Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Santa Clara County Super. Ct. No. CV047431
Mihara, Acting P.J.
Defendant Sok-Im Koulabouth (Sok-Im) prevailed at a court trial of plaintiff Kelly & Associates’s action against her. On appeal, plaintiff asserts that the trial court abused its discretion in refusing to reopen the case after its tentative decision in favor of Sok-Im. Plaintiff also asserts that it was entitled to prevail as a matter of law. We find no abuse of discretion, and we conclude that the trial court’s judgment is supported by substantial evidence. Therefore, we affirm the judgment.
I. Factual Background
In 1987, Terry Koulabouth (Terry) and Terry’s parents purchased a residence on Edgecrest Drive in San Jose and obtained a $120,000 mortgage on the residence. Terry and Sok-Im married in 1991. In 1996, Terry and his parents conveyed title to the Edgecrest residence to the parents, and Terry and Sok-Im, as husband and wife. Although Sok-Im did not provide consideration for this transfer of title, after this conveyance Sok-Im “took over the payments on the house” using her wages. Terry and Sok-Im lived together in the Edgecrest residence with Terry’s parents.
A friend of Terry’s family was originally on the deed, but the friend’s name was removed shortly after the property was purchased in 1987. The record does not reveal the price that was paid for the Edgecrest residence in 1987.
In 1996, Terry and James McBride established a partnership called Lion Manufacturing (the partnership). The partnership had no assets, and it initially had meager earnings. In early 2001, the partnership ceased operating as a partnership, and Terry and McBride continued the business as a corporation in which each of them held 50 percent of the shares.
In January 2001, Terry’s parents transferred their interest in the Edgecrest residence to Terry and Sok-Im, as husband and wife. Terry and Sok-Im did not pay Terry’s parents for this transfer.
In March 2001, plaintiff filed a breach of contract action in Alameda County against the partnership and McBride. Terry was aware of the lawsuit, but he did not believe that he was potentially liable because he had not been named as a party. Terry believed that McBride was solely responsible for any potential liability.
In December 2001, Terry transferred his interest in the Edgecrest residence to Sok-Im as her separate property. The Edgecrest residence was worth “[a]round 300 to 350 at the most” at the time of the transfer. There was a $120,000 first deed of trust, and a $45,000 second deed of trust on the residence. Sok-Im refinanced the property after Terry transferred it to her, and she took out a $239,300 loan secured by the property. Sok-Im used the proceeds of the loan to pay off the prior mortgages and $25,000 that Terry owed on his credit cards, to repair and remodel the Edgecrest residence, and to finance a vacation. Sok-Im did not pay Terry for this transfer, but she assumed responsibility for the new mortgage on the residence, which she paid using her wages.
In July 2003, Terry was added as a defendant in the Alameda County action. The corporation ceased doing business in late 2003. In September 2004, plaintiff obtained a judgment in the Alameda County action against the partnership, Terry and McBride. The partnership, Terry and McBride were found jointly and severally liable to plaintiff for $5,597.70 in damages, plus costs and $60,000 in attorney’s fees. The total judgment was for $67,889.48.
Terry, Sok-Im, their children, and Terry’s parents continued to live in the Edgecrest residence until 2004. In 2004, Terry’s parents moved out of the Edgecrest residence. In November 2004, Sok-Im sold the Edgecrest residence for $620,000, and she purchased a residence on Avignon Lane in San Jose as her sole and separate property, where she, Terry and their children thereafter resided. Sok-Im used the proceeds of the sale of the Edgecrest residence to buy the Avignon residence and make improvements to it. The Avignon residence cost $1.135 million, and Sok-Im borrowed $820,000 to buy it. Sok-Im continued to pay the mortgage payments using her wages. At that point, Terry was employed and making $60,000 a year.
In 2005, Terry learned that the partnership owed taxes for 1999, 2000 and 2001.
