Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIS25016, William S. Cannon, Judge.
McDONALD, J.
New Frontier Trading Corporation filed this lawsuit alleging that a quitclaim deed, signed by Cory Humphries (Cory) in favor of Stephanie Humphries (Stephanie) conveying Cory's record interest in a residence (the home) to Stephanie, was a transfer in fraud of creditors. The matter was tried to the court and, after the plaintiff rested his case-in-chief, the court granted the defense motion under Code of Civil Procedure section 631.8 for judgment in favor of defendants. After judgment was entered, Kahn timely appealed. On appeal, Kahn argues the court made numerous legal errors requiring reversal of the judgment.
The original plaintiff was New Frontier Trading Corporation. However, by the time of trial, Reinaldo Kahn (Kahn) had become the named plaintiff in this action as assignee of New Frontier Trading Corporation's rights against Cory. Accordingly, all further references to the plaintiff are to Kahn.
I
FACTUAL AND PROCEDURAL BACKGROUND
A. Facts
Stephanie and her former husband acquired the home in 1978. When they divorced in 1996, Stephanie received the home as her separate property.
Cory and Stephanie married in 1999, and Cory moved into Stephanie's home. At the time of their marriage, Cory owned a business (Ace Metal Trading (Cory's business)) as a sole proprietor. Because both Cory and Stephanie had previously suffered through difficult divorces, they agreed Stephanie would retain the home as her separate property and Cory would retain the business as his separate property.
The home remained vested in Stephanie's separate name until 2003 when she and Cory decided to refinance the home to obtain cash to pay bills. They were told that Stephanie's credit was bad and, to obtain the refinance loan, it would be necessary to place Cory's name on the title to the home. Accordingly, Stephanie signed a quitclaim deed to add Cory on the title to the home, and the deed was recorded in April 2003. Cory did not pay any consideration for adding his name to the title. They agreed the transfer was solely for purposes of the refinance and that he would transfer his interest in the home back to Stephanie in keeping with their agreement that the home was her separate property and the business was his separate property.
Cory and Stephanie began experiencing marital problems in 2004, and Cory moved out for a period and gave up his keys to the home. On November 30, 2004, he signed a quitclaim deed to Stephanie removing his name from title to the home. However, they reconciled and Cory resumed living with Stephanie, and Stephanie did not record the quitclaim deed at that time. However, when they experienced another downturn in their relationship in the spring of 2005, Stephanie recorded the quitclaim on April 1, 2005.
During the time frame that the 2004 quitclaim was signed and later recorded, Cory's business maintained between $35,000 and $40,000 in the bank, as well as equipment and inventory valued at nearly $200,000.
B. The Legal Actions
In November 2004, Kahn's assignor filed a legal action against Cory and Cory's business seeking damages for breach of contract (the underlying action). The underlying action was served on Cory on November 30, 2004. Stephanie was unaware of the underlying action at the time Cory executed the 2004 quitclaim deed. The sole purpose of the 2004 quitclaim deed was to insure that title to the home reflected the agreement of Stephanie and Cory that the home was her separate property.
In 2006, Kahn filed the current action against Cory and Stephanie, alleging Kahn had obtained a July 2005 default judgment against Cory for approximately $33,000. Kahn alleged, among other things, that the transfer of title to the home accomplished by the 2004 quitclaim deed (conveying title from Cory and Stephanie as joint tenants to Stephanie as her separate property) was fraudulent and made with the actual intent to hinder and delay Kahn as a creditor of Cory.
C. The Judgment
After Kahn rested his evidentiary presentation at trial, the court granted the defense motion, made pursuant to Code of Civil Procedure section 631.8, rejecting Kahn's claim that the 2004 quitclaim deed was a fraudulent transfer. The court found there was no intent to hinder, delay or defraud creditors when the quitclaim deed was signed and later recorded, because it credited the defense testimony regarding the innocent explanation for why the parties had engaged in the original 2003 transfer and the subsequent 2004 retransfer of title, and inferred (from the fact Cory's business had ample assets to satisfy the judgment even after the transfer) the transfer was unrelated to any effort to avoid payment by Cory to Kahn.
