Pillet v. Kendrick CA1/3 ( 2020 )

Filed 12/18/20 Pillet v. Kendrick CA1/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
ANDREW PILLET,
Plaintiff and Appellant, A157681, A158217
v.
(City & County of San
CLAIRE KENDRICK et al., Francisco No. CGC-15-
549693)
Defendants and
Respondents.
Andrew Pillet (Pillet) appeals from judgments entered against him in a
fraudulent transfer action he brought against Stephen H. Kendrick
(Kendrick), Kendrick’s daughters Claire, Rosemary, and Katharine, and
Juniper Twelve LLC.1 We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In 2005, Pillet obtained a civil judgment against Kendrick in the
amount of $995,945 plus attorney fees and costs and post-judgment interest.
The following year, he recorded an abstract of judgment for $994,945 in
El Dorado County, where Kendrick owned a real property (the Property), and
1 Stephen H. Kendrick is deceased and his estate was not substituted in
as a party. Juniper Twelve LLC is also not a party to this appeal. Thus, the
respondents in this appeal are Claire, Rosemary, and Katharine Kendrick.
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obtained a lien against the Property. At the time Pillet recorded his abstract
of judgment, the Property was already encumbered by two senior deeds of
trust securing loans totaling $1,802,500. In 2007, Pillet renewed his
judgment in the amount of $2,090,324, consisting of the original $994,945
plus attorney fees and costs and post-judgment interest. In 2009, he recorded
an amended abstract of judgment for $2,090,324. Pillet’s lien remained in
third priority position behind the two senior deeds of trust.
Meanwhile, Kendrick had entered into a business transaction with an
entity known as Fourth Third, LLC (Fourth Third) and owed the entity
$2,500,000. On January 13, 2012, Fourth Third demanded payment and
informed Kendrick of its intent to file a lawsuit unless payment was made by
January 18, 2012. Kendrick did not make the payment; instead, on
January 18, 2012, he transferred title of the Property—which was the only
asset he owned as of that date—to his daughters Claire, Rosemary, and
Katharine (the Kendrick Daughters) as a gift, without payment or
consideration.2 In May 2014, the Kendrick Daughters transferred title of the
Property to Juniper Twelve LLC (Juniper Twelve), an entity owned and
controlled by Kendrick. According to Pillet, the value of the Property at the
time of the 2014 transfer was $3,900,000—enough to satisfy all three liens.
Through both transfers, the Property remained subject to all three liens, and
none of the lienholders, including Pillet, took any action to force a sale of the
Property.
On December 31, 2015, Pillet filed the instant action against Kendrick,
the Kendrick Daughters, and Juniper Twelve seeking to set aside the 2012
and 2014 transfers of the Property. Pillet also renewed his 2005 judgment
2 Fourth Third filed a lawsuit against Kendrick on January 19, 2012 and
obtained a $2,900,000 judgment against him.
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against Kendrick and recorded a third abstract of judgment. By the time
Pillet filed the instant action, the first and second lien positions were held by
The Evergreen Advantage, LLC (Evergreen) as successor in interest to the
first and second trustee interests. Juniper Twelve eventually defaulted on
loans secured by Evergreen’s trust deeds, and Evergreen foreclosed on the
Property in 2017, thereby extinguishing Pillet’s and Juniper Twelve’s
interests in the Property.
On April 2, 2018, Pillet filed the operative complaint alleging two
causes of action for fraudulent conveyance (Civ. Code, §§ 3439.04, 3439.05)
and causes of action for declaratory relief and resulting trust. He alleged
Kendrick conveyed the Property to his daughters in 2012 after Fourth Third,
to whom Kendrick owed $2,500,000, threatened litigation. He alleged
Kendrick, his daughters, and Juniper Twelve conducted the 2012 and 2014
transfers “with the intention of hindering, delaying and defrauding [Pillet]”
and to “make the [P]roperty difficult, expensive, and cumbersome to enforce
the Judgment against the same.” Pillet asserted the Property should be sold
and that “[u]pon the sale, the court should direct that the net sales proceeds,
after payment of valid liens and encumbrances, costs of sale, and other
charges, be paid and that all remaining funds be remitted to Plaintiff.” Pillet
requested various remedies including “striking the conveyances” and
declaring them “null and void,” a declaration “that Kendrick was at all times
and is the owner of the Property,” and an order restraining defendants from
engaging in any further transfers.
