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Brown & Charbonneau, LLP Trial Attorneys Prevail in Fraudulent Transfer Case With Judgments Over $2,000,000

Brown & Charbonneau, LLP Trial Attorneys Prevail in Fraudulent Transfer Case With Judgments Over $2,000,000

B&C Partners and Trial Attorneys Gregory G. Brown and Mark M. Higuchi

After a 2-week trial, Gregory G. Brown and Mark M. Higuchi secured a huge win in a complex, multi-county, fraudulent transfer case (under the Uniform Voidable Transactions Act).  The Court awarded the Brown & Charbonneau, LLP Client another $778,000 and ordered that real estate transfers be set aside, including mortgages that were placed on the property.

The claims and judgments originated in Orange County.  In the first Orange County case, Brown & Charbonneau, LLP secured three separate judgments against one of the Defendants.  The judgments underlying judgments were for $180,862, $713,000 ($613,000 attorney’s fees and $100,000 in sanctions), and a third for $101,761.

Brown & Charbonneau, LLP Trial Attorneys Prevail in Fraudulent Transfer Case With Judgments Over $2,000,000While the claims were pending, however, the Defendants, conspired to and transferred millions of dollars of cash and real property assets to avoid paying the claims, including real estate in Visalia, California, Fresno, California and Montessano, Washington.  In ruling in favor of Brown & Charbonneau, LLP’s client, the court found that the Defendants transferred cash and assets with actual intent to hinder, delay and defraud the Plaintiff.  While the underlying actions were pending, the Defendant wife had transferred in excess of $800,000 of assets and cash to her Co-Defendant husband.

Brown & Charbonneau, LLP Trial Attorneys Prevail in Fraudulent Transfer Case With Judgments Over $2,000,000

Flow Chart Used in Trial Win

In finding in favor of the Plaintiff, the Court found that the Defendants testimony lacked any credibility, finding multiple instances of perjury by the two primary Defendants.  The Court also found evidence submitted by the Defendants to be questionable and, in one instance, found the Defendants had created and filed a false Satisfaction of Judgment to stop the Plaintiff’s collection efforts.  The Court also cited to numerous instances of contradictory testimony as another basis for finding the Defendants’ testimony was not credible.  Click to view  Fraud Transfer Trial Closing Brief.

Trial attorney Gregory G. Brown said “this case was incredibly hard fought every step of the way.  The frivolous claims and delays were rejected by the court.  Our Client can now move on with his life, knowing that justice prevailed.”

Brown & Charbonneau, LLP Trial Attorneys Prevail in Fraudulent Transfer Case With Judgments Over $2,000,000

US News & World Report Recognizes Brown & Charbonneau, LLP

The Client came to Brown & Charbonneau, LLP after he had incurred hundreds of thousands of dollars of losses due to the Defendant wife’s wrongful conduct.  The Defendant simply refused to reimburse Plaintiff pursuant to contractual obligations related to a divorce judgment no matter how many times Judges found in favor of the Plaintiff.

Both the Client and Brown & Charbonneau, LLP had to be persistent and never waiver.  The case spanned over seven years, 4 separate trials, 3 appeals, multiple civil cases in Orange County, Amador County and Fresno County, CA, a bankruptcy by one of the Defendants, and the death of another Defendant, resulting in another proceeding in the Probate Court.   One of the Orange County Judges sanctioned the Defendant wife $100,000 for conduct in the case designed to increase costs of litigation through unnecessary expense and unwarranted delay of the case.  The Court also found that Defendant’s frivolous conduct was designed to harass the Plaintiff.

The Defendants also filed frivolous claims against the Plaintiff that had to be defended.  The claims included assault and battery, breach of fiduciary duty and trespass.  All of these claims were either outright rejected by the Courts or dismissed by the Defendants during trial.

One of the more challenging tasks in trial, says trial attorney Mark M. Higuchi, “was dealing with years of testimony by the defendants.  They had testified in court on many occasions in the prior proceedings.  They had given deposition testimony in multiple cases.  The Defendant husband had testified in a debtor’s exam in an unrelated case.  The Defendant wife had also testified in a debtor’s exam relating to the original judgment.  The Defendant husband testified over a number of days in the trial.  Ultimately, the dozens of contradictions, lies and outright perjury became crystal clear to the Court, who found the Defendants’ extensive testimony to have no credibility.”

To review the entire winning Closing Argument Brief filed with the court, see bottom of this page.

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Plaintiff John Smith hereby submits this Closing Brief.

  1. INTRODUCTION

As evidenced at trial, this consolidated action arises from a stipulated Divorce Judgment between plaintiff John Smith (“Smith”) and defendant Jane Jones (“Jones”), entered March 25, 2009, in the Orange County Superior Court. The Divorce Judgment included the award to Jones of the parties’ former marital residence, and provided for Jones’s agreement to pay all obligations related to the property, and to indemnify and hold Smith harmless in the event she defaulted on the loans thereon (which remained in Smith’s name alone).

Beginning in August 2014, Jones breached these payment obligations under the Divorce Judgment, and since that time, Smith has been a creditor of Jones, as the holder of a right to payment from Jones under the Divorce Judgment. On August 13, 2015, Smith filed a Request for Order seeking reimbursement of mortgage payments, costs and attorneys fees pursuant to the Divorce Judgment. Three days after Smith filed his RFO, Jones signed a grant deed for her sale of her cherry farm in Visalia, record title to which she held in her name alone, as a married woman as her sole and separate property. Jones received $900,000 from this sale, which through a 1031 exchange, she purchased two properties, the Selma Property and the Montesano Property, record title to both of which she took in her name alone, as a married woman as her sole and separate property.

Over the next 7  years, throughout 15 – 20 post-judgment hearings in the Family Court, 3 appeals, a bankruptcy and 2 (now consolidated) civil actions in this Court, defendants Jones,[1] her husband Don Hart (“Hart”), Great Grapes, LLC, 222 Smith Street, LLC and HollyHill Trees, LLC (3 shell entities formed by Jones and Hart), conspired and engaged in numerous fraudulent transfers to hide and shield Jones’s assets (real properties and cash from said properties) from Smith, to avoid payment on Jones’s obligations to Smith under the Divorce Judgment by placing said assets beyond the reach of a writ of execution or judgment lien and leaving Jones “judgment proof.”[2]

As evidenced at trial, Smith has established all of the requirements of his causes of action against defendants for fraudulent transfer under the Uniform Voidable Transaction Act (Civil Code section 3439.01 et seq.), entitling Smith to, among other relief, a judgment setting aside these fraudulent transfers so that Smith may finally collect on the debts owed to him by Jones under the Divorce Judgment.  Smith is also entitled to a money judgment against Hart individually as a co-conspirator with Jones.