II
LEGAL PRINCIPLES
A. Standards for Evaluating a Fraudulent Transfer Claim
In 1986, California adopted the updated version of the Uniform Fraudulent Transfer Act (UFTA), enacting revised Civil Code section 3439 et seq. (Wyzard v. Goller (1994) 23 Cal.App.4th 1183, 1189.) "The UFTA permits defrauded creditors to reach property in the hands of a transferee." (Mejia v. Reed (2003) 31 Cal.4th 657, 663.) The UFTA, "like its predecessor and the Statute of 13 Elizabeth, declares rights and provides remedies for unsecured creditors against transfers that impede them in the collection of their claims." (Legis. Com. com., 12A West's Ann. Civ. Code (1997 ed.) foll. § 3439.01, p. 272.) "Under the UFTA, a transfer can be invalid either because of actual fraud [§ 3439.04, subd. (a)(1)] or constructive fraud [§§ 3439.04, subd. (a)(2), 3439.05]." (Mejia v. Reed, at p. 661.) Mejia explained at page 664 that:
All further statutory references are to the Civil Code unless otherwise specified.
"Under the UFTA, a transfer is fraudulent, both as to present and future creditors, if it is made '[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor.' (Civ. Code, § 3439.04, [subd. (a)(1)].) Even without actual fraudulent intent, a transfer may be fraudulent as to present creditors if the debtor did not receive 'a reasonably equivalent value in exchange for the transfer' and 'the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.' (Civ. Code, § 3439.05.)"
"Whether a conveyance was made with fraudulent intent is a question of fact, and proof often consists of inferences from the circumstances surrounding the transfer." (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 834.) Regarding those circumstances, Filip stated:
"Over the years, courts have considered a number of factors, the 'badges of fraud' [citation] described in a Legislative Committee comment to section 3439.04, in determining actual intent. [Citation.] Effective January 1, 2005, those factors are now codified at section 3439.04, subdivision (b) and include considerations such as whether the transfer was made to an insider (§ 3439.04, subd. (b)(1)), whether the transferee retained possession or control after the property was transferred (§ 3439. 04, subd. (b)(2)), whether the transfer was disclosed (§ 3439.04, subd. (b)(3)), whether the debtor had been sued or threatened with suit before the transfer was made (§ 3439.04, subd. (b)(4)), whether the value received by the debtor was reasonably equivalent to the value of the transferred asset (§ 3439.04, subd. (b)(8)), and similar concerns. According to section 3439.04, subdivision (c), this amendment 'does not constitute a change in, but is declaratory of, existing law.' " (Filip v. Bucurenciu, supra, 129 Cal.App.4th at p. 834.)
However, the presence of one or more of the "badges of fraud" does not create a presumption of fraud, but instead provides evidence from which an inference of actual fraudulent intent may, but need not, be drawn. (Wyzard v. Goller, supra, 23 Cal.App.4th at p. 1191.)
B. Standards of Appellate Review
Kahn challenges the court's decision to grant the defense motion for judgment under Code of Civil Procedure section 631.8. In a non jury trial, like the one held in this case, a motion for non suit is no longer recognized; the correct motion is a motion for judgment under Code of Civil Procedure section 631.8. (Commonwealth Memorial, Inc. v. Telophase Society of America (1976) 63 Cal.App.3d 867, 869, fn. 1.) A party may move for judgment in its favor under that section after the opposing party has completed presentation of its evidence. (Code Civ. Proc., § 631.8, subd. (a).) The judge, sitting as trier of fact, may weigh the evidence and order judgment in favor of the moving party. (Ibid.) " ' "The purpose of Code of Civil Procedure section 631.8 is... to dispense with the need for the defendant to produce evidence" ' " where the court is persuaded that the plaintiff has failed to sustain its burden of proof. (Roth v. Parker (1997) 57 Cal.App.4th 542, 549.) Because the trial court evaluates the evidence as a trier of fact, it may refuse to believe some witnesses while crediting the testimony of others. (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1255.)
