2013-00150501-CU-FR

CXA-16 Corporation vs. Muhammad Aslam Chaudhry

Nature of Proceeding:       Motion to Expunge Lis Pendens

Filed By:    Serlin, Mark A.

Defendants’ Motion to Expunge Lis Pendens is DENIED. Defendants’ request for
award of attorneys’ fees and costs is DENIED.  Plaintiff’s cross request for award of
attorneys’ fees and costs is GRANTED. C.C.P., sec.  405.38.

Plaintiff CX-16 Corporation’s Complaint, filed August 27, 2013 sets forth five causes of
action to avoid fraudulent transfers and for money judgments and equitable relief.  The
st
1  through 4th causes of action relate to four separate parcels of real property.

Defendants move to expunge the lis pendens as to three of the four parcels of real
th
property, namely 6136 25   Street, Sacramento, California, 6112 Hermosa Street,
Sacramento, California, and 6220 Hermosa Street, Sacramento, California.

In 2007, Defendant Muhammad Aslam Chaudhry (“Aslam”) (and two co-obligors)
borrowed $1,440,000, as evidenced by a Promissory Note  payable to Indymac
Commercial Lending Corp. (“Indymac”), secured by a deed of trust on commercial real
property. The Note was assigned to LNV Corporation.

In December 2009, LNV sued Aslam for defaulting on his debt (the “LNV Complaint”).
On March 4, 2010, Aslam through his legal counsel, attorney Gary Decker, filed a
verified answer to the LNV Complaint. One day later, on March 5, 2010, Aslam
recorded quit claim deeds transferring his interest in four residential properties, which
are the subject of this pending law suit, to his nephew Omar and his niece Fahmida,
for no consideration. All four of the quit claim deeds were notarized by Gary Decker.
The quit claim deeds each recite that the transfers were “a bonafide gift.”

On May 30, 2013, Plaintiff, after taking an assignment of the Note from LNV, obtained
a judgment against Aslam (and the co-obligors) in the amount of $1,067,526.73
(Sacramento Superior Court Case No. 34-2009-00066513). On August 27, 2013,
Plaintiff filed the pending lawsuit, alleging that the four transfers of real property in
March 2010 to Omar and Fahmida were avoidable fraudulent transfers, and recorded
lis pendens against each of the properties.

Omar and Fahmida have now filed a Motion to expunge three of the four lis pendens.
They do not dispute the fourth lis pendens.

The Fraudulent Transfer Act is codified in Civil Code §3439 et. seq. CCP section
3439.04 provides a framework for determining whether there was an actual intent to
delay, hinder or defraud a creditor. A transfer under the FTA is defined as “every
mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing
of or parting with an asset … , and includes payment of money, release, lease, and
creation of a lien or other encumbrance.” (Civ. Code, § 3439.01, subd. (i).)   CCP
section 3439.04(b), outlines the so-called “badges of fraud” that can guide the Court in
determining whether the transfer was fraudulent. The indicia are: “(1)  Whether the
transfer was to an insider, (2) Whether the debtor retained possession or control of the
property transferred after transfer, (3) Whether the transfer or obligation was disclosed
or concealed (4) Whether before the transfer was made or obligation was incurred, the
debtor had been sued or threatened with suit,(5) Whether the transfer was of
substantially all of the debtor’s assets,  (6) Whether the debtor absconded, (7) Whether
the debtor removed or concealed assets,(8) whether the value of the consideration
received … was reasonably equivalent to the value of the asset… (9) Whether the
debtor was insolvent or became insolvent shortly after the transfer; (10) Whether the
transfer occurred shortly before or shortly a substantial debt was incurred  and  (11)
Whether the debtor transferred the essential assets of the business to a lien holder
who transferred the assets to an insider..” As noted in Kirkeby v. Superior Court, (
2004) 33 Cal. 4th 642, 651,  fraudulent conveyance claims may support a lis pendens
where the plaintiff seeks to void a fraudulent transfer. See, also Hunting World v.
Superior Court (1994) 22 C.A.4th 67.

For purposes of this motion, plaintiff’s burden is to show by a preponderance of the
evidence the probable validity of the fraudulent transfer claims. C.C.P., sec. 405.32.
Probable validity means that it is more likely than not that the claimant will obtain a
judgment against the defendant on the claim.  CCP 405.3 The claimant must make a
showing that it is likely to prevail on the merits, in much the same fashion as one
seeking an attachment must show the probable merit of the underlying lawsuit. (See
§§ 481.190, 484.090, subd. (a)(2).) Amalgamated Bank v. Superior Court (2007) 149
Cal. App. 4th 1003, 1012.

It is not disputed that Aslam held full valid legal title to four properties and that, while
insolvent, transferred the properties to relatives for no consideration at the exact same
time he filed his answer to the LNV Complaint. This establishes the probable, and in
effect undisputed, validity of the claims pursuant to Civil Code, sec. 3439, et seq.

Defendants Omar and Fahmida do not provide any declarations of their own in support
of the Motion. Instead they rely entirely on declarations from their uncle, Aslam, and
their father, Bashir Choudhry (“Bashir”), who is Aslam’s brother. The Declarations
admit that Aslam bought the properties, held title and acted as the owner.

The defense asserted by Omar and Fahmida, that Aslam held the properties “in trust”
for Bashir, cannot be reconciled with Evidence Code, sec. 662. This statute provides:
“the owner of the legal title to property is presumed to be the owner of the full
beneficial title. This presumption may be rebutted only by clear and convincing proof.”
The clear and convincing standard requires evidence “so clear as to leave no
substantial doubt” and “sufficiently strong to command the unhesitating assent of every
reasonable mind.” In re Angelia P. (1981) 28 Cal.3d 908, 919.

In this case, Omar and Fahmida have provided no coherent or plausible evidence in
support of their theory that Aslam held the properties “in trust” for Bashir. Or, that there
is any relevance to their claim, even if true. In point of fact, the evidence shows that
Aslam purchased all of the properties directly with his own funds. Although a
corporation Comprehensive Security Services, Inc. (“CSSI”),  transferred funds to
Aslam which he apparently used, none of the purchase funds came directly or
indirectly from Bashir. In any event, as discussed below, alleged tracing of funds used
to purchase properties to third parties does not give rise to a presumption that such
third party (i.e., CSSI) is the real owner.

Timed exactly with filing his answer to Plaintiffs Complaint, Aslam transferred the four
real properties to Omar and Fahmida. There are no writings to support the existence of              any agreements to contradict the recorded documents. Given the evidence provided,
Defendants have plainly not carried their burden to show they are likely to prevail on
their “trust” theory (i.e., showing they have clear and convincing proof to contradict the
numerous recorded documents).

The Motion to Expunge is denied.

Defendants shall pay to Plaintiff’s counsel an award of reasonable attorneys’ fees in
the amount of $3,500.00 (10 hours at $350/hr.) incurred in opposing the motion not
later than Friday, March 7, 2014. C.C.P., sec.  405.38.

The minute order is effective immediately.  No formal order pursuant to CRC Rule
3.1312 or further notice is required.