On December 11, 2018, after Kendrick’s death, the remaining
defendants—the Kendrick Daughters and Juniper Twelve (together,
Defendants)—moved for summary judgment, asserting Pillet could not show
he was damaged by the 2012 and 2014 transfers because a transferee of a
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real property takes title to the property subject to any existing liens; thus,
the Property remained subject to Pillet’s lien through the transfers and the
transfers had no effect on Pillet’s lien. Defendants also asserted Pillet’s
causes of action for declaratory relief and resulting trust were “wholly
dependent on the Fraudulent Transfer Causes of Action and should also be
summarily adjudicated.” Pillet opposed the motion asserting there was a
disputed issue of material fact regarding the validity of his abstracts and that
he was entitled to remedies including a declaration that the transfers were
void and damages under the Uniform Fraudulent Transfers Act (UFTA).
The trial court denied the motion for summary judgment as to Juniper
Twelve on the basis that Juniper Twelve had been suspended by the State.
The court granted summary judgment in favor of the Kendrick Daughters,
stating they “shifted their burden to show that the [P]roperty was transferred
to them at the time a recorded Abstract of Judgment was on file, and that
Plaintiff failed to show any harm by the transfer. Plaintiff failed to establish
any material triable issues of fact. The Court also notes that the relief
Plaintiff seeks to obtain in this action against these defendants appears to be
impossible as they no longer have any interest in the [P]roperty; the
[P]roperty was foreclosed upon; the foreclosing entity is not a party to this
action.” Pillet appealed from the summary judgment.
Thereafter, Pillet obtained a default against Juniper Twelve and
proceeded by way of a default “prove-up” hearing as to Juniper Twelve. After
the hearing, the trial court entered judgment in favor of Juniper Twelve on
the basis that Pillet had a “security interest against [the Property] evidenced
by . . . the several abstracts of judgments that he [filed] as a lien against this
property.” Noting that a judgment lien “cannot be avoided by transferring
real property,” the court determined the Property “was at all times since 2005
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subject to [Pillet’s] valid lien interest and, therefore, Kendrick’s transfers of
the property did not constitute a transfer of an asset within the meaning of
the UFTA.” “The UFTA only provides a remedy to a creditor for the transfer
of an interest when the transfer is made to prevent a creditor from reaching
the interest. [Citations.]” The court stated Pillet “did not execute on this lien
that he had created 11 years before the foreclosure sale” and “cannot obtain
relief under the UFTA because he cannot establish injury which is an
essential claim under the UFTA.” “Therefore, the Court orders . . . [that]
plaintiff take nothing on his first and second causes of actions. Declaratory
relief is denied and the trust is denied.” Pillet appealed from the judgment
and filed an unopposed motion in our court to consolidate the two appeals,
which we granted.
DISCUSSION
Summary judgment is properly granted when there is no triable issue
of material fact and the moving party is entitled to judgment as a matter of
law. (Code Civ. Proc., § 437c, subd. (c).) A defendant meets its burden of
showing a cause of action has no merit by showing that one or more elements
of the cause of action cannot be established, or that there is a complete
defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860.) Once the defendant
meets its burden, the burden shifts to the plaintiff to show a triable issue of
material fact exists. (Code Civ. Proc., § 437c, subd. (p)(2).) On appeal, we
exercise our independent judgment, deciding whether under the undisputed
facts the plaintiff’s claim cannot be established or there is a complete defense.
(Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 860.) Here, we
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conclude the trial court properly granted judgment in favor of Defendants as
Pillet cannot show he was injured by the 2012 and 2014 transfers.3
The UFTA, former Civil Code, section 3439, et seq.,4 “ ‘declares rights
and provides remedies for unsecured creditors against transfers that impede
them in the collection of their claims,’ and its purpose ‘is primarily to protect
unsecured creditors against transfers and obligations injurious to their
rights.’ (Legis. Com. com., 12A West’s Ann. Civ. Code (1997 ed.) foll.
§ 3439.01, pp. 272, 273; accord, Mejia v. Reed (2003) 31 Cal.4th 657, 664.)”
(Renda v. Nevarez (2014) 223 Cal.App.4th 1231, 1235.) “The UFTA is
remedial legislation [citation] designed to protect creditors by authorizing
them to set aside transfers of property by which debtors try to avoid paying
debts by putting assets beyond creditors’ reach [citations].” (Ibid.) The
plaintiff to a fraudulent transfer cause of action bears the burden of
3 Pillet asserts the trial court’s summary judgment was essentially a
judgment on the pleadings because defendants conceded the truth of all
material allegations in the complaint. He suggests this court should
therefore review the summary judgment as if it were a judgment on the
pleadings and determine in the first instance whether he should be granted
leave to amend. We decline to do so. (Johnson v. Greenelsh (2009) 47 Cal.4th
598, 603 [“ ‘issues not raised in the trial court cannot be raised for the first
time on appeal’ ”].) In any event, Pillet does not explain how he would be
able to amend his complaint to state a valid claim. (See Schifando v. City of
Los Angeles (2003) 31 Cal.4th 1074, 1081 [on appeal from judgment on the
pleadings, the plaintiff has the burden of showing a reasonable possibility of
curing the defect with an amendment].)
4 Effective January 1, 2016 the UFTA was superseded by the Uniform
Voidable Transactions Act with respect to transfers made on or after the
effective date. (Civ. Code, § 3439.14, subd. (a).) Because the transactions at
issue in this case occurred prior to 2016, the UFTA applies. All undesignated
statutory references are to the Civil Code, and all references to the Civil Code
sections of the UFTA are to the statutes that were in effect at the time of the
transfers.
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establishing: (1) he has a “creditor’s claim,” i.e., a “right to payment”
(§ 3439.01, subd. (b)); (2) there was a “transfer” of an “asset” (§ 3439.01,
subds. (a), (m)); (3) the transfer was conducted “[w]ith actual intent to hinder,
delay, or defraud” a creditor (§ 3439.04, subd. (a)); (4) the plaintiff was
harmed by the transfer; and (5) the defendant’s conduct was a substantial
factor in causing the harm. (§§ 3439.04, subd. (a)(1), (c), 3439.05; Dollar
Trees Stores, Inc. v. Toyama Partners LLC (2012) 875 F.Supp.2d 1058, 1079.)
“A well-established principle of the law of fraudulent transfers is ‘[that
a transfer] may be attacked only by one who is injured thereby. Mere intent
to delay or defraud is not sufficient; injury to the creditor must be shown
affirmatively. In other words, prejudice to the plaintiff is essential. It cannot
be said that a creditor has been injured unless the transfer puts beyond his
reach property he otherwise would be able to subject to the payment of his
debt.’ [Citations.]” (Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75, 80
(Mehrtash), italics added.) In Mehrtash, the Court of Appeal held the
plaintiff-creditor failed to show injury where the fraudulently transferred
property was heavily mortgaged and there was no evidence “the value of the
property could support any net recovery for [the plaintiff] in the event the
conveyance were set aside” and the property were sold. (Id. at pp. 81-82; Fid.
Nat’l Title. Ins. Co. v. Schroeder (2009) 179 Cal.App.4th 834, 864 [creditor
had no fraudulent transfer claim where he failed to show he was injured by
the transfer].)
