Judge Theresa M. Traber, Case 20STCP00431 2023-05-02 Tentative Ruling

RESPONDING PARTY(S): Gustavo M. Ungo Jr, Individually; as Trustee of the Emilia and Gustavo Ungo Family Trust; and as personal representative and executor of the estate of Gustavo M. Ungo Sr.

This is an action to set aside fraudulent transfers. Plaintiff alleges that Defendant Gustavo Ungo Jr., as trustee for the Emilia and Gustavo Ungo Family Trust, improperly transferred assets from the Trust to himself, rendering the Trust insolvent, so as to evade a money judgment against the Trust’s assets.

Plaintiff moves for summary adjudication on its constructive fraud causes of action.

Plaintiff moves for summary adjudication on each of its 31 constructive fraud causes of action pertaining to the transfer of 31 separate properties from the Emilia and Gustavo Ungo Family Trust to Defendant Gustavo Ungo Jr. Plaintiff asserted separate intentional and constructive fraud causes of action as to each of the 31 properties, for a total of 62 causes of action, assigning the intentional fraud claims to the odd-numbered causes of action, and the constructive fraud claims to the even-numbered causes of action.

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party can show evidentiary support for a pleading or claim and, if not, to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code of Civil Procedure Section 437c(c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-82.)

As to each claim as framed by the complaint, the plaintiff moving for summary judgment must satisfy the initial burden of proof by presenting proving each element of a cause of action. (Code Civ Proc. § 437c(p)(1).) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.) Once the plaintiff has met that burden, the burden shifts to the defendant to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. (Code Civ. Proc. § 437c(p)(1).) To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Plaintiff requests that the Court take judicial notice of numerous documents. At the outset, the Court notes that the Request for Judicial Notice is contained within Plaintiff’s Appendix of Evidence, and not filed as a separate document. However, the Request is listed as the first exhibit in that Appendix, and the Appendix bears a proof of service on Defendant. As Defendant has not objected to the requests on this basis, despite numerous references to the Requests in the moving papers, the Court finds this defect to be harmless error.

Turning now to the substance of the requests, Plaintiff requests that the Court take notice of (1) a Judgment Based On Sister State Judgment in Fannie Mae v. Ungo et al., Case No. BS168101; (2) a Chapter 13 bankruptcy case, Case No. 2:18-bk-1255t-WB (US Bankruptcy Court, C.D. Cal.) and (3) dismissal of that case; (4) Plaintiff’s Motion to Amend the Judgment to add the Ungo Family Trust as judgment debtor in Fannie Mae v. Ungo, Case No. BS168101 and (5) the order granting that motion; (6) the Complaint in Ungo v. Interinsurance Exchange of the Automobile Club, Case No. 19STCV03836 and (7) the Opposition to the Motion for Summary Judgment filed in that case; (8) the Register of Actions from In re. Gustavo M. Ungo, Case No. 21STPB01114 and (9) Order Appointing Executor in that case. These requests are GRANTED pursuant to Evidence Code section 452(d) (court records).

Plaintiff also requests that the Court take judicial notice of a set of 25 Certified Grant Deeds recorded in the official records of Los Angeles County (nos. 10 – 33.) These requests are GRANTED pursuant to Evidence Code section 452(c) (official acts).

Plaintiff further requests that the Court take judicial notice of additional documents in connection with Plaintiff’s reply brief. As these documents are not relevant to the Court’s ruling, these requests are DENIED. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [“[J]udicial notice . . . is always confined to those matters which are relevant to the issue at hand.”].)

Defendant requests that the Court take judicial notice of (1) a document entitled The Emilia and Gustavo Ungo Family Trust; (2-4) the First, Second, and Third Amended Declarations of Trust; (5) Emilia Ungo’s Death Certificate issued by the County of Los Angeles; (6) Gustavo Ungo’s Death Certificate issued by the County of Riverside; and (7) the Register of Actions in Gustavo Ungo v. Interinsurance Exchange of the Automobile Club, Case No. 19STCV03836.

Defendant offers no justification for any of these requests, nor does he offer any explanation for why Requests Nos. 1-4 are matters which are properly subject to judicial notice. Requests Nos. 5-7 are judicially noticeable on their face as official acts and court records. However, none of the documents of which Defendant requests judicial notice are relevant to the Court’s ruling. Therefore, Defendant’s requests are DENIED. [“[J]udicial notice . . . is always confined to those matters which are relevant to the issue at hand.”].)

Plaintiff objects to the Declaration of Gustavo Ungo Jr. However, as the declaration of Defendant Ungo is not relevant to the Court’s ruling, the Court declines to rule on these objections. (Code Civ. Proc. § 437c(q).)

As a threshold matter, the Court must determine whether there is a triable issue of fact as to the date that the subject properties were transferred to the Emilia and Gustavo Ungo Family Trust.

With respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good faith purchaser of the asset from the debtor against which the applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee.

(Civ. Code § 3439.06(a)(1).) Under well-settled precedent, a transfer is perfected for the purposes of the UVTA when notice of the transfer is recorded. (See, e.g., Fujifilm Corp. v. Yang (2014) 223 Cal.App.4th 326, 336.)