  1. BACKGROUND
  2. The Divorce Judgment

Plaintiff John Smith and defendant Jane Jones were previously married. The marriage was dissolved, and on March 25, 2009 a judgment was entered in the Orange County Superior Court dividing the marital estate, Jones v. Smith, OCSC Case No. 08D000206 (the “Divorce Judgment”).  [Trial Exhibit (“TE”) 1]

The Divorce Judgment included the award to Jones of the parties’ former marital residence located at 11 Avenue Moon, San Clemente, California (the “San Clemente Property”), with Jones assuming all liabilities and obligations related to the San Clemente Property (e.g., mortgage payments, property taxes, insurance), and Jones agreeing to indemnify and hold Smith harmless from all liens, claims and encumbrances related to the San Clemente Property (as the loans on the San Clemente Property were in Smith’s name alone). [TE 1 (p. 13-15); draft 11/2/21 Trial Reporter’s Transcript (“RT”), 41:11-25[3]]

In or around August 2014, Jones began defaulting on the mortgage payments.  [TE 2; draft 11/2/21 RT, 43:2-44:10] Beginning in October 2014, Smith began to incur costs (including mortgage payments on the San Clemente Property to protect his credit) and attorney’s fees due to Jones’s ongoing lack of payment on her obligations related to the San Clemente Property and non-compliance with other terms of the Divorce Judgment. [TE 3; draft 11/2/21 RT, 50:9-51:4]  Since that time, Smith has been a creditor of Jones, and the holder of a right to payment from Jones for said costs and attorney’s fees pursuant to the Divorce Judgment.

  1. Family Court and Appellate Proceedings

On October 14, 2014, Smith filed his first Request for Order (“RFO”) seeking enforcement of the judgment and reimbursement of payments he had to make on the mortgage. [TE 3] On August 13, 2015, Smith filed an RFO requiring Jones reimburse Smith for funds he was forced to use to pay the mortgages on the San Clemente Property and other costs and attorneys fees incurred by Smith pursuant to the Divorce Judgment. [TE 5] On November 30, 2015, the Orange County Superior Court granted Smith’s August 13, 2015 RFO. [TE 5, 50 (judicial notice granted (“JN”))] A formal order in favor of Smith in the total amount of $265,753.65 was entered by the Orange County Superior Court on March 4, 2016. [TE 68]

On February 14, 2017, the Orange County Superior Court entered an order in favor of Smith granting an RFO seeking post-judgment collection remedies, and requiring Jones to pay Smith further attorney’s fees incurred, pursuant to the Divorce Judgment in the amount of $90,087.18. [TE 77]

On August 6-8, 2018, the Orange County Superior Court held an evidentiary hearing on remand from the Court of Appeal’s reversal of the March 4, 2016 Order, and on October 29, 2018, the Court entered a Judgment (Addendum to the Divorce Judgment) in favor of Smith and against Jones in the amount of $180,862.83, for reimbursement of costs related to the San Clemente Property. [TE 102]

On October 29, 2018, the Orange County Superior Court granted Smith’s request for attorney’s fees and sanctions against Jones, and on December 4, 2018, entered a Judgment (Addendum to the Divorce Judgment) in favor of Smith and against Jones in the amount of $713,000 ($613,000 attorney’s fees and costs and $100,000 sanctions under Family Code section 271 and Code of Civil Procedure section 128.5). [TE 103]

On September 13, 2019, the Orange County Superior Court entered a Judgment (Addendum to the Divorce Judgment) in favor of Smith and against Jones for further attorney’s fees incurred pursuant to the Divorce Judgment in the amount of $101,761. [TE 118 (JN)]

To date, no amount of the total $995,623.83 ($180,862.83 October 29, 2018 Judgment + $713,000 December 4, 2018 Judgment + $101,761 September 13, 2019 Judgment), exclusive of statutory post-judgment interest, has been paid by Jones/Estate of Jane Jones.

  1. Jones’s Sale of the Visalia Property

As discussed above, on August 13, 2015, following Jones’s August 2014 default on her payment obligations under the Divorce Judgment and a court ordered sale of the San Clemente Property, Smith filed an RFO in the Orange County Superior Court, seeking reimbursement of costs and attorneys’ fees pursuant to the Divorce Judgment. [TE 5] A hearing on Smith’s RFO was set for October 9, 2015. [TE 5]

After the filing of Smith’s RFO on August 13, 2015, Jones, on or about September 2, 2015, sold her cherry farm located at 5678 Drive 660, Visalia, CA 93292 (the “Visalia Property”) for $1,815,000. [TE 7, 8] Jones signed the Grant Deed for her sale of the Visalia Property on August 18, 2015, three days after Smith’s filing of his RFO for reimbursement. [TE 8 (p. 2)] It is undisputed that Jones held record title to the Visalia Property as “a married women as her sole and separate property” at the time of the sale. [TE 8]  “The owner of legal title is presumed to be the owner of the full beneficial title.  This presumption may be rebutted only by clear and convincing proof.” Evid. Code §662.

After loan payoffs, escrow and other sale costs, Jones received $900,000 from the sale, which through a 1031 exchange, Jones used to acquire two real properties, specifically, 1234 N. Breeze , Selma, CA 93662 (the “Selma Property”), a 17-acre, cash crop producing vineyard, and 222 Smith Street, Montesano, WA 98565 (the “Montesano Property”), an income producing 6-unit apartment building. [TE 7, 12, 17; 3/7/18 Jones Depo, 45:13-46:18; 11/4/21 RT, 109:26-110:11] Like the Visalia Property, record title to both of these properties were acquired in Jones’s name alone, as a married woman as her sole and separate property. [TE 12, 17]

As was evidenced at trial, after Smith’s claim against Jones arose in 2014, defendants Jones, Hart, Great Grapes, LLC, 222 Smith Street, LLC and HollyHill Trees, LLC conspired and engaged in numerous fraudulent transfers to hide and shield Jones’s assets (real properties and cash from said properties) from Smith, and avoid payment on Jones’s obligations to Smith under the Divorce Judgment by placing said assets beyond the reach of a writ of execution or judgment lien.

III.      LEGAL DISCUSSION

Pursuant to the Uniform Voidable Transaction Act (Civil Code section 3439.01 et seq., hereinafter, the “UVTA”), if a debtor makes a fraudulent transfer within the meaning of the UVTA, the creditor has the right to avoid the transaction so as to have the transferred property subjected to the creditor’s claim. Civ. Code §3439.07(a)(1). “The purpose of the voidable transactions statute is to prevent debtors from placing property which legitimately should be available for the satisfaction of demands of creditors beyond their reach.” Lo v. Lee (2018) 24 Cal.App.5th 1065, 1071.

