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 Post subject: El Saad: Conspiracy To Commit Fraudulent Transfer
PostPosted: Wed Nov 30, 2011 6:28 am 
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El Saad v. Tarakji, 2011 WL 5910059 (Cal.App. 4 Dist., Unpublished, Nov. 28, 2011).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California Rules of Court, rule 8.1115, restricts citation of unpublished opinions in California courts.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, Fourth District, Division 3, California.

Haitham EL SAAD et al., Plaintiffs and Respondents,

v.

Mike TARAKJI et al., Defendants and Appellants.

No. G044716.

(Super.Ct.No. 30–2009–00121128).

Nov. 28, 2011.

Appeal from a judgment of the Superior Court of Orange County, John C. Gastelum, Judge. Affirmed.

Jason Dilday for Defendants and Appellants.

Wellman & Warren, Scott W. Wellman and Derek Banducci, for Plaintiffs and Respondents.

OPINION

BEDSWORTH, Acting P.J.

*1 After a court trial, appellants Mike Tarakji, Ernest Tarakji, Manal Tarakji, Omar Salahieh, Platinum Touch Entertainment, LLC, and United Telecom & Technologies, Inc., were found liable to Haithem El Saad and Callcom, Inc. (collectively Callcom), based upon their participation in a conspiracy to fraudulently transfer the assets of West Coast Distribution, Inc., (hereafter West Coast) with the intention to hinder, delay or defraud its creditors.

Appellants argue the evidence was insufficient to support several of the court's findings in support of the judgment, including its finding that West Coast's assets were transferred to Platinum Touch; that any party had the intention to hinder, delay or defraud West Coast's creditors; and that Callcom's interest as a creditor of West Coast was harmed by the alleged transfer. Appellants also contend the court failed to provide a sufficient basis for imposing conspiracy liability on them, and that the court arbitrarily rejected the testimony which supported their position.

We affirm the judgment. The trial court provided the parties with a lengthy and detailed statement of decision, which explained both the court's assessment of the evidence and its application of the governing law. Although the statement purports to identify only seven material facts,—which, taken together, simply establish a timeline of events—the statement is rife with additional factual determinations, both express and implied. And on appeal, we are required to draw all reasonable inferences which can be gleaned from the evidence in favor of the court's decision. Appellants have largely ignored that rule in their opening brief, choosing instead to quibble with minor facts mentioned in the court's statement of decision, and to reargue—in isolation—the aspects of the evidence which they believe support their own position. That approach to challenging the sufficiency of the judgment is doomed to fail on appeal.

Appellants' challenge to the court's imposition of conspiracy liability is similarly flawed. Again, appellants ask us to focus on specific details of the court's decision, without acknowledging the broader picture or the obvious inferences to be drawn from their course of conduct. Moreover, appellants' specific complaints about the sufficiency of the court's findings are unpersuasive, to say the least.

Finally, the court was free to disbelieve the witnesses who testified to the innocence of appellants' conduct because that claim of innocence was contradicted by obvious and fairly compelling inferences deducible from the evidence before it. We certainly cannot say the court erred in doing so.

FACTS

On February 5, 2009, Callcom obtained a jury verdict for fraud against West Coast, a distributor of telephone calling cards, in the sum of $3,992,218.48. Eight days later, on February 13, 2009, appellant Platinum Touch Entertainment, LLC, was formed, with Salahieh as its principal.

On February 24, 2009, judgment was entered in favor of Callcom in the fraud case, and Callcom quickly served notice of a motion for assignment of West Coast's accounts receivable in partial satisfaction of its judgment.

*2 On March 6, 2009, three days after Callcom filed its motion for assignment, West Coast transferred all its assets to Alternative Bankruptcy Concepts, Inc. (hereafter ABC), in exchange for $1, in what was characterized as a "general assignment for the benefit of creditors." FN1 ABC agreed to act as the assignee on behalf of West Coast's creditors in exchange for a fee of $20,000.

