Sturm v. Moyer

• Court: California Court of Appeals
• Writing for the Court: WILLHITE, Acting P. J.
• Citation: Sturm v. Moyer, 32 Cal.App.5th 299, 243 Cal.Rptr.3d 556 (Cal. App. 2019)
• Decision Date: 15 February 2019
• Docket Number: B284553
• Parties: Robert STURM, Plaintiff and Appellant, v. Todd Andrew MOYER et al., Defendants and Respondents.

32 Cal.App.5th 299

243 Cal.Rptr.3d 556

Robert STURM, Plaintiff and Appellant,

v.Todd Andrew MOYER et al., Defendants and Respondents.

B284553

Court of Appeal, Second District, Division 4, California.

Filed February 15, 2019

Landsberg Law and Ian S. Landsberg, Encino, for Plaintiff and Appellant.

Law Offices of Warren R. Shiell and Warren R. Shiell, Beverly Hills, for Defendants and Respondents.

WILLHITE, Acting P. J.

The question presented in this case is one of first impression: Assuming fraudulent intent, can the Uniform Voidable Transactions Act ( Civ. Code, § 3439 et seq., formerly known as the Uniform Fraudulent Transfer Act, or UFTA)¹ apply to a premarital agreement in which the prospective spouses agree that upon marriage each spouse’s earnings, income, and other property acquired during marriage will be that spouse’s separate property? After examining the language of the relevant statutes, the legislative history, and public policy considerations, we conclude that it can.²

BACKGROUND

Our discussion of the background facts is based upon the allegations of the first amended complaint. Because this appeal is taken from a judgment of dismissal following the sustaining of a demurrer, we treat those alleged facts as true for the purposes of this appeal. ( Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1098, 95 Cal.Rptr.2d 779.)

In July 2005, Robert Sturm, plaintiff in this action, obtained a $ 600,000 judgment in bankruptcy court against Todd Moyer. The judgment, which is not dischargeable in bankruptcy, was renewed in January 2015. Following the original entry of judgment and through July 2016, Sturm conducted several judgment debtor examinations of Moyer, during which Moyer claimed to have no assets, and claimed that he did not intend to work ever again so he would not have to pay any portion of the judgment.

During a judgment debtor examination in July 2016, Sturm discovered that Moyer had married Jessica Schell in or around 2014, and that they had entered into a premarital agreement. The premarital agreement provided that each party’s earnings and income, and any property acquired during the marriage by each spouse, would be that spouse’s separate property; each party acknowledged that these earnings, income, and property otherwise would be community property. The agreement attached as exhibits lists of each party’s significant real and personal property and liabilities in which that party currently held an interest; Moyer’s list (Exhibit A) included Sturm’s judgment against him, as well as several liens and pending lawsuits. The agreement also included a kind of sunset provision (paragraph 5.15), which provided that in the event the judgments and liens against Moyer listed in Exhibit A, and any money judgment entered against him during marriage, lapse or otherwise become unenforceable for any reason, the parties’ earnings and income, and any assets purchased with those earnings and income, from the date of the marriage will be treated as community property, with certain exceptions. Finally, the premarital agreement included a provision allowing the parties to open a jointly owned checking account to meet their reasonable present and future living expenses, but providing that any property acquired with funds from the account will be owned in the ratio of the respective contributions of each party’s separate property into the account; it also expressly stated that the account will not create any community property interest.³

Sturm filed the instant lawsuit against defendants Moyer and Schell, asserting a single cause of action under the UFTA to set aside the alleged transfer of Moyer’s community property interest in Schell’s earnings and income. The original complaint attached as an exhibit the Moyer-Schell premarital agreement. Following defendants’ successful demurrer to the original complaint, Sturm filed a first amended complaint alleging the same cause of action. Defendants again demurred, and the trial court sustained the demurrer without leave to amend.

In sustaining the demurrer, the trial court found that "[u]nder In re Marriage of Dawley (1976) 17 Cal.3d 342, 131 Cal.Rptr. 3, 551 P.2d 323 and Family Code § 1500, defendants were entitled to alter the presumptions under Family Code § 760 and Family Code § 910(a) that property acquired during the marriage is community property and that the community estate would be liable to satisfy any judgments against defendant Todd Moyer. Even though the Premarital Agreement was not effective until Defendants married, pursuant to Family Code § 1613, Defendants still had the right to alter the presumptions of community property under Dawley ."

