Judge Kenneth R. Freeman, Case BC702295 2023-03-23 Tentative Ruling

A. Demurrer: Overruled as to actual fraudulent transfer claim in full; sustained without leave to amend as to the unjust enrichment claim, but without prejudice to Plaintiff amending a cognizable cause of action which properly seeks restitution under California law; overruled as to the third cause of action for civil conspiracy as to Sabal Storage; the fourth cause of action for conspiracy to defraud as to Sabal Storage; and aiding and abetting conspiracy as to Sabal Storage

1) Denied, to the extent the motion to strike seeks Plaintiff’s right to seek the value of the Sabal Storage property stemming from the alleged actual fraudulent transfer;

2) Granted, without leave to amend as to the request for rent stream, profits, and revenue under the UFTA claim;

3) Generally denied as to allegations inconsistent with Plaintiff’s permitted theory; granted as to demand for various assets that constitute damages not available under the UFTA; denied insofar as the motion seeks to strike a specific monetary figure;

5) Denied as to allegations concerning Plaintiff’s standing as an alleged creditor;

a) Granted as to allegation at ¶19 that “The Court of Appeal made clear that the trial court erred in dismissing the claims related to the Sabal Storage Property”;

b) Denied as to allegations that Sabal Storage property “rightfully belonged” to NFH, or that NFH was its “rightful owner”;

e) Denied as to ¶91 and the allegations that Mr. Buntzman “obstructed and responded to” the document subpoena;

7) Denied as to ¶68 and the discovery of the transfer of the Sabal Storage property;

8) Denied as to ¶¶1, 2, 15, 48, 68, and 102 and allegation of transfer of assets other than Sabal Storage property; and

9) Granted as to ¶25, with leave to amend to allege Degma is separately registered as a foreign LLC; granted as to allegation at ¶28 that GMA was “created under California law”

This litigation arises over a business relationship gone awry, and has an extensive factual and procedural history. Previously, this case was before Judge Carolyn Kuhl. The California Court of Appeal for the Second District (the “Court of Appeal”) reversed an earlier dismissal of all Plaintiff’s claims against Defendants. See Court of Appeal Opinion, attached to SAC as Ex. 4. The Court of Appeal stated that the trial court erred in dismissing the claims related to the Sabal Storage Property and that Plaintiff could re-plead claims related to Sabal Storage against Defendants. Id. at pp. 22-25.

Based on these allegations and the other allegations set forth in the Second Amended Complaint, Plaintiff alleges claims for: 1) Actual Fraudulent Transfer As To Sabal Storage; 2) Unjust Enrichment As To Sabal Storage; 3) Civil Conspiracy As To Sabal Storage; 4) Conspiracy To Defraud As To Sabal Storage; and 5) Aiding And Abetting Conspiracy As To Sabal Storage.

The request is granted as to Exhibits A-M, P, Y, Z, AA, BB, CC, DD, EE, HH, II, JJ, and MM-PP, pursuant to Evidence Code §452(d). These exhibits are all records of a state or federal court, and are subject to judicial notice under this section. The Court does not judicially notice the truth of the matters set forth within Exhibits D, G, I, L, M, P, Y, AA, DD, HH, II, MM, OO, and PP, and judicial notice is limited to the fact that these exhibits appear within the respective court files. See, e.g., C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4^th 1094, 1103-1104.

The request is granted as to Exhibits N, O, and Q-X. See Ragland v. U.S. Bank Nat’l. Ass’n. (2012) 209 Cal.App.4^th 182, 194; West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4^th 780, 802-803. However, the Court does not judicially notice the truth of the factual matters stated within these deeds and lien claims. See Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4^th 1106, 1117 (“the fact a court may take judicial notice of a recorded deed, or similar document, does not mean it may take judicial notice of factual matters stated therein”).

The request is granted as to the existence of Exhibits FF, GG, KK, and LL. However, the Court does not judicially notice the truth of the matters stated within these exhibits.

The request is granted as to Exhibits 3, 4, 5, 7, 8, 10, 11, 12, 13, and 16 pursuant to Evidence Code §452(d), as these are records of state or federal courts and are subject to judicial notice under this section. The Court does not judicially notice the truth of the matters set forth within Exhibits 3, 4, and 5, and judicial notice of these exhibits is limited to the fact that they appear in the respective court files.

The request is granted as to Exhibits 2, 6, and 9. Ragland v. U.S. Bank Nat’l. Ass’n., supra, 209 Cal.App.4^th at 194; West v. JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4^th at 802-803. Again, however, the Court does not judicially notice the truth of the factual matters stated within these deeds and lien claims. See Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4^th 1106, 1117.

The request is granted as to Exhibit 15, pursuant to Evidence Code §452(c).

The request is denied as to Exhibit 1. The slide presentation is not a record of the Court in this litigation, and does not appear in the Court’s file.

The request is denied as to Exhibit 14, as the January 12, 2018 letter is not an appropriate matter of which the Court may take judicial notice. Defendants have objected to judicial notice of this letter, and the objection is sustained.

CCP § 430.10(e) is grounds for a demurrer when the complaint fails to state facts sufficient to constitute a cause of action. CCP § 430.10(f) is grounds for a demurrer when the complaint is uncertain (vague and ambiguous). For purposes of ruling on a demurrer, material facts properly pleaded in the complaint must be taken as true. Serrano v. Priest (1971) 5 Cal.3d 584, 491. A demurrer may challenge only defects that appear on the face of the pleading or from matters which are judicially noticeable. Blank v. Kirwan (1985) 39 Cal.3d 311, 318. A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures. Khoury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.

The function of a demurrer is to test the legal sufficiency of a complaint, but not the truthfulness of the allegations. Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4^th 968, 994; Weil & Brown, Civ. Pro. Before Trial (The Rutter Group 2009 ¶7:5). The allegations of a complaint must be regarded as being true for purposes of ruling upon demurrers. Dryden v. Tri-Valley Growers (1977) 65 Cal. App. 3d 990, 998. Demurrers are to be sustained where a pleading fails to plead adequately any essential element of the cause of action. Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879-80. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. Donabedian, supra, 116 Cal.App.4^th at 994; Weil & Brown, Civ. Pro. Before Trial (The Rutter Group 2009) ¶7:8.

“'A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed (Code Civ. Proc., §§ 430.30, 430.70). The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.'” Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747. Accord McKenney v. Purepac Pharmaceutical Co. (2008) 162 Cal.App.4th 72, 79. When considering demurrers, courts read the allegations liberally and in context. McKenney, supra, 167 Cal.App.4th at 77; Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4^th 1216, 1228.

“‘If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.‘" Aicco, Inc. v. Ins. Co. of N. Am. (2001) 90 Cal.App.4^th 579, 587 (citing Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4^th 26, 38).

This case has a long and complicated factual and procedural history. In the interests of attempting to condense this history in this tentative ruling, the Court incorporates by reference the facts previously laid out by the Court of Appeal in Stillwater Liquidating, LLC v. Chernyakova, 2022 WL 557060 (February 24, 2022) (“Stillwater”) – a case decided earlier this year.

With the factual and procedural history of the case in mind, the case is now before this Court on the Second Amended Complaint (“SAC”). The SAC alleges five (5) causes of action: 1) actual fraudulent transfer as to Sabal Storage; 2) unjust enrichment as to Sabal Storage; 3) civil conspiracy as to Sabal Storage; 4) conspiracy as to Sabal Storage; and 5) aiding and abetting conspiracy as to Sabal Storage.

The Uniform Fraudulent Transfer Act, or “UFTA”, is codified at Civil Code §§3439.01, et seq.[1] The elements for a claim of statutory fraudulent transfer pursuant to Civil Code §3439 are as follows:

Civ. C. §§3439.04(a), 3439.05. See also Filip v. Bucurenciu (2005) 129 Cal. App. 4th 825, 834 ("There is no minimum number of factors that must be present before the scales tip in favor of finding of actual intent to defraud."); Kirkeby v. Sup. Ct. (2004) 33 Cal. 4th 642, 651 (fraudulent transfer was sufficiently alleged based on defendant’s transfer of property with the intent to defraud, hinder or delay creditors in collection); Annod Corp. v. Hamilton & Samuels (2002) 100 Cal. App. 4th 1286, 1298 (proof of fraudulent intent in conveyances often is inferences from the surrounding circumstances); CC §§3439.07(a)(1), 3439.08(a) (fraudulent transfers may be avoided as against transferees who did not take property in good faith for adequate consideration); Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 755 (UFTA is merely cumulative of other remedies and not exclusive); Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75, 80 (“‘It cannot be said that a creditor has been injured unless the transfer puts beyond [her] reach property [she] otherwise would be able to subject to the payment of [her] debt.’”); Mejia v. Reed (2003) 31 Cal.4th 657, 664 (“Under the UFTA, a transfer is fraudulent, both as to present and future creditors, if it is made ‘[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor.’ ”); Renda v. Nevarez (2014) 223 Cal.App.4th 1231, 1238 (“The UFTA does not impose on the debtor any liability additional to or distinct from the existing claim of the creditor; it simply allows the creditor to obtain ‘[a]voidance of the transfer ... to the extent necessary to satisfy the creditor's claim.’ ”); ibid at 1237 (“to the extent a transfer is voidable, ‘the creditor may recover judgment’ for the lesser of the value of the asset or the amount needed to satisfy the creditor's claim, and the ‘judgment may be entered’ against the person for whose benefit the transfer was made.”); Monastra v. Konica Business Machines, U.S.A., Inc. (1996) 43 Cal.App.4th 1628, 1645 (“A constructive trust plainly is a proper remedy” for a fraudulent transfer claim.); Fidelity Nat. Title Ins. Co. v. Schroeder (2009) 179 Cal.App.4th 834, 850 (resulting trust is a cognizable remedy as an alternative to fraudulent transfer).