On appeal, we apply the substantial evidence standard of review to a judgment entered under Code of Civil Procedure section 631.8, reviewing the record most favorably to the judgment and making all reasonable inferences in favor of the prevailing party. (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) We will not reverse the trial court's order granting the motion if its findings are supported by substantial evidence, even if there is other conflicting evidence in the record. (Roth v. Parker, supra, 57 Cal.App.4th at pp. 549-550.)
III
ANALYSIS
The determination of whether a conveyance was made " 'with actual intent to defraud creditors is not a question of law but one of fact to be determined by the trial court' " (Neumeyer v. Crown Funding Corp. (1976) 56 Cal.App.3d 178, 183), and if substantial evidence exists to support the determination that the transfer was not made with actual intent to defraud, we must uphold the determination even though contrary inferences could have been drawn from the circumstantial evidence. (Estate of Cook (1976) 64 Cal.App.3d 852, 862-863.) The evidence given by Stephanie and Cory-explaining why Cory was given a record interest in the home and later reconveyed that interest-provides substantial evidence to support the determination that the reconveyance was for legitimate reasons rather than with the actual intent to defraud creditors.
Kahn's arguments on appeal largely ignore whether substantial evidence supports the crucial determination regarding "actual intent to defraud, " and instead assert there were alleged legal errors by the trial court that require reversal. Although Kahn purports to assert one claim regarding lack of substantial evidence to support the judgment, Kahn's opening brief (by not setting forth the evidence introduced below that supported the trial court's factual determinations) has waived that argument. (Brockey v. Moore (2003) 107 Cal.App.4th 86, 96-97.)
On appeal, Kahn contends there were numerous legal errors committed by the trial court when it evaluated the evidence and concluded there was no actual intent to hinder, delay or defraud creditors by the execution and recording of the quitclaim deed in late 2004 and early 2005. We examine Kahn's claims serially.
Kahn contends it was error for the trial court to consider the fact that Cory had other assets from which Kahn could have satisfied the judgment. Kahn asserts this was error because (1) the presence of ample assets to satisfy a creditor's claim is not a factor listed under section 3439.04, subdivision (b), to be considered in determining actual intent to defraud, and (2) cases such as Fross v. Wotton (1935) 3 Cal.2d 384 and Adams v. Bell (1936) 5 Cal.2d 697 teach that the presence of ample assets to satisfy a creditor's claim does not bar a creditor from setting aside a fraudulent transfer. However, section 3439.04, subdivision (b), states that, "[i]n determining actual intent [to defraud], consideration may be given" to numerous factors, including "[w]hether the transfer was of substantially all the debtor's assets" (§ 3439.04, subd. (b)(5)), and "[w]hether the debtor was insolvent or became insolvent shortly after the transfer was made...." (§ 3439.04, subd. (b)(9)). Both factors necessarily involve consideration of whether the debtor had other assets after the challenged transfer, and therefore consideration of Cory's remaining assets was proper. Kahn's reliance on Fross v. Wotton and Adams v. Bell is unavailing. Those cases merely hold that "[w]here an actual intent to defraud is satisfactorily shown, the conveyance may be set aside even though the debtor has not entirely stripped himself of assets" (Adams v. Bell, supra, 5 Cal.2d at pp. 700-701), but those cases do not hold that evidence of the debtor's remaining assets may not be considered on the predicate issue of actual intent.
