Opinion
B230040
10-12-2011
EMANUEL AFRAMIAN, Plaintiff and Appellant, v. HAROUN SHABATIAN, Defendant and Respondent.
Kousha Berokim for Plaintiff and Appellant. Law Offices of Robert B. Mobasseri and Robert B. Mobasseri for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC402953)
APPEAL from a judgment of the Superior Court of Los Angeles County. Joanne O'Donnell, Judge. Reversed.
Kousha Berokim for Plaintiff and Appellant.
Law Offices of Robert B. Mobasseri and Robert B. Mobasseri for Defendant and Respondent.
Plaintiff Emanuel Aframian appeals from a judgment of dismissal following the trial court's order sustaining the demurrer of defendant Haroun Shabatian (Shabatian) without leave to amend. He contends that he adequately pled his claim for fraudulent transfer against Shabatian.
Although the pleading is poorly drafted and we are sympathetic to the trial court's frustrations, we conclude that plaintiff alleged the elements to proceed with his claims against Shabatian. Accordingly, we reverse the trial court's order.
FACTUAL AND PROCEDURAL BACKGROUND
The Pleadings
As best as can be discerned from the appellate record, plaintiff initiated this litigation on December 2, 2008. On October 16, 2009, plaintiff filed a first amended complaint and an amendment to the complaint, apparently naming Shabatian as a defendant.
On February 26, 2010, plaintiff filed a second amended complaint. Shabatian demurred, and the trial court sustained his demurrer with leave to amend.
On July 19, 2010, plaintiff filed a third amended verified complaint (TAC) against Shabatian and others. The TAC alleges two causes of action against Shabatian: fraudulent transfer and conspiracy. After sifting through the legal conclusions, statutory pronouncements and citations, case citations, jury instructions, and portions of deposition testimony that are riddled throughout the cause of action, we have summarized plaintiff's claim. According to the TAC, on May 30, 2008, codefendant Homayoun Namvar (Namvar) personally guaranteed a promissory note of Namco Capital Group, Inc. (Namco), in the amount of $1 million, payable to plaintiff. At that time, Namvar owned a home on South Rockingham Avenue in Los Angeles (the property).
"Because this matter comes to us on demurrer, we take the facts from plaintiff's complaint, the allegations of which are deemed true for the limited purpose of determining whether plaintiff has stated a viable cause of action. [Citation.]" (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 885.)
On July 28, 2008, Namvar transferred a security interest in the property in the amount of $5,050,000 to Shabatian without "a reasonably equivalent value" and "with the intent to wrongfully deprive [p]laintiff of the ability to collect on the [p]ersonal [g]uarantee from . . . Namvar, which would become due on September 15, 2008." Namvar allegedly caused the transfer to be recorded for Shabatian's benefit "at a time when his remaining assets were unreasonably small, if any, in relation to the transaction, making . . . Namvar insolvent." This transfer represented the only asset of Namvar. In fact, plaintiff's efforts to locate any other assets and properties owned by Namvar proved futile.
The TAC further alleges that Namvar has continuously failed to pay his debt to plaintiff, claiming that he does not have the financial ability to pay because his funds and assets had been invested with Namco, a bankrupt entity. "Namvar by giving a Note and Deed of Trust to . . . Shabatian, in exchange for no equivalent value, deliberately rendered himself unable to pay the [$1 million personal guarantee] to Plaintiff because this upcoming debt exceeded his ability to pay at a time, because his only asset was completely encumbered, when he was fully aware of Namco's extreme financial difficulties and its resulting inability to pay and that he would be called upon to pay the [personal guarantee] which he was unable to do after completely encumbering his only remaining asset. In other words, . . . Namvar intended to incur the [$5 million] encumbrance on his only asset to effectively make himself [unable] to pay his debt to Plaintiff."
In the conspiracy cause of action, plaintiff alleges that Namvar, Shabatian, and others conspired to commit the fraudulent transfer.
Demurrer
Shabatian demurred to the TAC. He argued that plaintiff "once again" was unable to plead the elements of a cause of action for fraudulent transfer. As the trial court pointed out to plaintiff when it sustained Shabatian's demurrer to the second amended complaint, plaintiff needed to allege that "Namvar was unable to make payments according to the terms of the various encumbrances." In the TAC, he still failed to do so. The "crucial allegation," namely whether the transfer of the property from Namvar to Shabatian caused Namvar to become unable to make his ongoing payment obligations, was absent.
In its order sustaining Shabatian's demurrer to the second amended complaint, the trial court found: "With respect to the eleventh cause of action for fraudulent transfer, plaintiff has now pled sufficient ultimate facts alleging intent to hinder, delay or defraud plaintiff. [Citation.] However, with respect to facts showing that debtor Namvar was engaged or was about to engage in a transaction for which remaining assets were unreasonably small in relation to the transaction or intended to incur or reasonably should have believed that the debtor would incur, debts beyond ability to pay as required, plaintiff still has not alleged that Namvar was unable to make payments according to the terms of the various encumbrances on his assets, such that plaintiff does not allege Namvar's 'insolvency.' Alleging that Namvar's 'sole' asset is encumbered is not an allegation that Namvar is insolvent, since there are no allegations that he was unable to make payments on the encumbrances. Because plaintiff fails to allege facts showing the debtor Homayoun Namvar's inability to meet his financial obligations at the time that defendant Shabatian's Deed of Trust was issued, the claim fails.
