Case Name: Barbara Holdings, Inc. v. 2006 Catalina Fund, LLC, et al.
Case No.: 18CV332880

I. Background

This a fraudulent conveyance action brought by plaintiff Barbara Holdings, Inc. (“Plaintiff”) against defendants 2006 Catalina Fund, LLC, and 574 Mariscal Fund, LLC (collectively “Defendants”).
According to the allegations of the complaint, third parties 2006 Catalina LLC and 574 Mariscal LLC unlawfully obtained $150,000 that belonged to Plaintiff through fraud, conversion, and conspiracy.

The third parties then used the money to acquire real property in San Diego and in Palm Springs. The San Diego property was subsequently deeded to defendant 2006 Catalina Fund, LLC by the third party 2006 Catalina LLC for no consideration. The Palm Springs property was later deeded to defendant 574 Mariscal Fund, LLC by third party 574 Mariscal LLC for no consideration. Therefore, both the third parties did not receive the reasonable equivalent value of the real properties at issue.

These transfers were made with the actual intent to hinder, delay, or defraud Plaintiff in the collection of its claims. Plaintiff has been harmed as a result.

Plaintiff asserts a single claim for fraudulent transfer of real property against Defendants.

Defendants presently demur to the complaint. Plaintiff opposes the demurrer.

II. Preliminary Matters

A. Meet and Confer Requirement

Plaintiff contends the demurrer should be overruled because Defendants did not meet and confer in good faith.

Prior to filing a demurrer, the demurring party must meet and confer with the party who filed the challenged pleading to determine whether an agreement can be reached that would resolve the objections to the pleading. (Code Civ. Proc., § 430.41.) “The party who filed the complaint…shall provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint…could be amended to cure any legal insufficiency.” (Code Civ. Proc., § 430.41, subd. (a)(1).)

Plaintiff specifically argues Defendants failed to appear for multiple in-person meetings that were scheduled to discuss the pleadings. In reply, Defendants insist that they did attempt to meet and confer over phone and through email but Plaintiff actually failed to meet and confer in good faith because it did not provide legal authority for its position.

Defendants’ meet and confer efforts were not deficient. Although Defendants did not appear at the meetings, they did discuss the perceived issues in the pleading at length by other means, as exemplified by the emails attached to Defendants’ declaration. (Crist Decl., Exhibits E, F.) In those emails, Defendants provided ample legal authority to Plaintiff as to why they considered the complaint deficient and requested Plaintiff explain how it would amend the pleading to correct these perceived deficiencies. Thus, they met and conferred in good faith.

Moreover, even if Defendants did not engage in the meet and confer process in good faith, the Court may not overrule a demurrer based on deficiencies in the meet and confer process. (Code Civ. Proc., § 430.41, subd. (a)(4).)

For the foregoing reasons, the Court will reach the merits of the demurrer.

B. Request for Judicial Notice

In support of their demurrer, Defendants request judicial notice of a printout from the California Secretary of State’s website and the case file from a separate lawsuit filed by Plaintiff.
As a preliminary matter, the Court notes that Defendants failed to make their request for judicial notice in a separate document. California Rules of Court rule 3.1113(l) requires that a request for judicial notice be “made in a separate document…” Here, Defendants instead included their request as part of their supporting memorandum of points and authorities. The Court will not summarily deny the request for judicial notice for this reason but admonishes Defendants to comply with rules governing the presentation of requests for judicial notice.

Defendants request judicial notice of a printout because it indicates that Plaintiff is not registered as a corporation in California. Judicial notice of the printout is proper under Evidence Code section 452, subdivisions (c) and (h). Subdivision (c) permits judicial notice of “official acts” from the Secretary of State. (See Pedus Building Services, Inc. v. Allen (2002) 96 Cal.App.4th 152, 156; see also Gamet v. Blanchard (2001) 91 Cal.App.4th 1276, 1286-87.) Courts have taken judicial notice of website printouts from government agencies. (See, e.g., People v. Nguyen (2013) 212 Cal.App.4th 1311, 1328 [taking judicial notice of a printout from the California Attorney General’s website].) The website printout is also the proper subject of judicial notice under Evidence Code section 452, subdivision (h), which permits judicial notice of “facts…not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.”

Next, Defendants request judicial notice of all filings from case number 17CV320282, a case that Plaintiff previously initiated against other parties, under Evidence Code section 452, subdivision (d), which states that the court may take judicial notice of court records. Defendants’ request is grossly overbroad. Although they request judicial notice of all the filings in the case, they only rely on the complaint from to support their arguments. The remaining documents are therefore irrelevant to resolving the issues raised by the demurrer and not the proper subject of judicial notice. (See People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [a “precondition” to the taking of judicial notice is that the documents “must be relevant to a material issue”].)

