Potter v. Alliance United Ins. Co.

Filed 7/23/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
CHRISTOPHER POTTER, B287614
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. MC026408)
v.
ALLIANCE UNITED INSURANCE
COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Brian C. Yep, Judge. Reversed and remanded
with directions.
Black Compean & Hall, Michael D. Compean and Frederick
G. Hall, for Plaintiff and Appellant.
Lewis Brisbois Bisgaard & Smith, Lane J. Ashley, Raul L.
Martinez, and Celia Moutes-Lee, for Defendant and Respondent.
Plaintiff and appellant Christopher Potter (Potter) was
injured by Jesus Remedios Avalos-Tovar (Tovar) in an auto
accident. Tovar was insured by defendant and respondent
Alliance United Insurance Company (AUIC), with a maximum
liability limit of $15,000. Potter offered to settle personal injury
claims against Tovar for his policy limit, but AUIC did not
respond to the offer. The claim was later tried to a jury and
Potter obtained a judgment against Tovar for nearly one million
dollars—which the trial court subsequently vacated when
granting AUIC’s motion for new trial. Then, before retrial, AUIC
paid Tovar $75,000 to release any bad faith claim he had against
AUIC (for AUIC’s failure to accept the early settlement offer).
Potter again prevailed after the second trial, this time obtaining
a judgment in excess of one million dollars. Unable to collect that
sum from the insolvent Tovar, Potter sued AUIC and alleged the
release it procured from Tovar was a fraudulent conveyance
under statutory and common law. We consider whether the trial
court was right to sustain AUIC’s demurrer and dismiss the
fraudulent conveyance suit on either of two alternative grounds—
namely, that the suit was barred by the statute of limitations and
failed to state a proper fraudulent conveyance claim.
2
I. BACKGROUND1
A. AUIC Procures the Release After a Jury Finding for
Potter
In October 2007, Potter was severely injured when the
motorcycle he was riding collided with the automobile Tovar was
driving. Tovar was insured under an automobile insurance policy
issued by AUIC, which included liability coverage limited to
$15,000 per person.
Two months after the accident, Potter wrote to AUIC and
offered to settle his claims against Tovar in exchange for
payment of the $15,000 policy limit. The offer stated it would
expire in 30 days. AUIC did not respond to the offer before it
expired.
Potter later filed a personal injury lawsuit against Tovar in
Los Angeles Superior Court. That action proceeded to trial in
July 2009. Tovar conceded he was at least partially at fault for
Potter’s injuries but challenged the amount of damages. The jury
returned a verdict in Potter’s favor, awarding him $908,643.
Tovar filed a motion for a new trial and the trial court
granted it—vacating the existing jury verdict and judgment.
Potter appealed.
In April 2010, while Potter’s appeal was pending, AUIC
and Tovar entered into a confidential “Release and Settlement
Agreement” (Release) pursuant to which Tovar released and
discharged AUIC from “any claims for negligence, delay, bad
1
Our factual recitation is taken from the operative
complaint’s allegations and attached exhibits. (See generally
Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919,
924, fn. 1 (Yvanova).)
3
faith, punitive damages, unfair practices, malpractice, emotional
distress, consequential loss and damage, excess judgment, and
personal injury.” Tovar also agreed he would “not make any
assignments, file any suit, take any action or pursue any action
[or] proceeding against releasees arising out of or in any way
pertaining to the [Potter] automobile accident or the insurance
and legal claims relating to said accident.” In exchange for
Tovar’s release of claims and agreement to forego any assignment
related to the Potter liability action, AUIC paid Tovar $75,000.
B. Judgment Again for Potter, Who Cannot Collect
Against Tovar
The Court of Appeal affirmed the order granting a new trial
in the Potter liability action and the case was remanded for
retrial. In early April 2012—before a trial setting conference in
the personal injury action and some two years after the Release
had been executed—counsel for Tovar disclosed the existence of
the Release to Potter’s counsel. The second trial in the personal
injury action commenced approximately a year later. The jury
again returned a verdict in Potter’s favor, this time awarding him
$975,000 in damages. The trial court also awarded Potter
$108,455.59 in recoverable costs and $441,697.92 in prejudgment
interest. In December 2013, the trial court entered judgment for
Potter in the amount of $1,523,887.16.