II. Procedural Background
In August 2005, plaintiff filed an action against Terry and Sok-Im. Plaintiff alleged that Terry was the judgment debtor on the 2004 Alameda County judgment, and Sok-Im had in her possession property that belonged to Terry, which was subject to execution to satisfy that judgment. The complaint contained three causes of action. One cause of action was a creditor’s action against Terry and Sok-Im under Code of Civil Procedure section 708.210. The other two causes of action sought to set aside the December 2001 transfer of property from Terry to Sok-Im as a fraudulent transfer. Terry ceased to be a party to this action after he filed for bankruptcy, and plaintiff tried the case solely against Sok-Im.
Both Terry and Sok-Im testified at the court trial, and portions of Terry’s deposition testimony were read into the record at trial. The primary issues at trial were whether Terry was insolvent when he transferred the Edgecrest residence to Sok-Im, and whether Terry and Sok-Im had a fraudulent intent at the time of the transfer.
Terry testified at trial that he had no assets at the time of the transfer other than his interest in the corporation, but he was being paid $5,000 to $6,000 a month by the corporation. He testified that, at the time of the transfer, the corporation had revenues of $250,000 a month, and he believed that this meant the corporation was worth “close to 2 million.” Sok-Im also believed that the corporation was “doing well” at the time of the transfer.
Terry testified at trial that his transfer to his wife was not intended to avoid any obligation to plaintiff. At his deposition, Terry testified that he transferred his interest in the property to Sok-Im because the couple disagreed about Terry’s investment in the business. They resolved this disagreement by agreeing that Terry would own his interest in the business, and Sok-Im would own the Edgecrest residence. At his deposition, Terry was asked: “My understanding of your testimony is that, in fact, at some point when you conveyed your interest in the Edgecrest property to your wife she paid off your debts and assumed your obligations; is that correct?” Terry responded: “Yes.” Terry and Sok-Im had no discussions about the Alameda County lawsuit at this time.
In closing argument, plaintiff’s trial counsel argued that Terry had been made insolvent as a result of the December 2001 transfer and the transfer should be set aside so that the Alameda County judgment could be executed against the Avignon property. Sok-Im’s trial counsel argued that Terry had not been rendered insolvent by the transfer because he retained his ownership of half of the corporation. He also maintained that neither Terry nor Sok-Im had intended to defraud anyone by means of the transfer.
On August 11, 2006, the trial court issued a tentative decision and proposed statement of decision. The court tentatively concluded that the transfer of the property “was not made with the intent to hinder, delay or defraud creditors.” The trial court credited Terry’s testimony that the corporation was “worth close to $2 million,” and that he was receiving income of $5,000 to $6,000 a month from the corporation at the time of the transfer. It found that “[t]he transfer of the Edgecrest property to his wife did not render [Terry] insolvent.” Although the court believed that “the community acquired a pro tanto interest in Edgecrest by virtue of payments made from community funds to reduce the principal balance of the mortgage,” it concluded that “[t]he evidence presented at trial, however, is insufficient to allow the court to determine the extent of the community interest in Avignon.”
On August 31, 2006, plaintiff filed a motion to reopen its case-in-chief. It asserted that the court had “adopted patently perjured testimony” by Terry regarding his income from, and the value of, the corporation at the time of the transfer. Plaintiff asserted that it could not have anticipated that the court would credit Terry’s uncorroborated trial testimony over his contrary deposition testimony. Plaintiff also claimed that the trial court had failed to resolve the question of whether Terry had retained a right to reimbursement under Family Code section 2640 after conveying the property to his wife.
At the hearing on the motion, plaintiff’s trial counsel argued that the court should reopen to hear testimony “on the contributions to the property and whether there’s been principal reductions in that respect.” He also argued that the case should be reopened to hear “further evidence” about whether Sok-Im gave consideration for the transfer. Finally, he argued that the case should be reopened to “require Mr. Koulabouth to come to court and show that he in fact was receiving” income at the time of the transfer. Sok-Im’s trial counsel argued that plaintiff had had “ample time to develop this case” through discovery and should not be permitted to reopen the case just because “they lost this case.” The trial court opined that Terry’s deposition and trial testimony could be harmonized. The trial court took the motion under submission and denied it.