The SAC alleges in applicable part as follows. During his lifetime, originally-named Defendant Mark Buntzman (“Buntzman”), now deceased, was the crony and business partner of Paul Rohan (“Rohan”). [SAC, ¶1.] Per the SAC, beginning no later than 2007, Buntzman and Rohan did multiple real estate deals together. [Id.] As of Spring 2010, Buntzman knew that Rohan had helped create and then controlled Net Five Holdings (“NFH”), and Buntzman in fact did multiple deals with NFH-related entities Rohan controlled. [Id.] Rohan, in turn, allegedly was an owner of GMA, one of Buntzman’s entities. [Id.]

The SAC alleges that in 2011, NFH collapsed and was named in a series of consolidated New York class actions, with Rohan’s conduct singled out in some. [SAC, ¶1.] In 2012, the Court overseeing the class actions issued an injunction (the “Class Action Injunction”) forbidding any transfer of NFH without notice. [Id.] Then the Chief Restructuring Officer (“CRO”) in a bankruptcy of one of the Stillwater Funds (the “Funds”), whose former assets became part of NFH when pledged by Gerova Financial (“Gerova”), began investigating Rohan’s role in NFH’s collapse. [Id.] The SAC alleges that with NFH already sued and Rohan knowing he would soon face suit himself, Rohan, in an effort to render himself and NFH judgment proof, transferred assets he controlled to Buntzman and his, including Defendants GMA and SDC (defined below). [Id.]

One of these transferred properties was the Sabal Storage Property, a Florida property which, Plaintiff alleges had been appraised most recently before that at $9.6 million. [SAC, ¶2.] While Rohan had allegedly pledged Sabal Storage to NFH, he broke that promise and always kept it in his own name, using a d/b/a –Sabal Ventures, LLC (“Sabal Ventures”) to hide this. [Id.] Then, in November 2013 to allegedly hide his ownership, Rohan transferred the Sabal Storage Property from Sabal Ventures to his empty shell—Sabal Palm Ventures, LLC (“Sabal Palm”)—and then immediately to GMA/SDC. [Id.] After the transfer Rohan continued to share in Sabal Storage’s ownership through GMA and also continued to manage it. [Id.] Buntzman, allegedly through his shells, began to enjoy the rent stream, profits, and revenues associated with the property. [Id.]

Then, in 2015, Buntzman sold the Sabal Storage Property for $6.075 million but none went to NFH or to Rohan directly. [SAC, ¶3.] Instead, Buntzman allegedly was enriched and later kicked back funds to Rohan through still other Rohan controlled-shells, and staked him in multimillion dollar investments. [Id.] The two strategized to keep Plaintiff from receiving Buntzman-related discovery in the suit it eventually brought against Rohan and NFH. [Id.] Rohan, in turn, allegedly spoliated documents related to Buntzman and his entities. [Id.] The Sabal Storage transfer was, Plaintiff alleges, actually fraudulent and also was the product of a civil conspiracy and conspiracy to defraud involving Rohan and Buntzman. [Id.] Buntzman also allegedly aided and abetted Rohan and third parties in a conspiracy to steal NFH properties. [Id.] Buntzman was unjustly enriched by this transaction and should not be permitted to retain the ill-gotten proceeds of it. [Id.] The SAC alleges that because of Defendants SDC and GMA’s wanton, willful, and fraudulent conduct, Plaintiff is entitled not only to actual damages against those Defendants, but punitive damages as well. [Id.]

These allegations, as well as the background allegations at ¶¶30-109, are incorporated into the actual fraudulent transfer claim. Plaintiff alleges the Sabal Storage Property was one of the properties that was to be contributed by Rohan/Planet Five to NFH. [SAC, ¶112.] It allegedly belonged at all relevant times to Rohan, even though it should have belonged to NFH and existed for the benefit of NFH’s creditors and members, including Gerova. [Id.] Plaintiff alleges that it, for Gerova and the Funds, was a creditor of Rohan and the Net Five Entities, including NFH and Rohan, and a member of NFH at the time of the transfers at issue, and to date. [SAC, ¶113.] Further, Rohan allegedly solely controlled NFH and other Net Five Entities. [SAC, ¶114.]

After Gerova and the Offshore Fund each went bankrupt and after the CRO for the Offshore Fund and the Creditors Committee began to investigate Rohan and NFH, Rohan allegedly misappropriated the Sabal Storage Property, hid this by using a d/b/a and, then, at the last minute, hastily arranged to transfer the Sabal Storage Property to a shell he controlled—Sabal Palm Ventures—before transferring title to the Sabal Storage Property to Buntzman and his Entities, GMA and SDC, with Degma apparently having an undisclosed interest. [SAC, ¶115.] The transfer, made by special warranty deed on November 19, 2013, was allegedly free and clear of liens. [Id.]

Rohan allegedly made the transfer of the Sabal Storage Property to Defendants while he and NFH were threatened with litigation and with a goal of making himself and NFH each judgment proof. [SAC, ¶116.] Rohan allegedly continued to be involved with the Sabal Storage Property after the transfer, both as an owner and manager of GMA and in its day-to-day operations. [SAC, ¶117.] Rohan allegedly anticipated Defendants would transfer the Sabal Storage Property back to him and testified under oath that this was his wish. [Id.]

Per the SAC, Defendants were at all times part of the conspiracy that led to shams and shells being used as part of the transfer and efforts to transfer the Property to Defendants for far below fair market value, if anything. [SAC, ¶118.] Plaintiff alleges that Buntzman was personally liable for the Sabal Storage Property being an actual fraudulent transfer because GMA/SDC were his alter egos. [SAC, ¶119.]

Plaintiff alleges that at the time of the transfer of the Sabal Storage Property, Rohan and the Net Five Entities were under threat of litigation by the Offshore Fund in its bankruptcy, as the CRO and Creditors’ Committee were investigating his and Net Five’s improprieties, as well as the Class Actions. [SAC, ¶120.] At the time of that transfer, Rohan and NFH were also allegedly parties in the Class Actions and were subject to the Class Action Injunction. [SAC, ¶121.] The transfer was in defiance of that Injunction. [Id.] The transfers were allegedly intended to and had the effect of stripping clean Rohan and the Net Five Entities and rendering them judgment proof in the NY AP and against envisioned claims against them by Gerova, (or in the alternative, the Funds), and Plaintiff. [SAC, ¶122.] Defendants Buntzman, GMA and SDC were allegedly unjustly enriched by the fraudulent transfer of the Sabal Storage Property. [Id.]

Plaintiff alleges that from November 19, 2013 through February 25, 2015, Buntzman, GMA and SDC received the rent stream, profits and revenue generated by the Sabal Storage Property, which is believed to exceed $1.2 million based on what the Property had been generating previously. [SAC, ¶124.] This, Plaintiff alleges, rightly belonged to Plaintiff, acting for Gerova and the Funds, and represents ill-gotten gains to these Defendants. [Id.] On February 25, 2015, Buntzman, GMA and SDC allegedly sold the Sabal Storage Property for $6,075,000. [SAC, ¶125.] Plaintiff alleges that none of this went to NFH, its rightful owner, Gerova, the Funds or Plaintiff. [Id.]

Plaintiff alleges the transfer of the Sabal Storage Property was actually fraudulent and was intended to and did defraud Plaintiff and those on whose behalf it acts, in violation of Cal. Civ. Code §3439.04(a)(1). [SAC, ¶126.] The transfer of the Sabal Storage Property was, Plaintiff alleges, characterized by numerous badges of fraud recognized by California Civ. Code §3439.04(b). [SAC, ¶127.] These include that: the transfer was to an insider (badge 1), in that Rohan acted for GMA and claimed it was a related party to DPH, his own entity; Rohan retained control of the Property after the transfer (badge 2), Rohan concealed that, in making the transfer, he was acting for Buntzman, GMA and SDC with regard to the Property and reaping financial benefits from this (badge 3); Rohan and NFH were under threat of or in litigation at the time of the transfer (badge 4); Rohan removed and concealed assets (badge 7); the price paid for the asset did not constitute reasonably equivalent value in the first instance, and additionally the rightful holder of the property did not receive reasonably equivalent value (or any value) (badge 8). [Id.]

Defendants raise several arguments in its demurrer to the SAC, arguing that Plaintiff is precluded from alleging the claim as a matter of law. The Court takes these arguments in turn.

According to Defendants, the fraudulent transfer claim initially fails because, pursuant to documents which are judicially noticed, Plaintiff is not a creditor of Paul Rohan – the alleged transferor of the Sabal Storage Property. Civil Code §3439.01(c) defines a “creditor” as “a person that has a claim, and includes an assignee of a general assignment for the benefit of creditors, as defined in [CCP §493.010], of a debtor.” A “debtor” is defined as “a person that is liable on a claim.” Civil Code §3439.01(e). Under the statute, a “claim,” except as used in “claim for relief,” “means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.”

Defendants argue that Plaintiff’s status as a creditor is rooted in its claims against Rohan in the NYAP bankruptcy proceeding; Plaintiff was granted leave to amend in those proceedings to assert a claim based on its alleged status as a creditor. Defendants also argue that Rohan never owned or transferred title to the Sabal Storage property. [Demurrer at 20:13-15.]