From the time of the accident through the time of the
second jury verdict, Tovar was insolvent—the only means he had
of paying any significant portion of the judgment was his
prerogative to sue AUIC. Potter offered to take an assignment of
Tovar’s rights against AUIC in exchange for a covenant not to
execute the judgment against Tovar’s personal assets. Because
4
he had already signed the Release, however, Tovar was unable to
agree.
AUIC paid Potter the $15,000 policy limit but refused to
satisfy the remainder of the judgment.
C. Potter Sues AUIC on a Fraudulent Conveyance
Theory and the Trial Court Sustains AUIC’s
Demurrer
Potter filed an original complaint in this action alleging
eight causes of action, including breach of contract, breach of the
implied covenant of good faith and fair dealing, and engaging in a
fraudulent conveyance. Potter subsequently filed first and
second amended complaints, each alleging a single cause of action
for fraudulent conveyance. Potter later filed a third amended
complaint (the operative complaint) alleging only two causes of
action: statutory and common law fraudulent conveyance.
The former cause of action, predicated on a violation of
California’s Uniform Voidable Transactions Act (the UVTA,2 Civ.
Code,3 § 3439 et seq.), alleges Tovar was insolvent prior to and at
the time Tovar and AUIC entered into the Release. The cause of
2
The UVTA was formerly known as the Uniform Fraudulent
Transfers Act (UFTA) until it was amended and renamed
effective January 1, 2016. (Stats. 2015, ch. 44, § 3.) Although the
transfer at issue here took place in 2010, the UVTA does not
substantively differ from the UFTA in any manner pertinent to
our analysis. Thus, like the parties, we refer to and cite the
current version of the UVTA throughout this opinion unless
otherwise noted.
3
Undesignated statutory references that follow are to the
Civil Code.
5
action further alleges that Tovar had a viable claim for breach of
the implied covenant of good faith and fair dealing against AUIC,
which was an “asset” he could have used to pay down his civil
liability, and that AUIC participated in a fraudulent transfer of
that asset by entering into the Release—which prevented Potter
from collecting all or a greater share of the judgment in his
favor.4
The operative complaint’s common-law-based fraudulent
conveyance cause of action proceeded on essentially the same
theory, but without reliance on the terms of the UVTA. The
Release was illegal, the cause of action alleged, because the
insolvent Tovar transferred his right to sue for breach of the
covenant of good faith and fair dealing to AUIC, AUIC intended
to prevent Potter from collecting the full amount of the judgment,
and Tovar did not receive reasonably equivalent value for the
claim released.
AUIC demurred to the operative complaint, arguing the
allegations predicated on the UVTA and common law failed to
state facts sufficient to constitute a proper fraudulent conveyance
cause of action. As relevant for our purposes, AUIC’s demurrer
argued the UVTA-based cause of action was (1) barred by the
statute of limitations and constituted a sham pleading because
4
The operative complaint further alleged facts evidencing
AUIC’s intent to “hinder, delay or defraud” Potter, namely, the
failure to disclose the Release for two years, the decision to enter
into the Release after Potter had obtained a judgment against
Tovar that was substantially higher than his policy limit, AUIC’s
awareness that Tovar lacked assets other than the rights to the
bad faith claim he released, and the purportedly inadequate
consideration Tovar received for the Release.
6
its amendments contradicted prior allegations regarding when
Potter became a creditor of Tovar; (2) Potter lacked standing to
assert a UVTA claim because AUIC was not a debtor, a
transferee, or a person for whose benefit a transfer was made; (3)
the bad faith claim was not an “asset” when Tovar and AUIC
entered into the Release because there was no judgment in effect
against Tovar at the time; and (4) Potter could not allege he was
injured by the transfer. As to the common law cause of action,
AUIC argued it failed because Potter lacked standing to sue and
could not prove any injury.
