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 Post subject: Cadle: Badges Of Fraud And Fraudulent Transfer Presumption
PostPosted: Wed Aug 17, 2011 5:28 am 
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Cadle Company II, Inc. v. Bell, 2011 WL 3525401 (Cal.App. 1 Dist., Unpublished, Aug. 11, 2011).

Not Officially Published (Cal. Rules of Court, Rules 8.1105 and 8.1110, 8.1115). California Rules of Court, rule 8.1115, restricts citation of unpublished opinions in California courts.

Court of Appeal, First District, Division 4, California.

The CADLE COMPANY II, INC., Plaintiff and Appellant,


Marilyn BELL, Defendant and Respondent.

No. A127550.

(San Mateo County Super. Ct. No. CIV 477881).

Aug. 11, 2011.

Templeton Briggs, Brewer & Brewer, Costa Mesa, CA, for Plaintiff and Appellant.

Lawrence A. Jacobson, Cohen & Jacobson, Redwood City, CA, for Defendant and Respondent.



*1 This appeal arises out of the third unsuccessful attempt by The Cadle Company II, Inc. (Cadle) to recover on a defaulted bank loan entered against Balew's Fine Jewelers, Inc. (Balew's), a defunct, family-run jewelry business. Cadle has filed five separate appeals, challenging the judgments entered in favor of the defendants and the orders awarding defendants cost of proof fees. In the instant appeal, Cadle appeals from the summary adjudication entered in favor of Marilyn Bell (Marilyn).FN1 We affirm.

FN1. The underlying litigation involves Marilyn Bell, and her two sons, Phillip Bell (Phillip) and Harold Bell (Harold). We shall refer to the defendants by their first names to avoid confusion. (See In re Marriage of Witherspoon (2007) 155 Cal.App.4th 963, 967, fn. 2 ["We refer to the parties by their first names for clarity and ease of reference, and intend no disrespect."].)


Balew's was owned by Marilyn's late husband Marvin Bell (Marvin), who died in April 2003. Following Marvin's death, and during the relevant time period, Balew's was managed by Phillip, one of Marilyn's sons. Marilyn worked for many years as a salesperson at the store prior to its closure. She worked up to five days a week at Balew's. Marilyn was also a nominal director. However, she was not involved with the corporation's management, finances, or bookkeeping.

In the months after Marvin's death, Balew's continued its operations. However, despite the efforts of Phillip, Marilyn, and other employees, the business struggled. For her efforts, Marilyn received a modest salary. As the business started to wind down in late 2003, Marilyn's compensation was reduced. In December 2003, Balew's ceased operations, after liquidating its assets and paying the proceeds to federal and state taxing agencies.

The underlying litigation arises from a defaulted bank loan. In April 2005, Cadle, a collection agency, sued Balew's and Marilyn ( The Cadle Company II, Inc. v. Balew's Fine Jewelers, Inc., et al. (Super. Ct. Santa Clara County, 2005, No. 105CV040095) [ Balew's I ] ), alleging breach of contract and breach of written guaranty of the loan. After dismissing that action on the eve of trial, Cadle filed an identical action against Balew's and Marilyn in November 2006, which also named Phillip as a defendant ( The Cadle Company II, Inc. v. Balew's Fine Jewelers, Inc., et al. (Super. Ct. Santa Clara County, 2006, No. 106CV073476) [ Balew's II ] ). Just after the case was ordered to trial, Cadle dismissed its claims against Marilyn and Phillip. Thereafter, Cadle obtained a default judgment against Balew's.

Cadle filed the first amended complaint in the instant action in April 2009, naming Balew's, Marilyn, Phillip, and Harold as defendants ( The Cadle Company II, Inc. v. Balew's Fine Jewelers, Inc., et al. (Super. Ct. San Mateo County, 2009, No. CV 477881) [ Balew's III ] ). The complaint alleged, among other things, that the individual defendants, while acting as officers and directors of the corporation, improperly dissipated Balew's assets for personal purposes at the expense of Balew's creditors.