Even if the Court was inclined to take judicial notice of the complaint alone, Defendants failed to provide the Court and opposing party with a copy of the complaint, as required by California Rules of Court, rule 3.1306(c). Furthermore, Defendants are essentially asking the Court to take notice of the truth of Plaintiff’s allegations in the complaint. Judicial notice of court records is improper for such a purpose. (Columbia Casualty Co. v. Northwestern Nat. Ins. Co. (1991) 231 Cal.App.3d 457, 473.) As such, judicial notice of the complaint from case number 17CV320282 is improper.
Accordingly, Defendants’ request for judicial notice is GRANTED as to the website printout and DENIED as to the case file from case number 17CV320282.

III. Merits of the Demurrer

Defendants demur to the complaint on the ground of failure to state facts sufficient to constitute a cause of action, lack of legal capacity to sue, and uncertainty. (See Code Civ. Proc., § 430.10, subds. (b), (e), (f).)

A. Failure to State Facts Sufficient to Constitute a Cause of Action

A party may demur to the pleading if it “does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) “[T]he complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.)

As a preliminary matter, a cause of action for fraudulent conveyance can be predicated on Civil Code sections 3439.04 or 3439.05. The allegations in the complaint correspond to the elements set forth in section 3439.04 and Plaintiff confirms its claim is based upon section 3439.04 in its opposition.

“A fraudulent conveyance claim is set forth in the Uniform Fraudulent Transfer Act, which is codified in Civil Code section 3439 et seq.” (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648.) Under Civil Code section 3439.04:

“A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: (1) With actual intent to hinder, delay, or defraud any creditor of the debtor. (2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either: (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. (B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.”

(Civ. Code, § 3439.04, subd. (a).)

Defendants first argue Plaintiff does not adequately allege the elements of fraudulent conveyance. Defendants contend that the fourth paragraph of the complaint does not allege the dates the third parties took the money, identity of alleged debtor, or amounts unlawfully taken by the third parties. Defendants insist the ninth paragraph of the complaint does not allege they had the actual intent to hinder, delay, or defraud Plaintiff with the requisite specificity. In opposition, Plaintiff argues it does allege the elements of fraudulent conveyance as required by Civil Code section 3439.04. It points to specific allegations in the complaint that plead the elements set forth in section 3439.04. Defendants’ argument is not well-taken.

Defendants do not substantiate their argument with legal authority. They provide no legal authority stating that Plaintiff must allege the dates the third parties took the money, identity of the debtor, or amounts unlawfully taken. They also fail to cite authority for the proposition that Plaintiff must allege any part of its claim with specificity. As such, Defendants’ position is unsubstantiated. (See People v. Dougherty (1982) 138 Cal.App.3d 278, 282 [a point asserted without authority in support is without foundation and requires no discussion].) And aside from the fact that Plaintiff does plead some of these details, Defendants do not articulate if or how Plaintiff, by failing to include certain facts, has failed to plead any element of the claim. Thus, this argument is not successful.

Next, Defendants argue that Plaintiff fails to specifically plead fraud and conversion against third parties with the requisite factual specificity and Plaintiff therefore fails to plead the claims that underlay its fraudulent conveyance cause of action. In opposition, Plaintiff argues that Defendants have provided no legal authority “for their radical proposition that the complaint must plead or prove all the elements of the underlying claims.” (Opp., p. 4:1-2 [emphasis in original].) This is true. Defendants cite no legal authority stating that in order to state a fraudulent conveyance claim predicated on fraud and conversion, a plaintiff must plead the underlying fraud and conversion claims with specificity. Instead, they only cite to cases dealing with separately stated fraud and conversion causes of action. Plaintiff has not separately alleged either of these claims. Consequently, this argument is unsubstantiated. (See People v. Dougherty, supra, 138 Cal.App.3d at 282.)

For the foregoing reasons, Defendants’ demurrer to the complaint on the ground of failure to state sufficient facts is OVERRULED.

B. Lack of Capacity to Sue

Defendants argue Plaintiff, as a foreign corporation, lacks the legal capacity to sue pursuant to Corporations Code section 2203, subdivision (c).
A defendant may object to a complaint by demurrer on the ground that “[t]he person who filed the pleading does not have the legal capacity to sue.” (Code Civ. Proc., § 430.10, subd. (b).) If a foreign corporation commences an action regarding intrastate business but has not complied with Corporation Code section 2203, subdivision (c), “the defendant may assert by demurrer…the lack of capacity to maintain an action arising out of intrastate business.” (United Medical Management, Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1739-1740.)