At the demurrer hearing, the trial court initially opined the
sham pleading and statute of limitations arguments “have some
merit.” But the court asked the parties to focus their arguments
on “whether this [i.e., the released bad faith claim] is an asset,
whether there’s been a transfer of this asset, whether there are
damages and, if so, whether they’re speculative or not, and the
issue of standing.” The parties thereafter argued consistent with
their positions in the demurrer briefing.
After hearing argument from counsel, the trial court
acknowledged AUIC’s conduct “doesn’t pass the smell test for
sure,” but the court further mused that “doesn’t mean that
something unlawful was done.” The court ultimately concluded it
would sustain AUIC’s demurrer without leave to amend “for all of
the reasons we discussed other than [an argument made by AUIC
seeking to invoke] the mediation privilege.” The trial court
prepared no further articulation of these reasons, and AUIC gave
notice of the bottom-line ruling. A judgment of dismissal was
then entered for AUIC.
7
II. DISCUSSION
Potter’s briefing on appeal includes no meaningful
discussion of his common law fraudulent conveyance cause of
action, nor of why the trial court erred in sustaining the
demurrer to it. We therefore do not address it and instead affirm
the trial court’s ruling on that score. But the trial court’s UVTA
ruling is adequately challenged, and that challenge has merit.
Insofar as the trial court sustained AUIC’s demurrer
because the UVTA claim is barred by the applicable statute of
limitations, the conclusion is unsound. That cause of action was
timely filed because the fraudulent transfer complained of was
made during the pendency of a lawsuit that would (and did)
establish whether a debtor-creditor relationship existed between
Potter and Tovar. Under California precedent, the statute of
limitations thus did not begin running until the judgment in the
personal injury action became final. The trial court’s remaining
reasons (from what we can gather) for sustaining AUIC’s
demurrer were also faulty. Tovar’s right to sue for bad faith was
an asset under the UVTA because it was an assignable form of
personal property at the time the Release was executed. Potter
had a “claim” against Tovar when the release was executed.
Potter sufficiently alleged injury because the cause of action was
an asset of Tovar’s that was put out of Potter’s reach by the
Release. And AUIC is a proper defendant because the “transfer”
of the bad faith claim (within the meaning of the UVTA, which
defines “transfer” to include a “release”) was made for its benefit.
A. Standard of Review
We review de novo an order sustaining a demurrer without
leave to amend. (Centinela Freeman Emergency Medical
8
Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994,
1010; Morales v. 22nd Dist. Agricultural Assn. (2016) 1
Cal.App.5th 504, 537.) “[W]e accept the truth of material facts
properly pleaded in the operative complaint, but not contentions,
deductions, or conclusions of fact or law. We may also consider
matters subject to judicial notice. (Evans v. City of Berkeley
(2006) 38 Cal.4th 1, 6[ ].)” (Yvanova, supra, 62 Cal.4th at p. 924,
fn. omitted.)
“‘[T]he plaintiff has the burden of showing that the facts
pleaded are sufficient to establish every element of the cause of
action and overcoming all of the legal grounds on which the trial
court sustained the demurrer, and if the defendant negates any
essential element, we will affirm the order sustaining the
demurrer as to the cause of action.’ [Citation.]” (Rossberg v.
Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1490-1491;
accord, Carman v. Alvord (1982) 31 Cal.3d 318, 324 [“A judgment
of dismissal after a demurrer has been sustained without leave to
amend will be affirmed if proper on any grounds stated in the
demurrer, whether or not the [trial] court acted on that ground”];
E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497,
504, fn. 2 [validity of the trial court’s action, not the reason for its
action, is what is reviewable].)
B. Overview of the UVTA
The UVTA is the most recent iteration of creditor
protection statutes that trace their origin to the reign of Queen
Elizabeth I. (Legis. Com. com., 12A pt. 2 West’s Ann. Civ. Code
(2016 ed.) foll. § 3439.01, p. 253; see also Mejia v. Reed (2003) 31
Cal.4th 657, 664 (Mejia).) A fraudulent transfer under the UVTA
“‘is a transfer by the debtor of property to a third person
9
undertaken with the intent to prevent a creditor from reaching
that interest to satisfy its claim.’ [Citation.]” (Kirkeby v.