In an action for relief against a transfer or obligation under the UVTA, a creditor may obtain (among other relief), avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim. Civ. Code §3439.07(a)(1). A judgment in favor of a creditor in a fraudulent transfer action sets aside the transfer or obligation insofar as it affects the creditor of the transferor. McGee v. Allen (1936) 7 Cal.2d 468, 476; Civ. Code §3439.08(b)(1)(A) [judgment may also be entered against the first transferee of the asset, or the person whose benefit the transfer was made, without qualification]; Civ. Code §3439.08(b)(1)(B) [judgment may also be entered also against the first transferee’s immediate transferee or mediate transferee]; Ahmanson Bank & Trust Co. v. Tepper (1969) 269 Cal.App.2d 333, 344 [transfer void as to knowing transferee and also as to subsequent transferee who took after lis pendens had been filed in action to set aside initial fraudulent transfer].[4]

In a situation involving a conspiring or knowing transferee, neither the transferor nor the participating transferee can enforce the transfer. It is considered void and unenforceable as against public policy, its purpose having been unlawful. Severance v. Knight-Counihan Co. (1947) 29 Cal.2d 561, 568-569. A transferee who participates or conspires with the transferor to intentionally defraud creditors of the latter is liable for return of the asset transferred or its value, at least to the extent necessary to satisfy the creditor’s claim. Civ. Code §3439.08(b), (c). Because such activity on the part of the transferee constitutes the tort of conspiracy, a personal money judgment may be entered against him or her.Taylor v. S&M Lamp Co. (1961) 190 Cal.App.2d 700, 705-706.  If the transferee has sold the property or converted it to his or her own use, judgment against him or her may be taken for the value of the asset. Holmes v. Hatch (1938) 11 Cal.2d 376, 386; Wright v. Salzberger (1932) 121 Cal. App. 639, 644-645 [judgment for amount received on sale of asset proper].

A judgment setting aside a fraudulent transfer or obligation amounts to a lien on the fraudulently transferred property.  Liuzza v. Bell (1940) 40 Cal.App.2d 417, 429. The judgment may order the property sold to satisfy the lien of the creditor, so long as the lien for the protection of a good faith transferee,[5] if any, is satisfied from the sale. Civ. Code §3439.08(d); Patterson v. Missler (1965) 238 Cal.App.2d 759, 771-773 [if a judgment for the creditor authorizes the asset to be sold, the proceeds must first be applied to the transferee’s lien, and then to the payment of the creditor’s underlying claim].

  1. Smith is a Creditor of Jones Under the UVTA

A person may seek the remedies provided under the UVTA if the person is a creditor to whom a debt is owed within the meaning of the UVTA. Civ. Code §3439.07; Hansen v. Cramer (1952) 39 Cal.2d 321, 323; Pope v. National Aero Fin. Co. (1965) 236 Cal.App.2d 722, 728.  A creditor is defined as a person having any “claim” against a debtor. Civ. Code §3439.01(c). The Civil Code defines a “claim” as  “a right to payment, whether or not the right is reduced to a judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” Civ. Code §3439.01(b). Thus, a creditor need not show that he or she has a specific lien on the property subject to the creditor’s claim or that a particular claim has been prosecuted to judgment. Estate of Kalt (1940) 16 Cal.2d 807, 811; Weisenburg v. Cragholm (1971) 5 Cal.3d 892, 896.

As was evidenced at trial, since 2014, Smith has been a creditor of Jones, and the holder of a claim against Jones for a right to payment (reimbursement) of costs and attorney’s fees pursuant to the Divorce Judgment. [TE 1-5; draft 11/2/21 RT, 43:2-44:10, 50:9-19] Smith’s status as a creditor of Jones for costs and attorney’s fees under the Divorce Judgment is not disputed, and was not disputed at trial. As a creditor of Jones, Smith is entitled to seek the remedies provided by the UVTA.

  1. Smith was “Injured” By the Subject Fraudulent Transfers of Defendants

Even though a person is a creditor within the meaning of the UVTA, a transfer[6] in fraud of the creditor may only be attacked if he or she is injured by the transfer. Mehrtash v. Mertash (2001) 93 Cal.App.4th 75, 80; Haskins v. Certified Escrow & Mortgage Co. (1950) 96 Cal.App.2d 688, 691. A creditor does not sustain injury unless the transfer or obligation puts beyond his or her reach property which would be subject to the payment of the creditor’s debt. Mehrtash v. Mertash (2001) 93 Cal.App.4th 75, 80-81.

As evidenced at trial, all of the subject fraudulent transfers caused injury to Smith in that the transfers put assets of Jones (real properties and cash from said properties) which would be subject to the payment of Smith’s debt beyond the reach of a writ of execution and/or judgment lien (since title was transferred out of Jones’s name and into newly formed LLCs, and cash from said properties was transferred to Hart or on his behalf).  To date, Smith has incurred over $1,300,000 in losses due to the defendants’ wrongful conduct.  This amount represents contractual reimbursement of monies paid by Smith on Jones’s mortgage and sale costs, attorney’s fees for 7 years of contentious litigation, and significantly, $100,000 in sanctions against Jones for her continuous delays, obstreperous conduct during the litigation, false testimony and other wrongful conduct[7].

  1. Intent to Hinder, Delay or Defraud – Civil Code Section 3439.04(a)(1)

Civil Code section 3439.4(a) states:

“(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: (1) With actual intent to hinder, delay, or defraud any creditor of the debtor.”

Civ. Code §3439.04(a).

“Over the years, courts have considered a number of factors, the ‘badges of fraud’ described in a Legislative Committee comment to section 3439.04, in determining actual intent. Effective January 1, 2005, those factors are now codified as section 3439.04, subdivision (b).” Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 834.

Civil Code section 3439.04(a) states:

“In determining actual intent under paragraph (1) of subdivision (a), consideration may be given, among other factors, to any or all of the following:

(1) Whether the transfer or obligation was to an insider.  ***

(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 of the debtor’s 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.”

Civ. Code §3439.04(b).

“There is no minimum number of factors that must be present before the scales tip in favor of finding of actual intent to defraud.” Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 834. “The

confluence of several [badges of fraud] can constitute conclusive evidence of actual intent to defraud, absent significantly clear evidence of a legitimate supervening purpose.” In re Acequia, Inc. (9th Cir. 1994) 34 F.3d 800, 806.  Further, in cases of interfamilial transfers (as is the case here), the parties are held to a “fuller and stricter proof” of the legitimacy of the transaction.  Kirkland v. Risso (1979) 98 CA3d 971, 978-979.

When there is actual intent to defraud, neither the solvency of the debtor nor the amount of consideration received in exchange for the transfer or obligation is material.  Fross v. Wotton (1935) 3 Cal.2d 384, 388-389; McKnight v. Superior Court (1985) 170 Cal.App.3d 291, 299. Thus, a finding of insolvency is not necessary in order to set aside a transfer where there is actual intent to defraud, and a finding of solvency does not preclude a finding of actual intent to defraud.  Hansford v. Lassar (1975) 53 Cal.App.3d 364, 378;  Fross v. Wotton (1935) 3 Cal.2d 384, 388-389.

“To prove intent to hinder, delay or defraud creditors, it is not necessary to show that [the debtor] had a desire to harm [his or her] creditors. [Plaintiff] need only show that [the debtor] intended to remove or conceal assets to make it more difficult for [his or her] creditors to collect payment.” Judicial Counsel of California Civil Jury Instructions, CACI No. 4200; Economy Ref. & Serv. Co. v. Royal Nat’l Bank (1971) 20 Cal.App.3d 434, 441-442.

Intent to defraud, hinder or delay may be proven by circumstantial evidence because, in most cases, proof of actual intent to defraud, hinder or delay cannot be made by direct proof, but must be made by inferences from circumstances surrounding the conveyance, as well as the relationship and interests of the parties. Neumeyer v. Crown Funding Corp. (1976) 56 Cal.App.3d 178, 183; Slater v. Bielsky (1960) 183 Cal.App.2d 523, 526.

