Opinion
No. 1 CA-CV 14-0030
03-10-2015
MICHELLE R. WHITE and MATTHEW L. WHITE, wife and husband, Plaintiffs/Appellees, v. NABIL B. KABRA, Defendant/Appellant.
COUNSEL Roush McCracken & Guerrero & Miller, Phoenix By Robert D. McCracken Counsel for Plaintiff/Appellee The Law Offices of David W. Dow, Phoenix By David W. Dow Counsel for Defendant/Appellant
NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV2011-005024
The Honorable John Rea, Judge
AFFIRMED
COUNSEL Roush McCracken & Guerrero & Miller, Phoenix
By Robert D. McCracken
Counsel for Plaintiff/Appellee
The Law Offices of David W. Dow, Phoenix
By David W. Dow
Counsel for Defendant/Appellant
MEMORANDUM DECISION
Judge Patricia A. Orozco delivered the decision of the Court, in which Presiding Judge Samuel A. Thumma and Judge Michael J. Brown joined. OROZCO, Judge:
¶1 Nabil Kabra (Nabil) appeals the trial court's judgment in favor of Michelle and Matthew White (the Whites) and the denial of his motion for a new trial. For the reasons that follow, we affirm.
FACTS AND PROCEDURAL HISTORY
"We view the facts in the light most favorable to sustaining the trial court's judgment." Harris v. City of Bisbee, 219 Ariz. 36, 37, ¶ 3, 192 P.3d 162, 163 (App. 2008).
¶2 The Whites purchased an all-terrain vehicle (ATV) from Nader Moeen Kabra (Nader), who was doing business as Kabra Offroad, LLC (Offroad). On January 1, 2008, Michelle took the ATV for a test drive and sustained injuries after a purported defect with the ATV caused her to crash. The Whites sued, and the trial court entered a default judgment in August 2010 against Offroad and Nader jointly and severally for $416,666.67 in compensatory damages, $250,000 in punitive damages, $1,250 in general and special damages, and $589 in costs.
¶3 Before the default judgment was entered, Nader owned unencumbered real property in Mesa, Arizona (the Property). In a quitclaim deed dated December 23, 2008, Nader transferred the Property to his brother, Nabil. The deed did not contain an affidavit of the Property's legal value, stating the transfer was exempt from that typical requirement because the transfer was for "only nominal actual consideration" because it was between siblings and, therefore, exempt under Arizona Revised Statutes (A.R.S.) section 11-1134.B.3(d). However, the Property's value was at least $312,000. Nader continued to reside on the Property after the conveyance and purportedly paid rent to Nabil.
¶4 At the time of the conveyance, Nader had $4,814.09 in a personal savings account, $696.25 in a personal checking account, $2,555.36 in a Kabra Auto Sales business savings account and $467.65 in a "DBA Nader M. Kabra" business account. He also had an ownership interest in Offroad, but had no other assets.
At various stages of the proceedings, Nader claimed to have both a fifty percent and a sixty-six percent ownership interest in Offroad.
¶5 In addition to the Whites' judgment, others judgments were taken against Nader for $2,743.61 in April of 2008 and for $10,396.00 in November of 2008. At the time of the transfer, Nader had approximately $70,000 in tax liens and judgments entered against him, for which he was personally liable.
¶6 After Nader failed to satisfy the White's judgment, the Whites filed a second action, claiming Nader transferred the Property and substantially all of his assets to Nabil in violation of A.R.S. § 44-1001, et seq. Nabil claimed Nader transferred the property to him in consideration for loans Nabil made to Nader totaling approximately $560,000. Nabil claimed the loan agreement with Nader was verbal, there being no supporting documentation of Nabil's claim except for bank records showing that certain funds had been transferred to Nader.
Both Nabil and Nader were named as defendants, however the parties stipulated to dismiss Nader from the proceedings after he filed bankruptcy.
¶7 After a bench trial, the trial court found the Whites had "proven their cases for both actual and fraudulent conveyance and enjoined Nader and Nabil from "taking any action whatsoever that will in any way encumber or transfer any interest in [the Property]." Nabil moved for a new trial, arguing the trial court's ruling was not supported by the evidence. The trial court denied the motion and this timely appeal followed. We have jurisdiction pursuant to Article 6, Section 9 of the Arizona Constitution and A.R.S. §§ 12-120.21.A.1. and -2101.A.1 (West 2015).
We cite the current version of applicable statutes when no revisions material to this decision have since occurred.
DISCUSSION
¶8 We review the denial of a motion for a new trial for abuse of discretion. Boatman v. Samaritan Health Servs., Inc., 168 Ariz. 207, 212, 812 P.2d 1025, 1030 (App. 1990). "A court abuses its discretion if it commits an error of law in reaching a discretionary conclusion, it reaches a conclusion without considering the evidence, it commits some other substantial error of law, or the record fails to provide substantial evidence to support the trial court's finding." Flying Diamond Airpark, LLC v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App. 2007) (internal citation and quotation omitted). "In reviewing a trial court's findings of fact, we do not reweigh conflicting evidence . . . but examine the record only to determine whether substantial evidence exists to support the trial court's action." In re Estate of Van Der Zee, 228 Ariz. 257, 260, ¶ 20, 265 P.3d 439, 442 (App. 2011) (internal citation and quotation omitted). I. Fraudulent Conveyance Under A.R.S. § 44-1004.A.