Superior Court (2004) 33 Cal.4th 642, 648.) “Under the U[V]TA,
a transfer can be invalid either because of actual fraud (Civ.
Code, § 3439.04, subd. (a)) or constructive fraud (id., §§ 3439.04,
subd. (b), 3439.05) . . . .” (Mejia, supra, at p. 661.)
“A creditor who is damaged by a transfer described in
either section 3439.04 or section 3439.05 can set the transfer
aside or seek other appropriate relief under Civil Code section
3439.07.” (Monastra v. Konica Business Machs., U.S.A., Inc.
(1996) 43 Cal.App.4th 1628, 1635-1636.) As pertinent here, a
creditor may recover against either “[t]he first transferee of the
asset or the person for whose benefit the transfer was made.”
(§ 3439.08, subd. (b)(1).)
Actual fraud under the UVTA is shown when a transfer is
made, or an obligation is incurred, “[w]ith actual intent to hinder,
delay, or defraud any creditor of the debtor.” (§ 3439.04, subd.
(a)(1).) Such a transfer is voidable as to a creditor of the debtor,
“whether the creditor’s claim arose before or after the transfer
was made or the obligation was incurred.” (§ 3439.04, subd. (a).)
It is not voidable, however, “against a person that took in good
faith and for a reasonably equivalent value given the debtor or
against any subsequent transferee or obligee.” (§ 3439.08, subd.
(a).)
Constructive fraud under the UVTA can be shown in either
of two ways. First, a transfer is constructively fraudulent where
a debtor makes a transfer or incurs an obligation “[w]ithout
receiving a reasonably equivalent value in exchange for the
transfer or obligation, and the debtor either: (A) [w]as engaged or
was about to engage in a business or a transaction for which the
10
remaining assets of the debtor were unreasonably small in
relation to the business or transaction[; or] (B) [i]ntended to
incur, or believed or reasonably should have believed that the
debtor would incur, debts beyond the debtor’s ability to pay as
they became due.”5 (§ 3439.04, subd. (a)(2).) As with actual
fraud, this form of transfer is voidable as to a creditor no matter
whether the creditor’s claim arose before or after the transfer.
(§ 3439.04, subd. (a).) Second, a transfer is constructively
fraudulent when a debtor makes a transfer or incurs an
obligation “without receiving a reasonably equivalent value in
exchange for the transfer or obligation and the debtor was
insolvent at that time or the debtor became insolvent as a result
of the transfer or obligation.” (§ 3439.05, subd. (a).) This form of
transfer is voidable as to a creditor whose claim arose before the
transfer was made. (§ 3439.05, subd. (a).)
C. The UVTA’s Filing Deadlines Pose No Bar to Potter’s
UVTA Cause of Action
The UVTA states a cause of action under section 3439.04,
subdivision (a)(1) (actual fraud) is “extinguished” unless filed “not
later than four years after the transfer was made or the
obligation was incurred or, if later, not later than one year after
the transfer or obligation was or could reasonably have been
discovered by the claimant.” (§ 3439.09, subd. (a).) The statute
provides a cause of action under section 3439.04, subdivision
(a)(2) (constructive fraud—assets too small or debts too large) or
5
Former section 3439.04, subd. (a)(2)(B) used the phrase “he
or she” rather than “the debtor.” (Former § 3439.04, subd.
(a)(2)(B).)
11
section 3439.05 (constructive fraud—insolvency) must be filed
“not later than four years after the transfer was made or the
obligation was incurred.”6 (§ 3439.09, subd. (b).)
