Mejia v. Reed
| Decision Date | 29 March 2002 |
| Docket Number | No. H020771.,H020771. |
| Citation | 118 Cal.Rptr.2d 415,97 Cal.App.4th 277 |
| Parties | Rhina MEJIA, Plaintiff and Appellant, v. Danilo REED, et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
John H. Blake, San Jose, Hannig Law Firm LLP, for Plaintiff and Appellant.
Gary L. Olimpia, Helen E. Williams, San Jose, Olimpia, Whelan & Lively, for Defendants and Respondents.
In this appeal, we are called upon to decide whether a marital property division may be subject to fraudulent transfer law. Resolving that issue requires us to harmonize two independent statutory schemes, one that governs fraudulent transfers and another that controls property division on divorce.
After analyzing the relevant statutes and reviewing other persuasive authority, we conclude that a divorcing couple's property division may constitute a fraudulent transfer. In reaching that conclusion, we respectfully disagree with our colleagues in the Fourth District.1
We also determine that there are material fact questions concerning application of the governing statute in this case. We therefore reverse the trial court's grant of summary judgment.
Danilo Reed (Husband) and Violeta Reed (Wife), defendants below and respondents here, were married in 1970.
In 1994, Husband had an extramarital sexual relationship with appellant Rhina Mejia (Plaintiff). Plaintiff became pregnant as a result of that liaison. In August 1994, Plaintiff brought an action to establish Husband's paternity of the child that she was carrying. Plaintiff gave birth to a daughter in February 1995. Husband's paternity of the child was later established through genetic testing.
Thereafter, Husband was ordered to pay child support of $750 per month. On Plaintiffs motion, the court later increased child support retroactively to $1,153 per month.2 As a result of the retroactivity of the modification, Husband owed a support arrearage, which he paid in installments over time pursuant to an agreement with Plaintiff. Since then, Husband has remained current in his monthly child support obligation.
In May 1995—less than a month after Husband was first ordered to pay child support—Wife petitioned for dissolution of her 25-year marriage to Husband. The following day, Husband and Wife executed a Marital Settlement Agreement (MSA) in connection with the divorce action. Among other things, the M.S.A. § divided the parties' assets and debts. As part of the division of their marital property, Husband conveyed his interest in all of the couple's various real properties to Wife, while she conveyed her interest in Husband's medical practice to him. The M.S.A. § further provided that Husband would be solely responsible for his extramarital child support obligation. Spousal support was reserved. The M.S.A. § was merged into a judgment of dissolution, which was entered in August 1995.
By June 1997, Husband abandoned his medical practice. Apart from a car and a pension plan, Husband has no assets; he has little income and lives with his mother in San Francisco "on a shoestring."
In June 1997, Plaintiff recorded a lis pendens, which gave notice of the pendency of Plaintiffs paternity action against Husband, and which affected the real property awarded to Wife in the dissolution. Wife moved for leave to intervene in the paternity action in order to expunge the lis pendens. Plaintiff moved to join Wife as a party to the paternity action and sought to restrain her from transferring any of the real property.
The court heard the motions of Wife and Plaintiff in succession, then issued its findings and order. In that order, the court concluded that Wife's joinder in the paternity action was unwarranted because Husband was current in his support obligations. The court further determined that Plaintiff had no standing to challenge Husband's property transfer to Wife. Based on those determinations, the court denied Plaintiffs motion to join Wife and it granted Wife's motion to expunge the lis pendens. That order was entered in October 1997.
The following month, Plaintiff filed this action. In her first amended complaint, Plaintiff alleged that the marital property division, which was made pursuant to the MSA, was a fraudulent transfer by Husband to Wife that was intended to defraud, hinder, and delay Plaintiff in her collection of future child support. The complaint sought to set aside Husband's real property transfers to Wife.
In March 1998, Husband and Wife each answered Plaintiffs complaint with general denials and various affirmative defenses. Both Husband and Wife asserted the affirmative defense that the real property transfers were effectuated as part of the parties' dissolution judgment.
A year later, Husband made a defense summary judgment motion. Husband based his motion on the lack of evidence that he harbored any actual fraudulent intent and on proof that he received adequate consideration in the property division. In opposition to the motion, Plaintiff submitted evidence, in the form of expert opinion, that Husband did not receive reasonably equivalent value in exchange for his real property transfers to Wife and that the M.S.A. § rendered Husband insolvent. Neither party explicitly addressed the threshold question of the applicability of fraudulent transfer law to the marital property division, nor did the trial court.3
After a hearing in July 1999, the court granted Husband's summary judgment motion. The court found that it was "undisputed that there was no actual intent to defraud" and further found that Husband was "not rendered insolvent" by the transfers. The court's stated reason for its insolvency ruling was that the future stream of child support payments, being an unmatured debt, could not be valued fairly for purposes of assessing solvency. The formal order granting Husband's summary judgment motion was entered on July 30, 1999.
Thereafter, the parties entered into a stipulation for entry of judgment, which was filed in September 1999.
This timely appeal by Plaintiff followed. In response to Plaintiffs opening brief on appeal, Husband filed a respondent's brief, in which Wife joined.
Before turning to the merits of the controversy, we first address the threshold issue of whether the judgment is appealable
As a general proposition, a party may not appeal from a consent judgment. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 399-400, 87 Cal.Rptr.2d 453, 981 P.2d 79.) "Parties cannot create by stipulation appellate jurisdiction where none otherwise exists." (Don Jose's Restaurant, Inc. v. Truck Ins. Exchange (1997) 53 Cal. App.4th 115, 118-119, 61 Cal.Rptr.2d 370, fn. omitted.) But there is an exception for cases in which consent was given solely "`to facilitate an appeal following adverse determination of a critical issue.'" (Norgart v. Upjohn Co., supra, 21 Cal.4th at p. 400, 87 Cal.Rptr.2d 453, 981 P.2d 79.) This is such a case. Here, it is apparent from the stipulated judgment that the parties did not intend "to settle their dispute fully and finally, but merely to hasten its transfer from the superior court to the Court of Appeal." (Id. at p. 401, 87 Cal. Rptr.2d 453, 981 P.2d 79.)
We therefore consider Plaintiffs appeal on its merits.
We first decide whether marital settlement agreements are subject to the UFTA. We then assess whether the record discloses a disputed material fact issue requiring a trial on Plaintiffs complaint.
To properly address the first question before us, we begin by setting forth the appropriate standard of review. We then examine the separate statutory schemes that govern marital property divisions and fraudulent transfers. Finally, we consider the interplay between the two statutes.
The UFTA permits defrauded creditors to reach property in the hands of a transferee. (See, Civ.Code, §§ 3439-3439.12.) The applicable provision of the Family Code protects property transferred to a spouse incident to divorce. (Fam.Code, § 916.) Neither statute explicitly refers to the other. Before attempting to harmonize the two statutory schemes, we review each in turn.
In 1986, California adopted the UFTA. Like all common-law fraudulent transfer statutes, California law has its basis in the Statute of 13 Elizabeth. "In the United States, state fraudulent conveyance law in the twentieth century has been expressed through the 1918 Uniform Fraudulent Conveyance Act (UFCA), ... and its successor, the 1984 Uniform Fraudulent Transfer Act (UFTA)." ...
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