Pursuant to Corporations Code section 2203, subdivision (c), a foreign corporation that transacts intrastate business in California without complying with the registration requirements prescribed by Corporations Code section 2105 “shall not maintain any action or proceeding upon any intrastate business so transacted in any court of this state [ ] until it has complied with the provisions thereof” and has paid certain enumerated penalties, fines and taxes. Section 2015 states in relevant part that a “foreign corporation shall not transact interstate business without having first obtained from the Secretary of State a certificate of qualification.” (Corp. Code, § 2105, subd. (a).)

In bringing a demurrer against a nonqualified foreign corporation for lack of capacity to maintain an action, “[t]he defendant bears the burden of proving: (1) the action arises out of the transaction of intrastate business by a foreign corporation; and (2) the action was commenced by the foreign corporation prior to qualifying to transact intrastate business.” (United Medical Management, Ltd. v. Gatto, supra, 49 Cal.App.4th at 1740.)

Defendants insist Plaintiff lacks capacity to sue because it is a Wyoming corporation that has not obtained a certificate of qualification from the Secretary of State and is engaged in intrastate business. Plaintiff does not dispute it does not have a certificate of qualification and the Court has taken judicial notice of a printout from the Secretary of State’s website reflecting this fact. Thus, the remaining issue is whether this action arises out of the transaction of intrastate business.

For purposes of section 2203, a foreign corporation “transact[s] intrastate business” by “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.” (Corp. Code, § 191, subd. (a).) Here, Defendants rely on the complaint Plaintiff filed in case number 17CV320282 to support its argument that Plaintiff has engaged in intrastate business. But the Court declined to take judicial notice of that pleading. Moreover, Defendants do not argue how this action arises out of the other complaint’s allegations of intrastate business. (See United Medical Management, Ltd. v. Gatto, supra, 49 Cal.App.4th at 1740.)

Additionally, Plaintiff’s complaint in this case does not allege any repeated and successive business transactions within the state. It only alleges that third parties unlawfully converted its money, bought real property with that money, and then transferred the properties to Defendants without consideration. (Complaint, ¶¶4-7.) It is not readily apparent from the complaint if the third parties were given the money as part of a business deal or even if these transactions took place in California. (See Complaint, ¶4.) Assuming that Plaintiff did give the third parties money for business purposes, these two isolated transactions do not constitute repeated and successive business transactions in the state such that they qualify as intrastate business. (See, e.g., West Pub. Co. v. Superior Court (1942) 20 Cal.2d 720, 728-729; Chapman v. Title Guarantee & Trust Co. (1938) 25 Cal.App.2d 567, 574.)

As such, it is not apparent from the face of the complaint and matters subject to judicial notice that Plaintiff lacks the capacity to sue.

Accordingly, Defendants’ demurrer to the complaint on the ground Plaintiff lacks the capacity to sue is OVERRULED.

C. Uncertainty

A pleading is subject to a demurrer if it “is uncertain…ambiguous and unintelligible.” (Code Civ. Proc., § 430.10, subd. (f).) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Reg. Authority (2012) 208 Cal.App.4th 1125, 1135.)

Defendants contend the complaint is uncertain because the fifth and seventh paragraphs have conclusory allegations, and the use of the term “converted” renders the complaint uncertain. Defendants go on to state that conversion and fraudulent transfer are “two separate and distinct concepts, yet Plaintiff intentionally uses the term conversion loosely in the complaint, without any specifics whatsoever to support the allegation.” (Demurrer, p. 9:21-24.)

Defendants completely fail to discuss whether the complaint is uncertain under the applicable standards. The pleading is not incomprehensible because of Plaintiff’s supposed conclusory allegations and use of certain terms. In essence, Defendants are merely arguing Plaintiff failed to incorporate sufficient facts to adequately allege a claim for fraudulent conveyance. A demurrer for uncertainty does not address whether the pleading fails to “incorporate sufficient facts in the pleading but is directed at the uncertainty existing in the allegations actually made.” (Butler v. Sequeira (1950) 100 Cal.App.2d 143, 145-146.) Thus, Defendants’ demurrer for uncertainty is unsubstantiated.

Consequently, the demurrer to the complaint on the ground of uncertainty is OVERRULED.