FN1. As explained in Credit Managers Assn. v. National Independent Business Alliance (1984) 162 Cal.App.3d 1166, 1169: "An assignment for [the] benefit of creditors is a business liquidation device available to an insolvent debtor as an alternative to formal bankruptcy proceedings." The assignee in a "general assignment for benefit of creditors" essentially stands in the shoes of a bankruptcy trustee.

Three days after that—on March 9, 2009—and without any party giving notice to Callcom, Alternative Bankruptcy Concepts sold West Coast's assets to Platinum Touch for $20,000 in cash—the exact amount of ABC's fee, which ABC retained. Thus, the net amount ultimately generated by the "general assignment" scheme, which disposed of the entirety of West Coast's assets, was $1. However, as part of the second transaction, between ABC and Platinum Touch, the latter also agreed to assume liability for a purported "secured lien" in the amount of $4.7 million, against the assets of West Coast.

On March 16, 2009, a week after Platinum Touch became the owner of West Coast's assets, Callcom filed its complaint alleging that appellants had wrongfully conspired to transfer West Coast's assets in an effort to hinder, delay or defraud its creditors.

Appellants Mike Tarakji and Ernest Tarakji are principals and shareholders of West Coast, and their sister, appellant Manal Tarakji, is also a shareholder. Each of them signed a written consent to the general assignment of West Coast's assets to ABC, after it had already been agreed Platinum Touch would purchase the entirety of those assets from ABC. After ABC sold the West Coast assets to Platinum Touch, Mike and Ernest Tarakji signed consulting agreements with Platinum Touch.

Appellant Salahieh, the owner of appellant Platinum Touch, is also a former employee of West Coast, and the brother-in-law of Stephan Tarakji. Stephan Tarakji is, in turn, a former shareholder of West Coast, the head of its accounting team, and the brother of appellants Mike, Ernest, and Manal Tarakji. FN2

FN2. Stephan Tarakji agreed to sell his 25 percent interest in West Coast in December of 2008, for $230,000.

United Telecom & Technologies, Inc., is the company which was the telecommunications carrier for West Coast's calling cards. United Telecom had an FCC license, and maintained the direct relationship with wholesale suppliers including a company known as NetIP—the holder of the purported $4.7 million secured lien against West Coast's assets. The UCC financing statement offered as evidence of the lien against West Coast's assets identifies the debtor as "West Coast Distribution, Inc., dba United Telecom and Technologies, Inc.," even though the two are separate companies, and West Coast never did business under United Telecom's name.

At trial, Callcom argued that the events and circumstances outlined above, which are undisputed, evidenced a conspiracy to hinder and defraud West Coast's creditors (and specifically Callcom), by arranging to transfer its assets for essentially no consideration to a new entity (Platinum Touch) which then contracted with West Coast's former owners and principals to reassume control of the business. Callcom offered evidence that West Coast's business had a value significantly in excess of the $20,000 paid by Platinum Touch, and it challenged the validity of the purported $4.7 million secured lien. Specifically, Callcom argued there was no actual evidence supporting the assertion that the lien amount was $4 .7 million—the UCC filing which allegedly perfected the lien stated no amount—and no evidence of any underlying agreement between West Coast and NetIP which might have supported the creation or existence of such a significant debt owed by West Coast.

*3 Appellants asserted their actions were entirely innocent, that the decision to make a general assignment of West Coast's assets for the benefit of its creditors was simply a function of the business' decline, and represented a better option than a liquidation of the company's assets in a bankruptcy proceeding. They argued the company had no net value, given the existence of the $4.7 million secured lien, and thus none of West Coast's unsecured creditors (such a Callcom) could have been harmed by the transfer of its assets.

The trial court ruled in favor of Callcom, and explained, in a lengthy and detailed statement of decision, its evaluation of the evidence and its application of the law. The court explained, among other things, that it viewed appellants' version of events as lacking in credibility, and it specifically singled out the testimony offered by appellants Ernest Tarakji and Omar Salaheih, as well as that of the attorney/owner of ABC (who devised the scheme to dispose of West Coast's assets and helped to carry it out) as "not credible, to say the least."