"Because plaintiff fails to allege sufficient facts to state a cause of action for fraudulent transfer, the conspiracy claim, which is predicated upon the fraudulent transfer claim, fails as to Shabatian."
Because the fraudulent transfer claim failed, so too did plaintiff's conspiracy cause of action.
Opposition to Demurrer
In an untimely memorandum of points and authorities, plaintiff opposed Shabatian's demurrer. He argued that the TAC was sufficient because he alleged that "Namvar was rendered insolvent as a result of the subject fraudulent transfer as his remaining assets were unreasonably small, if any, in relation to the subject transfer, and that . . . Namvar has been unable to make payments on his debts." Furthermore, because he made a prima facie showing of insolvency, the burden of proof shifted to Namvar to prove that he was solvent or had sufficient assets to pay debts at the time of the transfer. Finally, plaintiff argued that a finding of insolvency was unnecessary to set aside a transfer when there is actual intent to defraud.
Trial Court Order, Judgment, and Appeal
After entertaining oral argument, the trial court sustained Shabatian's demurrer without leave to amend. It reasoned: "Plaintiff still has not alleged that on July 28, 2008, the debtor transferred property and that because of this transfer he was subsequently unable to pay his debts. Plaintiff merely alleges that the debtor refused to pay a debt and that months later the debtor claimed that he had no other assets than a home encumbered with mortgages. This is not sufficient to properly state a claim for fraudulent transfer. Because plaintiff has not cured the defects identified in the court's July 7, 2010, minute order sustaining the defendants' demurrer to the Second Amended Complaint with leave to amend, leave to amend is denied. Because the conspiracy cause of action is based on the fraudulent transfer cause of action, the demurrer to which is sustained without leave to amended, the demurrer to the conspiracy cause of action is likewise sustained without leave to amend."
Judgment was entered, and this timely appeal ensued.
DISCUSSION
I. Standard of review
"Our Supreme Court has set forth the standard of review for ruling on a demurrer dismissal as follows: 'On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed "if any one of the several grounds of demurrer is well taken. [Citations.]" [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment. [Citation.]' [Citations.]" (Payne v. National Collection Systems, Inc. (2001) 91 Cal.App.4th 1037, 1043-1044.)
II. The trial court erred
Plaintiff purports to state a claim for fraudulent transfer against Shabatian. "'A fraudulent conveyance is 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.'" (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648.) The Uniform Fraudulent Transfer Act, codified in Civil Code section 3439 et seq., sets forth the elements of the fraudulent conveyance claim. Section 3439.04 provides, in relevant 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: [¶] . . . [¶] (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 he or she would incur, debts beyond his or her ability to pay as they became due." (§ 3439.04.)
All further statutory references are to the Civil Code unless otherwise indicated.
Indisputably, plaintiff alleges that Namvar transferred the interest in his home to Shabatian without receiving equivalent value. At issue in this appeal is whether plaintiff adequately alleged that Namvar "[i]ntended to incur, or believed or reasonably should have believed that he . . . would incur, debts beyond his . . . ability to pay as they became due." (§ 3439.04, subd. (a)(2)(B).) At best, plaintiff's TAC is poorly constructed; he improperly cites statutes, case law, jury instructions, Namvar's deposition testimony, and a host of legal propositions and conclusions in the TAC. But, after dissecting through the improper material and extrapolating from various paragraphs of the cause of action, we are forced to conclude that plaintiff alleges this basic element of this cause of action.
In his opening brief, plaintiff frames the issue as whether he has adequately alleged the element of insolvency for his fraudulent transfer claim. As discussed herein, we do not perceive this to be the relevant question, and we resolve this appeal by following applicable statutes and guiding principles.
--------
Specifically, plaintiff alleges that Namvar "was fully aware of Namco' extreme financial difficulties and its resulting inability to pay and that he would be called upon to pay the" personal guarantee. "In other words, [Namvar] intended to incur the [$5 million debt on his home] to effectively make himself [unable] to pay his debt to plaintiff." Fairly read, this allegation satisfies plaintiff's pleading requirement. By incurring the $5 million debt on his home, he intended to or reasonably believed or reasonably should have believed that he would be unable to satisfy the personal guarantee owed to plaintiff. At this stage of the litigation, plaintiff's claim for fraudulent transfer may proceed.
Plaintiff's conspiracy cause of action is predicated upon his claim for fraudulent transfer. Shabatian's only argument on appeal is that because the fraudulent transfer claim fails, so too must plaintiff's conspiracy claim. As set forth above, we conclude that the fraudulent transfer cause of action may go forward. It follows that the conspiracy cause of action survives demurrer as well. (Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566, 579.)
DISPOSITION
The judgment in favor of Shabatian is reversed. Plaintiff is entitled to costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
ASHMANN-GERST, J.
We concur:
DOI TODD, Acting P. J.
CHAVEZ, J.