Kahn also asserts the court improperly overruled his relevance objection to the evidence showing that Cory remained solvent after the transfer, because Cory's solvency was irrelevant to Kahn's claim under section 3439.04, subdivision (a)(1). Although solvency may not necessarily bar recovery insofar as Kahn asserted a claim under section 3439.04, subdivision (a)(1), Kahn overlooks that his pleadings included the allegations to which solvency was relevant. Kahn's complaint alleged the transfer was fraudulent because it was "done without the exchange of a reasonably equivalent value and [Cory] was engaged or about to engage in a business or transaction for which the remaining assets of [Cory] were unreasonably small, " thus pleading facts sufficient to assert a claim under section 3439.04, subdivision (b)(2). It also alleged Kahn was an existing creditor and Cory's transfer "was made without... receiving a reasonably equivalent value and is fraudulent as to [Kahn], " thus pleading facts sufficient to assert a claim under section 3439.05. Kahn does not contest that claims under either section 3439.04, subdivision (b)(2), or section 3439.05 do require examination of the post transfer solvency of the debtor, and Kahn cites nothing in the record showing he had abandoned those claims before trial.
Those cases appear incongruous with later cases suggesting that a creditor suing to set aside a fraudulent transfer must demonstrate he was injured by the transfer (see, e.g., Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75, 79-81), and the presence of ample assets from which a creditor could satisfy the obligation would appear to be relevant to whether the transfer injured the creditor. However, we need not resolve that incongruity in this case.
Kahn next argues the court erred as a matter of law by finding that the oral agreement between Stephanie and Cory, which showed they intended the 2003 quitclaim deed to be for convenience only and not to convey any joint tenancy ownership interest in the home by Cory, controlled over the presumption (raised by the recorded 2003 quitclaim deed) that Cory did acquire an ownership interest in the home. However, the statutes relied on by Kahn are inapplicable. Certainly, Family Code section 2581 specifies that property acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, is presumed to be community property, and that presumption is a presumption affecting the burden of proof that may be rebutted by certain types of evidence. However, section 2581 states that the specified presumption applies "[f]or the purpose of division of property on dissolution of marriage or legal separation of the parties...." The present action does not involve the division of property on dissolution of marriage. Kahn also argues the recording statutes make recorded title determinative of whether Cory acquired an ownership interest in the home. However, the purposes of the recording statutes are to provide protection for bona fide purchasers for value (see generally Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1250-1252), which is inapplicable to this action. Finally, even assuming the trial court did err in concluding Cory acquired no interest in the home by the 2003 quitclaim deed, we are convinced that error was harmless because he divested himself of that interest in 2004 without any actual intent to defraud creditors, which is fatal to Kahn's claim under section 3439.04, subdivision (a)(1).
For that reason, the other cases cited by Kahn, including In re Marriage of Haines (1995) 33 Cal.App.4th 277 and Estate of Blair (1988) 199 Cal.App.3d 161, are irrelevant because those cases addressed the impact of presumptions in the context of marital dissolutions.
In Kahn's final two claims of error, he asserts the trial court erred in concluding that (1) the 2003 quitclaim deed conveyed a de minimus interest in the home to Cory and that levy on such interest would produce little value for Kahn, and (2) Cory did not remove or conceal this asset in any way. We need not decide whether these findings were legally erroneous because, even assuming error, Kahn has made no effort to satisfy his burden of showing how these alleged errors were prejudicial. (Paterno v. State of California (1999) 74 Cal.App.4th 68, 105-106.) The appellate courts have repeatedly cautioned that, even assuming error, we "cannot presume prejudice and will not reverse the judgment in the absence of an affirmative showing there was a miscarriage of justice. [Citations.] Nor will this court act as counsel for appellant by furnishing a legal argument as to how the trial court's ruling was prejudicial. [Citation] Because [Kahn] has failed to establish prejudice, [his] claim of error fails." (Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 963.)
DISPOSITION
The judgment is affirmed. Defendants are entitled to costs on appeal.
WE CONCUR: McCONNELL, P. J., AARON, J.