JOSEPH C. SPERO, Chief Magistrate Judge.
Plaintiffs Priya Sanger and Michael Sanger are co-own a residential building in San Francisco as a tenancy in common with non-party Leah Ahn and another individual who is not involved with the facts of this case. The Sangers brought this action under California's Uniform Voidable Transactions Act (the "UVTA") challenging a deed of trust recorded on March 18, 2013 by Defendant Lance Ahn (Leah Ahn's brother) on behalf of Defendant Ahe Ahn (Leah Ahn and Lance Ahn's mother), which placed in trust Leah Ahn's interest in the tenancy in common, purportedly to secure Leah Ahn's repayment of a promissory note in favor of Ahe Ahn. The Ahns
Most of the facts relevant to the arguments raised in the present motion are not in dispute. The Sangers and Leah Ahn, along with another non-party, own a residential building in San Francisco as tenants in common, subject to a mortgage on the property as a whole. The tenancy in common is governed by a contract, the "Tenancy in Common Agreement" ("TICA"), which sets forth each cotenant's interest in the property, share of the mortgage obligation, and other rights and duties. Leah Ahn's share of the tenancy in common has at all relevant times been worth more than her share of the amount due on the mortgage but less than the total amount due.
The Sangers contend that Leah Ahn has been delinquent in her mortgage payments and other obligations for many years. They obtained a ruling to that effect from an arbitrator, which a California state court affirmed as a judgment in 2012. The judgment was amended several times in the years since then to reflect increasing amounts owed by Leah Ahn. The Sangers obtained a writ of execution against Leah Ahn in 2013 and an order of sale for her interest in the property in 2014, but Leah Ahn filed for bankruptcy, halting a planned sheriff's sale. In 2017, a bankruptcy court determined that the Sangers' abstract of judgment was invalid for failure to sufficiently identify the Sangers and judgment creditors, and Judge Tigar affirmed that decision on appeal to the district court in 2018. An appeal of that decision to the Ninth Circuit remains pending, with oral argument scheduled for October 22, 2019. See Ahn v. Sanger, No. 18-16794 (9th Cir.).
The Sangers filed this action in state court seeking to void the deed of trust and recover damages under the UVTA. The Ahns removed to this Court, and this Court granted the Sangers' motion for a preliminary injunction barring the Ahns from foreclosing under the deed of trust pending the outcome of litigation. The Sangers filed their operative first amended complaint ("FAC," dkt. 41) after the Court granted in part a motion for judgment on the pleadings. The Court recently denied a motion by the Sangers for leave to amend their complaint further after the deadline set by a scheduling order for amendment had expired.
In their present motion for summary judgment, the Ahns contend that the UVTA does not apply because there was no "transfer" of an "asset" as those terms are defined in the statute, as a result of the total amount due on the mortgage exceeding the value of Leah Ahn's interest in the tenancy in common. Mot. (dkt. 53) at 4-10. The Ahns also argue that they are entitled to judgment on the Sangers' claim against Lance Ahn, because Lance Ahn was is neither the transferee nor a person for whose benefit a transfer was made, and because the purported defects in the Sangers' underlying claim are fatal to any derivative claim against Lance Ahn based on a theory of conspiracy. Id. at 10-11. The Ahns' motion also briefly suggests that the Ahns are entitled to summary judgment because the Sangers are unsecured creditors. Id. at 8.
The Ahns' motion does not include a number of arguments first raised in their reply brief: (1) whether the Sangers' complaint sufficiently alleged that Leah Ahn's interest was of greater value than relevant encumbrances, an issue that is regardless better suited for motion at the pleading stage than at summary judgment, see Reply (dkt. 67) at 7-8; (2) whether the Sangers should be estopped from claiming they are secured creditors, an issue that is regardless irrelevant to the outcome of this motion for reasons discussed below, see id. at 8-10; (3) whether Lance Ahn's role was merely "administrative" such that he cannot be held liable as a coconspirator, id. at 12; and (4) whether the opinions of the Sangers' expert witness regarding the value of the property should be excluded,
Summary judgment on a claim or defense is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to designate "`specific facts showing there is a genuine issue for trial.'" Id. (citation omitted); see also Fed. R. Civ. P. 56(c)(1) ("A party asserting that a fact . . . is genuinely disputed must support the assertion by . . . citing to particular parts of materials in the record. . . ."). "[T]he inquiry involved in a ruling on a motion for summary judgment . . . implicates the substantive evidentiary standard of proof that would apply at the trial on the merits." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 252 (1986). The non-moving party has the burden of identifying, with reasonable particularity, the evidence that precludes summary judgment. Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). Thus, it is not the task of the court to scour the record in search of a genuine issue of triable fact. Id.; see Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026, 1031 (9th Cir. 2001); Fed. R. Civ. P. 56(c)(3).
