Judge: Gregory Keosian, Case: 19STCV38466, Date: 2024-02-01 Tentative Ruling

Case Number: 19STCV38466    Hearing Date: February 1, 2024    Dept: 61

Plaintiff URS Holdings, Inc.’s Motion for Summary Judgment is DENIED.

I.                SUMMARY JUDGMENT

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.”  (Code Civ. Proc. § 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment.  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment.  (Code Civ. Proc. § 437c, subd. (f)(2).)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact.  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).)

Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.  (Aguilar, supra, 25 Cal.4th at 850.)  The plaintiff may not rely upon the mere 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 that cause of action or a defense thereto.  (Ibid.)  To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence.  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Plaintiff URS Holdings, Inc. (Plaintiff) moves for summary judgment against Defendants Gary Topolewski and Northern Resources, Inc. on the grounds that Topolewski’s transfer of certain real property in September 2018 to Defendant Northern Resources bears all of the badges of a fraudulent transfer under the Uniform Fraudulent Transfers Act (UFTA). (Motion at pp.

(a) A transfer made or obligation incurred by a debtor is voidable 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 the debtor would incur, debts beyond the debtor's ability to pay as they became due.

(Civ. Code § 3439.04, subd. (a).)

“[A] transferee does not act in good faith under CUFTA [ (California's Uniform Fraudulent Transfer Act) ] if the transferee ‘(1) colludes with the debtor or otherwise actively participates in the debtor's fraudulent scheme, or (2) has actual knowledge of facts which would suggest to a reasonable person that the transfer was fraudulent. (Nautilus, Inc. v. Yang (2017) 11 Cal.App.5th 33, 45.)

Whether a debtor had the actual intent to hinder, delay, or defraud a creditor is a question of fact. Among other so-called “badges of fraud” indicating such intent, the fact finder may consider whether: (1) the debtor made the transfer to an “insider”; (2) the debtor retained possession or control of the property after the transfer; (3) the debtor had been sued before making the transfer; (4) the debtor removed or concealed assets; (5) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred; and (6) the transfer occurred shortly before or shortly after a substantial debt was incurred. (§ 3439.04, subd. (b).) None of these factors is determinative, and no minimum or maximum number of factors is required.

(Aghaian v. Minassian (2020) 59 Cal.App.5th 447, 456, internal quotation marks and citations omitted.)

Plaintiff submits the following evidence. Plaintiff had a multi-million dollar judgment entered against Topolewski in an underlying action as early as January 24, 2019, and had filed the motion for summary judgment on which it was based on July 24, 2018. (Motion Exh. 1.) The subject property on Tuba Street in Northridge, California, was given to Topolewski in a grant deed signed and dated July 24 and 25, 2018, and recorded on August 20, 2018. (Motion Exh. 39.) Topolewski transferred the property to Northern Resources in a quitclaim deed signed and dated September 26, 2018, and recorded on October 5, 2018. (Motion Exh. 40.) This latter quitclaim deed states: “THERE IS NO CONSIDERATION FOR THIS TRANSFER. DOCUMENTARY TRANSFER TAX IS $ZERO. . . . THE GRANTOR(S) AND THE GRANTEE(S) IN THIS CONVEYANCE ARE COMPRISED OF THE SAME PARTIES WHO CONTINUE TO HLD THE SAME PROPORTIONATE INTEREST IN THE PROPERTY.” (Ibid.)

Plaintiff argues that this transfer was fraudulent, based on the badges of fraud set out in Civil Code § 3439.04. Plaintiff contends that the 2018 transfer was made to an “insider” based on Topolewski’s role as the founder of Northern Resources, evidenced by his listing as a director in its articles of incorporation. (Motion Exh. 22.) Plaintiff argues that Defendants have tried to conceal the transfer, as they did not disclose Plaintiff’s role as founder of the company in their discovery responses, and have further deflected responsibility for the company’s operation onto a number of other people named in other documents filed with the Nevada Secretary of State, most of whom happen to share names  with fictional characters from Canadian popular culture. (Defendants’ Response to Plaintiff’s Separate Statement of Undisputed Material Facts (DUMF) No. 7–18.)[1] Plaintiff notes that records from the Los Angeles Department of Water and Power (DWP) show that Topolewski-affiliated companies have been paying for the utilities on the subject property since August 2018. (DUMF No. 40.) Plaintiff notes that cars associated with these same companies have been spotted on the property in September 2021 and February 2023, further indicating Topolewski’s continued possession and control of the property. (DUMF No. 45.) Plaintiff argues that Defendants’ accounts of how Topolewski acquired the property for Northern Resources vary in the amount of the finder’s fee to which he was entitled, demonstrating that Topolewski did not receive reasonable compensation for the transfer (Motion at p. 22.) And Plaintiff argues that Topolewski is likely insolvent given the severity of the judgment against him. (Motion at p. 23.)

Plaintiff’s motion is flawed. The court assessed much of the above evidence in ruling on and reconsidering the expungement of Plaintiff’s lis pendens notice in November 2021 and January 2022. The court in those rulings determined that Plaintiff had “established by a preponderance of the evidence the probable validity of [its] real property claim.” (Code Civ. Proc. § 405.32.) This is because, in proceedings being on the expungement of a lis pendens notice, “[i]f conflicting evidence is presented, the judge must weigh the evidence in deciding whether plaintiff has sustained its burden.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2023) Ch. 9(I)-J, ¶ 9:436.2.)

However, on a motion for summary judgment, “[t]he trial court may not weigh the evidence in the manner of a factfinder to determine whose version is more likely true,” and may not “grant summary judgment based on the court’s evaluation of credibility.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 840.)

Triable issues of fact exist for virtually every badge of fraud that Plaintiff identifies. Plaintiff claims that the 2018 transaction was made to an insider, based on Topolewski’s role in the foundation of Northern Resources. But Topolewski’s presence in the corporate documents falls off in 2011, several years before the transaction at issue, and Topolewski himself states that he has not been involved in the company since that time. (Topolewski Decl. ¶ 2.)[2] Plaintiff does not submit evidence of Topolewski’s contemporaneous involvement with Northern Resources, save the inability of its private investigator to locate Northern-associated addresses for its named directors. (DUMF No. 39.) This is insufficient to establish that these named directors are a smokescreen for Topolewski.

Plaintiff claims that Topolewski has not rebutted the presumption of insolvency applicable to a debtor who “is generally not paying the debtor’s debts as they become due.” (Motion at p. 23; Civ. Code § 3439.02, subd. (b).) But the motion is devoid of evidence to establish the presumption’s predicate fact that Topolewski is generally not paying his debts. Plaintiff identifies Topolewski’s payment of the utilities as evidence of continuing possession, but Topolewski claims that this is a form of ad hoc indemnification for Northern Resource’s involvement in the present lawsuit, not an exercise of control over the property. (Topolewski Decl. ¶ 4.) And although Plaintiff rightly challenges Defendants’ obstruction of discovery concerning their mutual ties, it does not contend that Topolewski’s transfer of the subject property to Northern Resources was concealed.  Finally, while Plaintiff rightly claims that Defendants have varied the amount of the “finder’s fee” that Topolewski was supposed to be paid for linking Northern to the subject property, Defendants provide evidence that this was the nature of the transaction, and have presented an $880,000 wire transfer from Northern to Topolewski during the relevant period. Indeed, the only badge of fraud that does not involve a triable issues of fact is the proximity of the underlying transaction to the underlying lawsuit. However the trier of fact may weigh this evidence in the final analysis, it is insufficient basis to conclude that the transfer was fraudulent as a matter of law.

The motion is therefore DENIED.