I

Our record in this case is something less than spare. It does not include a copy of the complaint. However, both sides seem to agree that appellants' liability was based upon a conspiracy to violate the Uniform Fraudulent Transfer Act (UFTA) (Civ.Code, secs. 3439, et seq.) "A fraudulent conveyance under the 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.' " ( Kirkeby v. Superior Court (2004) 33 Cal .4th 642, 648.) 'A transfer made ... by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made, if the debtor made the transfer as follows: [para.] (1) With actual intent to hinder, delay, or defraud any creditor of the debtor.' ( [Civ.Code,] sec. 3439.04, subd. (a).)" ( Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829.)

Civil Code section 3439.04 states that in determining whether a defendant had "actual intent to hinder, delay, or defraud" a creditor, "consideration may be given, among other factors, to any or all of the following: [para.] ... [para.] (3) Whether the transfer or obligation was disclosed or concealed. [para.] (4) Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit. [para.] (5) Whether the transfer was of substantially all the debtor's assets. [para.] ... [para.] (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. [para.] (9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred [and] (10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred."

Moreover, Civil Code section 3439.05 states: "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 ... became insolvent as a result of the transfer or obligation." (Italics added.)

II

*4 Appellants' primary contention on appeal is that the evidence is insufficient to support a determination in Callcom's favor on three of the five findings the court made in determining their liability for fraudulent transfer. Specifically, appellants claim there is insufficient evidence to support the court's determinations that (1) West Coast transferred any assets to Platinum Touch; (2) the assets were transferred with actual intent to hinder, delay or defraud West Coast's creditors; and (3) Callcom was harmed by that transfer.

The primary problem with this attack on the sufficiency of the evidence is that it has been launched without acknowledging the heavy burden imposed on an appellant who does so.

"An appellate court " 'must presume that the record contains evidence to support every finding of fact....' " ( In re Marriage of Fink (1979) 25 Cal.3d 877, 887, italics added; see Brown v. World Church (1969) 272 Cal.App.2d 684, 690, [" 'a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact' "].) It is the appellant's burden, not the court's, to identify and establish deficiencies in the evidence. ( Brown v. World Church, supra, 272 Cal.App.2d 684, 690.) This burden is a 'daunting' one. ( In re Marriage of Higinbotham (1988) 203 Cal.App.3d 322, 328–329.) 'A party who challenges the sufficiency of the evidence to support a particular finding must summarize the evidence on that point, favorable and unfavorable, and show how and why it is insufficient . [Citation.]' ( Roemer v. Pappas (1988) 203 Cal.App.3d 201, 208, italics added.) '[W]hen an appellant urges the insufficiency of the evidence to support the findings it is his duty to set forth a fair and adequate statement of the evidence which is claimed to be insufficient. He cannot shift this burden onto respondent, nor is a reviewing court required to undertake an independent examination of the record when appellant has shirked his responsibility in this respect.' ( Hickson v. Thielman (1956) 147 Cal.App.2d 11, 14–15.)" ( Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 409.)

Moreover, "[i]t is the duty of the appellant to present an adequate record to the court from which prejudicial error is shown. ( Null v. City of Los Angeles (1988) 206 Cal.App.3d 1528, 1533.)" ( Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 865.) In the case of an attack on the sufficiency of the evidence, that record must include the entirety of the evidence admitted a trial. We cannot conclude the evidence admitted was insufficient to support some necessary finding unless the entirety of that evidence is before us.

Appellants in this case have failed to satisfy either their obligation to summarize and analyze all of the available evidence pertaining to the issues they raise, or their obligation to provide a complete evidentiary record. Specifically, we have not been provided with the exhibits admitted into evidence at trial, and thus we are in no position to reach any conclusions about the sufficiency of the evidence before the trial court.

*5 But even if we were to assume the trial exhibits add nothing significant to the trial record, that assumption would not be enough to save appellants here, because their presentation of the testimonial evidence admitted at trial is quite one-sided, and thus amounts to nothing more than an effort to establish that the court could have ruled in their favor on the evidence presented, had it been persuaded to do so.