The “after the transfer was made or the obligation was
incurred” language used by section 3439.09 was interpreted by
the Court of Appeal over 20 years ago in Cortez v. Vogt (1997) 52
Cal.App.4th 917 (Cortez). The panel in that case analyzed when
UVTA filing deadlines are triggered in a case where the “transfer
alleged to be a fraudulent conveyance occurs during an
underlying action which later establishes by final judgment the
actual legal existence of a debtor-creditor relationship.” (Id. at p.
929.) We are, of course, presented with that same basic scenario
here: the Release was executed during the pendency of Potter’s
action against Tovar, which ultimately confirmed Potter was a
creditor of Tovar.
Relying on “legislative material published in connection
with the adoption of the [UVTA],” the Cortez opinion holds the
filing deadlines run from the time the underlying judgment
becomes final. (Cortez, supra, 52 Cal.App.4th at p. 929.) Cortez
reached that conclusion in light of: (1) the UVTA’s purpose as a
cumulative remedy in addition to preexisting remedies—
remedies for which California Supreme Court precedent holds the
limitations period begins to run at the time of judgment in the
underlying action (Adams v. Bell (1936) 5 Cal.2d 697, 703); (2) a
desire to construe the UVTA in a manner consistent with other
6
The wording of the UVTA differs slightly from the wording
of the former UFTA. The differences are inconsequential for our
analysis.
12
states’ laws;7 and (3) “[t]he potential of unnecessary litigation if
strict time limits are drawn for fraudulent transfer cases in
circumstances such as are involved in [Cortez].” (Cortez, supra,
52 Cal.App.4th at pp. 930-937.)
Potter’s lawsuit against Tovar, the result of which would
establish whether and to what extent Potter is a creditor of
7
The analysis and result in Cortez has since been criticized
by some courts in other jurisdictions. (See, e.g., Schmidt v. HSC,
Inc. (2014) 131 Hawaii 497, 511; Moore v. Browning (Ct.App.
2002) 203 Ariz. 102, 109; but see GEA Group AG v. Flex-N-Gate
Corp. (7th Cir. 2014) 740 F.3d 411, 417 [noting the Illinois
Supreme Court has not addressed the issue and could potentially
agree with the “forcefully argued” Cortez].) In the 20-plus years
since Cortez was decided, however, no published case in
California has disagreed with its holding or adopted the
reasoning of the critical out-of-state cases. We will not be the
first, partly in deference to the reliance interests that may have
grown up around Cortez and to the salutary aim of ensuring
predictability and stability in the law.
AUIC, for its part, does not argue Cortez was wrongly
decided. Rather, AUIC cites PGA West Residential Assn., Inc. v.
Hulven Internat., Inc. (2017) 14 Cal.App.5th 156 (PGA West) and
contends PGA West concluded section 3439.09 is a statute of
repose (not a statute of limitations), thereby rendering Cortez
distinguishable. AUIC misreads PGA West, or more precisely,
reads it too broadly. The court in PGA West considered a
question Cortez did not: whether section 3439.09, subdivision (c),
which places a backstop seven-year filing cap on a UVTA action
“[n]otwithstanding any other provision of law,” is subject to
tolling. PGA West does not, as AUIC suggests, declare either
subdivisions (a) or (b) statutes of repose, and we decline to so
extend the case’s holding, which is solely focused on subdivision
(c).
13
Tovar, was pending when the Release was signed. Following
Cortez, the UVTA filing deadlines did not begin to run until
judgment was entered in the underlying action. (Cortez, supra,
52 Cal.App.4th at p. 937.) That occurred on December 20, 2013,
and Potter filed his original complaint within four years of that
date, on June 24, 2016. The suit is therefore timely.
D. The Operative Complaint States a Valid UVTA Claim
AUIC’s demurrer did not challenge the sufficiency of
Potter’s allegations of either actual or constructive fraud.
Instead, the demurrer attacked the sufficiency of the
foundational allegations that establish certain predicates for a
UVTA violation, namely whether Potter sufficiently alleged (1) an
asset was transferred, (2) Potter was injured by the transfer, and
(3) any suffered injury entitled Potter to sue AUIC. AUIC
continues to press these points on appeal. AUIC additionally
argues the complaint failed to sufficiently allege that Potter had
a “claim” against Tovar or that Tovar was insolvent at the
pertinent time. We take up these arguments and find each
lacking.
