Buchanan v. Soto

• Decision Date: 06 November 2015
• Docket Number: D065652
• Citation: 194 Cal.Rptr.3d 663,241 Cal.App.4th 1353
• Court: California Court of Appeals Court of Appeals
• Parties: Diana BUCHANAN, Plaintiff and Respondent, v. Ramon SOTO, Defendant and Appellant.

241 Cal.App.4th 1353

194 Cal.Rptr.3d 663

Diana BUCHANAN, Plaintiff and Respondent,

v.Ramon SOTO, Defendant and Appellant.

D065652

Court of Appeal, Fourth District, Division 1, California.

Filed November 6, 2015

Law Offices of A. David Puzo and A. David Puzo, for Defendant and Appellant.

Law Office of David Barnier and David Barnier, for Plaintiff and Respondent.

Opinion

BENKE, J.

Defendant and appellant Ramon Soto (Ramon)¹appeals an order denying his motions to (1) vacate entry of default and default judgment pursuant to Code of Civil Procedure ² section 473and (2) quash service of summons and dismiss pursuant to section 418.10. Ramon filed the motions in connection with an action brought by plaintiff and respondent Diana Buchanan to set aside a fraudulent transfer (fraudulent conveyance action). He contends the court erred in denying his motions because, at the time of entry of default and judgment thereon, the court allegedly did not have personal jurisdiction over him and he was not properly served with process. Affirmed.

BACKGROUND

A. The Underlying Lawsuits

The factual and procedural summary relevant to the issues on appeal are derived in part from the trial court's February 14, 2013 Decision After Bench Trial (Decision), which provides in part as follows:

“Plaintiff Diana Buchanan (‘Buchanan’) claims that defendant Maria Soto (‘Maria’) transferred certain real property to her husband Ramon Soto (‘Ramon’) as a fraudulent conveyance to prevent Buchanan from executing an anticipated judgment on the property.... Buchanan eventually obtained the underlying judgment when she sued Maria for failing to pay money owed by Maria to Buchanan in connection with Maria's purchase of Buchanan's bridal business.

“Buchanan and Maria have entered into a written stipulation establishing many of the operative facts. The stipulated facts are as follows...:

“ ‘On or about January 30, 2007, Buchanan and Maria executed a written “Installment Note” agreement by which Buchanan agreed to sell assets associated with the Bridal Showcase business to Maria for the total sum of $367,761.58.’

“ ‘The terms of the Installment Note agreement provided that Maria was obligated each month to pay all accumulated interest at the annual rate of 7% per year on the Installment Note principal balance. Maria had [the] option to pay down the principal balance each month but was not required to pay down such principal balance until February 1, 2017, on which date the entire remaining principal balance and any unpaid interest were due in full.’

“ ‘Concurrent with the execution of the Installment Note agreement, Maria executed a deed of trust by which Maria pledged her property located at 109 Chesapeake Court in San Marcos, California [as] security for her payment obligations under the Installment Note agreement.’

“ ‘On July 7, 2011, Buchanan filed her Complaint within San Diego County Superior Court Case Numbe[r] 37–2011–00056053–CU–BC–NC (“The Collection Lawsuit”) against Maria, alleging that Maria had breached her obligations under the Installment Note agreement to pay minimum interest payments.’

“ ‘A long time prior, on April 25, 1994, Maria, her husband, Ramon Soto, Lidia Hernandez, and Alfonzo Hernandez purchased adjacent properties located at 355 and 365 Olive Avenue in Vista, California (“The Olive Properties”), and became co-owners on title to The Olive Properties. Between April 25, 1994 and July 29, 2011, no deeds were recorded related to The Olive Properties and The Olive Properties remained titled in the names of Maria, Ramon Soto, Lidia Hernandez, and Alfonso Hernandez.’

“ ‘On July 16, 2011, Buchanan's Complaint and related Summons in The Collection Lawsuit were personally served on Maria.’

“ ‘On July 29, 2011, Maria signed and recorded two deeds by which Maria transferred her entire ownership interest in The Olive Properties to her husband, Ramon Soto, as his separate property. These deeds were recorded with the San Diego County Recorder as Document Numbers 2011–0387163 and 2011–0387164.’

“ ‘On September 13, 2011, a default was entered against Maria within The Collection Lawsuit.’

“ ‘On September 16, 2011, a default judgment was entered in favor of Buchanan and against Maria within The Collection Lawsuit in the amount of $416,854.80.’

“ ‘Also on September 13, 2011, Buchanan filed her Complaint within the present action against Maria [and Ramon], alleging one cause of action for fraudulent transfer and seeking a court order setting aside the transfer of The Olive Properties by Maria to Ramon Soto.’

