Case Number: EC061982 Hearing Date: June 12, 2014 Dept: A

Uni-Source Trading v Nuno

DEMURRER

Calendar: 8
Case No: EC061982
Date: 6/13/14

MP: Defendant, Zuleika Nuno
RP: Plaintiff, Uni-Source Trading, Inc.

ALLEGATIONS IN FIRST AMENDED COMPLAINT:
The Plaintiff loaned $120,000 to Teresa Nuno. In 2010, Teresa Nuno transferred her interest in a business known as Magic Design to the Defendant, Zuleika Nuno, for no or inadequate consideration. This was a fraudulent conveyance done with the intent to avoid the debt. The Plaintiff seeks damages and a constructive trust for the business.

CAUSES OF ACTION IN FIRST AMENDED COMPLAINT:
1) Fraudulent Conveyance

RELIEF REQUESTED:
Demurrer to Complaint.

DISCUSSION:
This hearing concerns the Defendant’s demurrer to the sole cause of action for fraudulent conveyance in the Complaint. The Defendant argues that this cause of action lacks sufficient facts and is uncertain.

The Plaintiffs allege in paragraph 15 that a third party, Teresa Nuno, engaged in a fraudulent conveyance by transferring her business, Magic Design, to the Defendant. The Plaintiff does not seek any relief from Teresa Nuno. Instead, the Plaintiff brought this Complaint to seek $120,000 from the Defendant, an award of punitive damages against the Defendant, and a judgment that the business is held in a constructive trust for the Plaintiff.
The Plaintiff is seeking relief under Civil Code sections 3439 to 3439.12, which are the Uniform Fraudulent Transfer Act. Under section 3439.04(a), a transfer made by a debtor is fraudulent 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 he or she would incur, debts beyond his or her ability to pay as they became due.

Civil Code section 3439.08 states that a transferee who participates or conspires with the transferor to avoid a creditor’s claim is liable for the value of the asset transferred. The cause of action must be pleaded with particularity because it is a statutory claim. Covenant Care, Inc. v. Superior Court (2004) 32 Cal. 4th 771, 790.

The Defendant argues that the Plaintiff cannot plead that the transfer of the business was fraudulent because the loan was secured by collateral, i.e., a deed of trust in the home of Teresa Nuno. The Defendant offers no authority providing that a fraudulent conveyance claim cannot be brought when there is collateral.
Further, the statutory scheme for fraudulent conveyances does not limit it to unsecured claims. Instead, the broad definition of “Claim” in Civil Code section 3439.01(a) indicates that the Legislature intended to provide a remedy for fraudulent transfers, irrespective of when they were made. “Claim” is defined under section 3439.01(b) as “a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured” (italics added for emphasis). This definition indicates that a creditor may seek the remedies for a fraudulent conveyance even when the creditor’s claim is secured.
Accordingly, there are no grounds to find that the Plaintiff cannot plead a claim for fraudulent conveyance when its claim was secured by the collateral of a deed of trust.

The Defendant then argues that the cause of action is uncertain. CCP section 430.10(f) authorizes the Court to sustain a demurrer on the ground that the pleadings are uncertain. A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures. Khoury v. Maly’s of California Inc. (1993) 14 Cal.App.4th 612, 616. A demurrer for uncertainty will be sustained only when the complaint is so bad that the defendant cannot reasonably respond because the defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against the defendant. Id.
A review of the Complaint reveals that it is not so bad that the Defendant cannot reasonably respond. The Plaintiff has identified the nature of its claim, i.e., fraudulent conveyance, and has pleaded that the transfer of the business, Magic Design, was a fraudulent conveyance made with an intent to avoid the Plaintiff’s $120,000 claim against Teresa Nuno. The statutory scheme for fraudulent conveyance permits a judgment to be entered against the Defendant to avoid the transfer or to hold her liable for the monetary amount of the claim. The Defendant can reasonably respond to the claim by admitting or denying the issues, e.g., that she conspired with Teresa Nuno to avoid the Plaintiff’s claim through the transfer of the business from Teresa Nuno to the Defendant.
Therefore, the Court will overrule the demurrer based on uncertainty.

Therefore, the Court will overrule the demurrer to the Complaint because the Defendant’s demurrer offers no grounds to find that the cause of action lacks sufficient facts or that the cause of action is uncertain.

RULING:
OVERRULE demurrer