Renda v. Nevarez

• Decision Date: 14 February 2014
• Docket Number: D063075
• Citation: 223 Cal.App.4th 1231,167 Cal.Rptr.3d 874
• Court: California Court of Appeals Court of Appeals
• Parties: Mario RENDA, Plaintiff and Appellant, v. Ana Luisa NEVAREZ, Defendant and Respondent.

223 Cal.App.4th 1231

167 Cal.Rptr.3d 874

Mario RENDA, Plaintiff and Appellant,

v.Ana Luisa NEVAREZ, Defendant and Respondent.

D063075

Court of Appeal,

Fourth District, Division 1, California.

Filed February 14, 2014

See 8 Witkin, Cal. Procedure (5th ed. 2008) Enforcement of Judgment, § 488 et seq.

APPEAL from a judgment of the Superior Court of San Diego County, Randa Trapp, Judge. Affirmed. (Super. Ct. No. 37–2007–00075627–CU–NP–CTL)

John J. Freni for Plaintiff and Appellant.

No appearance for Defendant and Respondent.

IRION, J.

Mario Renda appeals the judgment he obtained against Ana Luisa Nevarez setting aside certain fraudulent transfers she made after he obtained a money judgment against her in a prior action. Renda contends he is entitled to a personal judgment against Nevarez for the amount of the transfers. We disagree and affirm the judgment.

BACKGROUND

Renda obtained a judgment for $817,429.55 against Nevarez in a prior action for fraud, breach of contract, and negligence. Nevarez did not pay the judgment, and Renda learned she was transferring assets to various sham entities. He therefore filed the instant action against Nevarez, the sham entities, and other defendants. Renda asserted a single cause of action under the Uniform Fraudulent Transfer Act (UFTA; Civ.Code, §§ 3439–3439.12), ¹ in which he alleged Nevarez made the transfers to hinder, delay, and defraud him in collecting on the judgment he obtained against her in the prior action. Renda also alleged the other defendants aided and abetted or conspired with Nevarez to hinder, delay, or defraud him by accepting or facilitating the fraudulent transfers. Renda sought judgment voiding the transfers and also awarding him damages, attorney fees, costs, and interest.

Most of the defendants defaulted, and the case proceeded to a jury trial against Nevarez and three business entities alleged to have aided and abetted or conspired with her in making the fraudulent transfers. The jury returned a special verdict finding Nevarez fraudulently transferred monies to two of the defaulting defendants with the intent to hinder, delay, or defraud Renda; the transfers harmed him; and his “damages” were $450,000. The jury also found against Renda on his aiding and abetting and conspiracy theories.

After the jury returned its verdict, Renda submitted a proposed judgment that would have held Nevarez and the defaulting defendants jointly and severally liable for $450,000. Nevarez objected on the grounds, among others, that the UFTA does not authorize a court to enter a judgment against the debtor for damages in the amount of the fraudulent transfer, and such a judgment would amount to an impermissible double recovery to the creditor. The trial court agreed with Nevarez and denied Renda's request for entry of a money judgment against her. The court subsequently entered a judgment voiding the $450,000 in fraudulent transfers and holding the defaulting defendants jointly and severally liable for that amount.

DISCUSSION

Renda argues he is entitled to a personal judgment against Nevarez for $450,000 because the UFTA expressly authorizes entry of a money judgment against “the person for whose benefit the transfer was made” (§ 3439.08, subd. (b)(1)), and the jury's verdict that Nevarez transferred $450,000 with the actual intent to hinder, delay, or defraud him makes her such a person. We disagree. Under the circumstances of this case, Renda is not entitled to recover a money judgment against Nevarez under the UFTA.

The UFTA “declares rights and provides remedies for unsecured creditors against transfers that impede them in the collection of their claims,” and its purpose “is primarily to protect unsecured creditors against transfers and obligations injurious to their rights.” (Legis. Com. com., 12A West's Ann. Civ.Code (1997 ed.) foll. § 3439.01, pp. 272, 273; accord, Mejia v. Reed (2003) 31 Cal.4th 657, 664, 3 Cal.Rptr.3d 390, 74 P.3d 166 (Mejia ).) The UFTA is remedial legislation (Cortez v. Vogt (1997) 52 Cal.App.4th 917, 937, 60 Cal.Rptr.2d 841) designed to protect creditors by authorizing them to set aside transfers of property by which debtors try to avoid paying debts by putting assets beyond creditors' reach (Mejia, at pp. 663, 668, 3 Cal.Rptr.3d 390, 74 P.3d 166; Fross v. Wotton (1935) 3 Cal.2d 384, 390, 44 P.2d 350; Lewis v. Superior Court (1994) 30 Cal.App.4th 1850, 1873, 37 Cal.Rptr.2d 63). When a debtor transfers property “[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor” (§ 3439.04, subd. (a)(1)), the creditor may obtain “[a]voidance of the transfer ... to the extent necessary to satisfy the creditor's claim” (§ 3439.07, subd. (a)(1); see Reddy v. Gonzalez (1992) 8 Cal.App.4th 118, 123–124, 10 Cal.Rptr.2d 55 [UFTA authorizes court to set aside transfer made with actual fraudulent intent]; see also GATX Corp. v. Addington (E.D.Ky.2012) 879 F.Supp.2d 633, 642 [“the primary remedy is to void the fraudulent conveyance”] ). To the extent the transfer is voidable, the creditor “may recover judgment for the value of the asset transferred ... or the amount necessary to satisfy the creditor's claim, whichever is less,” and the judgment may be entered against “[t]he first transferee of the asset or the person for whose benefit the transfer was made.” (§ 3439.08, subd. (b)(1).)