But that's not the test. Having failed to demonstrate that the evidence as a whole is actually insufficient to support the judgment rendered, appellants cannot prevail on their evidentiary claim.

Nor can appellants prevail by simply challenging details included in the court's statement of decision, which is essentially what they have done here. For example, appellants challenge the court's determination that West Coast transferred property to Platinum Touch, claiming that the evidence establishes only that West Coast made a "general assignment for benefit of creditors" to ABC, and pointing out that such an assignment is a legally sanctioned alternative to a liquidation of assets in bankruptcy. In making that assertion, appellants seem to be implying that merely because West Coast disposed of its assets in a presumptively legitimate way, no inference of wrongdoing can be drawn, and they cannot be held responsible for what happened to the assets after that. The assertion is disingenuous at best.

According to the facts stated in appellants' own opening brief, the decision to make the general assignment came only after the attorney/principal of ABC informed West Coast's officers that such an assignment would be possible only if NetIP, the purported beneficiary of West Coast's secured lien, consented to the transaction. NetIP, in turn, stated it would do so only if West Coast located a suitable buyer for the assets—i.e., Platinum Touch.

So it was only after all parties had agreed that West Coast's assets would ultimately be transferred, intact, to Platinum Touch, that West Coast secured the consent of its majority shareholders (Mike, Ernest and Manal Tarakji) to the general assignment, and the transfer of the assets to ABC was accomplished. The pre-existing agreement that ABC would transfer West Coast's assets to Platinum Touch is obviously why that second transaction was able to be completed in only a few days.

The obvious inference to be drawn from these facts is that it was at all times understood that ABC would simply be acting as the middle-man for a transfer of assets from West Coast to Platinum Touch. Further, although a "general assignment for benefit of creditors" is a business liquidation procedure ( Credit Managers Assn. v. National Independent Business Alliance, supra, 162 Cal.App.3d at p. 1169), and it requires that certain procedures be adhered to for the protection of the creditors, this case involved neither liquidation of West Coast's business nor adherence to those procedures.FN3 Indeed, it seems pretty clear that the general assignment procedure utilized in this case, which resulted in the complete disposition of West Coast's assets to a pre-arranged buyer within a mere three days, was nothing more than a smokescreen for the pre-arranged sale of an existing business. These circumstances are more than sufficient to support the inference that the real transfer of assets in this case was between West Coast and Platinum Touch.FN4

FN3. Specifically, Code of Civil Procedure section 1802 requires that "(a) [i]n any general assignment for the benefit of creditors, as defined in Section 493.010, the assignee shall, within 30 days after the assignment has been accepted in writing, give written notice of the assignment to the assignor's creditors, equityholders, and other parties in interest as set forth on the list provided by the assignor pursuant to subdivision (c) .... [para.] (b) In the notice given ..., the assignee shall establish a date by which creditors must file their claims to be able to share in the distribution of proceeds of the liquidation of the assignor's assets . That date shall be not less than 150 days and not greater than 180 days after the date of the first giving of the written notice to creditors and parties in interest." (Italics added.)

Clearly, Civil Code section 1802 is designed to ensure that the assignee gives notice to all identified creditors before proceeding with the disposition of the debtor's property. Moreover, Civil Code section 1802 makes it clear that the distribution of the proceeds of the debtor's property cannot happen for at least 150 days after the creditors have been notified. Moreover, like the trustee in a bankruptcy case, the assignee has a duty to "marshal and protect the assets of [the assignor], which may include filing and defending lawsuits." ( Sherwood Partners, Inc. v. EOP–Marina Business Center, L.L.C. (2007) 153 Cal.App.4th 977, 983.) In other words, the assignee for the benefit of creditors is obligated to follow formal procedures, and consider the interests and claims of all creditors before disposing of the debtor's property. Clearly, this means the assignee cannot simply make a deal in advance of the general assignment, to dispose of the debtor's property to a designated third party—even if that third party were chosen by the debtor's primary creditor—without providing notice to anyone else, as occurred in this case.

