Judge: Anne Richardson, Case: 20STCV19586, Date: 2024-04-29 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 20STCV19586    Hearing Date: April 29, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Plaintiff Paula Quezada sues Defendants Rogelio Quezada (ex-spouse), Erika Rivera (Rogelio Quezada’s girlfriend), Samuel Quezada (Rogelio Quezada’s brother), and Does 1 through 100 pursuant to a February 1, 2021, Second Amended Complaint (SAC) alleging claims of: (1) Fraudulent Conveyance and (2) Conspiracy to Engage in Fraudulent Conveyance against Rogelio Quezada and Erika Rivera; and (3) Fraud and (4) Constructive Fraud against Samuel Quezada (constructive fraud inoperative based on Jul. 22, 2021 ruling).

(The Court refers to the parties by their first name based on the shared surname between many of the parties. No disrespect is intended.)

The claims against Rogelio and Erika arise from the following allegations.

Paula and Rogelio were married for over 20 years.

On March 17, 2017, the Los Angeles Superior Court issued a dissolution judgment for Paula and Rogelio. As part of that judgment, the Superior Court awarded Paula full ownership of the real property known as 3902 Santa Ana Street, South Gate, California 90280. (The dissolution judgment is not attached to the SAC, though it was attached to Plaintiff’s First Amended Complaint (FAC). A review of that judgment shows that Paula was specifically awarded the former married couple’s community property interest in the subject property, not “full ownership” over the property or some similar language, as alleged in the SAC. However, because the SAC does not clarify whether anyone beyond Paula and Rogelio owned an interest in the subject property at the time of Paula and Rogelio’s dissolution, and because the SAC alleges Paula’s full ownership of the property, the Court reads the SAC as involving a judgment that conveyed Paula and Rogelio’s full community property interest in the subject property to Paula, where the community’s interest in the property was in fee simple, i.e., 100% ownership.)

Nevertheless, following the judgment, Rogelio undertook several actions in violation of the March 17, 2017, judgment. Rogelio first caused the property to be transferred to a “Maria Benitez,” who did not pay any consideration for the transfer and whose identity is not otherwise elaborated in the pleadings. Rogelio caused this transfer to be made to defraud Paula of the benefits and rights of the dissolution judgment. Thereafter, Rogelio prepared all the paperwork so that Maria could obtain a loan on the subject property. Maria was unaware that the loan was being obtained in her name. On January 25, 2017, Maria obtained a $350,000 loan that was secured by the property. Next, on January 26, 2017, Rogelio induced Maria to transfer $98,894.41 of those monies from Maria’s personal account to an account owned by Erika, Rogelio’s girlfriend at the time the SAC was filed. Erika assisted Rogelio in taking these actions.

In relation to the first and second causes of action—the claims stated against Rogelio and Erika, which are based on the above allegations—Paula prays for, among other things, costs, an order setting aside the conveyance of $98,894.41 from Maria to Erika, orders restraining further conveyances of the $98,894.41 transferred by Maria to Erika, and other relief deemed just and proper. However, the prayer does not seek an order setting aside the conveyance of the subject property from Rogelio to Maria or restraining further conveyances of the subject property.

B. Prior Procedural History

On February 1, 2021, Paula filed a proof of service purporting to reflect service of the SAC and its summons on Rogelio, Erika, and Samuel on February 1, 2021. However, the proof of service reflects the February 1, 2021, service of the SAC and its summons on David D. Mortiel, counsel for Samuel Quezada. Rogelio, Erika, and Samuel are not named in the proof of service itself. The Court notes that it appears David Mortiel has only ever represented Samuel in this action, according to the file.

On March 8, 2021, Samuel filed a demurrer and motion to strike against the SAC’s third and fourth causes of action for fraud and constructive fraud, based on claims that Samuel induced Plaintiff not to litigate title to another property (on Alameda Street) in the dissolution case because Samuel was on title to that property.

On March 30, 2021, Paula filed an updated proof of service for Samuel.

On April 1, 2021, the Court held an order to show cause hearing, at which time the Court noted that proof of service as to Rogelio and Erika had not been filed.

On July 20, 2021, Samuel filed a notice of non-opposition by Paula to Samuel’s demurrer and Samuel’s motion to strike.

On July 22, 2021, Rogelio and Erika filed a notice of bankruptcy.

That same day, the Court held a hearing at which the Court noted its receipt of Rogelio and Erika’s notice of bankruptcy. Based on that filing, the Court stayed this action as to Rogelio and Erika. The Court also ruled on Samuel’s October 26, 2020, demurrer and motion to strike, overruling the demurrer and denying the motion to strike as to the SAC’s third cause of action, and sustaining the demurrer and granting the motion to strike as to the SAC’s fourth cause of action. No leave to amend was mentioned in the Court’s order, and Plaintiff did not file an amended pleading in response to the order.

On August 5, 2021, Samuel filed an answer to the SAC.