In opposition, Defendant concedes that this is the law under the UVTA but argues that the general proposition that a deed transferring an interest in property becomes effective on date of execution, not recording, may take precedence here. (Luna v. Brownell (2010) 185 Cal.App.4^th 668, 673 [deed transferring interest is effective on date of execution and need not wait public recording].) Defendant cites no authority, however, to challenge the well-established rule of construction that specific provisions of law control over general principles. Although Defendant contends that Fujifilm supports Defendant’s reasoning, a review of that opinion demonstrates that the Court of Appeal conclusively rejected the argument that the general rule concerning the effectiveness of a transfer deed overrides the statutory language of the UVTA. (Fujifilm, supra, 223 Cal.App.4th at 336.) Defendant’s citation to Neufeld v. Balboa Ins. Co is entirely inapplicable, as that case was not concerned with claims under the UVTA or its predecessor, the Uniform Fraudulent Transactions Act. (See generally Neufeld v. Balboa Ins. Co. (2000) 84 Cal.App.4th 759.)

The Court is not persuaded by Defendant’s arguments. Under well-settled California law, a transfer is perfected, for the purposes of the UVTA, when notice of the transfer is recorded. The date of execution of the deed is immaterial for the purposes of this inquiry. Applying this law to the facts here, Plaintiff contends that Defendant recorded the grant deeds transferring ownership on August 28, 2018, August 31, 2018, September 4, 2018, October 23, 2018, and February 26, 2019. (Separate Statement of Undisputed Material Facts [SSUMF] No. 8.) In opposition, Defendant raises alleged disputed facts as to the execution dates of the transfers but does not dispute that these are the accurate recordation dates for the grant deeds. The Court therefore finds that Plaintiff has demonstrated that the transfers of ownership of the subject properties were effective on August 28, 2018, August 31, 2018, September 4, 2018, October 23, 2018, and February 26, 2019, respectively, and that Defendant has failed to establish a triable issue of material fact with respect to the dates on which the transfers were made as a matter of law.

Defendant also suggests in his opposition that the execution dates are the relevant touchstones because the Trust became irrevocable upon the death of Emilia Ungo on January 4, 2007, pursuant to the Third Amendment to the Trust, and that this change in the character of the Trust rendered its assets beyond the enforcement efforts of Plaintiff. As Defendant sees it, because the Judgment Debtor, Senior, had "no rights to revoke the Trust" to access the Trust assets, his Creditor, Plaintiff here, "has no rights to claim its assets to satisfy Senior's debts (Opposition, p. 11.) In reply, Plaintiff argues that the issue of whether the Trust was irrevocable is irrelevant because Senior, as Trustee, was made a judgment debtor in a prior action entitled Fannie Mae v. Gustavo M. Ungo and Jane Doe Ungo, Case No. BS168101 (the “Enforcement Action.), so the Trust’s assets may be accessed directly by Plaintiff under the judgment against the Trust.

Absent a determination that a trustee is an alter ego of a party, or an order explicitly naming the trust as a judgment debtor, the Court would be inclined to agree with Defendant that evidence demonstrating the Trust’s irrevocability might create a triable issue of fact as to the effective date of the transfers. (Portico Mgmt Group LLC v. Harrison (2011) 202 Cal.App.4th 464, 476-77 [property of irrevocable trust is not the property of trustors or trustees].) However, a determination that the trustee is an alter ego of a named defendant does allow creditors access to trust assets, notwithstanding the irrevocable character of the trust. (See Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 521-22.) Here, Plaintiff moved to add Senior as Trustee as a judgment debtor on the basis that Senior, as Trustee, was an alter-ego for Senior in his individual capacity. (Plaintiff’s Exh. 5.) That motion was granted on August 13, 2018. (Plaintiff’s Exh. 6.) Thus, the question of revocability is no longer relevant since the court in the Enforcement Action has already made the Trustee a judgment debtor. That judgment may not be attacked in this action. (Adoption of Matthew B. (1991) 232 Cal.App.3d 1239, 1268.) Plaintiff is therefore entitled, as a matter of law, to Trust assets to satisfy the judgment.[1]

Plaintiff argues that it is entitled to summary adjudication on its constructive fraud claims against Defendant as a matter of law.

Under the UVTA, a fraudulent transfer may be intentionally (Civ. Code § 3439.04) or constructively fraudulent (Civ. Code § 3439.05.) Plaintiff seeks summary adjudication only on the issue of constructive fraud under section 3439.05. This section provides:

A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer of obligation and the debtor was insolvent at the time or the debtor became insolvent as a result of the transfer or obligation.

(Civ. Code § 3439.05(a).) Thus, the four issues that must be addressed are: (1) whether Plaintiff is a creditor of Gustavo Ungo Sr. and the Trust; (2) whether the obligation was incurred before the transfer was made; (3) whether the transfer was made without the debtor receiving reasonably equivalent value; and (4) whether the debtor was insolvent or became insolvent as a result of the transfer.

