Judge: Carolyn M. Caietti, Case: 37-2023-00031977-CU-FR-CTL, Date: 2024-01-26 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - January 25, 2024

01/26/2024  10:30:00 AM  C-70 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Carolyn Caietti

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Civil - Unlimited  Fraud Demurrer / Motion to Strike 37-2023-00031977-CU-FR-CTL BASS VS INSURANCE SOLUTIONS PACIFIC COAST INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 09/25/2023

Defendants Business and Contractors Insurance Services, Inc., Joshua Schwartz, Chad Galvas, Jaqueline Baker and Gladys Carvajal's Demurrer to Plaintiff's Complaint is OVERRULED.

Generally, Plaintiff Craig Bass alleges he and Defendant Jay Adkins owned ISPC, a multi-state insurance brokerage and the primary assets of ISPC were agent appointment agreements ISPC obtained with various insurance companies. The earnings of ISPC were derived from the commissions paid by the various insurance companies for the insurance policies ISPC obtained for its customers.

(Verified Complaint, at ¶ 11.) The parties had a falling out. Shortly after issuance of a temporary restraining order, enjoining ISPC from transferring any assets, Adkins closed ISPC's doors and shut down. (Complaint, at ¶¶ 22-24.) Thereafter, Adkins and the moving defendants transferred ISPC assets, namely the insurance policies, to BCIS to prevent Bass from collecting on a judgment. (Complaint, at ¶ 27.) The Verified Complaint asserts causes of action (1) to set aside fraudulent transfer and damages – actual intent; (2) to set aside fraudulent transfer and damages – constructive fraudulent transfer (insolvency); and (3) civil conspiracy.

Defendants filed a general demurrer to the Verified Complaint as a whole. The Verified Complaint states facts sufficient to constitute the causes of action.

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) No other extrinsic evidence can be considered (i.e., no 'speaking demurrers'). (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) The complaint must be liberally construed and given a reasonable interpretation, with a view to substantial justice between the parties. (Amarel v. Connell (1988) 202 Cal.App.3d 137, 140–141; see also, Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1111-12 [in ruling on demurrers, courts treat as being true 'not only the complaint's material factual allegations, but also facts that may be implied or inferred from those expressly alleged'].) Defendants' first argument the insurance policies are not the type of 'assets' Plaintiff could execute against and, therefore, no 'assets' of the judgment debtor were transferred by ISPC to BCIS, is unpersuasive.

As explained in Potter v. Alliance United Ins. Co. (2019) 37 Cal.App.5th 894, 906, and as pertinent here, Calendar No.: Event ID:  TENTATIVE RULINGS

3020827  41 CASE NUMBER: CASE TITLE:  BASS VS INSURANCE SOLUTIONS PACIFIC COAST INC [IMAGED]  37-2023-00031977-CU-FR-CTL the Uniform Voidable Transactions Act defines an asset as the 'property of a debtor,' excluding property 'to the extent it is generally exempt under nonbankruptcy law.' (Ibid., citing Civ. Code, § 3439.01(a) (emphasis added).) 'As noted by the Legislative Committee comments, the definition of asset 'requires a determination that the property is subject to enforcement of a money judgment. Under Section 704.210 of the Code of Civil Procedure, property that is not subject to enforcement of a money judgment is exempt.' (Potter, supra, citing Legis. Com. com., 12A pt. 2 West's Ann. Civ. Code (2016 ed.) foll. § 3439.01, p. 253.) Defendants do not point to any exemptions under C.C.P. section 704.210, et seq. Rather, Defendants argue the insurance policies allegedly transferred are 'exempt' as a matter of law under C.C.P. section 699.720(a)(9), which provides '[a] contingent remainder, executory interest, or other interest in property that is not vested' is 'not subject to execution.' (Emphasis added.) Defendants maintain any interest is entirely contingent on many factors such as: 'the client deciding to renew the policy; the client deciding to use the same agent to do so; the client keeping the policy for the full term; the carrier recognizing the agent; the carrier keeping the particular commission structure; etc.' This position is unpersuasive. First, Defendants do not offer any case law supporting this interpretation.

Second, C.C.P. section 699.720 concerns property not subject to 'execution.' It does not concern 'exemptions.' Third, C.C.P. section 699.720(b) states, '[n]othing in subdivision (a) affects or limits the right of the judgment creditor to apply property to the satisfaction of a money judgment pursuant to any applicable procedure other than execution.' Next, Defendants argue the policies never belonged to Adkins, the judgment debtor, because the only people who may be considered owners of the policies are the insured clients who purchased the policies. This is also unpersuasive. First, Defendants do not provide any supporting legal authority.

Second, a 'transfer' means 'every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.' (Civ. Code, § 3439.01(m).) It has a broad meaning. (Potter, 37 Cal.App.5th at p. 909 (ruling a release qualifies as a 'transfer').) Here, the Complaint sufficiently alleges Adkins' conduct of parting with his interest in the insurance policies. First, Adkins is quoted as writing and instructing ISPC agents: 'I want you to transfer your policies ASAP away from ISPC!' (Complaint, at ¶ 26.) Second, the Complaint alleges he met with other agents to discuss transferring ISPC policies to BCIS and executed written requests to transfer the policies. (Complaint, at ¶ 27.) Defendants Schwartz, Galvez, Baker and Carvajal agreed to become agents of BCIS to service the transferred-ISPC insurance policies without any consideration. (Ibid.) In liberally construing the facts, the Complaint states sufficient facts.

For these reasons, the demurrer is OVERRULED.

Concluding Orders Defendants Business and Contractors Insurance Services, Inc., Joshua Schwartz, Chad Galvas, Jacqueline Baker and Gladys Carvajal are ordered to file and serve an answer to the Complaint by February 9, 2024.

If the tentative ruling is confirmed without modification, the minute order will be the Court's final ruling.

Defendants are ordered to serve written notice of the Court's final ruling on all appearing parties by January 30, 2024.

Plaintiff is reminded to comply with Department 70's Policies and Procedures and to provide courtesy copies of motion briefs.

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