A. Intent to Defraud
¶9 On appeal, Nabil argues the trial court erred when it found that the Property was conveyed with an intent to defraud because the debt to the Whites was "completely unknown at the time of the transfer." As provided in A.R.S. § 44-1004.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 under any of the following:(Emphasis added). We presume Nabil's argument that the debt "was completely unknown" stems from the fact that the Whites did not obtain a judgment against Nader until after he transferred the Property to Nabil. A claim is "a right to payment, whether or not the right is reduced to a judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured." A.R.S. § 44-1001.2. (Emphasis added) Thus, the Whites' claim arose on January 1, 2008, the date Michelle sustained injuries on the ATV, which was nearly a year before Nader transferred the Property to Nabil. Even if Nader did not know of the claim, it arose before the transfer, which is all that is required.
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 would incur, debts beyond his ability to pay as they became due.
¶10 Nabil further argues that the trial court erred by failing to "properly analyze" the factors in A.R.S. § 44-1004.B. in determining whether a party acts with actual intent to hinder any creditor or debtor. Section 44-1004.B. provides:
B. In determining actual intent under [A.R.S. § 44-1004.A.1], consideration may be given, among other factors, to whether:(Emphasis added).
1. The transfer or obligation was to an insider.
2. The debtor retained possession or control of the property transferred after the transfer.
3. The transfer or obligation was disclosed or concealed.
4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
5. The transfer was of substantially all of the debtor's assets.
6. The debtor absconded.
7. The debtor removed or concealed assets.
8. 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. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.
10. The transfer occurred shortly before or shortly after a substantial debt was incurred.
11. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.
¶11 Nabil maintains that the trial court failed to sufficiently consider factors 2-11, but cites to no authority suggesting the trial court was required to consider every factor listed in the statute. Moreover, Nabil has not shown that the trial court failed to consider these factors and the court's findings of fact expressly state that "[m]any of the badges of fraud listed in A.R.S. § [44-1004.B.] exist." In any event, the statute gives the trial court discretion by noting that "consideration may be given" to the enumerated factors "among other factors." A.R.S. § 44-1004.B. (emphasis added).
¶12 Nabil also contends the trial court "failed to address in any way" evidence that Nader could have claimed a homestead exemption had he not transferred the Property to Nabil and could have "avoid[ed] [the Whites]" had the judgment been in place while Nader owned the Property. Nabil argues that this is evidence that he did not intend to defraud the Whites. However, because we do not have the trial transcript, we cannot determine what arguments or evidence, if any, Nabil presented at trial regarding the homestead exemption. In short, the court could have considered a potential homestead exemption among other factors both enumerated and unlisted in A.R.S. § 44-1004.B, but we find no abuse of its discretion by failing to explicitly state that it had done so. "Actual intent may be shown by direct proof or by circumstantial evidence from which actual intent may be reasonably inferred." Gerow v. Covill, 192 Ariz. 9, 17, ¶ 33, 960 P.2d 55, 63 (App. 1998).
B. Sufficiency of the Evidence
¶13 Nabil next argues that "the verdict was against the weight of the evidence and contrary to law." Nabil has not provided complete transcripts of the proceedings in the trial court. We presume the evidence and arguments presented to the trial court support its ruling. See Blair v. Burgener, 226 Ariz. 213, 217, ¶ 9, 245 P.3d 898, 902 (App. 2010) ("It is the appellant's burden to ensure that the record on appeal contains all transcripts or other documents necessary for us to consider the issues raised") (internal quotation and citation omitted).
¶14 The trial court found:
Many of the badges of fraud listed in [A.R.S. 44-1004.B.] exist. The transfer was to an insider, Nader's brother. Nader continued to reside in the [Property]. At least two judgments had been entered against Nader before the transfer. The
transfer was of substantially all of Nader's assets. He was insolvent at the time of the transfer.
¶15 There is no dispute that Nader transferred the property via quit-claim deed to his brother, Nabil. Moreover, Nader admitted to remaining in the Property after the transfer and Nabil has provided no documentation supporting his claim Nader paid rent while living there. There was also evidence that judgments were taken against Nader for $2,743.61 in April of 2008 and for $10,396.00 in November 2008 and tax liens in the sum of $2,487.53 in May 2008 and $55,104.83 in October 2008.