However, the Court of Appeal, in reversing in part the trial court’s order sustaining the demurrer, stated:

Stillwater did not allege in the first amended complaint that a defendant named in the Adversary Proceeding was one of the transferors of the Sabal Storage property before it was transferred to one of the defendants named in this case. Nevertheless, when it ruled on the demurrer to that pleading, the court had before it judicially noticed documents showing that Stillwater could allege facts showing Rohan, a defendant named in the Adversary Proceeding, personally transferred the Sabal Storage property to a third party immediately before it was transferred to GMA and SDC, defendants named in this case. Such a theory is consistent with the court’s order granting Stillwater leave to amend the original complaint. (See § 3439.08, subd. (b)(1) [a creditor may pursue a claim under the Act against a subsequent transferee of the debtor’s property].)

Because Stillwater could allege the Sabal Storage property was transferred with the intent to render Rohan, Net Five Holdings, and the other defendants named in the Adversary Proceeding judgment-proof (§ 3439.04, subd. (a)(1)), the court should have granted Stillwater leave to amend Count 3 for actual fraudulent transfer of the Sabal Storage property to state facts consistent with those contained in Stillwater’s judicially noticed title records for that property. Stillwater, 2022 WL 557060 at *11 (emphasis added).

Plainly, the Court of Appeal allowed Plaintiff to allege facts showing Rohan personally transferred the Sabal Storage property to a third party immediately before it was transferred to GMA and SDC (two of the Defendants here). The Court of Appeal had its disposal all of the judicially noticed documents before the prior trial court, including the records from the NYAB proceeding. Plaintiff plainly alleges that it was a creditor of Rohan at ¶113. [See SAC, ¶113.] Defendants’ arguments to the contrary, in the Court’s view, would circumvent the mandate from the Court of Appeal in permitting amendment.

Additionally, Defendant argues that Plaintiff cannot carry its burden of demonstrating standing because Plaintiff failed to obtain a judgment against the purported debtor-transferor (in this case, Rohan). Defendants cite Weisenburg v. Cragholm (1971) 5 Cal.3d 892 for the proposition that because Plaintiff Stillwater failed to obtain a judgment against Rohan, it was never (and can never be) a creditor of Rohan, for purposes of alleging a claim under the UFTA.

In Weisenburg, the plaintiff alleged that he was a creditor of the defendants based on a judgment which he had recovered against them in a separate action; the trial court relied entirely on that judgment in determining that plaintiff was a creditor entitled to have certain conveyances at issue set aside. Weisenburg, 5 Cal.3d at 896. The judgment, though, was reversed, and on that basis, the Court held that since the plaintiff was not entitled to the remedy unless he had shown he was a creditor of the defendants, the basis for the finding that he was such a creditor was eliminated. Id. at 896-897.

Additionally, Defendants cite Ex Parte Health South Corp. (Ala. 2007) 974 So.2d 288 (“Health South”). There, a professional corporation (General Medicine) sued the former parent company (Health South) of a health-care company (Horizon), alleging that it was a creditor of Horizon (the health-care company) and that assets had been fraudulently transferred from it to the parent company. The parent company moved for summary judgment, which the trial court denied. The parent company, Health South, moved for writ of mandamus directing the trial court to enter summary judgment.

The Alabama Supreme Court denied the petition. The court held that the professional corporation, General Medicine, had standing as a creditor of Horizon to bring an action against the parent company, Health South, under the UFTA. The Alabama Supreme Court commented that to demonstrate standing under the UFTA, a creditor must show: 1) an actual concrete and particularized injury in fact (i.e., an invasion of a legally protected interest); 2) a causal connection between the injury and conduct complained of; and 3) a likelihood that the injury will be redressed by a favorable decision. Health South, 974 So.2d at 293. The court also referenced the definition of a creditor under the Alabama UFTA as one who has a claim, and the definition of claim under the statute as “‘[a] right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured….’” Health South at 293 (citing §8-9A-1(e), Ala. Code 1975).

The Health South court also analyzed the underlying settlement agreement between General Medicine and Horizon and its owner (Meadowbrook). As part of the settlement, Meadowbrook and Horizon paid General Medicine $300,0900 and consented to a judgment in the federal district court, in which Horizon admitted liability in the amount of $376 million. Health South at 291. In the agreement, General Medicine reserved its right to receive any payment “awarded or returned to Horizon or Meadowbrook as a result of any action brought by Gen[eral] Med[icine] against HealthSouth Corporation to execute on the Consent Judgment.” Id.

As the Alabama Supreme Court states, General Medicine covenanted not to execute on the consent judgment against Meadowbrook or Horizon beyond the $300,000 provided for in the agreement. Health South at 291. The settlement agreement also provided the settlement:

“is not releasing Horizon and/or Meadowbrook from liability to Gen [eral] Med[icine] arising out of the Lawsuit or the Consent Judgment, and that this agreement does not affect Gen[eral] Med[icine]'s rights or claims against any other person or nonparty to this agreement.” Health South at 292.

The underlying settlement agreement also stated that General Medicine agreed that it:

“(i) will not enforce, execute against or attempt to collect in any fashion from Horizon and/or Meadowbrook as a result of or under the Consent Judgment, beyond the amounts identified in paragraph 6(i.) [$300,000]; and (ii) will not execute against or attempt to collect in any fashion from Horizon and/or Meadowbrook as a result of or under the Consent Judgment, beyond the amounts identified in paragraph 6(i.) below; and (iii) will not commence another lawsuit against Horizon and/or Meadowbrook for anything occurring prior to the date of this agreement.” Health South at 294.

The Alabama Supreme Court, applying Michigan law (pursuant to the agreement’s choice-of-law clause), found that this provision constituted a covenant not to sue, and not a release. The Alabama Supreme Court further determined that:

Although the operation and effect of a covenant not to sue and that of a release may be the same as between the parties to the agreement, a covenant not to sue does not extinguish the underlying cause of action; it merely prohibits a party from pursuing it. [Citation.] In short, under Michigan law, because the breach-of-contract cause of action was not extinguished, General Medicine preserved its right to enforce the consent judgment against other parties, including HealthSouth. Ex parte Health South Corp., 974 So.2d at 296.

Here, Plaintiff, in the underlying NYAB proceeding, entered into a settlement agreement with Net Five Entities and Paul Rohan (the “Settling Defendants”) on August 5, 2022. [Exh. D to Defendants’ RJN.] Paragraph 4 of the NYAB Settlement Agreement provides in pertinent part as follows:

4. Covenant Not to Sue. Settling Defendants agree and acknowledge that Stillwater LLC holds a valid claim as a creditor against Rohan, which may include the Sabal Storage property provided, however, notwithstanding the foregoing, Stillwater LLC shall and does agree and covenants not to sue (in law, in equity, in any regulatory proceeding, or otherwise) Rohan, his wife, children, Halter, and/or Laubach, and agrees to forebear from instituting, supporting, encouraging, participating in or otherwise prosecuting, whether directly or indirectly, any lawsuit against Rohan, his wife, children, Halter, and /or Laubach, related to the subject matter of the Adversary Proceeding, Stillwater, Gerova, and/or Net Five. Notwithstanding, the within shall not limit Stillwater's right to prosecute claims (the "Retained Claims"), if any, against third parties, other than Rohan, his wife and children, Halter and/or Laubach, including prosecution of that certain action against the Estate of Mark Buntzman, Case No. BC702295, pending in Superior Court of California. [Defendant’s RJN, Exh. D at ¶4.]

The covenant not to sue, on its face, preserves Plaintiff’s “valid claim as a creditor against Rohan, which may include the Sabal Storage property provided….” While Plaintiff agreed to never sue Rohan, Rohan himself agreed that Plaintiff’s right to prosecute against third parties (including this specific action) would not be barred. As in Health South, Plaintiff appears to preserve its right to prosecute this third-party claim against the named Defendants (who were not parties to the NYAB settlement). Thus, at the pleading stage, the NYAB settlement does not, by itself, stand as a bar to Plaintiff prosecuting the action as to the named Defendants.

Weisenburg is distinguishable from this case. Weisenburg did not involve a specific covenant not to sue. The underlying judgment in that case was completely set aside. That was the reason for the court finding that the plaintiff could not have been a creditor within the meaning of the UFTA.

Defendant further argues that Plaintiff’s remedy is limited by Civil Code §3439.08(b)(1). This section provides in applicable part:

(b) To the extent a transfer is avoidable in an action by a creditor under paragraph (1) of subdivision (a) of Section 3439.07[2], the following rules apply:

(1) Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subdivision (c), or the amount necessary to satisfy the creditor's claim, whichever is less.

According to Defendant, any claim by Plaintiff “against Rohan is for $0 as a result of the NYAP Settlement Agreement; thus, even if Plaintiff were permitted to prosecute this case to judgment, its damages would statutorily be limited to its valueless ‘claim’ against Rohan.” [Demurrer at 26:7-9.] Again, however, this argument appears to cut against the Court of Appeal’s determination (having considered the judicially noticed documents) that Plaintiff “could allege the Sabal Storage property was transferred with the intent to render Rohan, Net Five Holdings, and the other defendants named in the Adversary Proceeding judgment-proof[.]” As Plaintiff points out, the Court of Appeal had before it the Sabal Storage title records, including the Corrective Deed and Saba Palm loan and foreclosure documents. [Opposition at 22:21-22.]

Defendants also argue that the fraudulent transfer claim for the Sabal Storage property fails because Rohan never owned the property. [Demurrer at 27:5-6.] Since he did not own the property, Rohan could not have been a debtor for purposes of the UFTA, according to Defendants.

Civil Code §3439.04(a)(1) states that “[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) [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor.” See Civil Code §3439.04(a)(1). The term “debtor” is defined under §3439.01(e) as “a person that is liable on a claim.” And a “claim,” except as used in “claim for relief,” “means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Civil Code §3439.01(b).