The court issued a statement of decision that repeated the findings it had made in the tentative decision, and it entered judgment for Sok-Im and awarded her costs. Plaintiff filed a timely notice of appeal from the judgment.
III. Discussion
Plaintiff contends on appeal that the trial court abused its discretion in denying its motion to reopen. It also maintains that the trial court erred as a matter of law in failing to apply Family Code section 2640 and find that plaintiff was entitled to apply the Avignon residence to satisfy the Alameda County judgment to the extent of Terry’s retained reimbursement right and the community’s pro tanto interest in the Avignon residence.
The community estate of a married couple is liable for the debts of either spouse. “Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” (Fam. Code, § 910.) And a person who controls property in which a judgment debtor holds an interest can be sued by the judgment creditor in an effort to apply the judgment debtor’s interest in the property to the satisfaction of the judgment. “If a third person has possession or control of property in which the judgment debtor has an interest or is indebted to the judgment debtor, the judgment creditor may bring an action against the third person to have the interest or debt applied to the satisfaction of the money judgment.” (Code Civ. Proc., § 708.210.)
However, the Avignon residence, which plaintiff sought to apply to the satisfaction of the judgment against Terry, was not part of the “community estate” and Terry held no recorded interest in it. The Avignon residence was held by Sok-Im as her separate property. Hence, neither Family Code section 910 nor Code of Civil Procedure section 708.210 appeared to justify plaintiff’s action against Sok-Im. Plaintiff could only succeed at trial if it could establish that, despite the fact that Sok-Im held sole title to the Avignon residence as her separate property, Terry or the community retained an interest in the Avignon property that could be reached by a creditor.
Plaintiff’s contention at trial was that the December 2001 transmutation of the property from community property to Sok-Im’s separate property was an invalid fraudulent transfer under Civil Code section 3439.04 or 3439.05. Plaintiff could establish that the transfer was fraudulent either by proving that the transfer rendered Terry insolvent (Civ. Code, § 3439.05) or proving that Terry made the transfer “[w]ith actual intent to hinder, delay, or defraud” his creditors (Civ. Code, § 3439.04). Plaintiff tried to prove both that Terry was rendered insolvent by the transfer and that he made the transfer with the actual intent to defraud his creditors. Sok-Im defended on the grounds that Terry was not rendered insolvent by the transfer and he lacked any intent to defraud.
“A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation 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.)
“(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 he or she would incur, debts beyond his or her ability to pay as they became due. [¶] (b) In determining actual intent under paragraph (1) of subdivision (a), consideration may be given, among other factors, to any or all of the following: [¶] (1) Whether the transfer or obligation was to an insider. [¶] (2) Whether the debtor retained possession or control of the property transferred after the transfer. [¶] (3) Whether the transfer or obligation was disclosed or concealed. [¶] (4) Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit. [¶] (5) Whether the transfer was of substantially all the debtor’s assets. [¶] (6) Whether the debtor absconded. [¶] (7) Whether the debtor removed or concealed assets. [¶] (8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred. [¶] (9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred. [¶] (10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred. [¶] (11) Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.” (Civ. Code, § 3439.04.) Plaintiff did not attempt to prove the applicability of Civil Code section 3439.04, subdivision (a)(2).
At trial, plaintiff introduced excerpts from Terry’s deposition testimony. At his deposition, Terry was asked if, at the time of the transfer, he had “any other assets” besides his interest in the Edgecrest residence. Terry responded: “No, except the business, if you want to call it that.” During his deposition, Terry several times attempted to distinguish between the corporation, which he worked for from early 2001 to 2003, and the partnership, which became defunct in early 2001. Terry testified at his deposition that the partnership had ceased doing business before the initiation of the Alameda County lawsuit and “we had to give [the machines] back because I lost everything, yes.” At trial, on the other hand, Terry testified that, at the time of the transfer, he was being paid $5,000 to $6,000 a month by the corporation, and the corporation, in which he was a 50 percent shareholder, was worth “close to 2 million.”
