Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County Nos. BA255384 Michael M. Johnson, Judge. Affirmed.
Law Offices of Early M. Hawkins, Early M. Hawkins, for Defendant and Appellant.
Edmund G. Brown, Jr., Attorney General, Dane R. Gillette, Chief Assistant Attorney General, Pamela C. Hamanaka, Senior Assistant Attorney General, Lawrence M. Daniels, Supervising Deputy Attorney General, Zee Rodriguez, Deputy Attorney General, for Plaintiff and Respondent.
MOSK, J.
INTRODUCTION
Defendant and appellant Wanda G. Cleveland (defendant) pleaded guilty to 11 charged counts of insurance fraud by knowingly preparing a writing with the intent to present the writing in support of a fraudulent claim (Pen. Code, § 550, subd. (a)(5) ), one count of insurance fraud by presenting a false or fraudulent claim (§ 550, subd. (a)(1)), grand theft (§ 487, subd. (a)), and willfully filing a false tax return (Rev. & Tax Code, § 19706). As to the insurance fraud by presenting a false or fraudulent claim and grand theft counts, defendant admitted taking a total amount of money of a value exceeding $150,000. (§ 12022.6, subd. (a)(2).) As to the insurance fraud by presenting a false or fraudulent claim count, the grand theft count, and three of the insurance fraud by preparing a writing counts, defendant admitted taking a total amount of money of a value between $100,000 and $500,000 within the meaning of section 186.11, subdivision (a)(3). The trial court placed defendant on probation subject to various terms and conditions, including the condition that she pay restitution to one of the victims in the amount of $152,000, and to the Franchise Tax Board in the amount of $22,436.05.
All statutory citations are to the Penal Code unless otherwise noted.
Defendant’s husband, Willie Cleveland (Cleveland), was charged as a defendant in the same amended information as defendant. Cleveland pleaded guilty to various charges, and admitted various allegations, including the allegation that he violated section 186.11, subdivision (a)(2). The prosecution alleged Cleveland took a total of $1,056,000. Cleveland is not a party to this appeal.
The trial court also granted the prosecution’s motion for a preliminary injunction concerning, as relevant here, certain real property to be used for restitution. In granting the motion, the trial court found that defendant’s and Cleveland’s residence at 10418 Gridley Road in Santa Fe Springs California (Gridley Road property) is a community property asset and ordered the Gridley Road property be forfeited by defendant and Cleveland and sold by the People to satisfy the restitution obligations of defendant and Cleveland. On appeal, defendant contends that the trial court erred in granting the preliminary injunction and in finding that the transfer of the Gridley Road property by Cleveland to defendant was a fraudulent conveyance so that the property was community property. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Because the sole issue on appeal concerns the characterization of the Gridley Road property as community property for purposes of paying restitution, an issue that does not implicate the facts underlying defendant’s offenses, we dispense with a recitation of those facts.
In granting the prosecution’s motion for a preliminary injunction, the trial court made the following factual findings: defendant and Cleveland were married prior to December 1993; on December 12, 1993, defendant and Cleveland acquired the Gridley Road property as husband and wife, joint tenants, and they continuously resided in that property; on March 31, 1997, Cleveland executed a quitclaim deed concerning the Gridley Road property to defendant; on December 7, 1999, Cleveland filed a Chapter 7 bankruptcy petition in federal court that listed the Gridley Road property as one of his assets; on July 21, 2004, Cleveland executed a grant deed of the Gridley Road property to defendant; this criminal action was initiated on March 14, 2006, by a felony complaint that alleged crimes that covered the period from September 1998 through October 2003; on May 25, 2007, Cleveland and defendant entered pleas in the trial court that included criminal fraud; and Cleveland and defendant remained married from 1983 through the present.
The trial court found that this listing was significant because Cleveland recognized that the Gridley Road property was a property in which he had an interest and not a property that he had transferred away.
At the hearing, defendant’s counsel represented that defendant and Cleveland were married when they acquired the Gridley Road property in 1983, and that they continued to be married up to and including the time of the hearing.
The trial court found that the Gridley Road property is community property under Family Code sections 751 and 760, and is subject to Cleveland’s restitution obligations under Family Code section 910. The trial court further found that the March 31, 1997, quitclaim deed and the July 21, 2004, grant deed were fraudulent conveyances.
In support of its argument that the March 31, 1997, quitclaim deed and the July 21, 2004, grant deed were fraudulent transfers, the prosecution presented evidence that Michael Eubanks obtained a $12,784.25 judgment against Cleveland in 1993, Shi H. Kim, doing business as Top Hat Liquor, obtained a $4,050 judgment against Cleveland in 1994, and Consumer Portfolio Services, Inc. obtained a $30,078.41 judgment against Cleveland in 1995. On appeal, defendant concedes that the Gridley Road property consisted of substantially all of Cleveland’s assets, that Cleveland quitclaimed the Gridley Road property to her for minimal consideration – “‘$100.00 or less,’” Cleveland became insolvent when he filed for bankruptcy in 1999, and Cleveland quitclaimed the property to defendant after becoming indebted.