Following discovery, Marilyn moved for summary adjudication on the grounds that Cadle's claims were time barred under the applicable statute of limitations and that Cadle's discovery responses were devoid of any facts to support Cadle's claims against her. Specifically: Discovery revealed that Cadle had no witnesses who could support its claims. Although Cadle asserted that Marilyn received $62,913 in illegal distributions, it conceded it was not presently in possession of a single check written to Marilyn. Moreover, when asked to identify all the facts supporting its claim that Marilyn received fraudulent transfers, Cadle responded only with the conclusory statement that Marilyn had received "[a] large dollar amount of checks ... while [Balew's] was being improperly liquidated." Cadle also refused to respond to Marilyn's request that it identify each purported fraudulent transfer from Balew's to Marilyn. Additionally, when asked to identify all documents supporting the contention that the purported fraudulent transfers were made with "actual intent," Cadle referred only to the deposition transcript of Phillip, which contains no such testimony.

*2 The trial court granted summary adjudication in favor of Marilyn, ruling that the causes of action against her were time barred and that there were no triable issues of material fact. The instant appeal followed.


A. Standard of Review

"[I]n moving for summary judgment, a 'defendant ... has met' his [or her] 'burden of showing that a cause of action has no merit if' he [or she] 'has shown that one or more elements of the cause of action ... cannot be established, or that there is a complete defense to that cause of action. Once the defendant ... has met that burden, the burden shifts to the plaintiff ... 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., sec. 437c, subd. ( o )(2).)" ( Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849.)

We review a judgment following a grant of summary adjudication de novo and decide independently whether the facts not subject to triable dispute warrant adjudication for the moving party as a matter of law.FN2 ( Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348.)

FN2. Marilyn filed a request, asking this court to judicially notice various federal and out-of-state cases. She also filed a motion to augment the record. We deferred ruling until the time of decision and now deny the request to take judicial notice and motion to augment the record.

B. Fraudulent Transfers

1. Uniform Fraudulent Transfer Act

"The Uniform Fraudulent Transfer Act (the Act [or UFTA] ) is found in Civil Code section 3439 et seq. Section 3439.04 provides: 'A transfer made or obligation incurred by a debtor is fraudulent 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: [para.] (a) With actual intent to hinder, delay, or defraud any creditor of the debtor. [para.] (b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor: [para.] (1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or [para.] (2) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.' Section 3439.04 is construed to mean a transfer is fraudulent if the provisions of either subdivision (a) or subdivision (b) are satisfied. ( Monastra v. Konica Business Machines, U.S.A., Inc. (1996) 43 Cal.App.4th 1628, 1635[ ].)

"Civil Code section 3439.08, subdivision (a) provides a defense to an action based on section 3439.04, subdivision (a). Section 3439.08, subdivision (a) states that '[a] transfer or an obligation is not voidable under subdivision (a) of Section 3439.04, against a person who took in good faith and for a reasonably equivalent value....' Thus, a showing of good faith and reasonably equivalent value is all that is required to defeat a creditor's action based on section 3439.04, subdivision (a). Obviously, if a transfer is made both in good faith and for a reasonably equivalent value, then the transfer is not a fraudulent transfer under section 3439.04, subdivision (b), either, since subdivision (b) applies only to transfers made without receipt of reasonably equivalent value.

*3 "The same holds true with respect to Civil Code section 3439.05, which provides: 'A transfer made or obligation incurred by a debtor is fraudulent 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 that time or the debtor became insolvent as a result of the transfer or obligation.' If the debtor received reasonably equivalent value, the inquiry ends there." ( Annod Corp. v. Hamilton & Samuels (2002) 100 Cal.App.4th 1286, 1294–1295 ( Annod ).)

2. Evidence of Reasonably Equivalent Value

"[W]hether a conveyance is made with fraudulent intent is a question of fact. ( Bulmash v. Davis (1979) 24 Cal.3d 691, 699[ ].)" ( Annod, supra, 100 Cal.App.4th at p. 1294.) Cadle asserts the trial court erred in determining there were no triable issues of material fact as to whether Marilyn tendered reasonably equivalent value for the payments because Marilyn did not offer affirmative proof that she actually worked at Balew's, or that she "generated sales for her work justifying [her] salary."

