Bagby v. Davis
| Decision Date | 22 May 2023 |
| Docket Number | 49136 |
| Parties | DOUGLAS A. BAGBY, Plaintiff-Appellant, v. JOSEPH D. DAVIS, HILARY DAVIS, Defendants-Respondents. |
| Court | Idaho Supreme Court |
Appeal from the District Court of the Seventh Judicial District of the State of Idaho, Blaine County. Ned C. Williamson District Judge.
The decision of the district court is affirmed.
Law Offices of Douglas A. Bagby, Los Angeles, CA, for Appellant pro se. Douglas A. Bagby argued.
Luboviski, Wygle, Fallowfield & Ritzau, P.A, Ketchum, for Respondent Joseph D. Davis. Stanek Law, PLLC, Hailey, for Respondent Hilary Davis. Benedon & Serlin, LLP, Woodland Hills, CA, for Respondents Joseph D. Davis and Hilary Davis. Mark Schaeffer, Pro Hac Vice, argued.
This appeal arises following a court trial in which Appellant Douglas Bagby argued that a transaction between Respondents Joseph and Hilary Davis was intended to hinder, delay, or defraud Bagby in his efforts to collect on a $5 million judgment against Joseph. The district court concluded that Bagby failed to meet his burden on several causes of action arising under California's version of the Uniform Voidable Transactions Act. Bagby appeals many of the district court's findings and conclusions. For the reasons discussed below, we affirm the district court's judgment dismissing Bagby's claims.
Bagby, a California resident, obtained a default judgment for $5,000,000 against Joseph, a former California lawyer who now resides in Florida. In this action, Bagby seeks to set aside a transaction between Joseph and Hilary in which Joseph transferred his one-half interest in real property located in Ketchum, Idaho, to Hilary. Joseph and Hilary maintain the purpose of the transaction was to settle claims that Hilary had against Joseph, while Bagby asserts the transaction was intended to hinder or delay his ability to collect on his judgment.
Joseph and Hilary were married in 1993. In 2003, the couple separated, but it was not until 2005 that Hilary filed a petition for dissolution of marriage. Bagby, a family law attorney, briefly represented Joseph in the dissolution action. The divorce proceedings continued for many years, and Joseph and Hilary remained legally married at the time of the 2021 trial in this case.
Relevant to this appeal are several claims that Joseph and Hilary asserted in the divorce action. First, Hilary asserted a claim against Joseph for $1,277,717, representing her share of attorney fees for the successful contingency fee cases that Joseph earned between the date of the parties' marriage and their separation. Joseph calculated the amount of these attorney fees by estimating time worked on each case before and after the parties' separation and apportioning the fees earned accordingly.
Hilary also asserted a claim against Joseph for attorney fees he earned during their marriage, which were converted into annuity contracts. Hilary claimed a right to half of these annuities in the divorce action, but Joseph maintained they were separate property. At trial, Joseph testified that 20% of the annuity payments were likely community property because the annuity contracts were purchased during the marriage, although the work was done prior to the marriage. This resulted in a community property allocation of $6,000 per month in fixed payments that would continue until Joseph's death. Based on Joseph's life expectancy, he estimated that Hilary's claim related to the annuity contracts totaled $600,000.
Finally, Joseph had a potential claim in the amount of $2.138 million for reimbursement under California Family Code section 2640. This claim was based on the theory that proceeds from the sale of a home owned by Joseph as separate property (the "Perugia House") could be traced to the acquisition of another property (the "Mapleton Drive Property") during Joseph's and Hilary's marriage. This claim was initially asserted during settlement negotiations between Joseph and Hilary, and the record indicates that the last mention of this claim was in April 2008. Bagby, while representing Joseph, identified "tracing issues" with this claim. These "tracing issues" stemmed from the proceeds from the sale of the Perugia House being commingled with approximately $4.8 million in income in a joint bank account.
