Opinion
F060575
09-06-2011
CONNIE FLORES, Plaintiff and Appellant, v. WILLIAM DAVIDSON et al., Defendants and Respondents.
Connie Flores, in pro. per., for Plaintiff and Appellant. The Crone Law Group and Michael J. Coffino for Defendants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 08CECG03585)
OPINION
APPEAL from a judgment of the Superior Court of Fresno County. Donald S. Black, Judge.
Connie Flores, in pro. per., for Plaintiff and Appellant.
The Crone Law Group and Michael J. Coffino for Defendants and Respondents.
This is an appeal from judgment entered after the trial court sustained respondents' demurrers without leave to amend. We reverse.
FACTS AND PROCEDURAL HISTORY
This litigation has been proceeding through the trial court since October 2008. It involves four plaintiffs and, by our count, 24 defendants. Appellant Connie Flores is one of the plaintiffs; respondents William Davidson and Michael Hedberg are two of the defendants. The case, at least insofar as it concerns appellant and the present respondents, has reached the stage of demurrer to the second amended complaint. The other plaintiffs, who are not parties to this appeal, are Joe Flores, appellant's spouse;James E. Salven, bankruptcy trustee for two corporations (known collectively as the DDJ entities); and W.D. Farming, LLC, an insolvent corporation (hereafter W.D. Farming).
Joe Flores, a vexatious litigant under Code of Civil Procedure section 391 et seq., was dismissed from the case prior to the present proceedings on the basis that he did not obtain court permission to file the state court litigation. (See Code Civ. Proc., § 391.7.) This court reversed that order of dismissal in Joe Flores's separate appeal. (See Flores v. Georgeson (2011) 191 Cal.App.4th 881.)
The history of this litigation, the relationships among the parties, and the allegations of wrongdoing against the different defendants are multifaceted and complex. Fortunately, that complexity is not pertinent to, nor reflected in, the current appeal. Accordingly, we will present only the most superficial overview of the litigation to provide a context for our discussion of the straightforward issue presented in the appeal.
We previously deferred ruling on the parties' motions for judicial notice. We now deny both motions because the materials attached to the motions are not relevant to the issues on this appeal.
The Floreses recovered a judgment in federal court against two corporations, known in this action as the DDJ entities. Those entities filed for bankruptcy and Salven eventually became the trustee of the bankruptcy estates. The DDJ entities allegedly conveyed their assets to other persons and entities, thereby making those assets unavailable to the bankruptcy estate and to the Floreses as judgment creditors. The plaintiffs filed this action in the trial court to recover damages from those to whom the assets were transferred.
As relevant to this appeal, the plaintiffs filed a second amended complaint. In it, the first, second, and seventh causes of action alleged, in various ways, that the DDJ entities made fraudulent distributions to W.D. Farming and that W.D. Farming distributed the DDJ cash and property in its possession to respondents and Russell Davidson, who were the owners of W.D. Farming. It alleged that neither W.D. Farming nor respondents paid fair consideration for the DDJ transfers, making those transfers fraudulent within the meaning of the Uniform Fraudulent Transfer Act (UFTA), Civil Code section 3439 et seq.
Respondents demurred to the complaint on the ground that it failed to state a cause of action. In their points and authorities in support of the demurrer, respondents' sole basis for the demurrer as to appellant was that the second amended complaint's causes of action mirrored those of the first amended complaint, and the trial court had previously sustained a demurrer without leave to amend as to those causes of action against respondents. The trial court sustained the demurrer without leave to amend as to all relevant causes of action on a different basis, which we describe below. After entry of judgment dismissing the action as to respondents, appellant filed a timely notice of appeal.
The court's ruling on the demurrer to the first amended complaint stated initially that the court sustained the demurrer as to the fifth and ninth causes of action without leave to amend, but "overrule[d] as to the rest" of the causes of action. At a later point in the ruling, however, the court stated that it sustained the demurer to the "first, second, fifth[,] seventh and ninth causes of action ... without leave to amend." The discussion immediately following this statement addressed only the fifth and ninth causes of action and set forth the reasons the demurrer should be sustained as to those two causes of action. Because the trial court decided the demurrer to the second amended complaint on the merits, we assume it determined that its initial statement of its ruling accurately reflected its intended disposition of respondents' demurrer to the first amended complaint.
After all briefing was filed in this case and the matter had been submitted for decision, respondents filed a motion to dismiss or stay the appeal. Appellant filed her opposition to the motion and this court entered an order deferring consideration of the motion until determination of the merits of the appeal.