Defendant contends that the trial court erred when it found that the Gridley Road property is a community property asset that can be used to satisfy both of their restitution obligations rather than her separate property that can be used only to satisfy her restitution obligation. If the Gridley Road property were defendant’s separate property, she would end up with an asset arising out of the property, even if the property is subject to her obligation, because the property is probably worth more than her obligation. On the other hand, if the property is community property, it could be used to satisfy Cleveland’s obligations, as well as defendant’s obligation. That is why defendant appeals the decision that the property is community property. Defendant contends that Cleveland quitclaimed the property to her in 1997, prior to any criminal conduct, and affirmed that transfer of property in a 2004 grant deed.
DISCUSSION
A. Relevant Legal Principles
The “aggravated white collar crime” enhancement in section 186.11 provides for an additional term of imprisonment, fines, and restitution for a defendant who is convicted of committing “two or more related felonies, a material element of which is fraud or embezzlement, which involve a pattern of related felony conduct, and the pattern of related felony conduct involves the taking of, or results in the loss by another person or entity of, more than one hundred thousand dollars ($100,000).” (§ 186.11, subds. (a), (c), & (d).) When a person is charged with having committed two or more qualifying felonies and the section 186.11 enhancement has been alleged, the trial court may preserve, subject to certain limitations not relevant here, “any asset or property that is in the control of that person, and any asset or property that has been transferred by that person to a third party, subsequent to the commission of any [qualifying] criminal act alleged . . . in order to pay restitution and fines imposed pursuant” to section 186.11. (§ 186.11, subd. (e)(1).) If the section 186.11 allegation is admitted or found true, the trial court may levy upon this property to pay restitution and fines imposed pursuant to section 186.11. (Ibid.)
“Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.” (Fam. Code, § 760.) “The respective interests of the husband and wife in community property during continuance of the marriage relation are present, existing, and equal interests.” (Fam. Code, § 751.) “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, subd. (a).) “Except as otherwise provided by statute: [¶] (1) The separate property of a married person is not liable for a debt incurred by the person’s spouse before or during marriage.” (Fam. Code, § 913, subd. (b)(1).) Pursuant to Family Code section 850, subdivision (a), married persons may transmute community property to the separate property of either spouse, with or without consideration. Such transmutations under Family Code section 850, subdivision (a), are subject to the laws governing fraudulent transfers. (Fam. Code, § 851.)
“‘A quitclaim deed transfers whatever present right or interest the grantor has in the property. [Citation.]’ [Citations.] More specifically, ‘it has been often decided by this court that a quitclaim deed conveys the absolute fee-simple title if the party executing it had such title [citations]; and therefore such deed does not imply any precedent interest or easement in the releasee, or any admission of the releasor to that effect.’ [Citation.] ‘In this State, from the earliest times, quitclaim deeds have been in every-day use for the purpose of transferring title to land, and have been considered as effectual for that purpose as deeds of bargain and sale.’ [Citation.] Indeed, as early as 1854, this court recognized and held a quitclaim deed to effect a transfer of ‘all the right and title of the grantor.’ [Citations.]” (City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 239, footnote omitted.) “A grant deed transfers title to real property. [Citation.]” (Drake v. Martin (1994) 30 Cal.App.4th 984, 994.)
“A fraudulent conveyance claim is set forth in the Uniform Fraudulent Transfer Act (UFTA), which is codified in Civil Code section 3439 et seq. ‘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.’ (Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 13 [33 Cal.Rptr.2d 283].) A transfer under the UFTA is defined as ‘every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset . . ., and includes payment of money, release, lease, and creation of a lien or other encumbrance.’ (Civ. Code, § 3439.01, subd. (i).) ‘A transfer of assets made by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer, if the debtor made the transfer (1) with an actual intent to hinder, delay, or defraud any creditor, or (2) without receiving reasonably equivalent value in return, and either (a) was engaged in or about to engage in a business or transaction for which the debtor’s assets were unreasonably small, or (b) intended to, or reasonably believed, or reasonably should have believed, that he or she would incur debts beyond his or her ability to pay as they became due. [Citations.]’ (Cortez v. Vogt (1997) 52 Cal.App.4th 917, 928 [60 Cal.Rptr.2d 841], fns. omitted; see also Civ. Code, § 3439.04.)” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648, fn. omitted.)
Kirkeby v. Superior Court was decided under a former version of Civil Code section 3439.04. The differences between that former version and the present version are immaterial to the issues raised in this appeal. We set forth the present version of Civil Code section 3439.04 in the text of this opinion and base our discussion on that version.
