John Sarkisian v. Ronald Stadtmueller ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUL 29 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: RUDOLPH MEDINA, AKA Rudy No. 20-60045
Medina,
Debtor, BAP No.
------------------------------ SC-19-1299
JOHN SARKISIAN; BERNADETTE
SARKISIAN,
Appellants, MEMORANDUM*
v.
RONALD E. STADTMUELLER, Chapter 7
Trustee,
Appellee.
Appeal from the United States Bankruptcy
Appellate Panel of the Ninth Circuit
Submitted July 27, 2021**
Pasadena, California
Before: M. SMITH and OWENS, Circuit Judges, and ROBRENO,*** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes that this case is suitable for
decision without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Eduardo C. Robreno, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
John and Bernadette Sarkisian (“John” and “Bernadette” individually, and
“the Sarkisians” jointly) appeal the decision of the bankruptcy appellate panel
(“BAP”) reversing the bankruptcy court’s grant of summary judgment in their
favor and against Ronald Stadtmueller, trustee for the bankruptcy estate of
Rudolph Medina (“Trustee”).
I. Facts and Background
Trustee attempted to enforce a money judgment against John. The Sarkisians
then transmuted their community property into separate property. John argued that
Trustee could not enforce the judgment against Bernadette’s now separately owned
property. Trustee filed an adversarial proceeding, asserting that the transmutation
was voidable as actually fraudulent under the California Uniform Voidable
Transactions Act (“UVTA”), California Civil Code §§ 3439 to 3439.14.
On November 7, 2019, the bankruptcy court granted summary judgment in
the Sarkisians’ favor, ruling that while the transmutation agreement was a transfer
under the UVTA, Trustee failed to prove the transfer actually injured him or the
estate. Specifically, the bankruptcy court found that Trustee’s contention, “that
because John severed his creditors’ access to half of the pre-Transmutation
Agreement assets, the estate has less to pursue, and therefore must be injured,” was
too hypothetical and generalized to amount to an actual injury.
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On August 14, 2020, the BAP reversed and remanded, holding that
California Civil Code § 3439.04(a)(1) does not require a creditor to prove a
defined injury when alleging an actual intentionally fraudulent transfer. See In re
Medina, 619 B.R. 236 (B.A.P. 9th Cir. 2020). The Sarkisians appealed.
II. Jurisdiction and Standard
The BAP had jurisdiction pursuant to 28 U.S.C. § 158(b). We have
jurisdiction pursuant to 28 U.S.C. § 158(d).
We review the appeal of a summary judgment ruling de novo, applying “the
same test that is initially employed by the trial court under Rule 56(c), Federal
Rules of Civil Procedure.” Radobenko v. Automated Equip. Corp., 520 F.2d 540,
543 (9th Cir. 1975). Under Federal Rule of Civil Procedure 56, applicable to
bankruptcy proceedings pursuant to Federal Rule of Bankruptcy Procedure 7056,
summary judgment is appropriate when “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); see Fed. R. Bankr. P. 7056.
III. Discussion
In order to void the transmutation agreement, Trustee brought an actual
fraudulent transfer claim under the UVTA, which provides in relevant part that “[a]
transfer made or obligation incurred by a debtor is voidable as to a creditor . . . if
the debtor made the transfer or incurred the obligation” “[w]ith actual intent to
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hinder, delay, or defraud any creditor of the debtor.” 1 Cal. Civ. Code §
3439.04(a)(1).
The BAP construed this statutory language as requiring Trustee to prove
only that the transmutation agreement was a: “(1) ‘transfer’ of an (2) ‘asset’ and
was (3) ‘made . . . with actual intent to hinder, delay, or defraud any creditor of the
debtor.’” In re Medina, 619 B.R. at 241 (quoting Cal. Civ. Code § 3439.04(a)(1)).
It concluded that “[n]o statutory language supports a requirement that the plaintiff
prove damages or actual injury or that the debtor’s remaining assets after the
transfer were insufficient to satisfy the debt without undue burden.” Id. at 241-42(footnote omitted). As a result, the BAP reversed the bankruptcy court’s grant of
summary judgment in the Sarkisians’ favor. Id. at 238.
The Sarkisians raise several arguments against the BAP’s interpretation
including that Mehrtash v. Mehrtash, 112 Cal. Rptr. 2d 802 (Ct. App. 2001),
creates an additional unwritten requirement under section 3439.04(a)(1): that the
creditor must establish he or she suffered an actual injury. Specifically, the
Sarkisians point to the language in Mehrtash stating that “[m]ere 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.” 112 Cal. Rptr. 2d at 805
1
The bankruptcy court previously held that the transmutation agreement was
a transfer under the UVTA. This holding was not appealed. In re Medina, 619 B.R.
at 240 n.3.
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(quoting 16 Cal. Jur. 3d Creditors’ Rights and Remedies § 430 (1983)). The
Sarkisians argue Trustee was required to produce evidence of an injury by showing
the transmutation: (1) made his collection efforts more difficult; (2) caused him a
specific financial injury; or (3) prejudiced him in some other way.
The BAP addressed the Sarkisians’ arguments and found, inter alia, that they
were relying on an incomplete reading of Mehrtash. The full relevant passage is:
“A transfer in fraud of creditors 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 [her] reach property [she]
otherwise would be able to subject to the payment of [her] debt.”
Id. (alterations in original) (emphasis added) (quoting 16 Cal. Jur. 3d Creditors’
Rights and Remedies § 430 (1983)). Because the last sentence indicates that the
necessary injury is a transfer of assets beyond the creditor’s reach, the BAP held
that Mehrtash was not inconsistent with its analysis and was not helpful to the
Sarkisians. In re Medina, 619 B.R. at 245-46. The BAP concluded that the only
affirmative injury necessary pursuant to section 3439.04(a)(1) and Mehrtash is
proof that the debtor, with the intent to hinder, delay, or defraud the creditor,
placed property out of the creditor’s reach that could have been used to pay the
debt. Id. We agree with the reasoning of the BAP regarding this argument as well
as the other arguments raised by the Sarkisians. See id. at 241-48 (analyzing the
Sarkisians’ arguments).
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The Sarkisians argue that the construction offered by the BAP creates an
untenable rule that anytime a debtor transfers something of value, there is per se
evidence of an injury to the creditor. But that is not so. Instead, the rule is, if the
debtor transfers something of value, and the creditor proves it was done with the
actual intent to hinder, delay, or defraud the creditor, then the creditor has been
injured.
The plain language of section 3439.04(a)(1), as well as long-standing case
law, do not require a creditor to prove an additional injury before the court voids a
transfer for actual fraud. See Fross v. Wotton, 44 P.2d 350, 352 (Cal. 1935)
(holding that an actual fraudulent transfer claimant need not prove there were no
other assets that would satisfy the debt and concluding that “this is in accordance
with the long-established rule in this state that where there is actual fraud it is
immaterial that the debtor does not entirely strip himself of his assets and there is
other property from which the creditor may be satisfied”); see also Hager v.
Shindler, 29 Cal. 47, 59 (1865) (providing that “[a] rich man may make a
fraudulent deed as well as one who is insolvent”). Instead, the only harm a creditor
must show is that the debtor concealed assets that could have been used to settle
the debt with the intention of making it more difficult for the creditor to collect.
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Thus, the BAP correctly concluded that the bankruptcy court erred by
finding that Trustee’s failure to provide evidence of a specific injury entitled the
Sarkisians to summary judgment, since no such evidence was required.
AFFIRMED.
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