Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC369347, Mel Red Recana, Judge.
Law Offices of Baird A. Brown and Baird A. Brown for Plaintiff and Appellant.
No appearance for Defendants and Respondents.
MANELLA, J.
Jane Doe challenges a judgment entered against her on one cause of action for fraudulent transfer. The alleged fraudulent transfer involved the payment of money by Richard Samson to his ex-wife Maria C. Samson pursuant to a preexisting agreement. We conclude that substantial evidence supported the judgment and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
For purposes of this appeal, we accept Doe’s representation that on December 16, 2004, she sued Richard, alleging that he had sexually assaulted her. On March 14, 2007, while Doe’s lawsuit was pending, Richard sold his house located on Natick Avenue to his former fiancée, May Freeda Alexander for $500,000. Proceeds of the sale were distributed as follows:
We refer to persons with the surname Samson by their first names.
• $227,408.08 to Maria.
• $15,000 to 3rd Sky Realty as a commission for Maria.
• $55,000 to Terrance Huber, Richard’s attorney.
• $31,029.83 to Bank of America for payment of a first trust deed.
• $63,064.09 to Richard.
• $24,549.96 to Richard as credit for costs.
• $56,000 to Walter Samson, Richard’s brother.
• $ 22,000 to Stella Kahn, Richard’s sister.
Doe challenges only the $227,408.08 payment made to Maria.
1. Doe’s First Amended Complaint
In her first amended complaint, Doe alleged four causes of action for fraudulent transfer and one cause of action for conspiracy to defraud. Doe named Richard, his ex-fiancée Alexander, his ex-wife Maria, his brother Walter, and his sister Kahn as defendants. Doe did not challenge payments to Bank of America, Richard’s attorney, or 3rd Sky Realty. In her second cause of action for fraudulent transfer, Doe alleged that the $227,408.08 distribution to Maria constituted a fraudulent transfer.
2. Court Trial
Both Richard and Maria testified in a court trial. According to Richard, in November 2006, he decided to sell his house, and Maria served as his real estate agent. After the sale, Richard continued living in the house and paid rent to Alexander. Maria testified that she had tried to persuade Richard to refinance the house instead of selling it. Maria also testified that she did not learn of Doe’s sexual assault lawsuit until she received the summons in this case.
Following Richard and Maria’s divorce, a judgment was entered in 1993 governing the distribution of property, child, and spousal support. It provided in part: “The Court reserves jurisdiction over spousal support for the Petitioner or Respondent until the death of either party, remarriage of the payee or further order of the court.” The court ordered Richard to pay child support in the amount of $700 a month.
In a written agreement dated February 10, 2003 (Agreement), Richard and Maria agreed that Richard would pay $450 in child support and that “upon the sale of the principal residence we will divide the equity equally, in the benefit of the children and any money owed for spousal support, as agreed upon final divorce settlement.” Both Richard and Maria explained that they intended the foregoing sentence to require that upon the sale of Richard’s house on Natick Avenue, Richard would transfer half of the proceeds to Maria for her to hold for the benefit of their two children. Maria and Richard testified that at the time they executed the Agreement, Maria had planned to seek a modification of the judgment to require Richard to pay her spousal support. They entered into the Agreement in lieu of Maria’s requesting a court order for spousal support.
3. The Parties’ Arguments
Doe’s written closing argument emphasized that it was highly unlikely that Richard’s brother or sister were his creditors. Doe argued that Maria could receive money only if the property was sold, and that her “fingerprints [we]re all over these transfers.” Doe further contended that the Agreement between Richard and Maria was not “trustworthy.” In her motion to set aside the judgment, Doe argued that Maria did not plead or prove the elements of Civil Code section 3439.08, subdivision (a), which provides a defense to a claim of fraudulent transfer for a person who “took in good faith and for a reasonably equivalent value.” (§ 3439.08, subd. (a).)
Undesignated statutory citations are to the Civil Code.
Maria argued that she received the payment from escrow in accordance with the terms of the Agreement, which she emphasized had been executed prior to Doe’s lawsuit. Maria cited section 3432, which provides: “[a] debtor may pay one creditor in preference to another, or may give to one creditor security for the payment of his demand in preference to another.”
4. Statement of Decision and Judgment
The court found “[a]s to defendant Maria C. Samson... [the] Agreement executed by Richard and his former wife prior to this case validates the proper transfer of funds.” The court found that this transfer was valid even though it was triggered by the sale of Richard’s house, the timing of which reflected Richard’s state of mind to avoid paying Doe. The court did not find that Maria participated in a conspiracy to defraud Doe. The court entered judgment in favor of Maria, finding the transfer to her “valid.”
The court also found valid the transfer to Richard’s ex-fiancée Alexander. Doe does not challenge that ruling.
With respect to Walter and Kahn, the court found that “Richard intended and did transfer fraudulently the proceeds of the sale of his house to his brother... and his sister....” “Given all the foregoing facts, the Court finds that there is clear and convincing evidence of fraud, malice and oppression that Richard intended and did hinder, delay and defraud plaintiff. He knew that... a verdict against him in [Doe’s underlying litigation was] predictable. However, there [was] no clear and convincing evidence of malice, oppression or fraud against defendants Walter J. Samson and Stella Kahn. The court set aside the distributions made to Richard, Walter, and Kahn and awarded Doe $50,000 in punitive damages.
The court denied Doe’s motion to set aside the judgment and motion for new trial. Doe appealed.
DISCUSSION
Doe argues that she proved actual and constructive fraud, and that Maria failed to plead or prove a defense under section 3439.08, subdivision (a). She requests this court reverse the judgment “with directions to enter judgment for Jane Doe.”