  1. The Selma Property

The fraudulent transfers discussed below are reflected in the flow chart attached hereto as Exhibit A.

On or about September 2, 2015, through a 1031 exchange involving Jones’s sale of her sole and separate property, the Visalia Property, Jones purchased the Selma Property for $599,000,[8] Jones taking record title to the Selma Property as “a married woman as her sole and separate property.”[9] [TE 17; 3/7/18 Jones Depo, 45:13-46:18]

Two days later, on or about September 4, 2015, Jones executed a promissory note in favor of the sellers, non-parties David and Martha Johnson, in the amount of $85,000, secured by a deed of trust recorded on the Selma Property. [TE 9, 15] At the time, a hearing on Smith’s RFO for reimbursement (filed August 13, 2015) was set for October 9, 2015. [TE 5]

On or about September 11, 2015, Jones borrowed an additional $165,000 cash and executed a promissory note in favor of the Johnsons for this amount, secured by a deed of trust recorded on the Selma Property. [TE 20, 21, 23] On September 18, 2015, Jones transferred $150,000 of these funds to non-party Plywood Investments, LLC, on Hart’ behalf and for his benefit, [10] but with no consideration received by Jones from Hart in return, and beyond the reach of a writ of execution or judgment lien.  [TE 24 (p. 3), 28 (p.3 and 5); 3/7/18 Jones Depo, 32:9-21, 32:22-33:2, 138:23-139:1] This was a fraudulent transfer under the UVTA.

On November 30, 2015, the Orange County Superior Court issued a ruling granting Smith’s August 13, 2015 RFO, ordering Jones reimburse Smith $192,148 in costs related to San Clemente Property plus interest, and $60,000 in attorney fees. [TE 50 (JN)]

Two days after the ruling, on or about December 2, 2015, Jones borrowed $180,000 and executed a promissory note in favor of non-party Phillip Grays for that amount, secured by a deed of trust recorded on the Selma Property. [TE 51, 53] On December 8, 2015, Jones transferred $169,000 of these funds to Hart, for no consideration, via a wire transfer to his personal bank account at Safe One Credit Union, and beyond the reach of a writ of execution or judgment lien.  [TE 63; 3/6/18 Hart Depo, 135:3-136:4, 161:22-162:22; 11/8/21 RT, 41:23-42:4] This was a fraudulent transfer under the UVTA.

On December 9, 2015, Jones granted a 50% interest in the Selma Property to Hart, for no consideration, and beyond the reach of a writ of execution or judgment lien (as to the interest transferred to Hart). [TE 56] This was a fraudulent transfer under the UVTA.

On December 22, 2015, Jones and Hart formed defendant Great Grapes, LLC, a California limited liability company. [TE 60] The LLC’s Articles of Organization filed with the Secretary of State designated Hart as the LLC’s agent for service of process, and the Articles were signed by Hart as the LLC’s “Organizer.” [TE 60] The “Minutes of Organizational Meeting of Members” for the LLC include an acceptance by Hart of his appointment as a manager of the LLC, signed by Hart. [TE 57 (p. 10)]

On December 22, 2015, member certificates reflecting Jones as the owner of a 40% member interest in the LLC (and Hart the owner of a 60% member interest) were issued by the LLC. [TE 58, 59] The “Minutes of Organizational Meeting of Members” for the LLC state the consideration for Jones and Hart’s member interests as “N/A”. [TE 57 (p. 7)]

On January 15, 2016, Jones and Hart transferred their respective interests in the Selma Property to Great Grapes, LLC, for no consideration,[11] and beyond the reach of a writ of execution or judgment lien. [TE 64] This was also a fraudulent transfer under the UVTA.

On or about November 17, 2017, Jones and Hart (as members of Great Grapes, LLC), caused the LLC to transfer title to the Selma Property to Hart alone, as his sole and separate property, for no consideration, and again, beyond the reach of a writ of execution or judgment lien.  [TE 100] This was a fraudulent transfer under the UVTA.

Thereafter, on or about November 20, 2017, Hart refinanced the Selma Property, taking out a $396,825 loan secured by a deed of trust recorded against the Selma Property (in favor of PS Funding, Inc.). [TE 96][12] After loan payoffs (including the $85,000 and $165,000 Johnson notes), escrow and other title costs, Hart alone received $107,925.15, by wire transfer to his personal bank account at Bank of Stockton on November 20, 2017. [TE 92, 93; 11/9/21 RT, 146:19-24]

Here, defendants’ fraudulent intent was evidenced at trial by:

  • Code §3439.04(b)(8) – All of the transfers of the Selma Property (from Jones to Hart on December 9, 2015, from Jones/Hart to Great Grapes, LLC on January 15, 2016 and from the LLC to Hart on November 17, 2017) were for no consideration.
  • Code §3439.04(b)(8) – All of the transfers of cash to Hart (directly to Hart and on Hart’s behalf) from loans taken out against the Selma Property ($150,000 to Plywood on Hart’s behalf on September 18, 2015, $169,000 directly to Hart on December 8, 2015 and $107,925.15 directly to Hart on November 20, 2017), were for no consideration.
  • Code §3439.04(b)(1) – All of the transfers of the Selma Property, and of cash to Hart (directly to Hart and on Hart’s behalf) from loans taken out against the Selma Property, were to an insider and interfamilial transfers as they were transfers to Jones’s husband / to an entity wholly owned/managed by Jones and Hart.
  • Code §3439.04(b)(4) – All of the transfers of the Selma Property, and of cash to Hart (directly to Hart and on Hart’s behalf) from loans taken out against the Selma Property, occurred between September 18, 2015 and November 20, 2017, after the August 13, 2015 filing of Smith’s RFO in the Orange County Superior Court and while Smith’s post-judgment enforcement proceedings were pending in said court.
  • Code §3439.04(b)(10) – All of the transfers of the Selma Property, and of cash to Hart (directly to Hart and on Hart’s behalf) from loans taken out against the Selma Property, occurred between September 18, 2015 and November 20, 2017, both before and after substantial debt to Smith was incurred by Jones.
  • Code §3439.04(b)(5), (9) – Jones had no other substantial assets and was insolvent; In a sworn declaration filed in the Orange County Superior Court on January 3, 2017, Jones stated: “I have no savings, and have not had any savings for years.I live essentially hand to mouth. My business has fallen on hard times, and it was evicted from its office space…I owe substantial sums to the IRS…I also had some four other lawsuits or threats of legal actions against me…” [1/3/17 Jones Decl., 2:18-24 (read into evidence 11/4/21)][13]

The evidence at trial established that defendants conspired to and did transfer title to the Selma Property, and cash to Hart (directly to Hart and on Hart’s behalf) from loans taken out against the Selma Property, with an actual intent to hinder, delay or defraud Smith in his attempts to collect the amounts owed by Jones pursuant to the Divorce Judgment.  Hart, as both a transferor and a transferee, was a knowing and active conspirator in the subject transfers, as established by, among other evidence:

  • Hart was at all relevant times aware of Smith’s claim, Hart

testifying that he became aware of the “dispute” as to the mortgage payments in or about October 2014, that he attended at least one of the hearings in the divorce case and submitted declarations in the case more than once, and testified in deposition he was “fully aware of what happened” concerning the mortgage payments. [11/4/21 RT, 98:11-21, 99:24-100:14, 100:26-101:5, 106:22-107:1; 3/6/18 Hart Depo, 107:12-18]

  • Hart testified he was aware of an “adverse ruling” (the November 30,

2015 ruling granting Smith’s RFO (TE 50 (JN)) “immediately after this ruling came out” and “before December 9, 2015.” [11/4/21 RT, 133:16-134:4]

  • Hart testified he was aware of the lis pendens related to the Selma

Property as of on or about April 30, 2016.  [11/4/21 RT, 139:11-19]

  • Hart signed the January 15, 2016 and November 17, 2017 grant deeds

of the Selma Property. [TE 64, 100]

  • Hart signed the Articles of Organization forming Great Grapes,

LLC (as its “Organizer”) and designating himself as the LLC’s agent for service of process, signed an acceptance of his appointment as a manager of the LLC in the Organizational Minutes, and held a 60% member interest in the LLC. [TE 60, 57 (p. 10), 58]

  • Hart signed a Secretary of State form Statement of Information for

Great Grapes, LLC which listed himself as the LLC’s “Chief Executive Officer.” [TE 67; 11/4/21 RT, 138:4-17]

  • Hart was listed as the person to whom a recorded copy should be sent

of a false and fraudulent Acknowledgment of Satisfaction of Judgment (signed by Jones as the judgment creditor) recorded against the Selma Property on October 30, 2017. [TE 84; draft 11/2/21 RT, 82:1-85:3, 117:19-21]

  • Hart testified he sought and was the sole borrower on the November

20, 2017 refinance of the Selma Property, and had to “submit all kinds of paperwork for that loan,” including signing the deed of trust securing the $396,825 refinance loan. [11/4/21 RT, 150:3-6, 151:14-21; TE 96, 92, 93]

  • Hart committed perjury in order to obtain the November 20, 2017

refinance of the Selma Property, Hart signing, under penalty of perjury, a “Declaration of Non-Owner Occupancy” submitted to the lender stating that his “true and only principal residence is located at: 968 Sierra Street #250, Kingsburg, CA 93631 — Hart testified at trial that he understood when signing the Declaration that he was declaring under penalty of perjury that the statements therein were true and correct, and then admitted at trial that this address was a UPS store. [11/4/21 RT, 156:20-157:4, 157:19-24][14]

  • Hart received $276,925.15 in cash from loans taken out against the

Selma Property, and an additional $150,000 was paid on his behalf to Plywood out of loan proceeds (for a total of $426,925.15). [TE 28, 63, 92]

Again, participation of a transferee in activities to intentionally defraud creditors of the transferor constitutes the tort of conspiracy and a personal money judgment may be entered against the transferee. Civ. Code §3439.08(b), (c);Taylor v. S&M Lamp Co. (1961) 190 Cal.App.2d 700, 705-706. The transferee is liable to the creditor for return of the asset transferred, and if the transferee has sold the property or converted it to his or her own use, judgment against him or her may be taken for the value of the asset. Holmes v. Hatch (1938) 11 Cal.2d 376, 386; Wright v. Salzberger (1932) 121 Cal. App. 639, 644-645 [judgment for amount received on sale of asset proper].

Smith is entitled to a judgment under the UVTA against Jones/The Estate of Jane Jones, Hart and Great Grapes, LLC, setting aside the transfers of the Selma Property from Jones to Hart on December 9, 2015 (as to Smith), from Jones and Hart to the LLC on January 15, 2016 (as to Smith) and from the LLC to Hart on November 17, 2017 (as to Smith), setting aside (as to Smith) the deed of trust in favor of PS Funding, Inc., a subsequent obligee who loaned funds to Hart with constructive notice of Smith’s claims (via the lis pendens recorded April 13, 2016), awarding monetary damages against Great Grapes, LLC (as a conspiring/knowing transferee) and Hart (as a conspiring/knowing transferee and a beneficiary of the transfers), jointly and severally, in the amount of $426,925.15 ($150,000 + $169,000 + $107,925.15), statutory prejudgment interest thereon, and punitive damages, and ordering the sale of the Selma Property to satisfy Smith’s underlying claim.

  1. The Montesano Property

The fraudulent transfers discussed below are reflected in the flow chart attached hereto as Exhibit A.

On or about September 4, 2015, through a 1031 exchange involving Jones’s sale of her sole and separate property, the Visalia Property, Jones purchased the Montesano Property for $385,000, Jones taking record title to the Montesano Property as “a married woman, as her separate estate.”[15] [TE 12; 3/7/18 Jones Depo, 45:13-46:18] The Montesano Property was a six-unit, income producing apartment building. [3/7/18 Jones Depo, 47:4-12; 3/6/18 Hart Depo, 29:6-16][16]

On October 8, 2015, Jones and Hart formed defendant 222 Smith Street, LLC, a Washington limited liability company.  [TE 31; 11/4/21 RT 111:15-18] The same day, member certificates reflecting Jones as the owner of a 40% member interest in the LLC (and Hart the owner of a 60% member interest) were issued by the LLC. [TE 30, 32]

On October 22, 2015 (after the initial RFO hearing on October 9, and prior to the second hearing date set for November 6, 2015), Jones transferred her entire interest in the Montesano Property to 222 Smith Street, LLC, for $10 consideration,[17] and beyond the reach of a writ of execution or judgment lien.[18] [TE 36, 5, 50 (JN)] This was a fraudulent transfer under the UVTA.

Then, on October 28, 2015, Jones (as the LLC’s manager), caused the LLC to transfer the Montesano Property back to herself (as “a married woman, as her separate estate”), for $10 consideration. [TE 38]   The next day, on or about October 29, 2015, Jones borrowed $250,000 and executed a promissory note in favor of non-party Lyle Fontain in that amount, secured by a deed of trust recorded on the Montesano Property. [TE 41, 43, 44; 11/8/21 RT, 57:2-7] Thereafter, Jones transferred this $250,000 to Hart at his personal bank account at Safe One Credit Union, for no consideration, and beyond the reach of a writ of execution or judgment lien.  [TE 41, 43; 11/8/21 RT, 57:2-7; 3/6/18 Jones Depo, 36:19-21, 36:17-18; 3/6/18 Hart Depo, 141:1-3, 135:3-136:4] This was a fraudulent transfer under the UVTA.

On November 4, 2015 (2 days before the second hearing date on Smith’s RFO for reimbursement), Jones transferred her entire interest in the Montesano Property back to 222 Smith Street, LLC, for $10 consideration, and again, beyond the reach of a writ of execution or judgment lien.  [TE 45, 50 (JN)] This was, again, a fraudulent transfer under the UVTA.