FN4. Appellants challenge the trial court's description of the asset transfer as either a "straw man" transaction, with ABC playing the role of the straw man, or as two separate fraudulent transactions. Appellants claim the court could not draw such a conclusion because "there was not even the suggestion of fraud on the part of [ABC] during the trial." We disagree. Even assuming nobody made that charge explicitly during the trial that does not mean the suggestion was not there. The inference that ABC was in cahoots with appellants to accomplish a fraudulent transfer designed to hinder Callcom's collection of its judgment is nearly unavoidable. It is practically inconceivable that an actual assignee for the benefit of creditors would agree, in advance of the assignment, to transfer the entirety of a debtor's assets to a third party—for nominal consideration—without ever notifying those creditors or giving them an opportunity to question the debtor's own negative characterization of its net value, or its chosen buyer. But if appellants are to be believed, that's exactly what ABC agreed to do here.

*6 Appellants also challenge the court's determination that the transfer of West Coast's assets was accomplished with actual intent to hinder, delay or defraud West Coast's creditors. And again, we are unpersuaded by their challenge. In essence, appellants are simply arguing that the inferences drawn by the trial court from the evidence presented were not the most compelling of the available options, and thus the court should not have drawn them. But if the inferences drawn by the court were reasonable—and in this case they certainly were—it does appellants no good to argue that alternative inferences were also available.

In any event, we could not agree that appellants' version of events is the most plausible one. Sure, it's possible that the plan to dispose of West Coast's assets immediately following the entry of the fraud judgment in favor of Callcom was an innocent quirk of timing. It's also possible that appellants had no concern about Callcom's mere notice of motion for an assignment of West Coast's accounts receivable, since, as appellants put it, that notice did nothing more than announce "a future hearing that may or may not have meant anything." But those possibilities seem fairly remote and implausible. Moreover, even if West Coast had not actually received that notice of motion (which it points out was served by mail ) prior to the execution of its general assignment of assets, it makes little difference. A fraud judgment had been entered against West Coast, and any reasonable party in that position would have had ample reason to anticipate a prompt effort by plaintiff to secure payment. West Coast must have understood that its assets were subject to imminent attack by Callcom.

Similarly, the fact that Mike and Ernest Tarakji, the former principals of West Coast, quickly secured consulting agreements with Platinum Touch—the ultimate purchaser of West Coast's assets following its general assignment—also suggests that the suspiciously timed asset transfers had been crafted as a ruse to shield West Coast's assets from Callcom, while allowing its business to be continued under a new name. Again, it's possible this was innocent, since as appellants point out, "hiring consultants to assist with the transition of a newly purchased company seems, without more, like a sensible decision...." But of course, in this case there was more. Much more. And in fact, appellants' own reference to Platinum Touch as a " newly purchased company " is telling. Even they have a difficult time avoiding the implication that Platinum Touch was really just a renamed version of West Coast—albeit one which had shed its troubling fraud liability to Callcom. The fact the trial court was not inclined to undertake the mental gyrations necessary to avoid that conclusion is of no avail to them.

And, of course, there was no error in the court's reliance on West Coast's failure to disclose the general assignment scheme to Callcom until after it happened, as a factor supporting the determination that the transfer was intended to hinder, delay or defraud creditors. The failure of a debtor to disclose a transfer of assets to creditors is explicitly identified by statute as one of the indicia of such an intent. (Civ.Code, sec. 3439.04, subd. (b)(3).) Further, the fact that West Coast entered into the general assignment scheme with the explicit understanding that ABC would immediately transfer the entirety of its assets to Platinum Touch, and without first notifying West Coast's creditors as required by Civil Code section 1802, can be relied upon as the basis of inferring West Coast actually intended to deny Callcom a notice required by law to be given before disposition of West Coast's assets.

*7 For all of these reasons, we conclude the court did not err in determining that the transfer of West Coast's assets was accomplished with the actual intent to hinder, delay or defraud its creditors.FN5

FN5. Appellants' last assertion on this point, that the trial court also improperly determined the value paid for West Coast's assets was "not reasonably commensurate with their value," is equally unpersuasive. Appellants' contention rests upon the assumption that West Coast was insolvent prior to the transfer, due to the existence of the purported $4.7 million lien against its assets. But the trial court found that lien to be unsupported by evidence of any underlying debt, and as we explain, ante, that finding was proper.