1. Plaintiff’s Status as Judgment Creditor of Gustavo Ungo Sr. and the Trust

Plaintiff contends, and Defendant does not dispute, that Plaintiff is a judgment creditor of Gustavo Ungo Sr. and the Trust, pursuant to the Court’s February 10, 2017 Judgment Based on Sister-State Judgment. (Defendant’s Response to Separate Statement Nos. 1-2.) The Court therefore finds that there is no dispute of material fact in this respect, and that Plaintiff is a creditor of Gustavo Ungo Sr. and the Trust.

2. Whether Defendants’ Obligation to Plaintiff was Incurred Before Transfer

Plaintiff contends that, as the transfer deeds were recorded after the date of the entry of Judgment Based on Sister-State Judgment, Defendant’s obligations to Plaintiff were incurred before the transfers occurred as a matter of law. In opposition, Defendant argues that there are disputes of fact as to the date of execution of the transfer deeds. However, as the Court has already determined that the transfers occurred in 2018 and 2019 as a matter of law, the Court likewise finds that Defendant’s obligation to Plaintiff was incurred before the transfers were effective under the UVTA. The Court therefore finds that Plaintiff has carried its burden to show that it will prevail on this element, and that Defendant has not established a triable issue of material fact as to the date of transfer.

3. Whether Transfers Were Made Without Receiving Reasonably Equivalent Value in Exchange

Plaintiff contends that the Trust, according to the grant deeds themselves, received no consideration for the transfer of the Trust properties. The deeds state that each of the properties was transferred to Gustavo Ungo Jr. as a bona fide gift. (SSUMF No. 9.) Defendant confirmed that he did not pay any money for the properties in his deposition. (Id.) The Court therefore finds that Plaintiff has offered evidence showing that the Trust did not receive any value for the transfer of the properties because they were gifts. The burden now shifts to Defendants to demonstrate a triable issue of fact as to this prong.

In opposition, although Defendant argues that the issue of value received is a question of fact, Defendant does not actually contest Plaintiff’s contention that the transfers were a gift, and therefore, by definition, nothing of value was exchanged. Indeed, Defendant admits as much in the opposition papers. (See RSS No. 9.) Defendant’s quibbling as to the meaning of the term “value” is not sufficient to carry his burden on summary adjudication to demonstrate a triable issue of fact. The Court therefore finds that the Trust did not receive any value for transfer of the Trust properties.

Plaintiff contends that the trust was insolvent at the time of the transfer, and, if it was not, it became so when the transfer was made.

(a). A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater than the sum of the debtor’s assets.

(b). A debtor that is generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the party against which the presumption is directed the burden of proving that the nonexistence of insolvency is more probable than its existence.

Plaintiff argues that the Trust was balance sheet insolvent because, upon recordation of the grant deeds, the Trust had no assets remaining whatsoever. (SSUMF Nos. 2-4.) Plaintiff contends that the Trust had only ever owned the Trust Properties, but this assertion is contradicted by the deposition testimony of Gustavo Ungo Jr., in which the witness stated that the Trust had also possessed other assets which were subsequently levied. (Plaintiffs’ Exh. 36 p. 82:6-15.) Defendant conceded, however, that the Trust had no remaining assets at the time of his deposition as a result of those transfers and the levying of the accounts. (Id.) The Court therefore finds that Plaintiff has demonstrated, based on this evidence, that the Trust was insolvent either at the time of or as a result of the transfer of the properties. The burden now shifts to Defendant to demonstrate a triable issue of fact with respect to this prong.

In opposition, Defendant does not contest Plaintiff’s contention that the Trust is insolvent. Instead, Defendant argues that Plaintiff has not shown intent to render the Trust insolvent, as required under Civil Code section 3439.04. Defendant argues that, since Plaintiff pled both sections 3439.04 and 3439.05 in its operative Complaint, Plaintiff should be required to prove both legal theories. This argument is absurd on its face. If Plaintiff can demonstrate that it is entitled to judgment as a matter of law based on a given legal theory, whether Plaintiff could or could not prevail under a different legal theory is entirely irrelevant. Defendant offers no evidence challenging Plaintiff’s showing that the Trust became balance sheet insolvent because of the transfer. The Court therefore finds that Defendant has not demonstrated the existence of a triable issue of fact with respect to this prong.

Plaintiff also contends that the trust is insolvent because it was not paying its debts as they came due, on the basis that the Trust has not paid the 2017 Judgment. The Court is not persuaded by Plaintiff’s circular reasoning in this respect.

Plaintiff has demonstrated that Defendant cannot prevail on Plaintiff’s constructive fraud claims. Defendant has not established a triable issue of fact as to any element of the constructive fraud claims. The Court therefore finds that Plaintiff is entitled to summary adjudication of its constructive fraud claims.

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.

[1] Because the issue of whether the Trust was revocable or irrevocable is irrelevant given the Trustee’s status as a Judgment Debtor, the Court does not address Plaintiff’s alternative argument that Defendant’s claims of irrevocability are barred by the doctrine of collateral estoppel.