Pasquali Law

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Review of the News:

Her body wasn't even cold, Andrew looked at his shoes. As if sensing his distress, Mrs. Andrew, his wife of 30+ years, joined us at the bar. As Andrew recounted the "matter of fact" manner in which his stepfather (for lack of a better term I'll simply refer to him as "thief") informed Andrew that he and his sisters would get "nothing" from mom's savings, Andrew used philosophy to mask his hurt. "It just wasn't worth going after him, it was only two hundred thousand dollars, and when you split it four ways, I would just rather move-on." It was hard to tell whether Andrew was trying to convince me, his wife...or himself.

Traditionally, victims of fraud have looked to the authorities for "justice." The problem is that the criminal justice system stops at the jailhouse door. The authorities will order restitution, but that’s only for out of pocket damages. More significantly, if a defendant cries poor mouth “look, I ain’t got the money” type of thing, the criminal justice system satisfies itself with the physical pound of flesh...the culprit’s body in the slammer.

Until just a few years ago, civil lawyers were similarly hamstrung, while an Order for Examination of Assets (OEX) could be ordered, and the perpetrator examined under oath about his financial condition, the system seemed to pre-suppose that thief would be truthful in disclosing not only what he had, but where he had it. Left unanswered was how to get at the money or property even if it could be traced!

Changes in California’s Uniform Fraudulent Transfer Act have restocked the victim’s quiver of arrows for use against those who would steal, or commit other intentional torts, and then try to hide their money. This office has used these new tools and gotten victims money where perpetrators initially claimed that they no longer had anything. Two decisions, one by the California Supreme Court, another by the 2nd District Court of Appeal, have sharpened plaintiffs’ arrows with two previously unavailable tools: the lis pendens and the right to a jury trial.

Fraudulent transfers of assets occur when perpetrators, or other debtors, squirrel away their ill-gotten gains, thereby seeking to become “judgment proof.” Adopted by California in 1986, the Uniform Fraudulent Transfer Act (Civil Code § 3439) allows defrauded creditors to reach transferred assets under specified circumstances. Its roots derive from four centuries of British common law, explained this way: “The principle is that a man is not entitled to go into a hazardous business, and immediately before doing so settle all his property voluntarily, the object being this ‘If I succeed in business, I make a fortune for myself. If I fail, I leave my creditors unpaid. They will bear the loss.’ That is the very thing which the Statute of Elizabeth was meant to prevent.” Re Butterworth (1882) 19 Chancery Division 588.

While the California statute’s remedies are far reaching: avoidance of transfer; attachment; injunctive relief; and receivership, it was not until 2004 that either the right to jury trial or the right to lis pendens were permitted.

A lis pendens places a “cloud” over title to real property. While not a lien, it places such a stench on title that, as one realtor told this author “nobody will touch it.” The problem with its use has been twofold, availability of remedy and potential liability. Without a “real property claim,” a lis pendens is subject to judicial expungement (Code of Civil Procedure §405.31) thereby subjecting the party recording it, and their attorney, to liability for slander of title. A “real property claim,” was limited to causes of action affecting title to, possession of, or easements concerning real property.

The California Supreme Court examined a case where a husband and wife allegedly “looted” a family owned corporation in order to preclude plaintiff from recovering monies. Defendant’s conduct included obtaining a loan from the company under false pretenses, then using the money to purchase residential income property. Both the residential income property and a family residence were later transferred to a limited family partnership. The trial court expunged a lis pendens on both properties, finding that the fraudulent transfer case essentially had “nothing to do with real property” since the goal of the fraudulent transfer action was merely to make the property available for the collection of judgment. The Court of Appeal agreed. In reversing, the Supreme Court ruled that claims alleging fraudulent transfer of title do affect title to or the right to possession of real property within the meaning of California’s lis pendens statute. California’s highest court could not ignore what it found to be the plain language of the statute but noted that this “problematic” outcome (expanding the application of lis pendens law) was “up to the Legislature—and not this court—to change.” Kirkeby vs. Superior Court of Orange County (2004) 33 Cal. 4th 642.