Defendants, in arguing that Rohan never owned the Sabal Storage property, show the following ownership history of the Sabal Storage Property from 2005 through its transfer to GMA and SDC in November 2013:

· July 1, 2005: Unaffiliated third parties deeded the approximately 4.4 acre Initial Property, which included the Sabal Storage Property, to Sabal Palm Ventures. RFJN, Ex. N.

· September 8, 2008: Pursuant to a Special Warranty Deed and the Corrective Deed, Sabal Palm Ventures separated the Initial Property into two properties, the North Parcel and the South Parcel, with the South Parcel being the Sabal Storage Property. SAC, Ex. 35; RFJN, Ex. O.

· November 19, 2013: Sabal Palm Ventures deeded the Sabal Storage Property to GMA and SDC as tenants in common, through the SPV-GMA/SDC Deed. SAC, Ex. 13. [Demurrer at 27:9-13.]

Certainly, the allegations of this case (including Rohan’s alleged ownership of the Sabal Storage property) are, and have been, hotly contested. Any right by Plaintiff Stillwater to payment from the transfer is disputed. At the pleading stage, however, the Court cannot make a factual determination as to whether, under Plaintiff’s theory of the case, Rohan in fact owned the property. It is again worth mentioning that the Court of Appeal, having considered the judicially noticed documents (including the deeds at issue) determined that Plaintiff could allege that Rohan personally transferred the Sabal Storage property. Stillwater, supra, 2022 WL 557060 at *11.

83. On November 19, 2013, Rohan transferred the Sabal Storage Property to Buntzman. To effectuate this, he first transferred the property to Sabal Palm, an empty shell. He recorded a Special Warranty Deed from “Paul B. Rohan, individually and d/b/a Sabal Ventures, L.L.C.” as Grantor to Sabal Palm Ventures, L.L.C. for less than a dollar of consideration (the “Rohan Deed”, attached hereto as Exhibit 42). The Rohan Deed further demonstrates that the M&I Loan to Sabal Palm was not properly secured because Sabal Palm did not own the Sabal Storage Property on September 25, 2008, nor did Sabal Palm own the Property during the foreclosure process or when a Certificate of Sale was issued.

84. Directly after the Rohan Deed made it look like he no longer owned the Sabal Storage Property personally, Rohan caused Sabal Palm to transfer the Sabal Storage Property to Buntzman’s entities, GMA and SDC, each receiving a 50% interest as tenants-in-common via a Special Warranty Deed. See Ex. 13 (the “Special Warranty Deed”). Rohan signed as Managing Member of Sabal Palm. The property description is Ex. A to the Special Warranty Deed. This transfer to GMA and SDC was already free and clear of any liens made by grantor. An unsigned, undated closing statement exists stating that GMA/SDC were to pay $3.9 million to “the lender” but Rohan/Sabal Ventures had no loan on the Property, and Sabal Palm was not the owner at the time it took a loan. If Defendants paid M&I this amount--and there is no proof they did--this would have been a gratuitous transfer done while fully aware of and a part of Rohan’s fraudulent scheme. Irrespective, it represents a small fraction of the Sabal Storage Property’s value. Moreover, if Defendants paid M&I, since the title records were public and they knew that Rohan himself held ownership (and were for years part of his every venture), this further evidences their knowledge and/or conspiracy in the fraud. [SAC, ¶83, 84.]

The Court cannot assess the veracity or import of the so-called “Rohan Deed” or “Special Warranty Deed” (Exhibits 42 and 13 to the SAC, respectively) at this time. Exhibit 42 to the SAC, dated November 19, 2013, states that it is “by and between Paul B. Rohan, individually and d/b/a SABAL VENTURES, L.L.C., hereinafter called “Grantor” to SABAL PALM VENTURES, L.L.C., a Florida limited liability company….” [Exh. 42 to SAC at 527.] The Rohan Deed provides “[t]hat Grantor, for and in consideration of the sum of Ten and no/100 Dollars…and other valuable consideration, the receipt whereof is hereby acknowledged, by these presents does hereby grant, bargain, sell, alien, remise, release, convey and confirm unto Grantee, its legal representatives and assigns, all that certain real property situate in Lake County, Florida, as described on Exhibit ‘A’ attached hereto.” [SAC, Exh.42.]

Exhibit 13 to the SAC, also a Special Warranty Deed, states that it was made on November 19, 2013, “by and between SABAL PALM VENTURES, L.L.C., a Florida limited liability company, hereinafter called ‘Grantor’ to G.M.A. INDUSTRIAL CORP., a New York corporation…, as to a 50% interest in the Property, and SDC REMAINDER LLC, a New York limited liability company…, as to a 50% interest in the Property, as Tenants in common hereinafter collectively called ‘Grantee’.” [SAC, Exh. 13.]

When the Court considers these allegations and attached exhibits through the prism of the Court of Appeal’s opinion, Plaintiff has alleged Rohan’s ownership of the Sabal Storage property, and that he effectively engineered the transfer in a fraudulent manner.

At the pleading stage, the Rohan Affidavit and the Corrective deed do not change this. The Rohan Affidavit, incorporated by reference into the SAC through Exhibit 34, states that “PAUL B. ROHAN, as current Managing Member of SABAL PALM VENTURES, L.L.C. and PAUL B. ROHAN, the intended sole member of SABAL VENTURES, L.L.C. hereby agree that the property was never conveyed or vested in SABAL VENTURES, L.L.C. and the deed is a nullity.” [SAC, Exh. 34 at ¶6.] The affidavit further declares that “[t]he undersigned makes this Affidavit realizing that First American Title Insurance Company and Van Rooy Law will be relying on representations herein made to issue a policy of title insurance on real property being purchased by the Company.” [SAC, Exh. 34 at ¶7.] The Rohan Affidavit was signed under penalty of perjury by Paul B. Rohan on November 19, 2013. [SAC, Exh. 34.]

The Corrective Special Warranty Deed (“the Corrective Deed”) is attached as Exhibit O to Defendant’s Request for Judicial Notice. The Corrective Deed states that it was “BEING GIVEN TO CORRECT A SCRIVENER’S ERROR IN THE NAME OF THE GRANTEE IN THE SPECIAL WARRANTY DEED...("ORIGINAL DEED"). [Defendants’ RJN, Exh. O.] The Corrective Deed states that “THE CORRECT GRANTEE IS SABAL PALM VENTURES, L.L.C., A FLORIDA LIMITED LIABILITY COMPANY. THE GRANTEE IN THE ORIGINAL DEED, SABAL VENTURES, L.L.C. IS NOT AN EXISTING FLORIDA LIMITED LIABILITY COMPANY AND NO LIMITED LIABILITY COMPANY NAMED SABAL VENTURES, L.L.C. IS REGISTERED TO DO BUSINESS IN THE STATE OF FLORIDA.” [Defendants’ RJN, Exh. O.]

While these documents may, in fact, absolve the Defendants of any liability (and may show that Rohan was never, and could not have been, a debtor and owner of the Sabal Storage Property), these are determinations the Court cannot make on demurrer.

Similarly, whether title could have vested in Rohan (through Sabal Ventures) is a factual determination which cannot be resolved at this time. Defendants argue that under Florida law, “Sabal Ventures, L.L.C.” was not and count not have been an alias or “dba” of Rohan at the time of either deed. [Demurrer at 29:10-11.] In support of this, Defendants cite Fla. Stat. §865.09(3)(a), which provides “[a] person may not engage in business under a fictitious name unless the person first registers the name with the [Division of Corporations of the Department of State].” According to Defendants, Sabal Ventures was never registered as a fictitious name for Rohan and Rohan has never registered any fictitious name. [Demurrer at 29:13-15.]

Again, however, these are all factual issues. Florida law itself recognizes that a deed to a nonexistent person is a valid conveyance to the intended but misnamed grantee, if such person exists and if the intention of the parties can be ascertained. See Apostolic Tabernacle Church of Titusville v. Florida State Council of Pentecostal Assemblies of the World, Inc. (Fla. 5^th DCA 1998) (citing Pruitt v. Ferguson (1982) 224 Va. 507, 517). Another Florida case recognizes that while “[a] fictitious name has no independent legal existence” and that “it is unlawful for a person or entity to engage in or transact business under a fictitious name without first registering it,” “the failure to comply with the registration requirements does not impair the validity of any contract entered into by the party conducting business under an unregistered fictitious name.” Worm World, Inc. v. Ironwood Productions, Inc. (Fla. 1^st DCA) 917 So.2d 274, 275 (emphasis added).

Ultimately, the Court would have to ignore the Rohan Deed, the Special Warranty Deed, the allegations of the SAC, and the Court of Appeal’s opinion in order to sustain the demurrer on this ground. The Court cannot do so here.

“An action for the fraudulent transfer of the debtor's property with the intent to ‘hinder, delay, or defraud any creditor of the debtor’ (Civ. Code, § 3439.04, subd. (a)) must be brought ‘within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.� Snapp & Assocs. Ins. Services, Inc. v. Robertson (2002) 96 Cal. App. 4th 884, 891, disapproved on other grounds by Aryeh v. Canon Bus. Sols., Inc. (2013) 55 Cal. 4th 1185, 1196. See Civil Code §3439.09(a).

Defendants argue that the UFTA claim is statutorily barred because the Sabal Storage Property was transferred in November 2013, and there is no dispute that the Action was not commenced within four (4) years after the November 2013 transfer of Sabal Storage to GMA/SDC. Thus, according to Defendants, Plaintiffs must invoke the one-year discovery rule under §3439.09(a). Defendants’ position is that this was a real estate transaction reflected in the public records, and as such, Plaintiff discovered (or reasonably could have discovered) the transfer outside the limitations period.