DISCUSSION
A. The Appeal.
In reviewing a judgment based on an order sustaining a demurrer, we assume the truth of all well-pleaded facts in the operative complaint. We independently review the complaint to determine whether it states a cause of action. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
The second amended complaint is 57 pages in length. In asserting claims by three plaintiffs who had very different relationships to the various defendants, and in asserting claims against multiple defendants who had varying relationships with even a single plaintiff, the second amended complaint is vague, sometimes confusing, and generally difficult to understand. Nevertheless, the parties agree that, insofar as it concerns appellant's claim against respondents, the gist of the first, second, and seventh causes of action is as follows: Property (including cash) belonging to the DDJ entities was transferred to W.D. Farming. As to appellant, a creditor of the DDJ entities, the transfers were fraudulent within the meaning of Civil Code sections 3439.04 and 3439.05, sections of the UFTA. Respondents then caused W.D. Farming to transfer some or all of that property to respondents in bad faith or for less than fair value. The second amended complaint seeks disgorgement of profits and an award of damages.
Civil Code sections 3439.04 and 3439.05 describe under what circumstances a transfer made or obligation incurred by a debtor is fraudulent as to a creditor.
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The trial court ruled, and respondents assert on appeal, that appellant could not state a cause of action against respondents under the UFTA because respondents did not receive any property from the DDJ entities. According to the trial court and respondents, appellant, as creditor of the DDJ entities, is only entitled to attack transfers made by the DDJ entities. Because appellant is not a creditor of W.D. Farming, transfers by W.D. Farming to respondents cannot be the basis for a cause of action on the part of appellant. We disagree.
The UFTA allows creditors to obtain judgments against subsequent transferees (if, of course, the transfer at issue was fraudulent). Civil Code section 3439.08, subdivision (b), expressly provides that a transfer in violation of the UFTA may be set aside not only as to "[t]he first transferee of the asset or the person for whose benefit the transfer was made," but in addition, as to "[a]ny subsequent transferee other than a good faith transferee who took for value or from any subsequent transferee." (Civ. Code, § 3439.08, subds. (b)(1), (2); Judicial Council of Cal. Civ. Jury Instns. (June 2006 new) CACI No. 4207; see generally Fisher v. Gibson (2001) 90 Cal.App.4th 275 and Filip v. Bucurenciu (2005) 129 Cal.App.4th 825.) Under the allegations of the second amended complaint, respondents constitute subsequent transferees who did not act in good faith and did not give value for the DDJ property transferred to them by W.D. Farming.
In the present case, we are merely at the demurrer stage. It may turn out appellant cannot even prove her prima facie case, namely, that respondents received DDJ property that had been transferred to W.D. Farming in violation of the UFTA. It may be that, if appellant meets her initial burden of proof, respondents can establish as an affirmative defense their good faith and their payment of fair value for the property. Nevertheless, at this stage in the litigation, it is clear that respondents' position as secondary transferees does not stand as a bar to appellant's UFTA causes of action against them. That is the sole basis upon which the trial court sustained the demurrer without leave to amend, and upon which it entered judgment against appellant. Accordingly, the judgment must be reversed.
B. The Respondents' Motion to Dismiss or Stay the Appeal.
Respondents' motion contends appellant is not a real party in interest. They assert the only right of action to set aside (or obtain an award of damages based upon) a fraudulent conveyance lies with the trustee of the bankruptcy estate of the DDJ entities. Their motion alleges that respondents (and other defendants in this case) purchased that right of action from the trustee in the bankruptcy proceeding and, thereafter, caused the trustee to dismiss with prejudice the causes of action in the present case. Thus, according to respondents, appellant has no further claims against them.
The sale of the estates' assets to respondents in the bankruptcy court did not, by its terms, purport to affect appellant's claims against respondents. The issue of whether appellant has individual claims against respondents is not an issue that is properly presented for the first time in the appellate court. Accordingly, we deny respondents' motion to dismiss or stay this appeal without prejudice to their right to raise these issues through motion for summary judgment, or other appropriate proceeding, in the trial court.
DISPOSITION
The judgment is reversed. The matter is remanded for entry of an order overuling respondents' demurrer to appellant's second amended complaint. Appellant is awarded her costs on appeal.
DETJEN, J. WE CONCUR:
WISEMAN, Acting P.J.
FRANSON, J.