The second shoe dropped in December 2004. California’s Second District Court of Appeal reviewed a trial court’s determination that, since fraudulent transfer actions are equitable in nature, no jury trial right was thought to exist. In holding that money judgment creditors were entitled to a jury trial, the Court of Appeal found it “beyond question” that a fraudulent conveyance action “was triable by a jury at common law in England in 1791.” Since there was no change in English common law “between 1791 and 1850 [when California adopted its Constitution, thus preserving common law jury trial rights] the California Constitution guarantees the right to jury trial in a similar action today.” Wisden vs. Superior Court of Los Angeles County (2004) 124 Cal. App.4th 750.

If you believe that you have been the victim of fraud, call an attorney with hands on experience representing fraud victims in litigation. This office can help.

Pasquali Law

(415) 841-1000 -or- (650) 579-0100

e-mail: info47@lawsuite.net

1220 Howard Avenue - Burlingame, California

Serving the cities of San Francisco, San Jose, Oakland, Fremont, Antioch, Berkeley, Concord, Daly City, Fairfield, Hayward, Richmond, Santa Clara, Santa Rosa, Sunnyvale, Vallejo, Alameda, Alamo, Albany, American Canyon, Ashland, Bay Point, Belmont, Benicia, Blackhawk-Camino Tassajara, Brentwood, Campbell, Capitola, Castro Valley, Cherryland, Clayton, Cupertino, Danville, Dixon, Dublin, East Palo Alto, El Cerrito, El Sobrante, Foster City, Gilroy, Half Moon Bay, Healdsburg, Hercules, Hillsborough, Hollister, Lafayette, Larkspur, Live Oak, Livermore, Los Altos, Los Gatos, Martinez, Menlo Park, Mill Valley, Millbrae, Milpitas, Moraga, Morgan Hill, Mountain View, Napa, Newark, North Bay, Novato, Oakley, Orinda, Pacifica, Palo Alto, Peninsula, Petaluma, Piedmont, Pinole, Pittsburg, Pleasant Hill, Pleasanton, Redwood City, Rohnert Park, San Anselmo, San Bruno, San Carlos, San Leandro, San Lorenzo, San Mateo, San Pablo, San Rafael, San Ramon, Santa Cruz, Saratoga, Scotts Valley, South Bay, South San Francisco, Stanford, Suisun City, Tamalpais-Homestead Valley, Union City, Vacaville, Walnut Creek, Watsonville, Windsor, and Marin County, San Francisco County, San Mateo County, Santa Clara County, Monterey County, Alameda County, Contra Costa County, Solano County, and Napa County

Serving the cities of San Francisco, San Jose, Oakland, Fremont, Antioch, Berkeley, Concord, Daly City, Fairfield, Hayward, Richmond, Santa Clara, Santa Rosa, Sunnyvale, Vallejo, Alameda, Alamo, Albany, American Canyon, Ashland, Bay Point, Belmont, Benicia, Blackhawk-Camino Tassajara, Brentwood, Campbell, Capitola, Castro Valley, Cherryland, Clayton, Cupertino, Danville, Dixon, Dublin, East Palo Alto, El Cerrito, El Sobrante, Foster City, Gilroy, Half Moon Bay, Healdsburg, Hercules, Hillsborough, Hollister, Lafayette, Larkspur, Live Oak, Livermore, Los Altos, Los Gatos, Martinez, Menlo Park, Mill Valley, Millbrae, Milpitas, Moraga, Morgan Hill, Mountain View, Napa, Newark, North Bay, Novato, Oakley, Orinda, Pacifica, Palo Alto, Peninsula, Petaluma, Piedmont, Pinole, Pittsburg, Pleasant Hill, Pleasanton, Redwood City, Rohnert Park, San Anselmo, San Bruno, San Carlos, San Leandro, San Lorenzo, San Mateo, San Pablo, San Rafael, San Ramon, Santa Cruz, Saratoga, Scotts Valley, South Bay, South San Francisco, Stanford, Suisun City, Tamalpais-Homestead Valley, Union City, Vacaville, Walnut Creek, Watsonville, Windsor, and Marin County, San Francisco County, San Mateo County, Santa Clara County, Monterey County, Alameda County, Contra Costa County, Solano County, and Napa County