Finally, appellants' attack on the sufficiency of the evidence to support the finding that Callcom was injured by the transfer of West Coast's assets also fails. Appellants' argument focuses on a single sentence in the court's statement of decision—which appellants claim mischaracterizes an expert's testimony regarding the value of West Coast at the time of the transfer—while failing to acknowledge the significant additional evidence, from multiple sources, suggesting that West Coast actually did have a significant positive net worth at that time.FN6 The omission is troubling, since the court explicitly relies upon some of that additional evidence in the portion of its statement of decision where it analyzes the injury element of Callcom's cause of action. Appellants' briefing should have acknowledged that evidence.

FN6. What appellants complain about is that Callcom's expert had testified the value of West Coast, based solely on the volume of calling cards it was selling on a monthly basis, was between $4 and $5 million in 2008. However, in March of 2009, when West Coast transferred its assets to ABC, he explained that the volume of calling card sales had been significantly reduced, so that application of the same formula suggested the value of the company—based solely on its volume of calling card sales—was $800,000 to $1 million dollars at that point. The expert also noted, however, that West Coast had other assets besides its calling card sales, including ownership of an expensive software program.

In its statement of decision, the trial court at one point characterized Callcom's expert as having testified that the value of West Coast's assets was $4 million "at the date of assignment,"—making it seem as though the court may have conflated West Coast's value in 2008 with its value at the time the assets were transferred in early 2009. It is this single sentence appellants focus so much attention on. But in doing so, they ignore another part of the statement of decision, in which the court correctly notes the expert "valued [West Coast's] brands (as of March 9, 2009) at some $800,000 to $1 million," while also noting the company also owned other assets, including proprietary accounting software.

Since it is beyond dispute that the court did not intend to rely solely on the testimony of Callcom's expert in reaching its conclusion about whether Callcom had been injured by West Coast's fraudulent transfer, and there is other evidence in the record to support that conclusion, we would be obligated to uphold it even if we believed the court had misrecollected that one piece of evidence. "Where findings of fact are challenged on a civil appeal, we are bound by the 'elementary, but often overlooked principle of law, that ... the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted,' to support the findings below. [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court. [Citations.]" ( Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.)

The only other objection appellants raise about the injury element of Callcom's claim is their assertion that the court somehow overstepped its bounds by concluding the purported NetIP lien—which appellants relied upon to establish that whatever assets West Coast had were unavailable to satisfy any debt owed to Callcom—was not supported by credible evidence. According to appellants, the validity of that lien was "uncontroverted during the trial," and thus the court could not find adversely to them on the point. Appellants' factual premise is simply wrong.

Callcom explicitly argued at trial—at some length—that the $4.7 million lien claimed by appellants was pure fiction. This is how Callcom's counsel summed it up to the court in closing argument: "And you've also heard from the defense a conclusory statement about the value of a supposed lien. The number $4.7 million keeps coming up.... [But] there's nothing other than the self-serving testimony and statements by the Tarakjis to support the $4.7 million number. [para.] It's important to focus on what is not in evidence here. There is no agreement between [West Coast] and Network I.P. If there was really $4.7 million owed, surely there would have been a written agreement, or at least they would have put on some invoices.... [para.] Now, obviously, the witnesses have referred to the UCC financing statement, which the witnesses have testified is for [West Coast] doing business as UT & T, United Telecom and Technologies, Inc. But the mere fact that somebody files a UCC does not create a debt. It just puts the world on notice that somebody is claiming a security interest in certain personal property. [para.] Mere notice is not enough here. They need to prove that there actually was a debt owed if they're going to rely on that." In light of this extensive discourse, we conclude the validity of the claimed NetIP lien was thoroughly controverted at trial.