1. The cause of action for bad faith is an “asset”
In pertinent part, the UVTA defines an asset as the
“property of a debtor,” excluding property “to the extent it is
encumbered by a valid lien[,]” and “to the extent it is generally
exempt under nonbankruptcy law.” (§ 3439.01, subd. (a).) As
noted by the Legislative Committee Comments, the definition of
asset “requires a determination that the property is subject to
enforcement of a money judgment. Under Section 704.210 of the
Code of Civil Procedure, property that is not subject to
14
enforcement of a money judgment is exempt.” (Legis. Com. com.,
12A pt. 2 West’s Ann. Civ. Code (2016 ed.) foll. § 3439.01, p. 253.)
“Except as otherwise provided by law, all property of the
judgment debtor is subject to enforcement of a money judgment.”
(Code Civ. Proc., § 695.010, subd. (a).) “‘Property’ includes real
and personal property and any interest therein.” (Code Civ.
Proc., § 680.310.) “‘Personal property’ includes both tangible and
intangible personal property.”8 (Code Civ. Proc., § 680.290.)
A cause of action to recover money damages is known as a
“chose in action,” which is considered a form of personal property.
(Vick v. DaCorsi (2003) 110 Cal.App.4th 206, 212, fn. 35; see also
Code Civ. Proc. § 17, subd. (b)(8)(A) [defining “personal property”
to include “things in action”].) From just these basic definitional
principles, Tovar’s right to bring a bad faith cause of action would
constitute personal property subject to the enforcement of a
money judgment.
The Code of Civil Procedure, however, includes an
exception to the rule that we must consider to see if it changes
the result. The Code states: “Except as otherwise provided by
statute, property of the judgment debtor that is not assignable or
transferable is not subject to enforcement of a money judgment.”
(Code Civ. Proc. § 695.030, subd. (a).) The question, of course,
becomes whether Tovar’s bad faith cause of action was
assignable, and for that, we look to the nature of the cause of
action.
8
Potter’s opening brief contends at some length that the
intangible nature of the property at issue here does not bear on
the adequacy of his pleading. Because we agree and AUIC does
not argue to the contrary, we do not address this point further.
15
“The implied covenant [of good faith and fair dealing]
imposes on an insurer the duty to accept a reasonable settlement
offer within policy limits when there is a substantial likelihood of
a judgment against the insured exceeding policy limits.
[Citation.] An insurer who breaches this duty is liable for all of
the insured’s damages proximately caused by the breach,
regardless of policy limits.” (Wolkowitz v. Redland Ins. Co. (2003)
112 Cal.App.4th 154, 162 (Wolkowitz).) An insured, however, has
no immediate remedy for a refusal to settle; rather, “[u]ntil
judgment is actually entered, the mere possibility or probability
of an excess judgment does not render the refusal to settle
actionable.” (Safeco Ins. Co. of Am. v. Superior Court (1999) 71
Cal.App.4th 782, 788 (Safeco).)
An insured may, however, assign a cause of action for bad
faith failure to settle in exchange for the plaintiff’s covenant not
to execute an excess judgment against the insured’s personal
assets. (Hamilton v. Maryland Cas. Co. (2002) 27 Cal.4th 718,
732 (Hamilton); see also 21st Century Ins. Co. v. Superior Court
(2015) 240 Cal.App.4th 322, 327 (21st Century); Safeco, supra, 71
Cal.App.4th at pp. 788-789.) This both “ensure[s] a reliable
judicial determination of the insured’s liability for purposes of a
later bad faith action and eliminate[s] the insured’s exposure to
an excess judgment.” (Wolkowitz, supra, 112 Cal.App.4th at p.
164.) The assignment “is not immediately assertable,” but
“becomes operative after the excess judgment has been rendered.”