The trial court, in its order granting summary adjudication in Marilyn's favor, explained why there was no triable issue of fact as to reasonably equivalent value.FN3 Specifically, the court found: "[Cadle's] additional facts fail to create a triable issue of material fact as to whether Balew's made payments to ... Marilyn [ ] 'without receiving a reasonably equivalent value in exchange' [within the meaning of the Act], an essential element of [Cadle's] Eighth and Ninth Causes of Action. [para.] While [Cadle's] Fact 6 asserts that 'Phillip [ ] proceeded to transfer over $31,000 to [Marilyn] commencing in April 2003, and continuing into April 2004' and [Cadle's] Fact 7 asserts that 'Phillip [ ] admitted that these sums were not employee payments for work performed for [Balew's], but were simply paid to [Marilyn] as a continuation of what the then-deceased Marvin had been drawing, and that [Marilyn] had not been getting any payments for any reason prior to that time,' the cited deposition testimony actually states: 'My dad was taking out a draw of somewhere around $5,500 or $6,000 for both of them while he was alive. And basically, then she assumed—after he passed away, she assumed his salary.' " (Underscoring omitted.) The trial court expressly found that "[n]o reasonable person could interpret the cited deposition testimony as supporting the proposition that 'these sums were not employee payments for work performed' especially given the testimony on [p]age 45 of the same deposition in which Phillip [ ] testifies that Marilyn [ ] worked five days a week, every week, and received compensation based on her contribution, and given that five of the checks attached as [e]xhibits ... are expressly denoted as 'salary.' " In support of this finding, the trial court also relied on Phillip's testimony in a prior deposition, the transcripts of which were included in Marilyn's moving papers, in which Phillip unequivocally testified that between 2001 and 2004, he and Marilyn received " 'regular salaries' " as " 'compensation' " from Balew's.

FN3. Cadle has not argued that Marilyn did not act in good faith. Accordingly, we need not address that aspect of Civil Code section 3439.08.

*4 Based on Cadle's failure to establish a triable issue of fact as to whether Balew's made payments to Marilyn " 'without receiving a reasonably equivalent value in exchange [,]' " the trial court correctly ruled that Marilyn was entitled to judgment as a matter of law on the Eighth and Ninth Causes of Action alleging fraudulent conveyances.

In an effort to create a triable issue of fact, Cadle asserts that there are "material contradictions" between Phillip's testimony and Marilyn's testimony as to how many days she allegedly worked at Balew's and whether she participated in any management activities. While there do appear to be some discrepancies between Marilyn's and Phillip's testimony, this issue was not raised in Cadle's opposition to the summary adjudication motion, and so cannot be considered on appeal. ( American Continental Ins. Co. v. C & Z Timber Co. (1987) 195 Cal.App.3d 1271, 1281 [theories that were not factually presented to trial court in motion for summary judgment cannot create "triable issue" on appeal].)

Cadle also complains that Marilyn never submitted her own declaration in support of her summary adjudication motion and that the declaration submitted by her attorney was insufficient to set forth admissible evidence, as her counsel "had no personal knowledge as to the circumstances surrounding the [challenged] transfers" to Marilyn. This contention, like the others raised in this appeal, is completely without merit.

Marilyn was not required to submit a personal declaration in support of her motion. Rather, Code of Civil Procedure section 437c, subdivision (d) requires only that supporting evidence be set forth in affidavits or declarations demonstrating that the affiant or declarant is competent to testify as to the matters stated therein, and he or she has personal knowledge of the facts. That is what occurred here. Marilyn moved for summary adjudication based on Cadle's factually devoid discovery responses. ( Union Bank v. Superior Court (Demetry) (1994) 31 Cal.App.4th 573, 590.) In support of this motion, Marilyn submitted a declaration from her attorney, attaching Cadle's responses to the discovery requests that were propounded by her attorney. Marilyn's counsel merely summarized the content of certain documents and some procedural history of which he had first-hand knowledge. The declarant also averred that the documents themselves were true and correct copies of court filings and of plaintiff's discovery responses that were taken from his files and that he had personal knowledge of their authenticity. This declaration meets the requirements of Code of Civil Procedure section 437c, subdivision (d).