Civil Code section 3439.04 provides, in pertinent 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:
“(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.”
The factors or “badges of fraud” in subdivision (b) of Civil Code section 3934.04 “do not create a mathematical formula to establish actual intent. There is no minimum number of factors that must be present before the scales tip in favor of finding of actual intent to defraud. This list of factors is meant to provide guidance to the trial court, not compel a finding one way or the other. [Citation.]” (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 834.) A party seeking to establish a transfer as fraudulent must show fraudulent intent by a preponderance of the evidence. (Annod Corp. v. Hamilton & Samuels (2002) 100 Cal.App.4th 1286, 1293.)
B. Standard of Review
Although the trial court decision with regard to a preliminary injunction is reviewed under the abuse of discretion standard, the sole issue here involves whether there was a fraudulent conveyance. We review for substantial evidence a trial court’s finding that a transfer of real property was fraudulent. (See Filip v. Bucurenciu, supra, 129 Cal.App.4th at p. 834.)
C. Substantial Evidence of Fraudulent Conveyance
Defendant admitted violating section 186.11, subdivision (a)(3). Accordingly, defendant’s assets and property can be levied upon to pay her restitution obligation of $174,436.05. (§ 186.11, subd. (e)(1).) Likewise, Cleveland’s admission that he violated section 186.11, subdivision (a)(2) subjects his assets and property to levy to satisfy his apparent $1,056,000 restitution obligation. (Ibid.)
Because defendant and Cleveland acquired the Gridley Road property during their marriage, the property was, at acquisition, a community property asset. (Fam. Code, § 760.) Absent a transmutation of the Gridley Road property from community property to separate property, the entire Gridley Road property can be used to satisfy the entire restitution obligation of either defendant or Cleveland. (Fam. Code, §§ 751, 910, subd. (a).) If the March 31, 1997, quitclaim deed or the July 21, 2004, grant deed was effective to transfer Cleveland’s community property interest in the Gridley Road property to defendant, then that community property interest would have been transmuted to defendant’s separate property and the Gridley Road property can not be levied upon to satisfy Cleveland’s restitution obligation. (Fam. Code, §§ 850, subd. (a), 913, subd. (b)(1).) If the quitclaim deed and grant deed were fraudulent transfers, however, then the Gridley Road property would remain community property and be available for levy to satisfy both spouses’ entire restitution obligations. (Fam. Code, §§ 751, 851, 910, subd. (a); Civ. Code, § 3934.04.) In considering the relevant factors, as discussed below, we hold that there was substantial evidence that the quitclaim deed and grant deed were fraudulent transfers under Civil Code section 3934.04, subdivision (a)(1), and, accordingly, the Gridley Road property is community property subject to injunctive relief.
Because we hold that the quitclaim deed and grant deed were fraudulent transfers under Civil Code section 3934.04, subdivision (a)(1), we need not consider whether the deeds were fraudulent transfers under subdivision (a)(2) of that section.
1. March 31, 1997 Quitclaim Deed
(a) The quitclaim deed was to an “insider.”
At the time of the quitclaim deed, defendant and Cleveland were married. Defendant concedes her status as an insider. (Civ. Code, § 3439.04, subd. (b)(1).)
(b) Cleveland retained possession or control of the Gridley Road property after the quitclaim deed.
As defendant concedes, Cleveland continued to reside in the Gridley Road property after the quitclaim deed and claimed in his 1999 bankruptcy petition that he had an interest in the Gridley Road property as a “fee owner.” (Civ. Code, § 3439.04, subd. (b)(2).)
(c) Cleveland had been sued prior to the quitclaim deed.
In his 1999 bankruptcy petition, Cleveland listed a 1993 judgment against him for $12,784.25, and a 1994 judgment against him for $4,050. In 1995, Consumer Portfolio Services, Inc. obtained a $30,078.41 judgment against Cleveland. (Civ. Code, § 3439.04, subd. (b)(4).)
(d) The quitclaim deed was of substantially all of Cleveland’s assets.
Defendant concedes that the Gridley Road property was substantially all of Cleveland’s assets at the time of the 1997 quitclaim deed. (Civ. Code, § 3439.04, subd. (b)(5).)
(e) The value of the consideration Cleveland received from defendant for the Gridley Road property was not reasonably equivalent to the value of the Gridley Road property.
The quitclaim deed provides, in pertinent part, “‘The value of the property in this conveyance: exclusive of liens and encumbremces [sic] is $100.00 or less: and there is no additional consideration received by the grantors . . . .’” (Civ. Code, § 3439.04, subd. (b)(8).) Defendant concedes that the consideration for the transfer was “minimal, ‘$100.00 or less,’” but argues that the lack of adequate consideration is irrelevant because consideration is not required for the transmutation of property between spouses under Family Code section 850, subdivision (a). Nevertheless, as stated above, transmutations of property between spouses are subject to fraudulent conveyance law under Family Code section 851.