¶16 Moreover, there was substantial evidence that Nader was insolvent when he transferred the Property. "A debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation." A.R.S. § 44-1002.A. Nader testified that at the time he conveyed the Property to Nabil, he had a total of $8,533.35 in his personal and business checking and savings accounts and that his only other asset was an ownership interest in Offroad. Although Nadar alleged that Offroad was worth $750,000, Offroad reported a business loss of $129,371 in its 2008 tax return and he provided no evidence supporting the claimed value of $750,000. The trial court was not required to find Nadar's valuation credible in light of the losses reported on Offroad's tax returns. "The credibility of witnesses is a matter peculiarly within the province of the trier of facts . . . It is not the prerogative of this court to weigh the evidence and determine the credibility of the witnesses." Imperial Litho/Graphics v. M.J. Enterprises, 152 Ariz. 68, 72, 730 P.2d 245, 249 (App. 1986)
¶17 "A debtor who is generally not paying his debts as they become due is presumed to be insolvent." A.R.S. § 44-1002.B. There was sufficient evidence that Nader's debts were greater than his assets and that he failed to pay his debts as they became due, meaning the trial court did not abuse its discretion by determining he was insolvent. On this record, the trial court properly considered factors in A.R.S. § 44-1004.B. in determining whether there was actual intent to hinder the Whites and there was sufficient evidence to support its findings. Thus, there was no abuse of discretion. II. Constructive Fraud Under A.R.S. § 44-1005
¶18 Nabil next argues the trial court erred by finding the "Property was fraudulently conveyed under constructive fraud." Under A.R.S. § 44-1005:
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.Nabil contends, "[t]he evidence in this case clearly established that the transfer did not lack a reasonably equivalent value or that the debtor was insolvent[.]"
Nabil again argues that the trial court erroneously concluded that Nadar transferred the Property with intent to defraud creditors. However, proof of intent is not required under A.R.S. § 44-1005. Kaufmann v. M & S Unlimited, L.L.C., 211 Ariz. 314, 318, ¶ 13, 121 P.3d 181, 185 (App. 2005). Thus, we do not address this argument.
--------
¶19 Nabil maintains that Nader transferred the Property to him to satisfy a debt. Nabil had the burden to prove an oral contract existed between him and Nader. See Tabler v. Indus. Comm'n, 202 Ariz. 518, 521, ¶ 12, 47 P.3d 1156, 1159 (App. 2002) ("[t]he party asserting the existence of an oral contract has the burden of proof"). While there was evidence that Nabil made several money transfers to Nader, there was no documentation suggesting that these transfers were intended to be loans or that Nader transferred the Property to satisfy a debt. Moreover, Nader did not list any such family loans in his applications for loans from financial institutions or in his bankruptcy schedule. Based on this record we find sufficient evidence supports the trial court's finding that the Property transfer was not for a reasonably equivalent value. As previously noted, there was ample evidence that Nader was insolvent. See supra ¶ 16. Thus, we find no abuse of discretion. III. Defenses
A. Good Faith
¶20 Nabil next argues that the trial court erred by failing to consider the legal defense available to him under A.R.S. § 44-1008.A., which provides, "[a] transfer or obligation is not voidable under § 44-1004, subsection A, paragraph 1 against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee." Nabil contends the Property transfer was made in good faith because "Nader Kabra and [Nabil] were completely unaware of a possible claim."
¶21 This defense fails for two reasons. First, a good faith defense is not available in fraudulent transfer actions brought under A.R.S. § 44-1005. Hullett v. Cousin, 204 Ariz. 292, 295, ¶ 13, 63 P.3d 1029, 1032 (2003). Second, on this record, the trial court was not required to find that Nabil demonstrated he took the Property for a reasonably equivalent value. See supra ¶19. Accordingly, Nabil has not shown how the trial court erred in considering his claimed defense under A.R.S. § 44-1008.A.
B. Laches
¶22 Nabil contends that the trial court erred by not finding the Whites claims were barred by the doctrine of laches. Specifically, he claims:
[The Whites] failed to make a claim to [Nader's] company which resulted in him losing the protection and/or reimbursement of the insurance policy that would have covered the losses. . .[The Whites'] failure to promptly act on their claims prejudiced [Nader] due to the judgment entered against him and therefore prejudiced [Nabil] by the property that satisfied [the] debt owed to him is being taken away.
¶23 To bar a claim on the basis of laches, the trial court must find that there was an unreasonable delay in asserting the claim under the circumstances and "it must be shown that any change in the circumstances caused by the delay has resulted in prejudice to the party sufficient to justify denial of relief." McComb v. Superior Court, 189 Ariz. 518, 525, 943 P.2d 878, 885 (App. 1997) (internal citation and quotation omitted). The record before us does not show that the trial court was required to find that the Whites unreasonably delayed bringing suit against Nader for the injuries Michelle White suffered. Moreover, Nabil has failed to demonstrate how this alleged "delay" prejudiced him. The fact that Nadar stopped paying premiums for Offroad's liability insurance before the Whites brought suit does not mean that the Whites are estopped from pressing their claims in this case. The Whites were required to bring suit in a timely manner, which they did. Thus, the trial court did not abuse its discretion. IV. Attorney Fees and Costs
¶24 On appeal, both parties request attorney fees and costs pursuant to A.R.S. §§ 12-341 and -349. In the exercise of our discretion, we deny both requests for attorney fees. We grant the Whites their taxable costs on appeal upon compliance with Arizona Rule of Civil Appellate Procedure 21.
CONCLUSION
¶25 For the foregoing reasons, we affirm the trial court's denial of Nabil's motion for a new trial.