The instant litigation was filed May 3, 2018. As is pertinent to the statutory timeline, Plaintiff alleges in applicable part as follows:

On July 21, 2017, in the NY AP, the BSDNY concluded that Rohan spoliated evidence.19 The BSDNY, among other penalties, ordered Rohan to pay Plaintiff $80,000. The monetary sanction has since been satisfied, while the BSDNY reserved determination as to any additional sanctions as a result of such conduct. This spoliation prevented Plaintiff from knowing details and the extent of Rohan’s connections with Buntzman and Defendants and their role in this conspiracy until Plaintiff was 1) able to obtain certain documents from a NFH server that was found to be in the possession of a former computer programmer for NFH, which Plaintiff gained access to on June 7, 2017 and 2) able to obtain documents through a subpoena to Buntzman and Degma, which Buntzman, in league with Rohan, obstructed and stalled in responding to and required a motion to compel and court order before they produced on February 1, 2018, and which production still appears to be materially incomplete. [SAC, ¶91.]

Thus, through ¶91, Plaintiff alleges that it did not know, and was unable to learn, of the Sabal Storage transfer prior to obtaining documents in June 2017 and February 2018.

Once again, the law of the case controls. As the Court of Appeal recognized, Judge Kuhl overruled Defendants’ prior demurrer to Count 3 in the First Amended Complaint on statute of limitations grounds “because Stillwater could show at trial that it did not discover the fraudulent nature of the underlying transfers less than a year before it filed this lawsuit (§3439.09, subd. (a)).” Stillwater, supra, 2022 WL 557060 at *8. Count 3 of the FAC alleged actual fraudulent transfer of the Sabal Storage property. While the Court of Appeal upheld Judge Kuhl’s dismissal of the constructive fraudulent transfer claims, it acknowledged that the court had already overruled the demurrer to the Sabal Storage fraudulent transfer claim. Therefore, for purposes of the pleading stage of this case, and with the allegation at ¶91 in mind, the demurrer must again be overruled on statute of limitations grounds.

Defendants demur pursuant to CCP §430.10(f) (uncertainty) as to Degma and Buntzman.

With respect to Degma, Defendants argue that the SAC fails to allege that Degma was never a transferee of the Sabal Storage property, and any allegations of liability are fatally uncertain.

In Filip v. Bucurenciu (2005) 129 Cal.App.4^th 825, the Court of Appeal held in a UFTA action that evidence that a judgment debtor, his former wife, and her daughter worked together to hide assets from a judgment creditor by numerous transfers of property in which the debtor had an interest was substantial evidence that transfers were made with fraudulent intent under the UFTA. As to Defendant Degma, the SAC here alleges in applicable part:

33. As more fully discussed herein, the various Defendant Entities did not have a distinct corporate purpose and Buntzman would regularly use these Entities alone or in combination as suited his immediate purpose or whim without there being a legitimate business justification for this. For example, as detailed below, he caused certain of the Defendant Entities to make transfers to Kelliecho and DPH, Rohan-controlled shells, even though these entities transacted no business with Kelliecho or DPH. Similarly, as discussed below with respect to the Sabal Storage Property, while it was transferred to GMA and SDC, Buntzman and Rohan discussed the need for a memorandum of right of first refusal from Degma (an entity with no apparent interest in the property), as well as a Rohan-controlled entity.

95. Further disproving Rohan’s testimony that the Sabal Storage Property were not related to his (Rohan’s) entities, Buntzman and Rohan, in February 2015, worked together on a deal with “Better Space Storage” in Lady Lake, Florida, which is where the “Sabal Storage Property” is located. The correspondence refers to an estoppel from Sabal Palm. This correspondence also notes that “Memos of ROFR [Right of First Refusal] are needed from GMA Parcel, Degma and DPH FL” (Rohan’s entity). It also lists GMA and SDC as providing the “Owner’s Affidavit.” (See Ex. 45).

97i. Rohan’s continued involvement in the further development and management of the Sabal Storage Property, and Buntzman allowing Rohan to control the Sabal Storage Property, evidence that Buntzman, Degma, SDC, and GMA were really acting as a straw man for the Sabal Storage Property so that Rohan could continue to control the operations after he covered his tracks and was rid of the Funds, Plaintiff and M&I.

115. After Gerova and the Offshore Fund each went bankrupt and after the CRO for the Offshore Fund and the Creditors Committee began to investigate Rohan and NFH, Rohan misappropriated the Sabal Storage Property, hid this by using a d/b/a and, then, at the last minute, hastily arranged to transfer the Sabal Storage Property to a shell he controlled—Sabal Palm Ventures—before transferring title to the Sabal Storage Property to Buntzman and his Entities, GMA and SDC, with Degma apparently having an undisclosed interest. The transfer, made by special warranty deed on November 19, 2013, was free and clear of liens. [SAC, ¶¶93, 95, 97i, and 115.]

While such allegations are not the model of clarity as to Degma, the precise nature and extent of Degma’s alleged involvement will be developed through discovery. Degma effectively is an alleged alter ego of Mr. Buntzman. There are sufficient allegations to allow Degma to answer them.

Defendants argue that the SAC fails to plead facts sufficient to support a fraudulent transfer claim against Mr. Buntzman. The gravamen of the claims, as they relate to Mr. Buntzman, is that Rohan transferred the Sabal Storage property to him (SAC, ¶83); that Buntzman was “really acting as a straw man for the Sabal Storage Property” [SAC, ¶97(i)]; and that Rohan “transferr[ed] title to the Sabal Storage Property to Buntzman and his Entities.” [SAC, ¶115.] According to Defendants, the allegations are directly contradicted by the real property records attached as exhibits to the SAC, which, Defendants argue, show that Buntzman was never a grantee nor grantor.

However, Plaintiff’s theory of the case is that Mr. Buntzman’s role as co-conspirator makes him individually liable for the transfer of the Sabal Storage property. [Opposition at 37:13-14.] Turning to the pertinent allegations against Mr. Buntzman, the SAC alleges:

While Rohan had pledged Sabal Storage to NFH, he broke that promise and always kept it in his own name, using a d/b/a –Sabal Ventures, LLC (“Sabal Ventures”) to hide this. Then, in November 2013 to hide his ownership, Rohan transferred the Sabal Storage Property from Sabal Ventures to his empty shell—Sabal Palm Ventures, LLC (“Sabal Palm”)—and then immediately to GMA/SDC. After the transfer Rohan continued to share in Sabal Storage’s ownership through GMA and also continued to manage it.. Buntzman through his shells began to enjoy the rent stream, profits, and revenues associated with the property. [SAC, ¶2.]

Although Rohan had caused entities he controlled to pledge Sabal Storage to NFH, he reneged on that promise and held it at all relevant times until November 19, 2013 in a d/b/a for himself—Sabal Ventures. On November 19, 2013, Rohan then dumped the Sabal Storage Property into an empty shell he controlled—Sabal Palm—and transferred it to GMA/SDC free and clear of liens. Rohan then remained involved in the Sabal Storage Property after the transfer, including because he had an ownership interest in GMA. The deed from Sabal Palm to Buntzman says the consideration paid was “Ten and no/100 Dollars and other valuable consideration…”. Defendants then flipped the property for millions in profit only 18 months later. Buntzman then caused his entities to kick back money to Rohan shells—including Kelliecho, LLC (“Kelliecho”) and DPH, with which they otherwise transacted no business. [SAC, ¶6.]

After receiving the Sabal Storage Property from Rohan (or Rohan-controlled entities and shams), Buntzman, through his alter ego Entities, kicked back more than $1 million to Rohan, funneling this through shell entities Rohan controlled, including Kelliecho and DPH, and using multiple different banks to thwart the tracing of these payments. Buntzman also staked Rohan in approximately $13 million of joint investments, including in the restaurants, brake parts store, and bait shop, which appear also to have been forms of kickbacks to avoid the reach of creditors. Rohan and Buntzman jointly developed and monetized multiple properties that Rohan/Planet Five had pledged to NFH but never provided. [SAC, ¶15.]

54. Rohan… invested, through Planet Five entities, in other Buntzman entities. For example, as noted above Rohan held an equity interest in Buntzman’s entity—1301 Morehead LLC. (See 1301 Morehead LLC Balance Sheet dated December 31, 2011, Ex. 15). That entity leased space to Greenman Eye Center in October 2011. (See email from Degma to E. Halter dated October 9, 2011, Ex. 22). However, it became an empty shell and Buntzman represented that GMA was the owner of the leased property. (Id.). Since Buntzman was still communicating with Halter (then a Net Five officer) who was handling the lease, this confirms that Rohan’s interest in the property remained, showing that Rohan held an undisclosed interest in GMA. [SAC, ¶54.]

The conspiratorial acts between Rohan and Defendants are detailed above and include that Rohan acted for Buntzman and his Entities with regard to the Sabal Storage Property, who assisted Rohan in stripping his and/or NFH’s their assets while under the threat of litigation and/or during litigation; that Mark and Gabriel Buntzman were involved in every venture of Rohan; that Rohan had an interest in GMA and acted as its manager and day to day operator, that GMA and Rohan’s shell, DPH were related parties. Buntzman also used a series of his entities including Defendants Degma, GMA, SDC, Parking Mall, and LTAP to kick money back to Rohan and otherwise hide assets from the reach of creditors. Buntzman further provided kickbacks to Rohan by underwriting his investments with him in restaurants, a brake shop and a bait shop, at a time Rohan was crying poverty. [SAC, ¶136.]

Exhibit 1 to the SAC, which is incorporated by reference, is an email allegedly from Rohan to one Alyssa Quill (cc’d to Mr. Buntzman), stating that Gabe and Mark Buntzman “are part of everything I do regarding different ventures,” when asked by Quill whether Rohan was partnering with the Buntzmans on the Sabal Storage project.