On or about May 3, 2019, Jones and Hart (as managing members of 222 Smith Street, LLC) caused the LLC to sell the Montesano Property to a third-party buyer for $500,000.[19] [TE 105, 113, 116; 11/8/21 RT, 88:11-17] After loan payoffs (including a $255,400 payment to Lyle Fontain), escrow and other sale costs, the LLC received $168,148.38 from the sale, by wire transfer to an LLC account on May 3, 2019. [TE 113; 153 (p. 5); 11/8/21 RT, 88:18-25] Thereafter, in just over 3 weeks, Jones and Hart caused the LLC to issue payments from the $168,148.38 sales proceeds, including a $100,000 check to Hart on 5/3/19 and a  $1,674.52 check to Hart on 5/10/19. [TE 153 (p. 5, 9-11); 11/8/21 RT, 93:23-94:5] In the beginning of June 2019, after the sale, there was $31,802.52 in the LLC bank account, and by the end of the month the account had a balance of $1.52. [11/8/21 RT, 97:17-23]

Here, defendants’ fraudulent intent was evidenced at trial by:

  • Code §3439.04(b)(8) – All of the transfers of the Montesano Property (from Jones to 222 Smith Street, LLC on October 22, 2015 and again on November 4, 2015) were for nominal ($10) consideration.
  • Code §3439.04(b)(8) – The transfer of $250,000 cash to Hart from a loan taken out against the Montesano Property, the LLC’s receipt of the $500,000 sales proceeds, and the transfers to Hart of at least $101,674.52 cash from said sales proceeds, were for no consideration.
  • Code §3439.04(b)(1) – All of the transfers of the Montesano Property, of cash to Hart from a loan taken out against the Property, and of the proceeds from the sale of the Property, were to an insider and interfamilial transfers, the transfers made to 222 Smith Street, LLC, an entity, wholly owned/managed by Jones and Hart, and to Hart directly.
  • Code §3439.04(b)(4) – All of the transfers of the Montesano Property, of cash to Hart from a loan taken out against the Property, and of the proceeds from the sale of the Property, occurred between October 22, 2015 and May 10, 2019, after the August 13, 2015 filing of Smith’s RFO in the Orange County Superior Court and while Smith’s post-judgment enforcement proceedings were pending in said court. The second (November 4, 2015) transfer of the Montesano Property was just 2 days before the second hearing on Smith’s August 13, 2015 RFO for reimbursement.
  • Code §3439.04(b)(10) – All of the transfers of the Montesano Property, of cash to Hart from a loan taken out against the Property, and of the proceeds from the sale of the Property, occurred between October 22, 2015 and May 10, 2019, both before and after substantial debt to Smith was incurred by Jones.
  • Code §3439.04(b)(5), (9) – Jones had no other substantial assets and was insolvent; In a sworn declaration filed in the Orange County Superior Court on January 3, 2017, Jones stated: “I have no savings, and have not had any savings for years.I live essentially hand to mouth. My business has fallen on hard times, and it was evicted from its office space…I owe substantial sums to the IRS…I also had some four other lawsuits or threats of legal actions against me…” [1/3/17 Jones Decl., 2:18-24 (read into evidence 11/4/21)][20]

The evidence at trial established that defendants conspired to and did transfer title to the Montesano Property, $250,000 cash from a loan taken out against the Property and proceeds from the sale of the Property, with an actual intent to hinder, delay or defraud Smith in his attempts to collect the amounts owed by Jones pursuant to the Divorce Judgment. Hart, as both a transferor and a transferee, was a knowing and active conspirator in the subject transfers, as established by, among other evidence:

  • Hart was at all relevant times aware of Smith’s claim, Hart

testifying that he became aware of the “dispute” as to the mortgage payments in or about October 2014, that he attended at least one of the hearings in the divorce case and submitted declarations in the case more than once, and testified in deposition he was “fully aware of what happened” concerning the mortgage payments. [11/4/21 RT, 98:11-21, 99:24-100:14, 100:26-101:5, 106:22-107:1; 3/6/18 Hart Depo, 107:12-18]

  • Hart testified he was aware of an “adverse ruling” (the November 30,

2015 ruling granting Smith’s RFO (TE 50 (JN)) “immediately after this ruling came out” and “before December 9, 2015.” [11/4/21 RT, 133:16-134:4]

  • Hart was aware of the lis pendens recorded against the Montesano

Property as of about August 24, 2016 (TE 106 (JN) (p. 14)]

  • Hart was a managing-member of 222 Smith Street, LLC, and held a

a 60% member interest in the LLC. [TE 116, 30]

  • Hart testified he signed an acceptance of his appointment as a

manager of the LLC in the its Organizational Minutes [11/4/21 RT, 116:117:4]

  • Hart was listed as the person to whom a recorded copy should be sent

of a false and fraudulent Acknowledgment of Satisfaction of Judgment (signed by Jones as the judgment creditor) recorded against the Montesano Property on February 26, 2019. [TE 104, draft 11/2/21 RT, 117:16-18]

  • Hart signed a Declaration filed in the Washington action in support

of the fraudulent motion to remove the lis pendens recorded against the Montesano Property [TE 106 (JN)]

  • Hart testified that he engaged in discussions with potential buyers of

the Montesano property in early 2019. [11/8/21 RT, 77:25-78:4]

  • Hart testified that he understood that he could not close the sale of the

Montesano Property unless he got the lis pendens removed, and that he and Jones hired an attorney in Washington to remove the lien. [11/8/21 RT, 80:23-81:8, 86:-7-10]

  • Hart signed the purchase agreement, the closing statement and the

grant deed in connection with the sale of the Montesano Property [TE 105, 113, 116]

  • Hart received at least $101,674.52 of the sale proceeds from the

Montesano Property, by checks he signed to himself [TE 153 (p. 5, 9-10); 93:23-94:5]

Again, participation of a transferee in activities to intentionally defraud creditors of the transferor constitutes the tort of conspiracy and a personal money judgment may be entered against the transferee. Civ. Code §3439.08(b), (c);Taylor v. S&M Lamp Co. (1961) 190 Cal.App.2d 700, 705-706.

Smith is entitled to a judgment under the UVTA against Jones/The Estate of Jane Jones, Hart and 222 Smith Street, LLC, setting aside the transfers of the Montesano Property from Jones to the LLC on October 22 and November 4, 2015 (as to Smith),  and awarding monetary damages against 222 Smith Street, LLC (as a conspiring/knowing transferee) and Hart (as a conspiring/knowing transferee and a beneficiary of the transfers), jointly and severally, in the amount of $500,000, the value of the asset fraudulently transferred, [21] statutory prejudgment interest thereon, and punitive damages.

  1. The Pioneer Property

The fraudulent transfers discussed below are reflected in the flow chart attached hereto as Exhibit A.