A judgment of dismissal was entered, from which Sturm timely filed a notice of appeal.

DISCUSSION

Sturm has alleged, in substance, that the Moyer-Schell premarital agreement effected a transfer of Moyer’s interest in community property (i.e., Schell’s earnings and income), and that the actual intent of this transfer was to hinder, delay, or defraud Moyer’s creditors, including Sturm. To decide whether the agreement is one to which the UFTA applies, we must examine the relevant provisions of both the UFTA and the Family Code.

A. Relevant UFTA Provisions

At the time of the events at issue in this lawsuit, the UFTA provided, in relevant part, that "[a] transfer made or obligation incurred by a debtor is fraudulent as to a creditor ... if the debtor made the transfer or incurred the obligation ... [¶] (1) With actual intent to hinder, delay, or defraud any creditor of the debtor."⁴ (Civ. Code, former § 3439.04; the current version of this statute replaces "fraudulent" with "voidable.") A "transfer" was defined in the UFTA to mean "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance." (Civ. Code, former § 3439.01, subd. (i); the definition is found as subd. (m) of the current version, with one amendment that is irrelevant here and would not affect our analysis.)

Civil Code section 3439.06 contains provisions regarding when a transfer is made and deemed perfected for purposes of the UFTA.⁵ Subdivision (d) of that statute provides that "A transfer is not made until the debtor has acquired rights in the asset transferred." ( Civ. Code, § 3439.06, subd. (d).)

B. Relevant Family Code Provisions

Under California law, all property (with some statutory exceptions) acquired by a married person while domiciled in California is community property ( Fam. Code, § 760 ), and each spouse’s respective interests in community property "are present, existing, and equal" during the marriage ( Fam. Code, § 751 ). However, the Family Code allows a couple by agreement entered into during or before the marriage to change the character of the property they acquire during marriage from community property to separate property.

Such an agreement may be made during the marriage under Family Code section 850, which provides that, subject to certain provisions, "married persons may by agreement or transfer, with or without consideration, do any of the following: [¶] (a) Transmute community property to separate property of either spouse. [¶] (b) Transmute separate property of either spouse to community property. [¶] (c) Transmute separate property of one spouse to separate property of the other spouse." One of the provisions referenced in that section is Family Code section 851, which states: "A transmutation is subject to the laws governing fraudulent transfers."

Before the marriage, couples may change the character of property acquired during marriage from community property to separate property by means of a premarital agreement under the Uniform Premarital Agreement Act ( Fam. Code, § 1600 et seq., hereafter the UPAA).⁶ The UPAA provides that the parties to a premarital agreement may contract with respect to various issues, including: "[t]he rights and obligations of each of the parties in any of the property^{[7 ]} of either or both of them whenever and wherever acquired or located" ( Fam. Code, § 1612, subd. (a)(1) ), and "[a]ny other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty" ( Fam. Code, § 1612, subd. (a)(7) ). The premarital agreement "becomes effective upon marriage." ( Fam. Code, § 1613.)

The characterization of property as separate or community is important when it comes to liability for debts incurred by either spouse, including debts incurred by a spouse before the marriage. Family Code section 910 states in relevant part: "Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt." ( Fam. Code, § 910, subd. (a).) Notwithstanding this provision, the earnings of the non-debtor-spouse⁸ -- which are community property under Family Code section 760 -- "are not liable for a debt incurred by [the other] spouse before marriage." ( Fam. Code, § 911, subd. (a).) Those earnings remain not liable for the debtor-spouse’s premarital debt, however, only "so long as they are held in a deposit account in which the person’s spouse has no right of withdrawal and are uncommingled with other property in the community estate, except property insignificant in amount." (Ibid. )

In short, although a married couple’s community property is liable for the premarital debts of either spouse, a portion of that community property -- the non-debtor-spouse’s earnings and income -- is shielded from liability for that premarital debt to the extent that those earnings and income are held in an account to which the debtor-spouse does not have access...