Wisden v. Superior Court, B175136.

• Decision Date: 03 December 2004
• Docket Number: No. B175136.,B175136.
• Parties: Karen WISDEN, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; John Sims, et al., Real Parties in Interest.
• Court: California Court of Appeals Court of Appeals

21 Cal.Rptr.3d 523

124 Cal.App.4th 750

Karen WISDEN, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent John Sims, et al., Real Parties in Interest.

No. B175136.

Court of Appeal, Second District, Division 8.

December 3, 2004.

Andrews & Hensleigh, Joseph Andrews, Los Angeles, and John Aumer, Sherman Oaks, for Petitioner.

No appearance for Respondent.

Katten Muchin Zavis Rosenman, Charles M. Stern and Rania Khamis, Los Angeles, for Real Parties in Interest American Housing Corporation and John Sims.

Keats, McFarland & Wilson and Emil W. Herich for Real Party in Interest Michael Heaman.

BOLAND, J.

SUMMARY

Plaintiff Karen Wisden seeks writ relief after the trial court denied her request for a jury trial on a cause of action for fraudulent conveyance. We conclude the trial court erred when it denied Wisden's request. Accordingly, we grant the petition.

FACTUAL AND PROCEDURAL HISTORY

Karen Wisden filed an action against American Housing Corporation (AHC) and two of its officers, John Sims and Michael Heaman, seeking to enforce an unpaid judgment entered against AHC. The complaint alleged that in a prior action brought by Wisden against AHC, the parties entered into a stipulated judgment for $75,000 in favor of Wisden and against AHC. According to the complaint, no money was paid in satisfaction of the judgment. The complaint further alleged Sims and Heaman testified during judgment debtor examinations that AHC was without assets and was insolvent.

The complaint asserted four causes of action, including a cause of action for fraudulent conveyance. In that cause of action, Wisden sought to set aside, to the extent necessary to satisfy her judgment against AHC, allegedly fraudulent transfers of funds totaling more than $1,500,000 from AHC to Sims and Heaman. She also sought to enjoin further disposition or dissipation of the funds obtained through the fraudulent transfers, imposition of a constructive trust on assets obtained through the use of those funds, and punitive damages.

Wisden requested a jury trial. The trial court issued an order to show cause, requesting briefing on Wisden's entitlement to a jury trial on any of the causes of action asserted in her complaint. In support of her contention that she had a right to a jury trial on the fraudulent conveyance claim,¹ Wisden cited Granfinanciera, S.A. v. Nordberg (1989) 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26 (Granfinanciera), where the Supreme Court held that persons sued by a bankruptcy trustee to recover allegedly fraudulent conveyances of money were entitled to a jury trial. Wisden also cited Code of Civil Procedure section 592 in support of her contention.²

In response, AHC and Sims claimed the fraudulent conveyance cause of action "invokes the provisions of California's Uniform Fraudulent Transfer Act (`UFTA')" and, under that act, no right to a jury trial is afforded. AHC and Sims sought to distinguish Granfinanciera on the grounds that the case involved the Seventh Amendment to the United States Constitution and a claim by a bankruptcy trustee to recover improper transfers, not a claim by a judgment creditor seeking to set aside a fraudulent transfer. AHC and Sims also claimed Code of Civil Procedure section 592 was inapplicable because Wisden was not seeking to recover "specific, real, or personal property." In a separate response, Heaman also argued Wisden was not entitled to a jury trial on the fraudulent conveyance claim.

Agreeing with the defendants, the trial court ruled Wisden was not entitled to a jury trial. It noted a "long line of federal authority" holding that claims under the UFTA and its predecessor statute are equitable in nature and do not involve a right to a jury trial. While acknowledging Wisden's assertion that her cause of action was a common law claim, the court held the cause of action was equitable in nature. It did not expressly address Wisden's contention that she had a right to jury trial under Code of Civil Procedure section 592.³

Wisden filed a writ petition challenging the trial court's ruling that she had no right to a jury trial. This court issued an alternative writ, received briefing and heard oral argument.

DISCUSSION

We conclude Wisden is entitled to a trial by jury on her cause of action for fraudulent conveyance. We first describe the legal principles which control our analysis, then apply those principles to this case, and finally address arguments raised by the real parties in interest.