In a further effort to muster some evidence of fraudulent intent, Cadle refers to the Legislative Committee comment to Civil Code section 3439.04, to the effect that certain "badges of fraud" are "evidence from which an inference of fraudulent intent may be drawn ." FN4 (Legis. Com. com., 12A West's Ann. Civ.Code (1997 ed.) foll. sec. 3439.04, p. 289.) Cadle argues fraudulent intent should be inferred because of the presence of at least three "badges of fraud," i.e., the challenged transfers were to insiders, the transfers were not based on adequate consideration, and Balew's was insolvent.

FN4. "The noted indicia of fraud are: [1] Whether the transfer or obligation was to an insider; [2] whether the debtor had retained possession or control of the property transferred after the transfer; [3] whether the transfer or obligation was disclosed or concealed; [4] whether the debtor was sued or threatened with suit before the transfer was made or obligation was incurred; [5] whether the transfer was of substantially all the debtor's assets; [6] whether the debtor has absconded; [7] whether the debtor had 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 had occurred shortly before or shortly after a substantial debt was incurred; and [11] whether the debtor had transferred the essential assets of the business to a lienor who had transferred the assets to an insider of the debtor." ( Wyzard v. Goller (1994) 23 Cal.App.4th 1183, 1191, fn. 4 [citing UFTA, sec. 4, subd. (b) ] ( Wyzard ).)

*5 However, "[a]s California courts have previously reminded litigants, the Legislative Committee comments concerning 'badges of fraud' are not part of the statute. ( Lyons v. Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1021[ ]; Wyzard v. Goller [,supra,] 23 Cal.App.4th [at p.] 1191[ ].) As the court in Wyzard explained, the Uniform Fraudulent Conveyance Act, on which the Act is based, 'lists 11 such "badges" which may be considered in deciding whether there was actual intent to hinder, delay or defraud. The California statute did not enact the "badges of fraud" provision, although a legislative committee that considered the bill through which the ... Act was enacted noted them and stated that the presence of one or more of them does not create a presumption of fraud.... [Citation.]' ( Wyzard v. Goller, supra, 23 Cal.App.4th at pp. 1188–1189, 1191, fn. omitted.) Furthermore, the Legislative Committee comment in question provides that in considering the enumerated 'badges of fraud,' the 'court should evaluate all the relevant circumstances involving a challenged transfer' and 'may appropriately take into account all indicia negativing as well as those suggesting fraud....' (Legis. Com. com., 12A West's Ann. Civ.Code, supra, foll. sec. 3439.04, p. 290.)" ( Annod, supra, 100 Cal.App.4th at p. 1298.)

In the instant case, the trial court had before it not only the proffered "badges of fraud," but also evidence negating any inference of fraud. Thus, the mere existence of the purported "badges of fraud," standing alone, was insufficient to raise a triable issue of material fact. ( Wyzard, supra, 23 Cal.App.4th at p. 1190.) We discern no error in the trial court's conclusion that Cadle's inferences did not raise a triable issue of material fact. FN5

FN5. By reason of this holding, we need not address whether the trial court erred in determining that Cadle's causes of action against Marilyn also were barred by the statute of limitations.