Here, assuming the 2012 and 2014 transfers were fraudulent, we
conclude Pillet cannot show he was injured by the transfers because he held a
judgment lien on the Property at all relevant times; thus, he had a secured
interest in the Property that remained in effect through both of the transfers.
“Under California’s judgment lien law, a judgment creditor’s recordation of
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an abstract of judgment creates a judgment lien that attaches to all real
property situated in the county in which the judgment is recorded and that
otherwise is subject to enforcement of the money judgment against the
debtor.” (Lezine v. Security Pacific Fin. Services, Inc. (1996) 14 Cal.4th 56,
64-65.) After obtaining a judgment, a judgment creditor may prepare an
abstract of judgment, which can then be recorded in any county in which a
debtor owns a real property. (Wells Fargo Financial Leasing, Inc. v. D & M
Cabinets (2009) 177 Cal.App.4th 59, 69.) Once recorded, the abstract
“attaches to” the property and becomes a judgment lien, (ibid.), and the
judgment creditor thereafter has the right and ability to execute the lien and
foreclose on the property as a means of securing payment of the judgment
debt (Dieden v. Schmidt (2002) 104 Cal.App.4th 645, 651).
Under Code of Civil Procedure section 697.390 subdivision (a), when a
real property that is subject to a judgment lien is transferred before the lien
is satisfied or extinguished, the property “remains subject to a judgment
lien . . . in the same amount as if the [property] had not been transferred.”
Under Code of Civil Procedure section 695.070, the judgment lien may be
enforced against the property after the transfer “in the same manner and to
the same extent as if there had been no transfer, even after the death of the
judgment debtor. (§ 695.070.)” (Dieden v. Schmidt, supra, 104 Cal.App.4th
at p. 651.) Thus, judgment liens cannot be avoided by transferring real
property, and when transferees take title to a Property, they do so “subject”
to any lien interests that exist at the time of transfer. (Ibid.; Federal Deposit
Ins. Corp. v. Charlton (1993) 17 Cal.App.4th 1066, 1069 [transferees are
charged with constructive knowledge of any liens and take title to the
property subject to the liens].)
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Here, Pillet obtained a judgment lien against the Property in 2006 and
the lien was enforceable against the Property at all times, until it was
satisfied or extinguished. Because a lien survives any transfers in title (Code
Civ. Proc., § 697.390), the Property remained subject to Pillet’s lien through
the 2012 and 2014 transfers in the same amount as if the Property had never
been transferred. Thus, when the Kendrick Daughters and Juniper Twelve
took title to the Property in 2012 and 2014 respectively, they did so subject to
all liens—Pillet’s lien and the two senior deeds of trust—that existed at the
time of the transfers. Pillet argues he was aggrieved because the transfers
made it “difficult, expensive, and cumbersome” for him to enforce the
Judgment” and placed a “cloud” on title, thereby making the Property
“further judgment-proof.” The transfers, however, did not affect Pillet’s
ability to execute on the lien in any way; rather, he had the right to do so at
all times.5 As noted, the stated Legislative purpose of the UFTA is “ ‘to
protect unsecured creditors against transfers and obligations injurious to
their rights.’ (Legis. Com. com., 12A West’s Ann. Civ. Code (1997 ed.) foll.
§ 3439.01, pp. 272, 273.)” (Renda v. Nevarez, supra, 223 Cal.App.4th at
p. 1235, italics added.) Here, Pillet had a secured interest in the Property at
all relevant times (i.e., he was not an “unsecured creditor”), and his interest
was not affected by the 2012 and 2014 transfers.
Pillet argues the trial court erred in “assum[ing]” he had a valid
judgment lien against the Property through the 2012 and 2014 transfers
5 The record does not reveal why Pillet did not execute on his lien. He
alleges the value of the Property significantly increased between 2012 and
2014. As he was in third priority position after two senior deeds of trust
totaling $1,802,500, perhaps the equity in the Property pre-2014 was
insufficient to result in any net recovery for him. It is unclear, however, why
he did not attempt to execute on his lien in 2014 when there was apparently
enough equity to satisfy all three liens.