1. The governing legal principles.

The California Supreme Court has described, on numerous occasions, the principles under which we determine whether a right to jury trial exists under the California Constitution (art. I, § 16). The rule is simple. If the right to trial by jury existed at common law in 1850, when the California Constitution was adopted, it exists today:

"It is the right to trial by jury as it existed at common law which is preserved; and what that right is, is a purely historical question, a fact which is to be ascertained like any other social, political or legal fact." (People v. One 1941 Chevrolet Coupe (1951) 37 Cal.2d 283, 287, 231 P.2d 832 [right to trial by jury in forfeiture proceeding].)⁴

The Court has expressly cautioned that the right to a trial by jury "cannot be avoided by merely calling an action a special proceeding or equitable in nature." (People v. One 1941 Chevrolet Coupe, supra, 37 Cal.2d at p. 299, 231 P.2d 832.) The constitutional right to a jury trial "does not permit the Legislature to confer on the courts the power of trying according to the course of chancery any question which has always been triable according to the course of the common law by a jury." (Ibid.) In other words, the Legislature cannot, "by providing new remedies ... in form equitable," convert a legal right "into an equitable one so as to infringe upon the right of trial by jury." (Ibid., fn. omitted.) Thus,

"In determining whether the action was one triable by a jury at common law, the court is not bound by the form of the action but rather by the nature of the rights involved and the facts of the particular case — the gist of the action. A jury trial must be granted where the gist of the action is legal, where the action is in reality cognizable at law." (People v. One 1941 Chevrolet Coupe, supra, 37 Cal.2d at p. 299, 231 P.2d 832.)

"On the other hand, if the action is essentially one in equity and the relief sought `depends upon the application of equitable doctrines,' the parties are not entitled to a jury trial." (C & K Engineering Contractors v. Amber Steel Co., supra, 23 Cal.3d at p. 9, 151 Cal.Rptr. 323, 587 P.2d 1136 (C & K Engineering), quoting Hartman v. Burford (1966) 242 Cal.App.2d 268, 270, 51 Cal.Rptr. 309 [enforcement of a promise to make a will].) While the legal or equitable nature of a cause of action is ordinarily determined by the mode of relief afforded, "the prayer for relief in a particular case is not conclusive...." (C & K Engineering, supra, 23 Cal.3d at p. 9, 151 Cal.Rptr. 323, 587 P.2d 1136.)

2. Wisden's action for fraudulent conveyance.

Consonant with these well-settled principles, we look first to the historical question whether an action to recover fraudulent conveyances was triable by a jury at common law in 1850. We need not look far, because the United States Supreme Court had occasion to assess this very question in Granfinanciera, supra, 492 U.S. 33, 109 S.Ct. 2782, 106 L.Ed.2d 26.

In Granfinanciera, the court concluded the respondent in that case, a trustee in bankruptcy, "would have had to bring his action to recover an alleged fraudulent conveyance of a determinate sum of money at law in 18th-century England, and ... a court of equity would not have adjudicated it." (Granfinanciera, supra, 492 U.S. at pp. 46-47, 109 S.Ct. 2782 fn. omitted.) The court's recitation of the historical facts is supported with extensive citations to the historical record and legal authorities. (Id. at pp. 43-47, 109 S.Ct. 2782.) The court observes, for example, that: "`In England, long prior to the enactment of our first Judiciary Act, common law actions of trover and money had and received were resorted to for the recovery of preferential payments by bankrupts.'" (Id. at p. 43, 109 S.Ct. 2782 quoting Schoenthal v. Irving Trust Co. (1932) 287 U.S. 92, 94 53 S.Ct. 50, 77 L.Ed. 185, fn. omitted, and citing numerous English cases.) While the Court acknowledged that "courts of equity sometimes provided relief in fraudulent conveyance actions" (Granfinanciera, supra, 492 U.S. at p. 43, 109 S.Ct. 2782), it concluded that fraudulent transfers of money were not "typically or indeed ever entertained by English courts of equity when the Seventh Amendment was adopted" in 1791. (Id. at p. 44, 109 S.Ct. 2782 [citing scholarly authority to the effect that if the fraudulent transfer were of cash, the action would be for money had and received, whereas the equitable process could be invoked if the subject matter were land or an intangible].) Granfinanciera concluded that the fraudulent conveyance action in that case — which sought monetary relief and disclosed no facts calling for an accounting or other equitable relief — "plainly seeks relief traditionally provided by law courts or on the law side of courts having both legal and equitable dockets."⁵ (Id. at p. 49, 109 S.Ct. 2782 fn. omitted.)

Based upon the historical analysis in Granfinanciera, it appears beyond debate that, in 1791, the right to trial by jury existed at common law in an action to recover an alleged fraudulent conveyance of a determinate sum of money. Moreover, none of the real parties in interest has adduced any authority suggesting that any change occurred in the common law between 1791 (the relevant date for Granfinanciera's Seventh Amendment analysis) and 1850 (the relevant date for analysis under the California Constitution).⁶ We must necessarily conclude, consonant with California Supreme Court a...