Per the SAC, “the various Defendant Entities did not have a distinct corporate purpose and Buntzman would regularly use these Entities alone or in combination as suited his immediate purpose or whim without there being a legitimate business justification for this.” [SAC, ¶33.] Further, per the SAC, “Buntzman and Rohan, in February 2015, worked together on a deal with ‘Better Space Storage’ in Lady Lake, Florida, which is where the “Sabal Storage Property” is located. The correspondence refers to an estoppel from Sabal Palm. This correspondence also notes that ‘Memos of ROFR [Right of First Refusal] are needed from GMA Parcel, Degma and DPH FL’ (Rohan’s entity). It also lists GMA and SDC as providing the ‘Owner’s Affidavit’.” [SAC, ¶95.]

On balance, these allegations set forth a purported basis for establishing Mr. Buntzman’s co-conspirator status as to Rohan. The Court must assume these allegations are true for purposes of ruling on the demurrer. The force and effect of the real property records will be developed during the substantive phase of this litigation.

Defendants argue that alternatively, the SAC “does not come close to alleging facts sufficient to justify piercing the corporate veil of GMA and SDC” on an alter ego theory. “The alter ego doctrine arises when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff’s interests….In certain circumstances the court will disregard the corporate entity and will hold the individual shareholders liable for the actions of the corporation[.]” Greenspan v. LADT, LLC (2010) 191 Cal.App.4^th 486, 510.

“There is no litmus test to determine when the corporate veil will be pierced; rather the result will depend on the circumstances of each particular case. There are, nevertheless, two general requirements: ‘(1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow.’ ... And ‘only a difference in wording is used in stating the same concept where the entity sought to be held liable is another corporation instead of an individual.’ ... Greenspan, 191 Cal.App.4^th at 511.

As Greenspan makes clear, under California law, courts consider fourteen (14) factors in assessing whether there can be alter ego liability:

[1] [c]ommingling of funds and other assets, failure to segregate funds of the separate entities, and the unauthorized diversion of corporate funds or assets to other than corporate uses ...; [2] the treatment by an individual of the assets of the corporation as his own ...; [3] the failure to obtain authority to issue stock or to subscribe to or issue the same ...; [4] the holding out by an individual that he is personally liable for the debts of the corporation ...; the failure to maintain minutes or adequate corporate records, and the confusion of the records of the separate entities ...; [5] the identical equitable ownership in the two entities; the identification of the equitable owners thereof with the domination and control of the two entities; identification of the directors and officers of the two entities in the responsible supervision and management; sole ownership of all of the stock in a corporation by one individual or the members of a family ...; [6] the use of the same office or business location; the employment of the same employees and/or attorney ...; [7] the failure to adequately capitalize a corporation; the total absence of corporate assets, and undercapitalization ...; [8] the use of a corporation as a mere shell, instrumentality or conduit for a single venture or the business of an individual or another corporation ...; [9] the concealment and misrepresentation of the identity of the responsible ownership, management and financial interest, or concealment of personal business activities ...; [10] the disregard of legal formalities and the failure to maintain arm's length relationships among related entities ...; [11] the use of the corporate entity to procure labor, services or merchandise for another person or entity ...; [12] the diversion of assets from a corporation by or to a stockholder or other person or entity, to the detriment of creditors, or the manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in another ...; [13] the contracting with another with intent to avoid performance by use of a corporate entity as a shield against personal liability, or the use of a corporation as a subterfuge of illegal transactions ...; [14] and the formation and use of a corporation to transfer to it the existing liability of another person or entity.” ... Greenspan, 191 Cal.App.4^th at 512-513; Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-840.

Critically, “[t]his long list of factors is not exhaustive. The enumerated factors may be considered “[a]mong others “under the particular circumstances of each case. ... No single factor is determinative, and instead a court must examine all the circumstances to determine whether to apply the doctrine....” Greenspan at 513 (internal quotations omitted).

In terms of pleading alter ego liability, though, “[i]t is not even essential, apparently…that the alter ego doctrine always be specifically pleaded in the complaint in order for it to be applied in appropriate circumstances.” First Western Bank & Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 915.

Plaintiff alleges that Buntzman “owned and controlled and treated as his alter egos” Degma, GMA, and SDC. [SAC, ¶5.] Buntzman allegedly “staked Rohan in joint investments while Rohan was in or under threat of litigation, including restaurants, a brake parts store, and a bait shop. Because Buntzman provided Rohan with the funds to invest in these at a time he was crying poverty, these appear to also have been ways to kick back funds to him for the Sabal Storage transfer and other transfers, including through shell entities of Buntzman which are also named as Defendants here.” [SAC, ¶14.]

Buntzman allegedly operated Degma out of his home and each of the other Defendant Entities out of the same California office space, and would allegedly use the same email addresses both for himself personally and for the Entities. [SAC, ¶31.] Under the SAC, “the various Defendant Entities did not have a distinct corporate purpose and Buntzman would regularly use these Entities alone or in combination as suited his immediate purpose or whim without there being a legitimate justification for this.” [SAC, ¶33.]

Defendants’ argument that Plaintiff has merely made a “few bare, conclusory statements” about Buntzman’s relationship with GMA/SDC [Opposition at 36:13-14] ultimately may prove successful on a substantive level, in terms of Plaintiff having to prove such liability. To reiterate, though, the alter ego doctrine does not require all of the factors be present; instead, the Court must view the totality of the circumstances. For purposes of the pleading stage, Plaintiff has adequately alleged facts for purposes of alter ego liability against Mr. Buntzman, as it relates to his relationship with GMA/SDC. It has adequately alleged unity of interest and ownership such that the separate personalities of Buntzman and the corporate entities no longer existed; and 2) that inequitable results would follow if the Court treats the acts as those of the corporation alone.

For all of these reasons, Plaintiff has alleged a basis for liability as against Mr. Buntzman, GMA, SDC, and Degma.

The remaining causes of action are for Unjust Enrichment As To Sabal Storage (2^nd C/A); Civil Conspiracy As To Sabal Storage (3^rdC/A); Conspiracy To Defraud As To Sabal Storage (4^th C/A); and Aiding And Abetting Conspiracy As To Sabal Storage (5^th C/A).

The Court of Appeal previously recognized Judge Kuhl’s determination that these common law claims “rose and fell with Stillwater’s fraudulent transfer claims because they were ‘premised’ on the same theories.” Stillwater, 2022 WL 557060 at *20. The Court of Appeal, in reversing the order on the FAC, stated that to the extent the common law counts “arise out of facts common to Stillwater’s claim for actual fraudulent transfer of the Sabal Storage property asserted in Count 3, the court should have granted Stillwater leave to amend those claims.” Stillwater, supra, at *20.

Taking these claims in turn, “[u]njust enrichment is not a cause of action, however, or even a remedy, but rather “ ‘ “a general principle, underlying various legal doctrines and remedies” ’ … . [Citation.] It is synonymous with restitution. [Citation.]” [Citation.] Unjust enrichment has also been characterized as describing “ ‘the result of a failure to make restitution … .’ ” [Citation.]” McBride v. Boughton (2004) 123 Cal.App.4^th 379, 387. Nevertheless, the California Supreme Court in Ghirardo v. Antonioli (1996) 14 Cal.4^th 39, 43-44 appeared to recognize that a cause of action for “unjust enrichment” exists under certain circumstances. See also Villager Franchise Sys. v. Dhami, Dhami, & Virk (E.D. Cal. 2006) 2006 U.S. Dist. LEXIS 6114 at *22.

The Second District has specifically determined that a cause of action for unjust enrichment does not exist. See Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4^th 779, 793; McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4^th 1457, 1490; and Bank of New York Mellon v. Citibank, N.A. (2017) 8 Cal.App.5^th 935, 955. The First and Fourth District Courts of Appeal, respectively, also have determined that a cause of action for unjust enrichment does not exist in California. Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1315 and Lauriedale Assocs., Ltd. v. Wilson (1992) 7 Cal.App.4^th 1439, 1448. In fact, the term “unjust enrichment” “is synonymous with restitution.” Melchior, supra, 106 Cal.App.4^th at 794 (emphasis added). The Fourth District, though, has recognized a cause of action for unjust enrichment. See Levine v. Blue Shield of California (2010) 189 Cal.App.4^th 1117.

Absent California law recognizing a “cause of action” for unjust enrichment, the demurrer to the claim for unjust enrichment claim is sustained, without leave to amend. With that said, however, Plaintiff will be given leave to amend to allege a proper cause of action, other than unjust enrichment, seeking restitution (which, per McBride, is synonymous with unjust enrichment). It is the Court’s intent that upon amendment alleging a claim in proper form, there will be no further pleading challenges. The Court is satisfied that Plaintiff has alleged a basis for restitution of the rental income and sales proceeds stemming from the sale of the Sabal Storage property.

Turning to the third through fifth causes of action, Defendants argue that: 1) civil conspiracy is not a cause of action under Applied Equip. Corp. v. Litton Saudi Arabia, Ltd. (1994) 7 Cal.4^th 503, 510-511; 2) aiding and abetting liability can be imposed when a defendant (i) knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act, or (ii) gives substantial assistance to the other in accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a breach of duty to the third person.

Here, as discussed at length above, there is a sufficient basis for alleging actual fraudulent transfer. The third and fifth causes of action are derivative claims, premised on the underlying alleged actual fraudulent transfer. Since the Court has determined the actual fraudulent transfer claim is adequately stated, Plaintiff has stated a basis for the third and fifth causes of action.