A party need not present evidence to support or oppose a motion for summary judgment in a form that would be admissible at trial, but the contents of the parties' evidence must be amenable to presentation in an admissible form. See Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003). Neither conclusory, speculative testimony in affidavits nor arguments in moving papers are sufficient to raise genuine issues of fact and defeat summary judgment. Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant, Scott v. Harris, 550 U.S. 372, 378 (2007), but where a rational trier of fact could not find for the non-moving party based on the record as a whole, there is no "genuine issue for trial" and summary judgment is appropriate. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).
The Sangers seek to void Ahe Ahn's deed of trust pursuant to California Civil Code section 3439.04, which governs transactions voidable by present or future creditors. FAC ¶ 64.
The Ahns' arguments here focus not on whether the deed of trust was "fraudulent" within the meaning of the UVTA,
The UVTA applies to "transfers," defined as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance." Cal. Civ. Code § 3439.01(m). The statute defines an "asset" broadly as "property of a debtor," but excludes (among other exceptions) "[p]roperty to the extent it is encumbered by a valid lien." Id. § 3439.01(a). "Property" is defined as "anything that may be the subject of ownership." Id. § 3439.01(j). A "valid lien" is defined as "a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings." Id. § 3439.01(n).
To bring a claim under the UVTA, a creditor must affirmatively show prejudice as a result of the challenged transfer. Mehrtash v. Mehrtash, 93 Cal.App.4th 75, 80 (2001). The transfer must cause "property [the plaintiff] otherwise would be able to subject to the payment of [the plaintiff's] debt" to be placed "beyond [the plaintiff's] reach." Id. (citation and internal quotation marks omitted).
The Ahns rely heavily on a California appellate court's decision in Schoenfeld v. Norberg, 11 Cal.App.3d 755 (1970). That case did not involve a claim under the UVTA, but instead a judgment creditor's efforts to force a sale of a judgment debtor's home. See id. at 758-59. The home was worth $35,000, it was subject to other liens and encumbrances of $9,099, and the judgment debtor was entitled to a homestead exemption of $12,500. Id. at 759. The trial court ordered a sale without resolving whether the judgment debtor and his wife owned the home as community property or as a joint tenancy. Id. The appellate court reversed, holding that the trial court erred in failing to resolve that question because if the home was community property, the entirety of it could be reached to satisfy the husband's debt, while if it was a joint tenancy, only the husband's interest could be sold. Id. at 760-61. The appellate court also held that, if the property was held as a joint tenancy and the husband's interest was to be sold, the homestead exemption and encumbrances would apply in full to that one-half interest. Id. at 761-67. The appellate court's analysis of encumbrances reads as follows:
Id. at 765-67. The Schoenfeld court acknowledged that its holding established "severe limitations . . . on the situations in which a sale of property held in cotenancy between the judgment debtor-homestead claimant and another party could be ordered," but concluded that it was bound by statutory language "apparently adopted without consideration of encumbrances on jointly owned property." Id. at 766. A more recent California appellate decision quoted Schoenfeld for the proposition that a debtor's interest in a tenancy in common "can be sold at execution only if its appraised value exceeds the value of any homestead exemption plus the total value of joint encumbrances on the entire property," but that case involved attorney malpractice claims, and Schoenfeld was at most tangentially relevant to its outcome. Dang v. Smith, 190 Cal.App.4th 646, 661 (2010).
The Sangers argue that Schoenfeld is inapposite because it considered power to order a judgment sale rather than the definition of an "asset" under the UVTA, but cite no authority distinguishing Schoenfeld or reaching a different conclusion with respect to the UVTA. The only case cited by the Sangers at all relevant to this issue is Romo v. Stewart Title of California, 35 Cal.App.4th 1609 (1995), which explains that a buyer at a nonjudicial foreclosure takes title subject to any senior liens.
The Ninth Circuit distinguished Schoenfeld in a 1991 bankruptcy case not cited by either party here, holding "that Schoenfeld is a case about powers of sale rather than a case about valuation." In re Reed, 940 F.2d 1317, 1323 (9th Cir. 1991). Much like in Schoenfeld, the bankruptcy debtor in Reed held a residence as a joint tenancy with his wife, and the value of encumbrances and his homestead exemption exceeded the value of his one-half interest, but not the value of the residence as a whole. Id. at 1322-23 & nn.6, 9. The debtor and his wife sold the home while the bankruptcy was pending. Id. at 1320. The Ninth Circuit affirmed a preliminary injunction issued by the bankruptcy court requiring the debtor to turn over net proceeds of the sale to the bankruptcy estate. Id.