(f) Cleveland became insolvent shortly after the quitclaim deed. Defendant concedes that Cleveland was insolvent when Cleveland filed his bankruptcy petition in December 1999, but argues that he was not insolvent at the time of the March 1997 quitclaim deed. (Civ. Code, § 3439.04, subd. (b)(9).) Under Civil Code section 3439.04, the debtor need not be insolvent at the time of the transfer; the debtor need only become insolvent within a short time after the transfer was made. Here, Cleveland became insolvent shortly after the quitclaim deed.
(g) The quitclaim deed occurred shortly after and shortly before Cleveland incurred substantial debt.
As noted above, Cleveland sustained judgments against him in 1993, 1994, and 1995 totaling $47,362.66 prior to the March 1997 quitclaim deed. Defendant concedes that Cleveland quitclaimed the property after becoming indebted. Cleveland’s 1999 bankruptcy petition shows that Cleveland incurred $4,800 in credit card debt in 1998, shortly after the quitclaim deed. In this case, Cleveland pleaded guilty to a series of criminal acts that began in 1998, shortly after the quitclaim deed, and that continued through 2003, subjecting him to a restitution obligation of $1,056,000.
Defendant argues that the evidence does not support the trial court’s determination that the March 1997 quitclaim deed was fraudulent. Defendant claims that Cleveland became disabled in 1996 due to injuries he sustained at work. As a result, defendant claims, Cleveland experienced financial difficulties, and he and defendant experienced marital difficulties and “contemplated divorce.” These events, defendant claims, caused Cleveland to quitclaim the Gridley Road property to her in March 1997. There is no evidence in the record to support defendant’s claims. In her statement of facts, defendant’s support for the claim that Cleveland was injured at work and became disabled, that Cleveland experienced financial difficulties, and that defendant and Cleveland experienced martial difficulties and contemplated divorce is defendant’s opposition to the prosecution’s motion for a preliminary injunction. That opposition itself is unsupported by evidence.
2. The July 21, 2004 Grant Deed
Defendant claims that she refinanced the Gridley Road property in 2004 and that the bank required that Cleveland execute a grant deed conveying to defendant his interest in the property. At that time, Cleveland had no interest in the Gridley Road property, defendant contends, having transferred all such interest to defendant through the March 1997 quitclaim deed. Defendant contends that the July 21, 2004 grant deed “served no purpose, except to confirm the effect of the March 31, 1997 quitclaim deed.” Defendant reasons that because the March 31, 1997, quitclaim deed was not fraudulent, it follows that the July 21, 2004, grant deed also was not fraudulent.
Defendant fails to point to any evidence that supports her claim that she refinanced the Gridley Road property in 2004 and that the bank required that Cleveland execute a grant deed conveying to defendant his interest in the property. Moreover, as with the 1997 quitclaim deed, several indications of fraud mark the 2004 grant deed as a fraudulent transfer. The transfer was to an insider (Civ. Code, § 3439.04, subd. (b)(1)), Cleveland retained possession or control of the property after the grant deed (Civ. Code, § 3439.04, subd. (b)(2)), and, just the year prior to the grant deed, Cleveland had completed a five-year crime spree pursuant to which he took $1,056,000 and subjected himself to a restitution obligation (Civ. Code, § 3439.04, subd. (b)(10)).
Thus, based upon the foregoing, there was substantial evidence to support the trial court’s decision that there was a fraudulent transfer of the Gridley Road property and that it is subject to injunctive relief.
D. The Trial Court’s Determination Did Not Change The Nature Of The Gridley Road Property
Defendant contends that section 186.11 permits a trial court to prevent the dissipation of assets or property to ensure the payment of restitution, but the section does not permit a trial court to “reach back into the past and change the nature of property.” Defendant contends that the trial court’s ruling that the March 1997 quitclaim deed and 2004 grand deed were fraudulent and, therefore, that the Gridley Road property is community property went beyond preserving the Gridley Road property; rather, it changed the nature of the property from defendant’s separate property to defendant’s and Cleveland’s community property. Defendant mischaracterizes the effect of the trial court’s holding.
By holding that the March 1997 quitclaim deed and 2004 grant deed were fraudulent transfers, the trial court held that neither instrument was effective to transfer Cleveland’s community property interest in the Gridley Road property to defendant, and, therefore, the Gridley Road property remained community property. Accordingly, because each deed was void when made, the trial court’s holding did not have the effect of changing the nature of the Gridley Road property; instead, it merely stated that neither deed was effective in changing the nature of that property.
DISPOSITION
The judgment is affirmed.
We concur: TURNER, P. J., KRIEGLER, J.