Applied Equipment Corp. v. Litton Saudi Arabia, Ltd. does not change this. The Applied Equipment court stated:

Standing alone, a conspiracy does no harm and engenders no tort liability. It must be activated by the commission of an actual tort. “ 'A civil conspiracy, however atrocious, does not per se give rise to a cause of action unless a civil wrong has been committed resulting in damage.' ” Applied Equipment, 7 Cal.4^th at 511 (citations omitted; emphasis added).

'The elements of an action for civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of the common design.... In such an action the major significance of the conspiracy lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity.' Applied Equipment at 511.

The alleged civil conspiracy between the Defendants and Rohan here, under the SAC, was not done in isolation. The Plaintiff alleges damage from the conspiracy and the purported actual fraudulent transfer of the Sabal Storage property. The conspiracy was allegedly “activated by the commission of an actual tort.” Applied Equipment at 511. Therefore, the civil conspiracy claim has been adequately stated.

Similarly, the aiding and abetting claim has been adequately stated as against the Defendants here. As the court in Berger v. Varum (2019) 35 Cal.App.5^th 1013, 1025 observed:

California imposes liability on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person. [Internal citations and quotes omitted). Berger v. Varum (2019) 35 Cal.App.5th 1013, 1025.

Here, Defendants allegedly knew that Rohan’s conduct in effectuating the alleged actual fraudulent transfer constitutes a breach of duty, and because Defendants allegedly gave substantial assistance or encouragement to Rohan to so act through their long-standing business relationship.

Finally, the fourth cause of action for conspiracy to defraud is also stated, as this cause of action incorporates the allegations of the actual fraudulent transfer.

For all of these reasons, the demurrer to the unjust enrichment claim is sustained, without leave to amend, but without prejudice to Plaintiff amending a cognizable cause of action which properly seeks restitution under California law. The demurrer to the third through fifth causes of action is overruled.

CCP §436(a) allows a court to “[s]trike out any irrelevant, false, or improper matter inserted in any pleading.” City of Rancho Cucamonga v. Reg’l. Water Quality Control Bd. – Santa Ana Region (2006) 135 Cal.App.4^th 1377, 1386. CCP §431.10(b) defines an “immaterial” allegation as: an allegation that is not essential to the statement of a claim or defense; an allegation that is neither pertinent nor supported by an otherwise sufficient claim or defense; or a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint. An “immaterial allegation” is defined as “irrelevant matter” as that term is used under CCP §436. CCP §431.10(c).

f) False and irrelevant allegations concerning Plaintiff’s standing as an alleged

g) Allegations misstating or failing to conform to prior court rulings, including the

h) Allegations misstating or failing to conform to prior court rulings, including the

i) Allegations misstating or failing to conform to prior court rulings, including the

j) Allegations misstating or failing to conform to prior court rulings, including the

k) Patently false and improper allegations regarding Plaintiff’s discovery of the

In their points and authorities, Defendants break down these allegations of the SAC into four (4) broad areas. The Court takes these in turn in addressing the motion.

Plaintiff’s prayer seeks monetary relief in the form of “the value of the [Sabal Storage] Property transferred in the amount as may be determined at trial, plus any amount of rent stream, profits and revenue during the period of Defendants’ [sic] as may be determined at trial, believed to exceed $10.8 million.” [SAC, ¶128(b) at 31:1-4.]

Defendants first argue that since Plaintiff abandoned any right it may have had to obtain any payment from Rohan by settling the NYAP without receiving a judgment against him (and by agreeing to never sue him again), the value of Plaintiff’s claim is $0. [Motion to Strike at 8:16-17.] As discussed in connection with the Court’s analysis of the demurrer, though, the Court has determined that Plaintiff has stated a cognizable claim for actual fraudulent transfer. Thus, to the extent the motion to strike seeks Plaintiff’s right to seek the value of the Sabal Storage property stemming from the alleged actual fraudulent transfer, the motion to strike is denied.

With respect to the motion to strike the alleged lost rent stream, profits and revenue of the Sabal Storage property, the Court must turn to the text of §3439.07, which addresses the remedies of creditors under the UFTA. Section 3439.07 provides in pertinent part:

(a) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in Section 3439.08, may obtain:

(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim.

(2) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedures described in Title 6.5 (commencing with Section 481.010) of Part 2 of the Code of Civil Procedure, or as may otherwise be available under applicable law.

(3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure, the following:

(A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or other property of the transferee.

(B) Appointment of a receiver to take charge of the asset transferred or other property of the transferee.

(b) To the extent a transfer is avoidable in an action by a creditor under [§3439.07(a)(1)], the following rules apply:

(1) Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subdivision (c), or the amount necessary to satisfy the creditor's claim, whichever is less. (Emphasis added.)

Section 3439.08(c) states that “[i]f the judgment under subdivision (b) is based upon the value of the asset transferred, the judgment shall be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.” Civil Code §3439.08(c).

By its terms, CUFTA allows only equitable remedies such as avoidance, attachment, an injunction, or appointment of a receiver; upon finding a CUFTA violation, the court may cancel the transfer or impose a lien against the transferred property, but it may not award damages. Forum Ins. Co. v. Devere Ltd. (C.D. Cal. 2001) 151 F.Supp.2d 1145, 1148 aff’d. 62 Fed.Appx. 151, 2003 WL 1793377.

The question is whether the lost profits and rents qualify as relief which is available under the statutory scheme. Reading the above provisions together, and keeping in mind that only equitable relief is available under the UFTA, lost rent and profits do not appear to be available under the UFTA itself because those represent damages at law. Berger v. Varum (2019) 35 Cal.App.5^th 1013, relied on by Plaintiff, does not hold differently. In that case, the Court of Appeal determined that the plaintiff could seek tort damages (including lost rents) under his common law fraudulent transfer claim. While the plaintiff in that case also adequately alleged a claim for the UFTA (i.e., the UVTA), the court determined that relief sought under the UVTA was “cumulative to the remedies applicable to fraudulent conveyances that existed before the uniform laws went into effect.” Berger, 35 Cal.App.5^th at 1020 (internal citation and quotations omitted). The Berger case simply does not hold that damages, such as lost rents, profits, and revenue, are available under the UFTA/UVTA.

For these reasons, the motion to strike the request for rent stream, profits, and revenue is well-taken, and should be granted, without leave to amend as to the UFTA claim.

Defendants next seek an order striking those allegations which they argue constitute a theory of standing, broader than what the Court of Appeal allowed on remand. Specifically, according to Defendants, Plaintiff had represented that it had standing as a contingent litigation creditor of the Net Five Defendants – a limitation which, Defendants argue, was accepted by the trial court in asserting its fraudulent transfer claims. Subsequently, according to Defendants, Plaintiff changed its theory on appeal, arguing that Rohan himself had been the owner and transferor of the Sabal Storage Property. Defendants argue that the Court of Appeal remanded “solely for the purpose of granting Plaintiff leave to amend ‘those claims aris[ing] out of the allegedly fraudulent transfer of the Sabal Storage Property’ based on a single theory: ‘Rohan, a defendant named in the Adversary Proceeding, personally transferred the Sabal Storage property to a third party immediately before it was transferred to GMA and SDC.” [Motion To Strike at 10:10-14 (citing Stillwater, 2022 WL 557060 at *11.]

Plaintiffs, in the SAC, have made numerous allegations about seeking relief on behalf of Gerova and the Stillwater Funds, as well as allegations that the Sabal Storage asset rightfully belonged to NFH. According to Defendants, any allegations under which Plaintiff asserts claims or seeks recovery of any asset other than the Sabal Storage Property, on behalf of any party other than Plaintiff (in its capacity as a contingent litigation creditor of Paul Rohan in the NYAP) falls outside of Plaintiff’s permitted theory of standing and the mandate of the Court of Appeal. [Motion to Strike at 13:15-19.]

However, the very nature of Plaintiff’s existence is as “a Delaware limited liability company that was formed pursuant to a comprehensive settlement that resolved the interests of all 12 Funds and Gerova (the “Settlement”), including in connection with the Bankruptcy, the Gerova Bankruptcy and the Class Actions.” [SAC, ¶20.] The Settlement was allegedly memorialized in a series of documents that were approved by orders of the United States District Court for the Southern District of New York (the “SDNY”), in which the Class Actions had been proceeding; the BSDNY, where the Offshore Fund’s bankruptcy is pending; where the Gerova Bankruptcy was pending; and the Bermuda court, where Gerova’s winding up petition was pending. [Id.]

The SAC alleges the Settlement provides, amongst other things, for a transfer to Plaintiff of: (a) Gerova’s ownership interest in the assets that had belonged to the Funds; (b) Gerova’s interest in the Net Five Entities and any rights attendant thereto; (c) the Funds’ ownership interests of all of the tangible and intangible assets and claims formerly belonging to the Stillwater Funds; and (d) claims against third parties related to the transfer to Gerova of the Funds’ assets and all subsequent transfers. [SAC, ¶21.] Further, Plaintiff alleges that pursuant to the Settlement, all of the claims owned by Gerova and/or each of the Funds relating to the assets at issue herein and formerly owned by the Funds were transferred to Plaintiff. [SAC, ¶22.] Plaintiff brings the instant action to enforce such claims and rights of Gerova and each and every Fund. [Id.] These allegations are substantially the same as those alleged in the FAC. [See FAC, ¶¶14-16.]

These allegations have therefore remained consistent. It would be inappropriate to strike the allegations, insofar as Plaintiff seeks relief on behalf of Gerova and/or the Stillwater Funds. Similarly, to the extent Defendants seek to strike allegations surrounding Rohan’s alleged keeping of the Sabal Storage property for himself after he pledged it to NFH, any such order would be inappropriate at this time (given the Court of Appeal permitting Plaintiff to allege actual fraudulent transfer and the derivative claims with respect to the Sabal Storage property).

