." ' " (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829.)
The UFTA states in pertinent part: "(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: [¶] (1) With actual intent to hinder, delay, or defraud any creditor of the debtor. [¶] (2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either: [¶] (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. [¶] (B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due." (Civ. Code, § 3439.04.) Luke alleged a cause of action for actual fraud pursuant to subdivision (a)(1) and for constructive fraud pursuant to (a)(2).
To prove either actual or constructive fraud, a plaintiff must prove he or she was injured. "A well-established principle of the law of fraudulent transfers is, 'A transfer in fraud of creditors may be attacked only by one who is injured thereby. Mere intent to delay or defraud is not sufficient; injury to the creditor must be shown affirmatively. In other words, prejudice to the plaintiff is essential. It cannot be said that a creditor has been injured unless the transfer puts beyond [her] reach property [she] otherwise would be able to subject to the payment of [her] debt.' [Citations.]" (Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75, 89 (Mehrtash); accord, Fidelity, supra, 179 Cal.App.4th at p. 841.) Seldom does the issue arise because "ordinarily creditors do not bother to seek avoidance of debtors' conveyances without a clear prospect of profiting by the litigation." (Mehrtash, at p. 80.) Indeed, the trial court observed, "It appears from the evidence that Plaintiff has had the ability to secure satisfaction of his judgment by levying against the bordering two parcels but for some unexplained reason has failed to do so."
Luke challenges the efficacy of Mehrtash and Fidelity, maintaining that the rule requiring injury announced in these cases applies only in constructive fraud cases. We disagree. Neither court limited the well-accepted principle that a plaintiff seeking any of the remedies accorded by the UFTA must establish that he or she was harmed by the fraudulent conveyance to cases involving constructive fraud. To the contrary, the court in Mehrtash characterized the constructive fraud argument a "straw man" and concluded, "Even assuming that plaintiff proved the elements of a constructively fraudulent transfer, plaintiff failed to prove she was injured by it." (Mehrtash, supra, 93 Cal.App.4th at p. 82.)
It is true that the facts in Mehrtash and Fidelity are the flip side of the facts before us. In Mehrtash and Fidelity, the creditor could not collect any damages because the mortgage, homestead exemption, and other encumbrances exceeded the value of the real property that was fraudulently conveyed. As a result, the creditor stood to collect nothing even if he or she prevailed on the fraudulent conveyance claim. By contrast, the Lesara Court residence was unencumbered, except for Luke's judgment lien on the property. Vicki, the transferee, acknowledged that her interest was subject to Luke's lien. It is a mystery, as the trial court observed, why Luke did not simply execute on his lien. The ultimate outcome, however, was the same. Luke, like his counterparts in Mehrtash and Fidelity, suffered no injury as a result of the allegedly fraudulent conveyance. Whereas the creditors in those cases, however, had no apparent recourse against the debtors because there was no equity in the fraudulently conveyed properties, Luke has at his disposal, not only the Lesara Court property now owned by Vicki subject to his lien, but a vast assortment of assets as well. The trial court concluded: "Further, since all three properties are subject to the abstract of judgment, and the parties have stipulated the Lesara Court home is subject to the abstract of judgment, Leonard appears to have the means to satisfy the judgment."
Luke is offended by the notion that he might be required to execute against some of Leonard's other assets, particularly the two undeveloped lots, rather than the Lesara Court residence which he considers more desirable. Relying on a case from the nineteenth century, he insists he need not demonstrate injury as long as he establishes Leonard's fraudulent intent. Ignoring the dispositive issue in the case, as well as the outcome, Luke extracts an idea voiced in dicta in First Nat. Bank of L.A. v. Maxwell (1899) 123 Cal. 360 (Maxwell): " 'Indeed, it matters not, where personal intent to defraud is shown, that the fraudulent conveyance, if allowed to stand, would not harm anyone, by reason of the fact that the debtor has other property ample in amount within the reach of his creditors;' and in Hager v. Shindler[ (1865)] 29 Cal. [47, ]60, it was said: 'A rich man may make a fraudulent deed as well as one who is insolvent.' " (Maxwell, at p. 372.) Thus, Luke would have us reject a rule firmly entrenched in cases under the UTFA in favor of some inapposite dicta in a very old case that predated the UTFA. The modern, apposite rule must prevail.
In Maxwell, the debtor transferred title immediately after entering into an agreement with the creditor bank to forestall execution of its judgment. (Maxwell, supra, 123 Cal. at pp. 363-364.) The questions presented were whether the debtor had intended to delay or defraud her creditors and whether the bank had waived the fraud. (Id. at p. 366.) The Supreme Court found in favor of the creditor bank on both questions. (Id. at pp. 366-370.) After resolving the dispositive issues, the court "briefly noticed" a peripheral issue. (Id. at pp. 371-372.) That issue, according to the court, was the allegation that the debtor had other real and personal property. (Ibid.) The resolution of the issue was dicta because the debtor had already lost and the resolution of the issue would not impact the outcome of the case.
Here, as in Maxwell, Luke will not prevail whether or not the court considered the fact that Leonard had other properties subject to Luke's judgment lien. Luke failed to prove that the Lesara Court property was insufficient to satisfy his judgment plus interest. As plaintiff, it was incumbent upon him to prove all the elements of a fraudulent conveyance under the UFTA, including a showing that he was injured by the fraudulent conveyance. As the trial court concluded, plaintiff failed to prove the requisite injury.
Luke counters that he did demonstrate injury. After all, he points out he is in his late 80's and needs the money. His testimony at trial, however, related to the damages he believed he was entitled to for causes of action he lost in prior lawsuits. He laments his attorneys' fees. He is bitter about how, in his view, his sons mismanaged his affairs when he went abroad for two years. But his financial woes are not attributable to the alleged fraudulent conveyance, but rather to perceived historical wrongs perpetrated by family members. None of these facts counter the fatal fact that he already has a judgment lien against properties with a cumulative value in excess of the amount of the judgment plus interest. He has yet to explain why he does not execute on the liens, including the lien on the very property he alleges was fraudulently conveyed. No one disputes his right to execute, including both Leonard and Vicki who, according to their testimony at trial, fully expect to pay the judgment when the lien against Lesara Court is executed.
Thus, sadly this case is much ado about nothing. Luke has a judgment and has the ability to collect on it whether or not Leonard fraudulently conveyed his interest to his wife. The court properly entered judgment in favor of Leonard and Vicki, not because they are blameless, but based on the critical factual finding that Luke has sustained no injury. The court did not err.
DISPOSITION
The judgment is affirmed. Leonard and Vicki Umina shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
RAYE, P. J. We concur: ROBIE, J. MURRAY, J.