We conclude that the trial court’s implicit finding that Richard and Maria entered a valid agreement pursuant to which Richard paid Maria $277,408.08 was supported by substantial evidence. We rely on the well established legal principle that a debtor may prefer one creditor over another. We need not consider Doe’s alternative argument that Maria failed to prove a defense under section 3439.08.
1. The Judgment Is Supported by Substantial Evidence
“If the party challenging the statement of decision fails to bring omissions or ambiguities in it to the trial court’s attention, then, under Code of Civil Procedure section 634, the appellate court will infer the trial court made implied factual findings favorable to the prevailing party on all issues necessary to support the judgment, including the omitted or ambiguously resolved issues. [Citations.] The appellate court then reviews the implied factual findings under the substantial evidence standard. [Citations.]” (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 59-60.)
“When a judgment or finding of fact is attacked on the ground that there is no substantial evidence to sustain it, the power of the appellate court begins and ends with the determination of whether there is any substantial evidence contradicted or uncontradicted that will support the finding or judgment. [Citation.] Substantial evidence is evidence of ponderable legal significance, reasonable in nature, and of solid value. [Citations.] In reviewing the record for substantial evidence, we are required to review the entire record in the light most favorable to the judgment. [Citation.]” (George v. California Unemployment Ins. Appeals Bd. (2009) 179 Cal.App.4th 1475, 1489.)
a. A Debtor May Prefer One Creditor over Another
Section 3432 codifies the principle that a debtor may prefer one creditor over another. (Lyons v. Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1019 [“for over 400 years, the rule has been that an insolvent or failing debtor can prefer one creditor over another”].) In Wyzard v. Goller (1994) 23 Cal.App.4th 1183, 1185, we applied section 3432 to hold that a debtor’s payment to his attorney and longtime friend was not fraudulent as to another creditor, even though the debtor became insolvent after making the payment. (Wyzard v. Goller, supra, at p. 1185.) There, the debtor entered an agreement with his attorney for fees toward the end of trial, when it became apparent that a judgment would be entered against the debtor and that he would be unable to pay both his legal fees and the judgment. (Id. at p. 1186.) Nevertheless, we concluded that under section 3432, the transfer made to the attorney, “while a preference, [wa]s not for that reason a transfer made to ‘hinder, delay or defraud’” another creditor. (Id. at p. 1191.)
We cited the following language from Smith v. Whitman (1963) 189 A.2d 15, which considered competing claims of creditors in the context of fraudulent conveyances, and concluded that “a preference as such is not a fraudulent conveyance. True, a creditor who collects from an insolvent debtor fares better than other claimants. Yet if the transfer were set aside in favor of another creditor, there would be but a substitution of one preference for another. For that reason a preference cannot be undone by a competing creditor whether the preference was obtained through judicial process or by a transfer from the debtor, and the Uniform Fraudulent Conveyance Act did not alter that proposition.” (Id. at p. 18.)
Doe implicitly recognized the principle that a debtor may prefer one creditor over another, as she never challenged the escrow payments to Bank of America or Richard’s attorney. Assuming the Agreement was valid, the same principle applies to the payment to Maria. If the Agreement was valid, then Richard paid Maria based on an antecedent debt triggered by the sale of the house, and he received value for the payment. (§ 3439.03 [“Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied”].) Upon the sale of the house, Maria’s contingent claim to half the proceeds of the house became a debt owed by Richard. The remaining question is whether the Agreement was valid.
2. Substantial Evidence Supports the Trial Court’s Finding that the Agreement Was Valid
Substantial evidence supports the trial court’s implicit findings that the ambiguity in the Agreement was explained by parole evidence and that the Agreement was supported by consideration.
a. The Terms of the Agreement Were Explained by Parole Evidence
Although Doe urged the trial court to find that the Agreement was not trustworthy, the court was entitled to credit Richard’s and Maria’s testimony that the Agreement reflected their mutual assent to share the proceeds of the Natick residence. Without objection, parole evidence was admitted to explain the terms of the Agreement. (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 39-40 [ambiguity may be explained by parole evidence].) Richard and Maria testified consistently that under the terms of the Agreement, upon the sale of the house, Richard was obligated to transfer half of the proceeds to Maria for the benefit of their children. This testimony supported the trial court’s express conclusion that Richard transferred the $227,408.08 pursuant to the terms of the Agreement. (See section 1636 [“A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.”].)
b. The Agreement Was Supported by Consideration
The record supports the court’s implicit conclusion that the Agreement was supported by consideration, even though the court initially questioned whether the consideration was sufficient. Consideration is an essential element of a contract. (US Ecology, Inc. v. State of California (2001) 92 Cal.App.4th 113, 128; § 1550.) Here, Maria explained that in executing the agreement, she gave up her right to pursue spousal support. Her forbearance constituted sufficient consideration. (See Dixon Lumber Co. v. Peacock (1933) 217 Cal. 415, 418 -419 [wife’s relinquishment of right to seek support for herself and minor daughter constituted consideration for transfer of land]; Rest.2d Contracts, § 71 [a forbearance may constitute consideration for a promise].) Doe has shown neither that the Agreement was invalid nor that reversal is warranted.
Doe argues that Richard did not receive reasonably equivalent value for the promise to pay half the proceeds of the home to his ex-wife. That question would be important if we were required to consider whether Maria proved a defense under section 3439.08, subdivision (a), under which reasonably equivalent value is an element of the defense. However, because we conclude Doe failed to show the transfer was fraudulent, we need not consider whether Maria demonstrated she received reasonably equivalent value.
The trial court’s statement that the transfer of proceeds to Maria indicated Richard’s “state of mind to avoid paying plaintiff’s judgment” is no different from any preference of one creditor over another.
DISPOSITION
The judgment is affirmed.
We concur: EPSTEIN, P. J.WILLHITE, J.