Between January 2022 and January 2024, the Court held a number of status conferences regarding Rogelio and Erika’s then-ongoing bankruptcy proceedings.

C. Motion Before the Court and Subsequent Procedural History

On January 11, 2024, Rogelio and Erika—in pro per—filed a demurrer to the SAC’s four causes of action, only the first two of which are alleged against them, and the fourth of which is no longer operative. The demurrer attaches a proof of service showing service of the demurrer on Paula’s counsel by mail on January 11, 2024, though the proof of service left two locations blank: a line following the date of “January 11, 2024”; and a line relating to the California city from which the demurrer was mailed to Paula’s counsel.

On January 25, 2024, the Court held a status conference regarding Rogelio and Erika’s bankruptcy proceedings. Only counsel for Paula and counsel for Samuel attended this hearing. Rogelio and Erika did not make any appearances, either in their own person or through counsel. At the hearing, counsel for Paula and counsel for Samuel both represented that the bankruptcy proceedings had been resolved as of that date. Based on those representations, the Court took the status conference regarding bankruptcy off calendar although the Court’s order did not explicitly lift the July 22, 2021 stay in this action as to Rogelio and Erika. Counsel for Plaintiff also agreed that Rogelio had not been served with the SAC as of January 25, 2024.

No opposition by Paula appears in the record despite Paula’s counsel acknowledging Rogelio’s pending demurrer at the January 25, 2024, hearing.

Neither does the record reflect a reply or notice of non-opposition.

Rogelio and Erika’s demurrer is now before the Court.

II. Stay as to Rogelio Quezada and Erika Rivera

Based on the resolution of their bankruptcy proceedings, the Court LIFTS the July 22, 2021, stay in this action as to Rogelio and Erika.

III. Demurrer

A. Note - Timeliness

A person against whom a complaint or cross-complaint has been filed may, within 30 days after service of the complaint or cross-complaint, demur to the complaint or cross-complaint. (Code Civ. Proc., § 430.40, subd. (a).)

Here, the record is clear in showing that the SAC and its summons were never served on Rogelio and Erika in this action.

However, Rogelio and Erika’s July 22, 2021, notice of bankruptcy, and their demurrer now before the Court, constitute a general appearance for the purposes of timeliness in demurrer. This is because a defendant makes a general appearance when he takes any part in the action or proceeding. (Creed v. Schultz (1983) 148 Cal.App.3d 733, 740; see Roy v. Superior Court (2005) 127 Cal.App.4th 337, 341 [“A defendant who has not yet answered has been held to have made a general appearance … if he invokes the authority of the court on his behalf, or affirmatively seeks relief”].) A general appearance by a party is equivalent to personal service of summons on such party. (Renoir v. Redstar Corp. (2004) 123 Cal.App.4th 1145, 1149-1150.)

As such, the 30-day clock for Rogelio or Erika to demur to the SAC would have been triggered as of at least July 22, 2021, but for the Court staying this action as to Rogelio and Erika that same day. That stay was not lifted until the date of this order, as discussed in Section II above. It therefore follows that Rogelio and Erika filed their demurrer within 30 days of the stay being lifted, i.e., filed on January 11, 2024. And though Rogelio and Erika filed their demurrer during a stay, counsel for Plaintiff and counsel for Defendant Samuel Quezada clarified on January 25, 2024, that Rogelio and Erika’s bankruptcy proceedings had concluded by that date, with Plaintiff Paula Quezada’s counsel recognizing that Rogelio and Erika’s demurrer was on calendar.

The Court thus proceeds with a discussion of Rogelio and Erika’s demurrer.

B. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) Courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

C. Analysis

1. Demurrer, SAC, First Cause of Action, Fraudulent Conveyance: OVERRULED.

a. Relevant Law

i. Statutory Law

In California, a fraudulent conveyance under the Uniform Fraudulent Transfer Act (UFTA) involves “a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.” (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829 (Filip).) A transfer under the UFTA is fraudulent as to a creditor if the debtor made the transfer with actual intent to hinder, delay, or defraud any creditor of the debtor. (Civ. Code, § 3439.04, subd. (a); Filip, supra, at p. 829.)

To find a transfer voidable as to a creditor, the transfer by the debtor must be made with actual intent to hinder, delay, or defraud the creditor of the debtor. (Civ. Code, § 3439.04, subd. (a).) Some factors that may be considered in determining actual intent are: (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. (Civ. Code, § 3439.04, subd. (b).)  

A “debtor” is a person that is liable on a claim. (Civ. Code, § 3439.01, subd. (e).)

A “claim” means a right to payment, whether or not it has been reduced to judgment. (Civ. Code, § 3439.01, subd. (b).)