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because “there were . . . disputed issues of material fact concerning whether
Pillet’s liens were valid.” It appears his argument is that because the
abstracts his former attorney prepared and filed were defective, his liens
were void as a matter of law, as if they had never existed, and thus the 2012
and 2014 transfers were not made “subject to” his liens. Defendants respond
that Pillet is unfairly “attempting to capitalize” on what he perceives as
mistakes made by his former attorney, and that none of the alleged “defects”
“recently discovered” by Pillet affect the validity of his judgment lien. We
agree with Defendants that the purported defects did not render Pillet’s
judgment lien void.
Pillet asserts his 2006 abstract was defective because it was not
certified by the court clerk, and that his 2009 abstract was defective because
it did not include Kendrick’s social security information and the address at
which he was served. Section 674 subdivision (a)(6), however, provides that
the last four digits of the debtor’s social security number must be provided
only “if . . . known to the judgment creditor.” Here, Pillet satisfied this
requirement by checking the box on the abstract form stating the social
security number was “unknown.”6 Further, section 674 subdivision (a)(3)
provides the abstract must also include the debtor’s first and last name and
“last known address and the address at which the summons was either
personally served or mailed to the . . . debtor or the . . . debtor’s attorney of
record.” The 2009 abstract provides Kendrick’s first and last name and lists
6 Pillet submitted a declaration to the trial court stating he actually
knew Kendrick’s social security information and his attorney therefore
should have included it in the abstract. Under section 674 subdivision (b),
however, Pillet was authorized to amend his abstract at any time to include
the social security information, and the amended abstract would have been
assigned “priority as of the date of recordation of the original abstract of
judgment.”
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an address as his last known address. Other documents in the record show
that this address is the same address at which Kendrick was served with the
summons. Thus, on its face, the 2009 abstract satisfied the requirements set
forth in section 674.
We further note that Pillet acknowledged below that he recorded
multiple abstracts of judgment that appeared on the Property title reports
and that his abstracts likewise appeared on the Grantor/Grantee Index in
El Dorado County. There was no indication that anyone had ever questioned
or attacked the validity of Pillet’s lien or that Pillet made any attempts to
execute on his lien and was unable to do so due to the purported defects.
There was also no dispute that Defendants had actual or constructive
knowledge of all existing liens on the Property, including Pillet’s lien, and
that they took title to the Property subject to those liens. We conclude, based
on the record before us, that the 2009 abstract was not defective or void and
affirm the trial court’s implied finding that there were no disputed issues of
material fact relating to the validity of Pillet’s judgment lien.
In sum, we conclude the trial court properly granted judgment in favor
of Defendants on the grounds that there were no disputed issues of material
fact and the transfers did not cause injury to Pillet.7
7 The trial court granted judgment in favor of Defendants for the
additional reason that Pillet could not prove another element of the UFTA—
i.e., that the 2012 and 2014 transfers constituted transfers of an “asset” as
defined by the UFTA. (§ 3439.01, subd. (a) [defining “asset” as property that
is not encumbered by a valid lien].) The parties raise various arguments
relating to whether the court properly determined that the Property—which
was encumbered by a valid lien—was an “asset” whose transfer was protected
by the UFTA. In light of our conclusion that the court properly entered
judgment for Defendants for other reasons, we will not address Pillet’s
arguments relating to the court’s additional/alternate reason for granting
judgment in favor of Defendants.
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DISPOSITION
The summary judgment in favor of the Kendrick Daughters and
judgment in favor of Juniper Twelve are affirmed. Respondents Claire,
Rosemary, and Katharine Kendrick shall recover their costs on appeal.
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_________________________
Petrou, J.
WE CONCUR:
_________________________
Siggins, P.J.
_________________________
Fujisaki, J.
A157681, A158217/Pillet v. Kendrick
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