(Hamilton, supra, at p. 732; see also Wolkowitz, supra, at p. 164
[an insured can assign the bad faith cause of action against the
insurer to the claimant “before trial in the underlying action”];
21st Century, supra, at p. 327 [“insured may assign any bad faith
claims to the plaintiff in exchange for a covenant not to execute;
16
the assignment will become operative after trial and in the event
that an excess judgment has been rendered”].)
Under this established authority, Tovar’s bad faith cause of
action against AUIC was assignable when Tovar entered into the
Release even though Tovar could not yet have sued AUIC.
Because it was assignable, and because it does not appear to be
otherwise exempted, the potential cause of action is property
subject to a money judgment and therefore an asset under the
UVTA. AUIC’s arguments to the contrary are all unpersuasive.
AUIC relies on Safeco, supra, 71 Cal.App.4th 782, for the
proposition that a cause of action for bad faith failure to settle
accrues only after a judgment has been rendered in excess of the
policy limits. True, that is what Safeco says, but that is not all it
says. Safeco and the other cases we have cited recognize a bad
faith cause of action may be assigned to the claimant before trial
in the underlying action (id. at p. 788), and AUIC does not reckon
with that aspect of precedent that is dispositive on the meaning
of “asset” under the UVTA. AUIC also contends the cause of
action was not an asset because Tovar could not have sold it to
satisfy the excess judgment. The cause of action was
transferable, though, and that undercuts AUIC’s unsupported
assertion that the cause of action was not an asset.
Additionally, AUIC contends section 1045, which provides
“[a] mere possibility, not coupled with an interest, cannot be
transferred,” demonstrates the unaccrued cause of action could
not have been assigned. This contention is similarly
unpersuasive. “Although common law and statutory rules
against assignment of expectations . . . prevent the transferee
from immediately asserting his claim, the attempted transfer of a
future right arising out of the breach of the insurer’s duty to
17
settle in good faith operates as an ‘equitable assignment or
contract to assign, which becomes operative as soon as the right
comes into existence.’ [Citation.]” (Schlauch v. Hartford Accident
& Indem. Co. (1983) 146 Cal.App.3d 926, 931, fn. 3.) Indeed,
California courts have long enforced assignments of contingent
expectancies “[d]espite . . . section 1045.” (Bank of California v.
Connolly (1973) 36 Cal.App.3d 350, 366-367; see also Dougherty
v. California Kettleman Oil Royalties, Inc. (1937) 9 Cal.2d 58, 89.)
Because we conclude the cause of action was an asset
within the meaning of the UVTA, AUIC’s argument that the
Release was not a transfer of an asset also fails. “‘[T]ransfer’
under the U[V]TA has a broad meaning.” (Sturm v. Moyer (2019)
32 Cal.App.5th 299, 308.) It includes “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.” (§ 3439.01, subd. (m),
italics added.) Under the plain language of the UVTA, a release
qualifies as a “transfer.”
AUIC nevertheless relies on canons of statutory
interpretation to argue Tovar’s release of his contingent bad faith
cause of action could not constitute a transfer under the UVTA
because “release” only applies to an asset or interest in an asset,
not to the release of a right. The canons do not alter the statute’s
plain meaning, however, and in any event, we have decided there
was an asset involved and the argument therefore fails by
necessity.
18
2. Potter alleged sufficient facts to establish he
had a claim against Tovar
AUIC also argues Potter did not have a “claim” against
Tovar, and thus was not a “creditor” when Tovar executed the
Release, because Potter did not have a judgment against Tovar at
the time. While AUIC is correct that a creditor under the UVTA
is “a person that has a claim,” the word “claim” is not as narrowly
defined as AUIC contends. With an exception not pertinent here,
a claim is “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.” (§ 3439.01, subd. (b).)
The plain language of section 3439.01 demonstrates an
individual need not have a judgment to have a claim, as does
section 3439.04, which provides certain transfers are voidable as
to a creditor “whether the creditor’s claim arose before or after
the transfer was made” (§ 3439.04, subd. (a)). Though Potter did
not have a judgment against Tovar when the Release was
executed, he had a claim against him. He and Tovar were thus,
respectively, a creditor and debtor under the terms of the UVTA.