In 2013, Bagby was seriously injured in a motorcycle accident. Bagby retained Joseph, who was a personal injury attorney, to represent Bagby in a California lawsuit to recover for his injuries. Bagby's suit was unsuccessful and Bagby perceived the lack of success as being due to Joseph's malpractice. In May 2017, Bagby sued Joseph in California for legal malpractice. Joseph failed to answer the complaint and his default was entered in August 2017. In September 2018, a default judgment in the amount of $27,146,021.41 was entered against Joseph. In February 2020, following an appeal, the default judgment was reduced to $5 million.
In 2004, after their separation but prior to their divorce, Joseph and Hilary purchased a home together in Ketchum, Idaho (the "Ketchum House"). The record shows that they each owned a one-half interest in the Ketchum House as tenants in common. Both Joseph and Hilary testified that in 2016, they discussed an agreement whereby Joseph would transfer his interest in the Ketchum House to Hilary in satisfaction of her claims against him for attorney fees he earned during their marriage. Two years later, in December 2018 (about three months after the default judgment was entered), Joseph and Hilary met in Ketchum, Idaho, where they executed a quitclaim deed and a warranty deed conveying Joseph's one-half interest in the Ketchum House to Hilary.
Joseph testified at the trial that he was looking forward to retiring, wanted to limit his exposure to expenses associated with the Ketchum House, and wanted to resolve Hilary's claim for the attorney fees earned during their marriage. Hilary, a real estate agent, valued the Ketchum House at between $2.3 and $2.4 million, which was near the $2,132,327 assessed value of the property in 2018. The Ketchum House transfer occurred approximately three months after Bagby obtained his initial default judgment against Joseph. Bagby did not record an abstract of any judgment, lien, or encumbrance based on the judgment in his legal malpractice action against the title to the Ketchum House before it was transferred to Hilary.
At the time of the Ketchum House transfer in December 2018, Joseph owned assets with an estimated value of between $5 and $10 million. Approximately $6 million in earned attorney fees were deposited into accounts at City National Bank during 2018. In June 2019, Joseph appeared for a debtor's examination in Los Angeles, California. Joseph closed his bank accounts at City National Bank about a month prior to the debtor's examination. Joseph then opened a new bank account following the debtor's examination.
Between September 2018 and June 2019, Joseph prepaid several expenses. These expenses included a year of lease payments for his office space, a year of lease payments on his automobile, and a year's worth of dues to multiple country clubs in which Joseph was a member.
In May 2019, Joseph invested $3.5 million in a Nevis Island limited liability company called, "Blue Globe Finance." Joseph testified that Blue Globe is a hedge fund. Joseph was asked whether he was aware if Blue Globe was a haven for debtors, and Joseph responded no. Joseph testified that he learned about Blue Globe at an investment seminar.
In the first half of 2020, Joseph transferred the title to a 2003 Range Rover located in Idaho to Hilary. Joseph testified that he transferred the Range Rover to Hilary because he was no longer going to be in Idaho. The value of the Range Rover was not established.
In June 2020, Joseph moved to Florida. He testified that he decided to move to Florida after Bagby's attorney told him that Bagby was going to foreclose on his California home and that Joseph should find a new place to live. Joseph then stated that he had family in Florida, and it made sense to move there for that reason. Hilary testified that Joseph told her that, by moving to Florida, the contingent fee annuities would be exempt from execution. Joseph denied having told Hilary that he would obtain an exemption from execution on the annuities by moving to Florida.
In May 2019, Bagby sued Joseph and Hilary in Idaho, asserting claims for actual and constructive fraudulent transfer under California's Uniform Voidable Transactions Act ("UVTA"). Bagby alleged that the transfer of the Ketchum House was intended to hinder, delay, or defraud Bagby in his attempt to collect on the $5 million judgment. Joseph and Hilary generally denied the allegations, and they asserted an affirmative defense under the UVTA that Hilary was a good faith purchaser for value. The affirmative defense was based on their assertion that Joseph transferred the Ketchum House to Hilary in satisfaction of her claims against him in the dissolution action for her share of attorney fees he earned prior to their separation. The parties agreed to apply California substantive law to the claims and affirmative defense. A court trial was held in the matter at which only three witnesses testified: Joseph, Hilary, and Bagby. Other than having local counsel question him when he called himself as a witness, Bagby represented himself at trial.
In its written findings and conclusions, the district court found Joseph and Hilary to be...
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