Judge: Frank M. Tavelman, Case: 19BBCV00366, Date: 2022-09-09 Tentative Ruling

Case Number: 19BBCV00366    Hearing Date: September 9, 2022    Dept: A

Motion for Summary Judgment

ALLEGATIONS:

In case EC064985, Steven E. Myers (“Steven”) and Linell A. Myers (“Linell”, and together, “Plaintiffs”) filed suit against Jan L. Slort (“Jan”); David Jeffrey Slort (“David”); Daniel John Slort (“Daniel”); and Jennifer A. Hines (“Hines”, and together, “Defendants”), alleging that Plaintiffs won a judgment of attorney fees against Jan and David as trustee (“Myers Action”).  Plaintiffs allege that Jan subsequently made a transfer of property (“Subject Property”) to Hines to defraud Plaintiffs.

In the current action, Plaintiffs filed a Complaint on October 11, 2022, alleging six causes of action: (1) Set Aside Fraudulent Transfer made on June 8, 2011; (2) Set Aside Fraudulent Transfer made on May 2, 2013; (3) Set Aside Fraudulent Transfer made on June 8, 2011; (4) Set Aside Fraudulent Transfer made on May 2, 2013; (5) Cancel 2011 Quitclaim Deed; and (6) Cancel 2011 Grant Deed.

HISTORY:

The Court received the Motion for Summary Judgment filed by Defendants on June 24, 2022; the opposition filed by Plaintiffs on August 30, 2022; and the reply filed by Defendants on September 2, 2022.

RELIEF REQUESTED:

Defendants move for summary judgment as to the operative Complaint; or, in the alternative, summary adjudication as to the first, second, third, and fourth causes of action in the Complaint.

ANALYSIS:

I.          LEGAL STANDARD

A party may move for summary judgment in any action or proceeding if it is contended the action has no merit or that there is no defense to the action or proceeding. (CCP § 437c(a).) To prevail on a motion for summary judgment, the evidence submitted must show there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. (CCP § 437c(c).) In other words, the opposing party cannot present contrary admissible evidence to raise a triable factual dispute.

“A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (CCP § 437c(p)(2).)

When ruling on a summary judgment motion, the trial court must consider all inferences from the evidence, even those contradicted by the moving party’s evidence. The motion cannot succeed unless the evidence leaves no room for conflicting inferences as to material facts; the court has no power to weigh one inference against another or against other evidence. (Murillo v. Rite Stuff Food Inc. (1998) 65 Cal. App. 4th 833, 841.) In determining whether the facts give rise to a triable issue of material fact, "the facts alleged in the evidence of the party opposing summary judgment and the reasonable inferences there from must be accepted as true.” (Jackson v. County of Los Angeles (1997) 60 Cal. App. 4th 171, 179.)

With a summary judgment motion, a three-step analysis is required of the trial court. (AARTS Productions, Inc. v. Crocker Nat’l Bank (1986) 179 Cal. App. 3d 1061, 1064–65.) First, the trial court must identify the issues framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent’s pleading. (Ibid.) Secondly, the court must determine whether the moving party’s showing has established facts which negate the opponent’s claim and justify a judgment in movant’s favor. (Ibid.) When a summary judgment motion prima facie justifies a judgment, the third and final step is to determine whether the opposition demonstrates the existence of a triable, material factual issue. (Ibid.)

II.        UNTIMELY FILINGS

Although Plaintiffs’ opposition was untimely filed, the Court accepts the Hirschman Declaration, in which Mr. Hirschman states that he has suffered from the effects of Covid-19 and so could not submit the opposition in time. The Court also considers that Defendants have nonetheless been able to file a substantive reply brief a few days late – which the Court will also accept, given that Defendants’ delay was caused by Plaintiffs’ initial untimely submission. The Court finds that both delays are de minimis and will consider all parties’ papers in ruling on the instant motion.

III.       MERITS

A.    Parties’ Arguments

Defendants claim that the Subject Property was also related in Case No. 19STCV12459 (“Related Action”).  In the Related Action, David, as trustee, sued Jennifer seeking quiet title to Subject Property. Jennifer in turn alleged that Jan had quitclaimed 50% of the Subject Property to her as a gift, which is evidenced by a quit claim deed - Instrument Number 20170635126, recorded in the Los Angeles County Recorder’s Office.

In that action, the Court entered judgment on March 15, 2022 against Jennifer ruling, “In connection with judgment in favor of Plaintiff on his quiet title claim, the Court declares the quitclaim deed recorded in the Official Records at the Los Angeles County Recorder’s Office as Instrument Number 20170635126 is hereby cancelled as null and void and is of no force or effect.” (Defendants’ RJN, Exh. G.) As a result of this quiet title ruling against Jennifer, Defendants argue in this action that the Related Action’s ruling void the quit claim deed at issue in the current case.  The Related Action’s ruling effectively cancelled the “transfer” for the purposes of Plaintiffs’ fraudulent transfer claim in the current case.

Defendants assert that David, in his capacity as trustee, holds title to the Subject Property; that the judgment received in the prior case is enforceable; and that Plaintiffs have the ability to enforce the judgment. Defendants thus argue that, because the instant action concerns allegations of fraudulent transfer relating to the same Subject Property involved in the earlier lawsuit, Plaintiffs have had the ability to enforce and collect on the judgment but failed to do so.

