Judge: Peter A. Hernandez, Case: 18PSCV00137, Date: 2022-12-13 Tentative Ruling

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Case Number: 18PSCV00137    Hearing Date: December 13, 2022    Dept: O

Defendants’ motion for summary judgment is DENIED as to Defendant Ren and GRANTED as to Defendant Bian.  

BACKGROUND

This action arises out of a loan agreement between Defendant YYP Entertainment (“YYP”) and Plaintiff N.D.U. Capital LLC (“Plaintiff”). Defendant Yiping Ye (“Ye”) is YYP’s principal. Moving parties are Defendants Michelle Ren (“Ren”) and Lingyun Bian (“Bian”). Ren is Ye’s ex-wife and Bian is the trustee of a family trust executed by Ren and Ye during their marriage. Plaintiff alleges that on January 6, 2018, it agreed to loan $200,000 to YYP, a business doing nightlife promotions. After YYP failed to make a payment on the loan, Ye executed a Personal Guarantee on July 17, 2018. YYP and Ye failed to pay Plaintiff by August 18, 2018.

Plaintiff alleges that Ye and Ren transferred various assets from 2017 to 2018 to avoid payment obligations to Plaintiff. According to Defendants, in September, 2017, Ye and Ren executed a deed transferring real property in Rowland Heights into a family trust for the benefit of their children. Then, in December, 2017, Ren purchased real property in Yorba Linda and as part of that purchase, Ye executed a disclaimer deed.

On November 30, 2018, Plaintiff filed a complaint asserting causes of action for:

1.                  Breach of Contract

2.                  Breach of Personal Guarantee

3.                  Fraud

4.                  Violation of Uniform Fraudulent Transfer Act

The only cause of action that applies to Ren is the fourth cause of action for violation of Uniform Fraudulent Transfer Act. All four causes of action apply to Bian. On December 18, 2019 YYP’s and Ye’s defaults were entered.

The Final Status Conference is set for August 11, 2023 and Trial is set for August 25, 2023.

Procedural Background

On June 6, 2022, Defendants Ren and Bian filed a motion for summary judgment, or in the alternative summary adjudication on all the causes of action, against Plaintiff. On August 22, 2022, Plaintiff filed an opposition to Defendants’ motion for summary judgment, along with evidentiary objections and a request for judicial notice. On September 22, 2022, Defendants Ren and Bian filed a reply to Plaintiff’s opposition along with their own evidentiary objections to Plaintiff’s evidence. On September 27, 2022 the Court continued the motion for summary judgment hearing to November 30, 2022 and allowed the parties to file supplemental briefs. On November 2, 2022, Plaintiff filed a supplemental opposition brief. On November 16, 2022, Defendants Ren and Bian filed a supplemental reply brief.

Judicial Notice

The Court grants requests for judicial notice of Nos. 1, 5, 6, 7, 8, 9, 10, 11, 12, and 13 pursuant to Evidence Code sections 452, 453.

The Court denies requests for judicial notice of Nos. 2, 3, 4 because Plaintiff is requesting the court to take judicial notice of complaints filed in other cases against Defendants. The court cannot take judicial notice of facts that are in dispute, including allegations in the complaint.

Evidentiary Objections

Plaintiffs’ evidentiary objections Nos. 1, 2, 3, 4, 5, 7, 8, 9, 10, and 11 are overruled.

Legal Standard

A defendant moving for summary judgment/adjudication has met his burden of showing a cause of action has no merit if the defendant can show one or more elements of the plaintiff’s cause of action cannot be established.  (CCP § 437c(p)(2).)  “A defendant can satisfy its burden by presenting evidence that negates an element of the cause of action or evidence that the plaintiff does not possess and cannot reasonably expect to obtain evidence needed to support an element of the cause of action.”  (Superior Dispatch, Inc. v. Insurance Corp. of New York (2010) 181 Cal.App.4th 175, 186.)  The court must liberally construe evidence in support of the party opposing summary judgment and resolve all doubts concerning the evidence in favor of that party. (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

As to Defendant Ren

A.        Moving Party’s Burden is Not Met

The lone claim against Ren is the fourth cause of action for violation of the UVTA. In order to meet her burden on this cause of action, Ren must demonstrate that Plaintiff does not create a triable issue of material fact as to any of the possible sources of liability that arise under the UVTA. The subsections at issue are sections 3439.05, 3439.04(a)(1), and 3439.04(a)(2). Here, because Ren does not demonstrate that there is no triable issue regarding whether or not the elements of Code of Civil Procedure section 3439.04(a)(1) [UVTA] are met, she does not satisfy her initial burden.

1.                  There is a Triable Issue of Fact as to the Fourth Cause of Action

In its supplemental reply brief, Plaintiff argues that Defendants did not meet their burden to show there is no triable issue on UFTA section 3439.04(a)(1). The Court agrees.

The Uniform Voidable Transfer Act (“UVTA”) is codified by section 3439 of the Code of Civil Procedure. It "permits defrauded creditors to reach property in the hands of a transferee." Mejia v. Reed (2003) 31 Cal.4th 657, 663; Fidelity Nat. Title Ins. Co. v. Schroeder (2009) 179 Cal.App.4th 834, 840. A voidable transfer occurs when the debtor made the transfer or incurred the obligation:

(1)        with actual intent to hinder, delay, or defraud any creditor of the debtor, or

(2)       without receiving a reasonably equivalent value in exchange for the transfer. 

(Civ. Code § 3439.04, subd. (a).)