C. Creditor's Suit

As in the trial court, Cadle fails on appeal to present any argument discussing the existence of a triable issue of fact regarding the tenth cause of action ("Creditor's Suit") against Marilyn. Indeed, the only mention of this cause of action by Cadle is in the context of the statute of limitations. Even assuming arguendo that this cause of action is timely, the issue is nevertheless forfeited on appeal due to Cadle's failure to present a cogent and reasoned argument with appropriate citations to the record discussing the existence of any triable issues of fact. ( Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 685 ["appellant must affirmatively demonstrate error through reasoned argument, citation to the appellate record, and discussion of legal authority"]; People ex rel. Dept. of Alcoholic Beverage Control v. Miller Brewing Co. (2002) 104 Cal.App.4th 1189, 1200 ["appellant must present a factual analysis and legal authority on each point made or the argument may be deemed waived"].) "We are not bound to develop appellant['s] arguments.... [Citation.] The absence of cogent legal argument or citation to authority allows this court to treat the contentions as waived. [Citations.]" ( In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830; see also Cal. Rules of Court, rule 8.204(a)(1)(B).)

D. Motion to Compel

1. Background

*6 In August 2009, Cadle noticed Marilyn's deposition for August 26, 2009, and also demanded production of various documents. Marilyn, through her counsel, objected on the following grounds: "(1) the date was not cleared in advance and [Marilyn] was unavailable; (2) 'This is the third action which [Cadle] and its counsel have filed against the elderly [Marilyn] with respect to the same alleged debt, with the first two actions dismissed by [Cadle] for failure of proof. [Cadle] has taken the deposition of [Marilyn] on two previous occasions as to the same matters alleged in the present [c]omplaint. There exists no basis for a third deposition on the same matters, and the purported noticing of the deposition can only be viewed as a further attempt to intimidate, harass, and badger [Marilyn]'; and (3) '[Marilyn] has been advised by her medical service provider that based upon her current medical condition, she is unfit to sit for deposition. This has been communicated to [Cadle] on multiple prior occasions.' "

According to the declaration of Marilyn's counsel, Cadle's counsel below and on appeal (Templeton Briggs) left a telephone message in response to Marilyn's objections, indicating that he agreed with Marilyn, adding that the " 'reasons for cancelling the deposition are perfectly legitimate[.]' " (Underscoring omitted.) However, after Marilyn filed her motion for summary adjudication, Cadle renoticed Marilyn's deposition and reasserted its demand for the production of documents. Marilyn again interposed objections, but Cadle insisted on going forward with the deposition. Thereafter, Marilyn filed a motion for a protective order; Cadle filed a motion to compel her deposition. The trial court denied both motions.

2. The Trial Court Did Not Err in Denying the Motion to Compel

Cadle argues that the trial court erred in denying its motion to compel the deposition of Marilyn. Cadle appears to suggest that the trial court should have continued the summary adjudication motion so that Cadle could take Marilyn's deposition. Cadle also argues that the trial court's simultaneous denial of Marilyn's protective order was an "unexplained contradiction" that constitutes additional grounds for reversal. Cadle, however, presents no authority for its assertions and fails to cite to the record.

"An appellant must provide an argument and legal authority to support his [or her] contentions. This burden requires more than a mere assertion that the judgment is wrong. 'Issues do not have a life of their own: If they are not raised or supported by argument or citation to authority, [they are] ... waived.' [Citation.] It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness. When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived. [Citation.]" ( Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, fn. omitted.)

*7 In any event, Cadle's motion to compel was patently defective. Code of Civil Procedure section 2025.450, subdivision (b) requires that any motion seeking to compel attendance at a deposition and production of documents must be accompanied by a meet and confer declaration, and a statement of facts showing good cause justifying the demand for production. Here, Cadle's motion was not accompanied by any declarations. Instead, Cadle purported to rely upon papers it filed in opposition to Marilyn's motion for a protective order, which papers were filed two days after its motion to compel, and which papers also did not include the requisite declarations. This alone constituted grounds to deny the motion to compel.

The fact that the trial court also denied Marilyn's motion for a protective order does not demonstrate any "contradiction" that would suggest error. Cadle was required to present its own procedurally adequate motion to compel, and it did not do so. The trial court did not err in denying the motion to compel.


The judgment and the order denying the motion to compel deposition are affirmed. Marilyn is entitled to recover her costs on appeal.

We concur: RUVOLO, P.J., and REARDON, J.

= = = = = = = A S S E T P R O T E C T I O N = = = = = = = =

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