As a preliminary matter, Plaintiffs agree that the first and third causes of action are mooted by this Court’s March 15, 2022, ruling in the Related Case. But Plaintiffs argue that the second and fourth causes of action are still actionable because they involve Jan’s alleged May 2, 2013 fraudulent transfer of 50% interest in the Subject Property to his own irrevocable trust. Plaintiffs argue that this “irrevocable” trust is illusory because Jan retained the power to amend the trust to make it revocable. Plaintiffs also argue that further “badges of fraud” exist, including that (1) Jan did not receive any value for transferring his interest in the Subject Property; (2) neither David nor Danial gave any value for the transfer; and (3) Jan continues to live in the Subject Property, and that the trust grants Jan the exclusive lifetime right to continue residing in the Subject Property, grants Jan all rental monies generated from the Subject Property, and that Jan pays all mortgage payments and other obligations relating to the Subject Property.

Plaintiffs also argue that they did not initiate judgment enforcement proceedings against David in his position as trustee because they were only capable of recovering a net amount of $97,000 from the Subject Property after deducting Jan’s mortgage and homestead exception. Second, Plaintiffs argue that these circumstances only changed after the Court’s March 15, 2022 ruling nullifying Hines’ interest in the Subject Property. Third, Plaintiffs argue that this action is set for trial in October of 2022, and so they wish to wait until the conclusion of the trial before instituting expensive judgment enforcement proceedings. Fourth and finally, Plaintiffs argue that Jan and David recently put the Subject Property up for sale, and if it is sold, Plaintiffs will be paid from the sale escrow without having to incur judgment enforcement proceeding costs.

B.     Analysis

The Plaintiffs’ claims appear to be brought under Civ. Code § 3439, et seq., the Uniform Voidable Transfer Act (“UVTA”). Under the UVTA, there are four grounds to void transfers. This action concerns only the first, which designates as fraudulent any transfer made or obligation incurred by a debtor with actual intent. (Civ. Code, § 3439.04(a)(1).) Actual intent may be identified through eleven “badges of fraud” factors:

1) The transfer was to an insider.

2) The debtor retained possession or control of the property transferred.

3) The transfer was disclosed or concealed.

4) Before the transfer was made, the debtor had been sued or threatened with suit.

5) The transfer was of substantially all 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 not reasonably equivalent to the value of the asset transferred.

9) The debtor was insolvent or became insolvent shortly after the transfer was made.

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 lienholder who transferred the assets to an insider of the debtor.

(Civ. Code § 3439.04(b).)

A creditor seeking damages under the UVTA must show injury; mere intent to delay or defraud is not sufficient and injury to the creditor must be affirmatively shown. (Mehrtash v. Mehrtash (2001) 93 Cal. App. 4th 75, 80.) A creditor is not injured unless the transfer places the property beyond the creditor’s reach. (Ibid.)

As both parties agree that the first and third causes of action have been rendered moot by the Court’s March 15, 2022 ruling in the Related Case, the Court grants summary adjudication as to the first and third causes of action.

As to the remaining second and fourth causes of action, the Court finds that Defendants have met their prima facie burden to show that Plaintiffs were not hindered or delayed in enforcing their judgment, and Defendants cannot show that a transfer was made with the intent to delay, hinder, or defraud creditors. Defendants also show that Plaintiffs’ judgment in the prior case against Jan and David, in his capacity as trustee was entered,  and therefore if Jan were to transfer his interest in the Subject Property to David and Daniel, as trustees of the Jan Leon Slort Irrevocable Trust of 2013 (“Slort Trust”), Plaintiffs may still enforce their judgment against David in his position as trustee of the Slort Trust. The burden thus shifts to Plaintiffs to show a triable issue of material fact.

The Court finds that Plaintiffs failed to show a triable issue of material fact on these two causes of action. The Court need not analyze Plaintiffs’ arguments on whether there exist “badges of fraud” pursuant to Civ. Code § 3439.04(b) because Plaintiffs’ opposition itself concedes that Plaintiffs deliberately and voluntarily refrained from enforcing their judgment for strategic reasons.

A creditor seeking a UVTA remedy must establish that they were injured by a voidable transfer; a creditor is not injured unless a transfer has placed property out of their reach. (Mehrtash, supra, 93 Cal. App. 4th at p. 80.) Plaintiffs acknowledge that they delayed enforcing the judgment because they did not believe they could recover their full judgment amount after considering the homestead exception and any remaining money owed on the property.  Plaintiffs do not refute they had, and continue to have, the ability to enforce their judgment.   As a result, they have suffered no injury. 

Plaintiffs claim against the Subject Property remains because the interest was transferred from Jan to David and Daniel as trustees of the Slort Trust. Even if the Court were persuaded by Plaintiffs’ argument that Jan could revoke the Slort Trust, their judgment may still be enforced against Jan; they are essentially covered under either situation.

IV.       CONCLUSION

The Court thus grants the motion for summary judgment in its entirety.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records.

ORDER

Defendants Jan L. Slort; David Jeffrey Slort; and Daniel John Slort’s Motion for Summary Judgment came on regularly for hearing on September 9, 2022, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows:

THE MOTION FOR SUMMARY JUDGMENT IS GRANTED.

IT IS SO ORDERED.

DATE:  September 9, 2022                           _______________________________

                                                                        F.M. TAVELMAN, Judge

                                                                        Superior Court of California

County of Los Angeles