On September 18, 2015 (after the August 13, 2015 filing of Smith’s RFO and before the initial October 9, 2015 hearing thereon), Jones paid $150,000 from her personal bank account to non-party Plywood Investments, LLC, the seller of certain real property located at 2255 and 2277 Portridge Hwy, Pioneer, CA 95666 (the “Pioneer Property”), a 176-acre property that had a 3.880 acre glass greenhouse that was used to produce tomatoes and cucumbers. [TE 5, 24 (p. 3); 11/9/21 RT, 89:26-90:5] This fact is undisputed, and is evidenced by a wire transfer record from Jones’s personal bank account specifically referencing the Pioneer Property. [TE 24 (p. 3)] As evidenced at trial, the source of these funds is traced directly to the $165,000 Johnson loan Jones took out against the Selma Property, was paid to Plywood on Hart’s behalf and for his benefit without consideration to Jones, and for this reason alone, was a fraudulent transfer under the UVTA. [TE 24 (p. 3), 28, 20; 11/9/21 RT, 89:26-90:5]

Hart testified that he “invested” the Johnson loan funds into HollyHill Trees, and that $150,000 of the $165,000 loan funds were used for “option money” for the Pioneer Property. [3/6/18 Hart Depo, 135:3-136:4; 11/9/21 RT, 66:7-25] Hart further testified that: “On my behalf [the $150,000] was sent from my wife wired directly to Plywood Investments.” [11/9/21 RT, 89:26-90:5]

Hart testified that he “put together” defendant HollyHill Trees, LLC, a California limited liability company (“HH”).  [11/9/21 RT, 89:6-8] On September 24, 2015, Articles of Organization for HH (signed by Jones as “Organizer” and designating Hart as agent for service of process) were filed with the Secretary of State. [TE 25]

On or about February 3, 2017, HH purchased the Pioneer Property from Plywood Investments, LLC, who transferred title to the Pioneer Property via Grant Deed, recorded February 10, 2017. [TE 76] As Hart admitted at trial, Jones was never an owner of HH. [11/9/21 RT, 89:9-11] Despite Jones’s contribution of $150,000 of her personal funds towards the purchase of the Pioneer Property, title to the Pioneer Property was taken, not by Jones, but solely by HH, and with no consideration received by Jones (from either HH or Hart). [TE 24 (p. 3), 76] This was a fraudulent transfer under the UVTA.  Additionally, Hart facilitated this fraudulent transfer and thus became a co-conspirator.

Here, defendants’ fraudulent intent was evidenced at trial by:

  • Code §3439.04(b)(8) – Jones paid $150,000 of her personal funds to the seller of the Pioneer Property, on Hart’s behalf and for his benefit, which Hart admits was used to purchase the Pioneer Property, yet upon closing, title was vested solely in HH, an entity in which Jones never had any ownership interest.
  • Code §3439.04(b)(8) – Jones received no consideration in exchange for her $150,000 payment on Hart’s behalf and for his benefit, either from Hart or from HH by way of any ownership interest in HH or the Pioneer Property.
  • Code §3439.04(b)(1) – The transfer by Jones was made to an insider and was an interfamilial transfer, the transfer made on Hart’s behalf and for his benefit, her husband.
  • Code §3439.04(b)(4) – The transfer occurred between September 24, 2015 and February 3-10, 2017, after the August 13, 2015 filing of Smith’s RFO in the Orange County Superior Court and while Smith’s post-judgment enforcement proceedings were pending in said court.
  • Code §3439.04(b)(10) – The transfer occurred between September 24, 2015 and February 3-10, 2017, both before and after substantial debt to Smith was incurred by Jones.
  • Code §3439.04(b)(5), (9) – Jones had no other substantial assets and was insolvent; In a sworn declaration filed in the Orange County Superior Court on January 3, 2017, Jones stated: “I have no savings, and have not had any savings for years.I live essentially hand to mouth. My business has fallen on hard times, and it was evicted from its office space…I owe substantial sums to the IRS…I also had some four other lawsuits or threats of legal actions against me…” [1/3/17 Jones Decl., 2:18-24 (read into evidence 11/4/21)][22]

The evidence at trial established that defendants conspired to and did cause Jones to pay $150,000 of her personal funds to the seller of the Pioneer Property, on Hart’s behalf and for his benefit, and placing said funds beyond the reach of a writ of execution or judgment lien, with an actual intent to hinder, delay or defraud Smith in his attempts to collect the amounts owed by Jones pursuant to the Divorce Judgment.

Smith is entitled to a judgment under the UVTA against Jones/The Estate of Jane Jones, Hart and HH, setting aside (as to Smith) Jones’s transfer of $150,000 of her personal funds, on Hart’s behalf and for his benefit, and awarding monetary damages against HH (as a conspiring/knowing transferee) and Hart (as a beneficiary of the transfer and co-conspirator), jointly and severally, in the amount of $150,000, the value of the asset fraudulently transferred.

  1. TRANSFER WITHOUT REASONABLY EQUIVALENT VALUE – CIVIL CODE SECTION 3439.04(a)(2)(B)

Alternatively, “[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…[w]ithout receiving a reasonably equivalent value in exchange for the transfer or obligation,” and “[i]ntended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.” Civ. Code §3439.04(a)(2)(B).

For the same reasons discussed above, Smith, alternatively, is entitled to a judgment against defendants as set forth herein pursuant to Code of Civil Procedure section 3439.04(a)(2)(B).

  1. CONSTRUCTIVE FRAUD – CIVIL CODE SECTION 3439.05(a)

Alternatively, “[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 or 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).

A transfer under Civil Code section 3439.05(a) is considered constructively fraudulent as to creditors of the transferor [Hansford v. Lassar (1975) 53 Cal.App.3d 364, 374]; that is, proof of insolvency and of lack of reasonably equivalent value are presumptively conclusive of the fraudulent intent of the transferor, and the actual intent to defraud on the part of the transferor is immaterial and need not be establishedStearns v. Los Angeles City Sch. Dist.(1966) 244 Cal.App.2d 696, 727; Menick v. Smithy (1955) 131 Cal.App.2d 542, 547.

For the same reasons discussed above, Smith, alternatively, is entitled to a judgment against defendants as set forth herein pursuant to Code of Civil Procedure section 3439.05(a).

IV.     CONCLUSION

Plaintiff John Smith respectfully submits this Closing Brief.

 

DATED: December 1, 2021                               BROWN & CHARBONNEAU, LLP

 

By:___________________________________

GREGORY G. BROWN

MARK M. HIGUCHI

Attorneys John Smith

[1] Jones passed away on June 15, 2019. On March 30, 2021, this Court entered an order (on the stipulation of the parties) substituting Don Hart in his capacity as personal representative of the Estate of Jane Jones, pursuant to Code of Civil Procedure section 377.41. Thus, Hart is a defendant in this action both in his individual capacity, and in his capacity as personal representative for the Estate.

[2] These fraudulent transfers are reflected in the flow chart attached hereto as Exhibit A.

[3] The certified copy of the transcript for the 11/2/21 trial proceedings was not received from the Court Reporter as of the filing of this Closing Brief. The citations to the 11/2/21 trial proceedings herein are therefore from the Reporter’s draft transcript. Upon receipt of the certified transcript, Plaintiff shall file and serve an amended Closing Brief, changing only the citations to the 11/2/21 trial proceedings to reflect the certified transcript (and supply copies of the relevant excerpts from the certified transcript).