In determining the existence or nonexistence of actual intent to hinder, delay, or defraud creditors of a debtor, courts have given consideration to many factors:  the so-called “badges of fraud.”  The presence of one or more badges of fraud does not create a presumption of fraud.  Rather, it is merely evidence from which an inference of fraudulent intent may be drawn.  Some facts which courts have considered include:  1) whether the transfer or obligation was to an insider (Johnson v. Drew (1963) 218 Cal.App.2d 614); 2) whether the debtor had retained possession or control of the property transferred after the transfer (Howard v. Everex Sys., Inc. (9th Cir. 2000) 228 F.3d 1057, 1069, fn. 17); 3) whether the transfer or obligation was disclosed or concealed (Heath v. Helmick (9th Cir. 1949) 173 F.2d 157); 4) whether the debtor was sued or threatened with suit before the transfer was made or obligation was incurred (Economy Refining & Service Co., v. Royal National Bank of New York (1971) 20 Cal.App.3d 434); 5) whether the transfer was of substantially all the debtor’s assets; (Burrows v. Jorgensen (1958) Cal.App.2d 644); and 6) whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred (Neumeyer v. Crown Funding Corp. (1976) 56 Cal.App.3d 178).

Defendants argue that Plaintiff lacks evidence to show that Ren had actual intent to hinder, defraud, or delay creditors of her ex-husband because the transfers were instead in anticipation of Ye and Ren’s impending divorce.

As a preliminary matter, Defendants seek to demonstrate Ren did not have an intent to defraud even though Ye is the debtor and section 3439.04(a)(1) refers to the intent of the debtor. Ren’s intent is not at issue. To show there is no triable issue, Defendants must show there is no genuine dispute about whether Ye had an actual intent to defraud.

2.                  There is a triable issue as to whether Ye had actual intent to defraud

Section 3439.04(b) lists 11 factors for evaluating whether there was actual intent to defraud: (1) Whether the transfer or obligation was to an insider; (2) Whether the debtor retained possession or control of the property transferred after the transfer; (3) Whether the transfer or obligation was disclosed or concealed; (4) Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) Whether the transfer was of substantially all the debtor's assets; (6) Whether the debtor absconded; (7) Whether the debtor removed or concealed assets; (8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) Whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.

Defendants allege that Ye and Ren began having marital trouble in 2015 following an incident of domestic violence against Ren. (Defendants’ Separate Statement, 5). They briefly separated in 2016. (DSS, 6). Formal divorce remained a topic of conversation. (DSS, 7). Ye founded YYP in 2017. (DSS, 7). As far as Ren knew, YYP was a successful business throughout 2017. (DSS, 11). Ye and Ren continued to talk about divorce due to Ye’s philandering. (DSS, 12). Ye and Ren were actively involved in asset planning around a possible divorce. (DSS, 13). To that end, in September, 2017 Ye and Ren executed a deed transferring Ye’s interest in the Rowland Heights property to Ren and Ren executed a deed transferring the Rowland Heights property into a trust for the benefit of their children. (DSS, 14). Additionally, Ren purchased a Yorba Linda property in December 2017 (per Defendants) 2018 (per Plaintiff) in her name only with funds from her parents in China. (DSS, 18-19). Ye, in turn, executed a deed disclaiming any interest in the Yorba Linda property purchase. (DSS, 20).  Defendants also allege that Ye did not meet Plaintiff’s managing member until January 2018. (DSS, 21). They signed the first loan agreements on January 5, 2018. (DSS, 23). Ye signed a personal guarantee on the loan agreements on July 27, 2018. (DSS, 23). The matters was subsequently filed on November 30, 2018.

Plaintiff first alleges that Ren and Ye cannot have made the transfers in contemplation of divorce because their divorce was not finalized until 2021 and they held themselves out as married throughout the period through 2018. (Plaintiff’s Response to DSS, 13). Plaintiff also alleges that the transfers were made without any consideration in return. On September 1, 2017, while married, Ye executed an Interspousal Transfer Grant Deed with respect to the Rowland Heights Property in favor of Ren with no money being exchanged. (PSS, 2). Then on December 26, 2017, this time in regards to the Yorba Linda property, Ye executed an Interspousal Transfer Grant Deed in favor of Ren without any exchange of money. (PSS, 5 and 6). Plaintiff additionally alleges that Ye and Ren were in financial trouble at the time of the transfers because they were facing numerous lawsuits. On October 25, 2017, a case entitled Zhang v. Hummingbird Nest Entertainment Corp., Case No.: KC069738 (herein "Hummingbird Nest Lawsuit"), was filed against Ye's company, Hummingbird Nest Entertainment Corp.  (DSS, 3). On August 20, 2018, Ye was brought into the Hummingbird Nest Lawsuit as Doe defendant 1. (DSS, 3).

The fact that one or more of the factors may be present does not necessarily create a triable issue of material fact. (Annod Corp. v. Hamilton & Samuels (2002) 100 Cal.App.4th 1286, 1299.) Defendants analogize the circumstances here to those in Annod Corp. However, unlike here, the evidence there demonstrated that transfers were made in good faith and for reasonably equivalent value. (Id. at 1229.) Here, it is disputed that the demonstrated transfers were made in good faith and it is alleged that the transfers were made for little to no value. Therefore, Defendants do not meet their burden of showing there is no triable issue.

Accordingly, Defendants’ motion for summary judgment is DENIED as to Defendant Ren.

As to Defendant Bian

The specific causes of action against Bian are unclear. An amendment to the complaint was filed on June 1, 2021 alleging Bian as a defendant in the case. Bian contends that the operative complaint fails to state a claim against her. The Complaint fails to reference Bian, the Separate Statements do not include any facts associated with Bian, and Plaintiff does not rebut any allegations made by Defendants that there are no factual allegations against Bian. Furthermore, the Supplement Brief filed by Plaintiff also ignored addressing any factual allegations against Bian. It appears there are none. The court intends to grant summary judgment for Bian on all causes of action in the Complaint.