The trial court reconciled Terry’s deposition and trial testimony and concluded that Terry was not insolvent at the time of the transfer because he had a substantial income and a valuable interest in the corporation. Terry’s trial testimony, even when balanced against his deposition testimony, clearly supported the trial court’s finding that Terry was not insolvent at the time of the transfer. And the trial court also believed Terry’s trial testimony that he had not intended to defraud creditors when he transferred his interest in the Edgecrest residence to Sok-Im. We consider plaintiff’s contentions in this context.
A. Motion to Reopen
“Trial courts have broad discretion in deciding whether to reopen the evidence. [Citation.] We review a court’s denial of a motion to reopen evidence for an abuse of discretion. [Citation.] The appropriate test for abuse of discretion is whether the trial court’s decision exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, we have no authority to substitute our decision for that of the trial court.” (Horning v. Shilberg (2005) 130 Cal.App.4th 197, 208-209.) “A trial court does not abuse its discretion when its refuses to reopen a case for new evidence that will not produce a different result. [Citations.] A motion to reopen is also subject to a diligence requirement.” (Broden v. Marin Humane Society (1999) 70 Cal.App.4th 1212, 1222.)
Plaintiff attempted to prove at trial that Terry was rendered insolvent by the transfer of his interest in the property to Sok-Im. Although Terry’s deposition testimony suggested that he had no assets after this transfer because the partnership was defunct, his trial testimony revealed that, at the time of the transfer, he had a significant income from the corporation and a valuable interest in the corporation.
Plaintiff argues that it could not have anticipated Terry’s “false and perjured trial testimony” or the trial court’s crediting such testimony. Plaintiff argues that it was unreasonable for the trial court to refuse to reopen its case to allow plaintiff to rebut Terry’s unanticipated testimony. We disagree.
As the trial court concluded, Terry’s trial and deposition testimony were not necessarily in conflict, but could be harmonized. While the partnership was defunct at the time of the transfer, the corporation remained a valuable business which, although it lacked assets, provided Terry with a substantial income. The trial court could have concluded that plaintiff’s failure to discover, in advance of trial, that Terry claimed to have had a substantial income and own a valuable interest in the corporation at the time of the transfer was due solely to a lack of diligence. The fact that Terry distinguished between the partnership and the corporation at his deposition, and noted that the corporation had continued in business after the demise of the partnership, should have been enough to alert plaintiff to the need for further discovery regarding Terry’s interest in and income from the corporation. Its failure to conduct such discovery demonstrated a lack of diligence. The trial court did not abuse its discretion in denying plaintiff’s motion to reopen its case.
Plaintiff claims that the trial court erred in failing to apply Family Code section 2640 in order to find that the community estate included a portion of the Avignon residence because Terry had not waived his right of reimbursement, and Sok-Im had contributed community property wages to her separate property interest in the Edgecrest and Avignon residences.
Plaintiff’s contention is misplaced. Family Code section 2640 is only applicable when a court is dividing the community estate in a dissolution or separation action. The portion of Family Code section 2640 upon which plaintiff relies is prefaced by “In the division of the community estate under this division . . . .” (Fam. Code, § 2640, subd. (b), italics added.) Division 7 of the Family Code, which is the division in which Family Code section 2640 appears, is the division of the Family Code devoted to dissolution and separation actions in which the community estate is to be divided. (Fam. Code, § 2550.) This action was not a dissolution or separation action, and it did not involve the division of the community estate. Terry and Sok-Im are not separated, are not dissolving their marriage, and are not dividing their community estate. Hence, Family Code section 2640, by its own terms, was inapplicable.
Family Code section 2640 reads in full: “(a) ‘Contributions to the acquisition of property,’ as used in this section, include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property. [¶] (b) In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division. [¶] (c) A party shall be reimbursed for the party’s separate property contributions to the acquisition of property of the other spouse’s separate property estate during the marriage, unless there has been a transmutation in writing pursuant to Chapter 5 (commencing with Section 850) of Part 2 of Division 4, or a written waiver of the right to reimbursement. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division.” (Fam. Code, § 2640.)
IV. Disposition
The judgment is affirmed.
WE CONCUR: McAdams, J., Duffy, J.