[4] A notice of lis pendens is a conveyance, relating to the effect of recordation, so that a subsequent purchaser or encumbrancer has constructive notice thereof and is bound by a subsequent judgment in the action. Putam Sand & Gravel Co. v. Albers (1971) 14 Cal.App.3d 722; Swartfager v. Wells (1942) 53 Cal.App.2d 522, 529 [“when the subsequent deed to real property is not recorded prior to the record of the notice of action, a judgment affecting that title is not void even though the subsequent purchaser acquired the property in good faith and for a valuable consideration; a judgment quieting title to real property is absolutely controlling against one, though not a party to the action, who acquires from a party thereto a deed to that property subsequent to the commencement of the suit and after the recording of the lis pendens”]; Ahmanson Bank & Tr. Co. v. Tepper (1969) 269 Cal.App.2d 333, 341-342 [“every conveyance of real property…is void…as against any judgment affecting the title, unless such conveyance shall have been duly recorded prior to the record of notice of action”].

[5] “Good faith” means that the transferee acted without actual fraudulent intent and did not collude with the debtor or actively participate in the fraudulent scheme of the debtor. Annod Corp. v. Hamilton & Samuels (2002) 100 Cal.App.4th 1286, 1299.

[6] A transfer under the UVTA means “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.” Civ. Code §3439.01(m).

[7] Family Code §271 sanctions for conduct that “furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys and Code of Civil Procedure §128.5 sanctions to pay for the unnecessary costs and expenses “incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.”

[8] In his debtor exam, Hart testified:

Q:  Let me go on, then, with the Selma property. Was the proceeds from the Visalia property used to purchase

the Selma property?

A:  I don’t know. Wasn’t my money.

[9/15/16 Hart Debtor Exam, 23:21-24]

[9] On September 23, 2015, less than 3 weeks after Jones’s purchase of the Selma Property, Jones testified under oath that other than the San Clemente Property and the Visalia Property, she owned no other property in the last 5 years. [9/23/15 Jones Depo, 41:16-20]

[10] Hart testified at trial that:

Q:  Now, sir, do you recall that $150,000 was wired to Plywood Investments by Ms. Jones? Do you recall

us talking about that?

A:  Yes.

Q:  And that was wired to Plywood Investments on your behalf, correct?

A:  Yes.

Q:  She transferred $150,000 for you to invest in connection with Hollyhill Trees. Is that correct?

A:  That’s correct.

[11/8/21 RT, 35:4-14]

[11] In his deposition, Hart admitted this transfer was for no consideration:

Q:  So it was. Did the two of you contribute the North Breeze property to Great Grapes LLC?

A:  Contribute. We — we put — Great Grapes was formed for liability reasons for the farming operation —

Q:  And —

A:  — at no consideration.

Q:  Okay. That was my question.

A:  Yeah.

[3/6/18 Hart Depo, 76:8-16]

[12]At this time, a lis pendens had been recorded on the Selma Property, Smith having recorded the lis pendens on April 13, 2016 (approximately 2 weeks after filing the subject civil action). [TE 69] PS Funding, Inc. thus had constructive notice of Smith’s claim against the Selma Property, and is bound by any judgment in this action, even if it granted the loan in good faith and for valuable consideration. Putam Sand & Gravel Co. v. Albers(1971) 14 Cal.App.3d 722; Swartfager v. Wells (1942) 53 Cal.App.2d 522, 529; Ahmanson Bank & Tr. Co. v. Tepper (1969) 269 Cal.App.2d 333, 341-342 [“every conveyance of real property…is void…as against any judgment affecting the title, unless such conveyance shall have been duly recorded prior to the record of notice of action”].

[13] Further, in her deposition, Jones testified that she had “zero income,” and in her debtor exam testified that while she had a bank account: “there’s no money in it because I have no money…I haven’t put any money in there because there is no money.” [9/23/15 Jones Depo, 101:10-15; 5/5/17 Jones Debtor Exam, 58:22-59:10]

[14] The Declaration of Non-Owner Occupancy, dated November 17, 2017,  further states that: “Lender has stressed to me the importance of knowing that the [Selma] Property is not my primary residence. I understand that Lender would not make this Loan if the following statements were incorrect” and “The [Selma] Property is NOT my principal address.” [TE 178] At trial, Hart testified that he lived at the Selma Property from early 2016 until he moved to the North Del Ray property in 2019. [11/4/21 RT, 106:6-8]

[15] Again, on September 23, 2015, less than 3 weeks after Jones’s purchase of the Montesano Property, Jones testified under oath that other than the San Clemente Property and the Visalia Property, she owned no other property in the last 5 years. [11/23/15 Jones Depo, 41:16-20]=

[16] With respect to the rental income generated from the Montesano Property, Hart testified at trial he did not take all the money from the rents. [11/8/21 RT, 53:8-54:2] In his deposition, Hart testified that:

Q:  And does Ms. Jones receive any of the rental income?

A:  No.

Q:  Do you take it all?

A:  Yes.

[3/6/18 Hart Depo, 29:6-16; 3/7/18 Jones Depo, 47:24-48:7]

[17] In his deposition, Hart admitted this transfer was for no consideration:

Q:  And my next question is, was there any consideration transferred in exchange for transferring the 222

Smith Street property into the 222 Smith Street LLC?

A:   No.

[3/6/18 Hart Depo, 76:17-20]

[18] Jones admitted in deposition that she aware that Smith was making a claim for money against her at the time of this transfer. [3/7/18 Jones Depo, 69:7-21]

[19] Smith had recorded a lis pendens against the Montesano Property on June 30, 2016. [TE 71] However, without filing with the court and without notice to Smith, on June 30, 2017, a “Release of Lis Pendens” was recorded, signed by Jones and fraudulently stating that the subject action was “no longer pending.” [TE 80 (JN); draft 11/2/21 RT, 80:15-81:1, 117:16-18] This was defendants’ first attempt to remove/avoid the lis pendens.

On February 26, 2019, without filing with the court and without notice to Smith, a false and fraudulent Acknowledgment of Satisfaction of Judgment (signed by Jones as the judgment creditor) was recorded against the Montesano Property. [TE 104; draft 11/2/21 RT, 87:3-88:6, 117:16-18] This was defendants’ second attempt to remove/avoid the lis pendens.

Finally, on April 23, 2019, at 8:04 am, the LLC filed a lawsuit against Smith and an accompanying motion to remove the lis pendens in Washington.  [TE 106 (JN)] Jones and Hart both filed declarations in support of the motion. [TE 106 (JN)] Neither the motion nor the underlying action was ever served on Smith. [draft 11/2/21 RT, 71:1-72:11] The very same day and just sixteen minutes later, at 8:20 am, the court entered an order granting the motion to remove the lis pendens. [TE 107 (JN)]

[20] Further, in her deposition, Jones testified that she had “zero income,” and in her debtor exam testified that while she had a bank account: “there’s no money in it because I have no money…I haven’t put any money in there because there is no money.” [9/23/15 Jones Depo, 101:10-15; 5/5/17 Jones Debtor, 58:22-59:10]

[21] This includes the transfer of $250,000 cash to Hart from the $250,000 loan taken out by Jones against the Montesano Property.

[22] Further, in her deposition, Jones testified that she had “zero income,” and in her debtor exam testified that while she had a bank account: “there’s no money in it because I have no money…I haven’t put any money in there because there is no money.” [9/23/15 Jones Depo, 101:10-15; 5/5/17 Jones Debtor, 58:22-59:10]

 

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