The Ninth Circuit acknowledged that "[c]ases interpreting Schoenfeld have strictly adhered to its mandate that, when calculating a Debtor's equity in a joint-tenancy interest for creditor sale purposes, one must subtract the full value of the outstanding liens and encumbrances and the homestead exemption from the Debtor's one-half interest in the fair market value," and no sale can be ordered on behalf of a creditor where the result is negative. Id. at 1322 (citing bankruptcy court decisions).
The relevant case law provides little guidance as to how the UVTA applies to encumbrances on tenancies in common. In the absence of precedent so holding, this Court declines to adopt the unintuitive rule that a fractional interest in a tenancy in common must exceed the value of encumbrances on the property as a whole to constitute an "asset." As the Court noted at the hearing, such a rule would countenance intentionally fraudulent transfers of assets with real net value so long as a total encumbrance on the whole of a tenancy in common exceeded the value of a defendant's fractional interest, regardless of the how the value of that interest compares to a proportionate share of the encumbrance.
The language of the UVTA does not compel a holding that a tenancy-in-common interest is not an "asset" where a shared mortgage exceeds the value of the individual interest, but the individual share of that mortgage does not. The Court declines to so hold. While there might be circumstances where Schoenfeld could nullify any prejudice as a result of a transfer of a fractional interest of lesser value than an encumbrance on the property as a whole, because Schoenfeld's bar against a subsequent forced sale would result in the property remaining outside the creditor's reach regardless of whether the transfer occurred, this is not such a case.
The parties dispute whether the Sangers have a secured interest in the property at issue. The Court need not decide that issue, because the UVTA protects both secured and unsecured creditors.
The Ahns rely on a 1994 California decision and a 2015 Utah decision for the proposition that unsecured creditors cannot proceed under the UVTA. Mot. at 8 (citing Tassone v. Tovar, 28 Cal.App.4th 765, 769 (1994); Rupp v. Moffo, 358 P.3d 1060, 1065 (Utah 2015)). In both cases, the relevant courts determined that senior encumbrances on or exemptions applicable to the properties at issue exceeded the value of the properties as a whole,
The Ahns quote a phrase from Rupp stating that "unsecured creditors are not harmed because they would never have been able to recover their debt by means of the encumbered property," but fail to acknowledge that the phrase appears in a discussion of "property that is fully encumbered by a valid lien." See Rupp, 358 P.3d at 1064-65; Mot. at 8. Rupp explicitly acknowledges that Utah's codification of the UVTA, which is materially identical to California's, contains no "indication that a creditor's standing is contingent on any actual interest in the property at issue." Rupp, 358 P.3d at 1063.
To the extent that Tassone could be read as suggesting, as an alternative to its clearer holding that the debtor's homestead exemption exceeded the value of the property at issue, that a creditor must have a lien on the property purportedly transferred in order to proceed under the UVTA, it is contrary to the language of the statute. A more recent California decision has explained that a plaintiff need not even have a judgment, much less a lien, at the time of the challenged transfer:
Potter v. All. United Ins. Co., 37 Cal. App. 5th 894, 909 (2019) (emphasis added).
The UVTA is clear that an unsecured creditor may bring a claim to void a transfer. Cal. Civ. Code § 3439.01(b). Whether the Sangers were secured creditors is of no consequence.
The Ahns' motion challenges the Sangers' claim against Lance Ahn only on the grounds that: (1) Lance was not a transferee or beneficiary of the transfer; and (2) any claim against Lance Ahn based on a theory of conspiracy must fail for the same reasons that the Ahns argued they were entitled to summary judgment on the underlying claim against Ahe Ahn.
The Sangers' claim against Lance Ahn is based solely on a theory of conspiracy. See Opp'n at 8-9. The Court previously held that such a theory can be viable with respect to a claim under the UVTA, although the Sangers' original complaint lacked sufficient allegations regarding Lance Ahn's involvement to state such a claim. See Order Re Mot. for J. on the Pleadings (dkt. 38) at 10-12.
The only basis for judgment on the Sangers' claim against Lance Ahn as a coconspirator that the Court considers here is the argument raised in the Ahns' motion: that the Ahns are entitled to judgment on the underlying claim against Ahe Ahn under the UVTA. Because the Court declines to grant judgment on the underlying claim for the reasons discussed above, the Court also declines to grant judgment on the claim against Lance Ahn as a coconspirator.
For the reasons discussed above, the Ahns' motion for summary judgment is DENIED.