*8 Further, it makes no difference that Callcom's own witnesses "testified to the existence of the lien." A party is certainly not bound by the testimony given by every witness it calls to the stand at trial. If that were true, no party would ever compel an adverse witness to testify. More important, none of the testimony cited by appellants—which came from the attorney/principal of ABC (subpoenaed by Callcom to testify about the circumstances surrounding the general assignment and subsequent sale of West Coast's assets) and from Callcom's expert witness—suggested any claim to first-hand knowledge about the validity of the lien or of the underlying debt. Stated simply, nothing in the testimony of Callcom's witnesses bound it to any concession about the validity of the purported NetIP lien.

Finally, there is no merit to appellants' suggestion the court improperly shifted the burden to them to establish the validity of the NetIP lien. According to appellants, since Callcom had the burden of proving injury—i.e., that absent the fraudulent transfer, West Coast would have had assets available to satisfy its judgment—that burden included the obligation to affirmatively establish the non-validity of the purported lien which negated the value of West Coast's assets. Thus, appellants believe that any lack of evidence bearing on the point—including a lack of evidence "document[ing] the existence of the underlying debt"—must result in a win for them.

We cannot agree. Callcom made a prima facie case demonstrating injury from the fraudulent transfer simply by offering evidence that, prior to the general assignment, West Coast had assets which were presumptively available to satisfy the claims of its creditors. It is the transfer of those assets beyond the creditors' reach which is the essence of the cause of action. Once Callcom made that showing, then appellants were free to offer whatever evidence they might have to demonstrate why the transferred assets were actually of no value to West Coast's creditors. That's where the evidence of a prior lien comes in. If that $4.7 million lien were valid, and secured by West Coast's assets, it would negate the first $4.7 million worth of those assets as a basis for a fraudulent transfer claim. (Civ.Code, sec. 3431.01, subd. (a)(1).) So if appellants had more credible, or more complete, evidence establishing the validity of the claimed NetIP lien, as they suggest in their brief they did, they should have offered that evidence at trial.

We find no error in the trial court's determination that Callcom was injured by the fraudulent transfer of West Coast's assets.

III

Appellants next assert the court's findings were insufficient to justify the imposition of consipiracy liabililty.FN7 We find the claim unpersuasive for two reasons.

FN7. " '[T]he basis of a civil conspiracy is the formation of a group of two or more persons who have agreed to a common plan or design to commit a tortious act.' [Citations.] The conspiring defendants must also have actual knowledge that a tort is planned and concur in the tortious scheme with knowledge of its unlawful purpose. [Citations.] [para.] However, actual knowledge of the planned tort, without more, is insufficient to serve as the basis for a conspiracy claim. Knowledge of the planned tort must be combined with intent to aid in its commission." ( Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1582.) Knowledge and intent " 'may be inferred from the nature of the acts done, the relation of the parties, the interest of the alleged conspirators, and other circumstances.' " (Ibid.) " 'The major significance of a conspiracy cause of action "lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong ... regardless of the degree of his activity. [Citations.]' " ... Each member of the conspiracy becomes liable for all acts done by others pursuant to the conspiracy, and for all damages caused thereby." ( Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823, fn. omitted.)

First, as a true challenge to the sufficiency of the findings, the claim is waived. It is well-settled that any deficiencies in the findings contained in a statement of decision must be brought to the attention of the trial court, or be waived. (Code Civ. Proc., sec. 634; In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133–1134.) Here, appellants' objection to the trial court's proposed statement of decision contained no assertion that its findings were insufficient to support conspiracy liability. Instead, appellants acknowledged they were challenging "the questionable inferences relied upon by the court ... [which were] also relevant to the conspiracy claim," and then challenging the sufficiency of the evidence to establish that either Manal Tarakji or United Telecom were participants in the conspiracy. Because appellants did not challenge the sufficiency of the court's findings in support of conspiracy liability below, we will not address that contention on appeal.