Whether the conveyance was indeed made with fraudulent intent requires an evidentiary finding and is thus more proper on summary judgment. (See Filip, supra, 129 Cal.App.4th at 834.)

ii. Common Law

A cause of action for fraudulent transfer may be brought under the UFTA or common law. (See Husky Internat. Electronics, Inc. v. Ritz (2016) 136 S.Ct. 1581, 1587 (Husky Int’l); Macedo v. Bosio (2001) 86 Cal.App.4th 1044, 1051.) A fraudulent transfer does not require a misrepresentation from a debtor to a creditor. (See Husky Int’l, supra, at p. 1597.) “Fraudulent conveyances typically involve ‘a transfer to a close relative, a secret transfer, a transfer of title without transfer of possession, or grossly inadequate consideration.’” (Ibid., quoting BFP v. Resolution Trust Corp. (1994) 511 U.S. 531, 540-541.)  

b. Court’s Determination

After review, the Court finds in favor of Plaintiff Paula Quezada.

The SAC alleges that after Rogelio ceased to own any interest in the subject property, he executed a conveyance of the subject property from himself to Maria Benitez, who did not pay any consideration for the transfer and whose connection to the parties in this action is unclear. (SAC, ¶¶ 8-9, 13.) The SAC also alleges that Rogelio next prepared paperwork for Maria to obtain a $350,000 loan on the subject property, which was successfully secured despite Maria not being aware that the loan was being made in her name, and with Rogelio later inducing Maria to transfer $98,894.41 to Erika (Rogelio’s girlfriend). (SAC, ¶¶ 10-12, 13.) Last, the SAC alleges that Erika knowingly helped Rogelio with these actions. (SAC, ¶ 18.)

These allegations state a fraudulent conveyance of real property by Rogelio to Maria because the SAC alleges that the real property belonged to Paula at the time of Rogelio’s transfer to Maria. Moreover, these allegations state a fraudulent conveyance of $98,894.41 by Maria to Erika, as induced by Rogelio with Erika’s help, because the $98,894.41 were secured by Maria through a loan on the subject property, which was fraudulently conveyed to her by Rogelio for no consideration.

Moreover, whether the conveyance was indeed made with fraudulent intent requires an evidentiary finding and thus should not be resolved except in the extraordinary case by a motion directed at the pleadings. (See Filip, supra, 129 Cal.App.4th at 834.)

Rogelio and Erika’s demurrer is thus OVERRULED as to the SAC’s first cause of action.

The Court notes, however, that the SAC’s prayer only seeks to void the transfer of $98,894.41 and orders related to those monies. (SAC, ¶¶ 1-14; see 17-18 [costs; other relief deemed proper].) The prayer does not seek to void the transfer of the subject property from Rogelio to Maria or further orders relating to the subject property.

2. Demurrer, SAC, First Cause of Action, Conspiracy to Engage in Fraudulent Conveyance: SUSTAINED, without leave to amend [caveat below].

a. Relevant Law

“Civil conspiracy is not an independent tort. Instead, it is ‘a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration. [Citation.] By participation in a civil conspiracy, a coconspirator effectively adopts as his or her own the torts of other coconspirators within the ambit of the conspiracy. [Citation.] In this way, a coconspirator incurs tort liability co-equal with the immediate tortfeasors.” (City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 211-212 (City of Industry), quoting Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511; see, e.g., City of Industry, supra, at p. 212 [“constru[ing] the fifth count for fraud and the tenth count for conspiracy together as a single count for fraud”].)

b. Court’s Determination

Conspiracy is not a cause of action in the State of California. (City of Industry, supra, 198 Cal.App.4th at p. 212.)

Rogelio and Erika’s demurrer is thus SUSTAINED as to the SAC’s second cause of action, without leave to amend.

However, the Court grants Paula leave to reallege any conspiracy grounds against Defendants in a subsequent pleading filed by Paula as a result of this order.

3. Demurrer, SAC, Third and Fourth Causes of Action, Fraud and Constructive Fraud: NULL.

Here, the Court determines that Rogelio and Erika’s demurrer is NULL as to the SAC’s third and fourth causes of action, which are only alleged against Samuel Quezada. Therefore, Rogelio and Erika have no standing to file a demurrer as to these claims.

The Court also notes that the Court sustained a demurrer to the fourth cause of action on July 22, 2021. Because Plaintiff did not file an amended pleading following the July 22, 2021, order, the fourth cause of action has ceased to function as an operative claim in this lawsuit. 

IV. Conclusion

Defendants Rogelio Quezada and Erika Rivera’s Demurrer to Complaint is:

(1) OVERRULED as to the Second Amended Complaint’s first cause of action;

(2) SUSTAINED, without leave to amend, as to the Second Amended Complaint’s second cause of action with the caveat that Plaintiff Paula Quezada may, in a subsequent pleading filed as a result of this order, reallege her conspiracy grounds against Defendants outside of a stated count (otherwise incorrectly referred to as a cause of action); and

(3) NULL as to the Second Amended Complaint’s third and fourth causes of action, which are only alleged against Defendant Samuel Quezada.