(§ 3439.01, subds. (c), (e).)
3. Potter sufficiently alleged injury
The operative complaint alleges Potter obtained a verdict in
his favor in the amount of $1,523,887.16 and has been damaged
because he cannot collect the full amount of the excess judgment
from either Tovar or AUIC. As we have already concluded, the
bad faith cause of action was a transferrable asset. Without the
Release, Tovar could have assigned the cause of action to Potter.
If Tovar had declined to do so in favor of pursing it himself,
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Potter could have placed a lien on the cause of action or potential
proceeds of the lawsuit. (Code Civ. Proc., § 708.410, subd. (a).)
The Release deprived Potter of those options. While it is unclear
at this juncture what value Tovar’s cause of action had or has,9
the allegation is sufficient to demonstrate injury for the purposes
of a demurrer.
We also reject AUIC’s argument that Potter was not
injured by the Release because it did not put any property out of
the reach of a creditor. The basic premise of this contention is
that Potter did not have a judgment or a “right to payment” when
the Release was executed. As described above, a right to
payment under the UVTA need not be “reduced to judgment” in
order for a claim to exist. (§ 3439.01, subd. (b).) Potter had a
“claim,” and was a creditor, when the Release was executed.
4. Potter alleged sufficient facts to establish AUIC
is a proper defendant for this cause of action
AUIC appears to have abandoned the contention, raised
below, that Potter lacks standing to sue AUIC for fraudulent
conveyance. We nevertheless address the contention briefly
because it is unclear from the trial court’s “for all of the reasons
we discussed” ruling whether it based any part of its decision on
this contention.
The UVTA permits a creditor to recover against a
transferee or a “person for whose benefit the transfer was made.”
9
It seems fair to assume, however, from the $75,000 AUIC
paid Tovar in consideration for the Release, that the cause of
action had significant monetary value when the Release was
executed.
20
(§ 3439.08, subd. (b)(1)(A).) AUIC argued Potter could not state a
cause of action for fraudulent conveyance against AUIC because
AUIC was not a debtor, a transferee, or a person for whose
benefit a transfer was made. The facts as alleged in the operative
complaint forestall this conclusion. As alleged, the transfer in
question was made for AUIC’s benefit.
5. AUIC’s insolvency argument fails
AUIC argues the trial court properly sustained the
demurrer because the Release did not render Tovar “insolvent” as
defined by the UVTA. Only one of the three methods of proving a
violation of the UVTA requires a plaintiff to prove insolvency
(§ 3439.05), and the operative complaint pleads all three methods
in the alternative. As a result, even if AUIC were correct, it has
not shown the complaint fails to state a cause of action for
violation of the UVTA.
E. Potter Waived Any Challenge to the Demurrer Ruling
on the Common Law Cause of Action
Though Potter’s briefs on appeal include passing mentions
of his cause of action for common law fraudulent conveyance, he
includes no meaningful discussion of it and cites no pertinent
authority regarding it. “‘When an appellant fails to raise a point,
or asserts it but fails to support it with reasoned argument and
citations to authority, we treat the point as waived.’ (Nelson v.
Avondale Homeowners Assn. (2009) 172 Cal.App.4th 857, 862[ ].)
‘We are not bound to develop appellants’ arguments for them.
[Citation.] The absence of cogent legal argument or citation to
authority allows this court to treat the contention as waived.’
[Citations.]” (Cahill v. San Diego Gas & Electric Co. (2011) 194
21
Cal.App.4th 939, 956.) Cahill’s observations apply fully to
Potter’s common law cause of action and the trial court’s ruling
as to that cause of action will therefore stand.
DISPOSITION
The judgment of dismissal is reversed and the case is
remanded for further proceedings consistent with this opinion.
Potter is to recover his costs on appeal.
CERTIFIED FOR PUBLICATION
BAKER, J.
We concur:
RUBIN, P. J.
MOOR, J.
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