*9 Second, if we consider this argument as a challenge to the sufficiency of the evidence to support conspiracy liability against appellants generally, which is what it appears to be, we must again point out that appellants have not troubled themselves with the heavy burden imposed upon a party making such a claim. Without bothering to acknowledge the rather staggering mound of circumstantial evidence suggesting a group effort to shed West Coast's liability to Callcom, not to mention the negative inferences which are practically leaping off that mound, appellants simply focus on arguing it is possible to conclude their actions were innocent, and then assert that "conspiracies cannot be established by suspicions."

However, a defendant's knowledge and intent can be " ' " 'inferred from the nature of the acts done, the relation of the parties, the interest of the alleged conspirators, and other circumstances.' " ' " ( Wyatt v. Union Mortgage Co. (1999) 24 Cal.3d 773, 785, quoting Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 316.) We have no difficulty concluding the circumstances were more than sufficient to support those inferences in this case. We will not belabor the point.

With respect to the conspiracy liability of Manal Tarakji and United Telecom specifically, appellants have failed to make any effort to summarize the totality of the evidence pertaining to those issues, or to explain why that evidence is insufficient, as a matter of law, to support the determination that either participated in the conspiracy. "A party who challenges the sufficiency of the evidence to support a particular finding must summarize the evidence on that point, favorable and unfavorable, and show how and why it is insufficient." ( Roemer v. Pappas (1988) 203 Cal.App.3d 201, 208, italics added.) Consequently, the claim of insufficiency of the evidence pertaining to those appellants specifically is waived.

But in any event, we have no trouble locating evidence sufficient to support the inference that both Manal Tarakji and United Telecom were participants in the conspiracy. Manal was a 25 percent owner of West Coast, which was valued at between $4 million and $5 million in 2008, and yet she signed a written consent to the general assignment scheme in March of 2009, by which West Coast would transfer its assets to ABC for $1, after which ABC would immediately transfer those assets to a third party—Platinum Touch—to continue running the business as a going concern. This occurred only three months after Manal's brother, Stephan, sold his 25 percent interest in West Coast for the agreed price of $235,000. No owner of such an apparently valuable business would agree to essentially give it away unless (a) she believed doing so was the only effective way to avoid the business' significant liability to a third party—in other words, that Manal did so in this case as a participant in the alleged conspiracy; or (b) she had been persuaded that the company had suddenly lost its entire value for other reasons. Appellants point to no evidence of the latter.

*10 As for United Telecom, the evidence suggested it conspired in the attempt to utilize its own debtor-creditor relationship with NetIP, as the basis for attempting to create a secured lien against West Coast's assets, by filing a UCC statement claiming the debtor was "West Coast Distribution, Inc., dba United TeleCom and Technologies." That purported lien was then relied upon for the assertion that West Coast had no assets available to pay Callcom's judgment. That inference was sufficient to support United Telecom's inclusion in the conspiracy.

In light of the foregoing, we find no error in either the court's findings in favor of conspiracy liability, or its inclusion of Manal Tarakji and United Telecom among the conspirators.

IV

Appellants' final contention is that the court erred by arbitrarily rejecting the testimony of those witnesses whose testimony favored appellants' preferred interpretation of what occurred in this case. Appellants claim that "[u]nless impeached or contradicted by other testimony or by an inference deducible from the facts proved, or unless it is inherently improbable, the court must accept [testimony] as true."

However, to state the argument is to demonstrate why it is of no assistance to appellants here. Stated simply, appellants' version of events was thoroughly impeached and contradicted by inferences deducible from the facts proved. Indeed, the sequence of events here fairly shouted fraudulent conveyance. And while we could not say that appellants' version of the facts was incredible as a matter of law, we can say that the obvious inferences to be drawn from the proven facts in this case weighed strongly against them. Under these circumstances, the court certainly did not err by concluding their version of events was not credible.

DISPOSITION

The judgment is affirmed. Callcom is to recover its costs on appeal.

WE CONCUR: O'LEARY and FYBEL, JJ.

= = = = = = = = J U D G M E N T E N F O R C E M E N T = = = = = = = =

Posted by Jay D. Adkisson of Riser Adkisson LLP http://www.risad.com and the publisher of http://www.calejl.com the most comprehensive free online resource regarding judgment enforcement and judgment collection in California.

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