“ ‘On October 25, 2011, Maria filed a motion to set aside the default and the default judgment entered against her within The Collection Lawsuit. Maria's motion was denied after a hearing on December 9, 2011.’ ”

The record shows Buchanan in mid-November 2011 filed an application for order for publication of summons via The San Diego Union–Tribune—North County edition, seeking service of the fraudulent conveyance complaint on Ramon. Accompanying the application was a declaration filed under penalty of perjury by Buchanan (i.e., her counsel).

The declaration provides Buchanan initially attempted personally to serve Ramon with the summons and complaint at the San Marcos address where Maria resided. Maria subsequently contacted Buchanan and claimed that Ramon did not reside at the San Marcos address; that he was deported to Mexico as a result of criminal charges; that Maria believed he used to live at a certain address in Tijuana, which Maria provided to Buchanan; and that the only information Maria then had regarding his then-current whereabouts was “that he was living ‘in the rural Mexicali area.’ ” Buchanan thus contended she had made a diligent effort to serve Ramon at his “(apparently) former United States address” and “diligently investigated” his current whereabouts, including by asking Maria, “who would figure to have the most information regarding” her husband and his whereabouts.

The court subsequently granted the application for service on Ramon by publication of the summons and complaint in the fraudulent conveyance action. Service by publication was effected on December 1, 8, 15 and 22, 2011. Entry of default against Ramon occurred on March 13, 2012.

In January 2013, the court conducted a two-day bench trial. The court in its Decision rejected Maria's “main defense” that the fraudulent conveyance action against her could not continue because Ramon was an indispensible party to that action and service of the summons and complaint on him was improper. The court found that Ramon was in fact a party to the fraudulent conveyance action, as he was a named defendant.

The court also found that it was reasonable to infer, and the court in fact inferred, that Ramon had “actual knowledge” of the pendency of the fraudulent conveyance action because “he has telephone contact with Maria, and Maria acknowledges discussing The Olive Properties with Ramon by telephone”; and that, although Maria did not have standing to contest validity of the service on Ramon, such service was in any event valid because “Ramon has been properly served by publication in accordance with applicable statutory and appellate authority.”

In finding Ramon was properly served by publication, the court in its Decision also found that Ramon's address was then unknown despite Buchanan's reasonable efforts to obtain his address; that Buchanan initially sought to serve Ramon personally at the San Marcos residence that Buchanan reasonably believed was the “marital residence” of Ramon and Maria; that Buchanan did not know Ramon had been deported to Mexico after serving a prison sentence in the United States; that after learning Ramon was living in Mexico, Buchanan asked Maria and Maria's counsel for his address so service could be effectuated in Mexico; that neither Maria nor her counsel could provide an address where Ramon was then living; that Ramon was then residing “at an unknown address in the Mexicali area”; and that Maria reiterated while under oath at trial that she was unable to provide a current address for Ramon.

The court noted it was “skeptical” of Maria's testimony on this subject matter, stating: “The court believes, from the totality of the evidence and Maria's demeanor while testifying, that she has, or could easily obtain, Ramon's current address but she does not wish to provide that information to Buchanan. The Court also believes, based on Maria's testimony, that Ramon has actual knowledge of this case through his telephone communications with Maria, and that Ramon has consciously chosen not to participate directly in this case.”

Reaching the merits of the fraudulent conveyance action, the court ruled in favor of Buchanan. The court found Buchanan satisfied her burden to show Maria's transfer to Ramon of her ownership interests in the Olive Properties was a fraudulent transfer within the meaning of Civil Code section 3439.04. The court further found that “Maria made the transfer with actual intent to hinder, delay, or defraud Buchanan”; that “Maria made the transfer without receiving a reasonably equivalent value in exchange for the transfer”; that when Maria made the transfer, she believed and/or reasonably should have believed “she had or would incur debts beyond her ability to pay as they became due”; that Maria transferred her interest in the Olive Properties “within a matter of days after being sued by Buchanan in the underlying collection lawsuit”; and that Maria's testimony she transferred the Olive Properties to Ramon as part of a pre-existing arrangement, whereby Maria received certain properties in Mexico in exchange for the transfer of the Olive Properties, was “not credible.”

B. Ramon's Motions to Vacate Judgment/Quash Service of Summons and Complaint

In early December 2013, several months after the court issued its Decision, Ramon filed his motions to vacate entry of default and default judgment and to quash service of summons and complaint. In both motions, Ramon contended that the...