Here, as authorized by section 3439.07, subdivision (a)(1), the trial court set aside the $450,000 in transfers Nevarez made with the intent to impede Renda's collection on the judgment he obtained against Nevarez in the prior action. As authorized by section 3439.08, subdivision (b)(1), the court also entered a judgment for $450,000 against the defaulting defendants as transferees. The court, however, refused to enter a money judgment against Nevarez as “the person for whose benefit the transfer was made.” ( Ibid.) In so refusing, Renda argues, the court erred.

Whether a debtor who makes a fraudulent transfer is “the person for whose benefit the transfer was made,” against whom a creditor may obtain a money judgment under section 3439.08, subdivision (b)(1), appears to be an issue of first impression in California. Renda has cited no case holding such a debtor is subject to a money judgment under the UFTA, and we have found none.² There are cases supporting the opposite conclusion, however. A federal appellate court construing the provision of the Bankruptcy Code from which the UFTA provision derives ³ held “there is no cause of action ... for the value of an avoidable transfer against the transferring debtor as an ‘entity for whose benefit such transfer was made.’ ” ( In re Coggin (11th Cir.1994) 30 F.3d 1443, 1454.) In addition, the Court of Appeal, applying common law principles and remedies later codified by the UFTA, held a money judgment against the transferee was permissible, but a money judgment against the debtor was “not sustained by reason or authority.” ( Wright v. Salzberger (1932) 121 Cal.App. 639, 646, 9 P.2d 860.) Although these cases suggest the UFTA does not authorize entry of a money judgment against a debtor under any circumstances, we need not (and do not) decide that broad issue to resolve this appeal. Instead, for reasons we explain below, we conclude that even if we assume a creditor may recover a money judgment against a debtor under the UFTA under some circumstances, the trial court properly denied that remedy in this case, because the money judgment Renda sought under the UFTA would partially duplicate the money judgment he had already obtained against Nevarez in the prior action, in violation of the rule prohibiting double recovery for the same harm.

A creditor who successfully attacks a transfer under the UFTA is not automatically entitled to a money judgment against the person for whose benefit the transfer was made. The statute provides that to the extent a transfer is voidable, “the creditor may recover judgment” for the lesser of the value of the asset or the amount needed to satisfy the creditor's claim, and the “judgment may be entered” against the person for whose benefit the transfer was made. (§ 3439.08, subd. (b)(1), italics added.) Ordinarily, when a statute provides a court “may” do something, the statute is permissive, not mandatory, and grants the court a discretionary authority. (E.g., Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538, 542, 121 Cal.Rptr.3d 312, 247 P.3d 542; Neville v. County of Sonoma (2012) 206 Cal.App.4th 61, 75, 141 Cal.Rptr.3d 570; SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1197, 58 Cal.Rptr.3d 904.) In exercising discretion to provide relief from fraudulent transfers, courts are directed by the UFTA to consider “the principles of law and equity,” which “supplement its provisions.” (§ 3439.10; see § 3439.07, subd. (a)(3)(C) [“[s]ubject to applicable principles of equity,” a court may grant “[a]ny other relief the circumstances may require”]; Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 840, 28 Cal.Rptr.3d 884 (Filip ) [holding court has “discretion in fashioning relief” under UFTA].) Hence, a court may refuse to enter a money judgment against a person for whose benefit a fraudulent transfer was made if an applicable legal or equitable principle bars entry of such a judgment.

The trial court properly exercised such discretion in denying Renda a money judgment against Nevarez for the $450,000 in fraudulent transfers. A well-established principle, applied both at law and in equity, is that a plaintiff is entitled to only a single recovery for a distinct harm suffered, and double or duplicative recovery for the same harm is prohibited. (Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1158–1159, 17 Cal.Rptr.2d 608, 847 P.2d 574 (Tavaglione ).) ⁴ Here, the harm Renda suffered consisted of the damages caused by the fraud, breach of contract, and negligence that underlay his prior action against Nevarez; and for that harm, he recovered a...