To the extent Defendants seek an order striking a demand for various assets that constitute damages not available under the UFTA, the motion is well-taken for the reasons discussed above. However, the specific amount of equitable monetary relief to which Plaintiff may entitled is unclear at this time. Therefore, the Court declines to strike a specific monetary figure, with the understanding that any monetary figure will be limited by the relief available under the specific causes of action alleged.

Defendants seek an order striking allegations that the Sabal Storage Property was transferred to Sabal Ventures or Rohan personally, and what Defendants argue is Plaintiff’s “convoluted conspiracy theory about Rohan’s ownership of the property[.]” [Motion to Strike at 17:24.] For the reasons discussed in connection with the Court’s analysis of the demurrer, the Court determines that Plaintiff has stated a claim for actual fraudulent transfer of the Sabal Storage property. The Court declines to make a finding, at the pleading stage, that the allegations at pages 18-20 of Defendant’s points and authorities in support of the motion “are demonstrably false in light of the relevant public records attached to the SAC as exhibits[.]” [Motion to Strike at 18:1-3.] The Court therefore denies the motion.

Defendants move to strike all allegations of Plaintiff as an alleged creditor, on grounds that “Plaintiff has abandoned its ability to obtain any payment from Rohan by settling the NYAP without receiving a judgment against him, and by covenanting never to sue him again.” [Motion to Strike at 20:7-9.] For the reasons discussed in connection with the Court’s analysis of the demurrer, the Court determines that Plaintiff has adequately pled its status as an alleged creditor of Rohan. The motion to strike these allegations is denied.

Defendants seek an order striking allegations which they argue are patently false or do not otherwise conform to the law.

At ¶19, Plaintiff alleges that “The Court of Appeal made clear that the trial court erred in dismissing the claims related to the Sabal Storage Property.” This allegation is a legal conclusion, and not a factual allegation, and the motion to strike is granted as to this portion of ¶19.

Defendants also seek an order striking allegations which it argues the Court, affirmed by the Court of Appeal, previously determined were legally improper. In particular, Defendants argue that any allegation that NFH never owned the Sabal Storage Property, and that the NFH Operating Agreement did not vest title of the Sabal Storage property in NFH, is contrary to the Court of Appeal and trial court’s determinations.

As discussed in the Court’s analysis of the demurrer, the Court of Appeal, in permitting amendment of the FAC, stated in applicable part:

To be sure, Stillwater did not allege in the first amended complaint that a defendant named in the Adversary Proceeding was one of the transferors of the Sabal Storage property before it was transferred to one of the defendants named in this case. Nevertheless, when it ruled on the demurrer to that pleading, the court had before it judicially noticed documents showing that Stillwater could allege facts showing Rohan, a defendant named in the Adversary Proceeding, personally transferred the Sabal Storage property to a third party immediately before it was transferred to GMA and SDC, defendants named in this case. Such a theory is consistent with the court's order granting Stillwater leave to amend the original complaint. (See § 3439.08, subd. (b)(1) [a creditor may pursue a claim under the Act against a subsequent transferee of the debtor's property].)

Because Stillwater could allege the Sabal Storage property was transferred with the intent to render Rohan, Net Five Holdings, and the other defendants named in the Adversary Proceeding judgment-proof (§ 3439.04, subd. (a)(1)), the court should have granted Stillwater leave to amend Count 3 for actual fraudulent transfer of the Sabal Storage property to state facts consistent with those contained in Stillwater's judicially noticed title records for that property. Stillwater, 2022 WL 557060 at *11.

Thus, the Court of Appeal appears to have recognized that Plaintiff would be permitted to allege an interest of NFH in the Sabal Storage property, which was purportedly transferred to render Rohan, Net Five Holdings, and the other defendants in the Adversary Proceeding judgment-proof. Given this allowance by the Court of Appeal, it is premature to strike the allegations as to actual ownership of the Sabal Storage property by NFH, that such property “rightfully belonged” to NFH, or that NFH was its “rightful owner.” Therefore, the motion to strike these allegations as to NFH is denied.

Defendants seek to strike the allegations at ¶¶146 and 147 dealing with the alleged conversion of the Sabal Storage property. The trial court previously determined in the demurrer to the FAC that conversion is a tort that may be committed only with relation to personal property and not real property. [Defendants’ RJN, Exh. H at 3 (referencing Munger v. Moore (1970) 11 Cal.App.3d 1, 7).] Therefore, the tort of conversion is specifically no longer part of this litigation. Plaintiff admits that it is not pursuing a cause of action for the tort of conversion, but is instead referencing “convert” and “conversion” under the Black’s Law definition (namely, “to take another’s property without cause or permission”). However, “conversion” appears to be a term of art, applicable only to personal (and not real property) – even outside the context of a formal cause of action for conversion. Thus, the motion to strike the claims of “conversion” is appropriate, and the motion is granted as to these allegations.

1. In 2012, the Court overseeing the class actions issued an injunction (the “Class Action Injunction”) forbidding any transfer of NFH without notice.

121. At the time of that transfer, Rohan and NFH were also parties in the Class Actions and were subject to the Class Action Injunction. The transfer was in defiance of that Injunction. [SAC, ¶¶1, 121.]

The Class Action Injunction [SAC, Exh. 29] provides in pertinent part, ““Net Five and its subsidiaries (if any) shall not sell, transfer, or pledge any asset they own or control that is valued at $50,000 or more to any Related Persons…without first disclosing the following information to Plaintiffs…” According to Defendants, Sabal Palm Ventures was not a party to the Class Action Injunction, and Defendants here were not “related persons” under that Injunction.

As discussed in connection with the analysis of the demurrer, ownership of Sabal Storage is a highly disputed issue in this case. Whether it was Rohan, NFH, and/or any of the named Defendants here cannot be decided at the pleading stage. Nor can the Court resolve at this time whether the Defendants qualify as “Related Persons” within the meaning of the injunction. The motion to strike ¶¶1 and 121, and the reference to the class injunction, is therefore denied.

The final allegation in this category deals with the allegation that Mr. Buntzman “obstructed and stalled in responding to” a document subpoena served by Plaintiff in connection with the NYAP. [SAC, ¶91.] Defendants argue that the fact Mr. Buntzman was awarded $8000 in costs to respond to Plaintiff’s subpoena means that he could not have obstructed and stalled in responding to it. However, the motion to quash itself was denied, and SLL represents it never received the documents subject to the subpoena. [Opposition at 24:11.] Whether Buntzman, in fact, “obstructed and stalled in responding to” the document subpoena is not before the Court. There is no basis to strike the allegation at the pleading stage, and the motion is denied as to ¶91.

Plaintiff alleges that it “did not know (and was unable to learn) of these transfers [of the Sabal Storage Property] prior to obtaining documents both from NFH’s server, which it was first able to view on June 7, 2017, and from Buntzman and Degma, which it only first received on February 1, 2018.” [SAC, ¶68.] According to Defendants, this allegation is “demonstrably false” and not inconformity with the Court’s prior ruling. [Opposition at 26:3-4.]

As discussed in connection with the Court’s analysis on the demurrer based on statute of limitations grounds, the Court has determined that Plaintiff has alleged a basis for delayed discovery of the claim and when it discovered transfer of the Sabal Storage property. The motion to strike is therefore denied as to ¶68.

Defendants seek an order striking all allegations which reference the alleged fraudulent transfer of assets to them, other than the Sabal Storage property (¶¶1, 2, 15, 48, 68, and 102). The Court acknowledges that this case has been whittled down to the transfer of the Sabal Storage property, and not the other assets which were the subject of earlier iterations of the SAC. While it appears Plaintiff is barred from recovery of many of these assets, such allegations may have a bearing on its attempt for relief on the Sabal Storage property.

This is not to say that evidence of such transfers may be subject to a motion in limine or a proper limiting instruction at the appropriate time. Further, Plaintiff may be required to make a showing that such transfers are relevant to the alleged scheme involving the transfer of the Sabal Storage property in seeking merits-based discovery. At the pleading stage, though, the motion to strike the allegations is premature, and is denied as to ¶¶1, 2, 15, 48, 68, and 102.

Finally, Defendants seek an order striking ¶25 (alleging Defendant Degma is a “Florida limited liability company” when in fact, it is organized under Delaware law); and ¶28 (alleging GMA was “created under California law when, in fact, GMA is organized under New York law).

Paragraph 25 alleges that Defendant Degma “is a Delaware and Florida limited liability company whose principal place of business at the time of the filing of this lawsuit was 8115 Mulholland Terrace, Los Angeles, CA 90046—Buntzman’s personal address.” [SAC, ¶25.] As Defendants note, Exhibit KK to the RJN shows that Degma is, in fact, organized under Delaware law. The motion is granted, with leave to amend to allege that Degma separately is registered as a foreign LLC, consistent with Plaintiff’s RJN, Exh. 15.

With respect to ¶28, Exhibit LL to Defendants’ RJN (State of New York’s Department of State, Division of Corporations’ online search engine) shows that Defendant GMA is a domestic business corporation in New York. While Plaintiff alleges that GMA was “created” under California law, Exhibit LL plainly undermines this. Therefore, the motion to strike the allegation that Defendant GMA was “created under California law” is granted.

[1] As Defendant explains, following transfer of the Sabal Storage Property, the California Legislature revised and renamed the UFTA, enacting the Uniform Voidable Transactions Act, or UVTA. Defendant represents that the applicable provisions of the UFTA were not altered substantively by the UVTA, and the Court agrees that for sake of clarity, it will reference the “UFTA” in analyzing the instant demurrer.

[2] Section 3439.07(a)(1) provides that “[i]n an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in Section 3439.08, may obtain: (1) [a]voidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim.”