Case Title: Kirkeby v. Sup. Ct.

Citation: 

Docket Number: S117640

State: california

Court: California Supreme Court

Date: 2004-07-22T00:00:00Z

Document:
1 
Filed 7/22/04 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
CYNTHIA KIRKEBY, 
) 
 
 
) 
 
Petitioner, 
) 
 
 
) 
S117640 
 
v. 
) 
 
 
) 
Ct.App. 4/3 G031262 
THE SUPERIOR COURT OF 
) 
ORANGE COUNTY, 
) 
 
) 
Orange County 
 
Respondent; 
) 
Super. Ct. No. 01CC09667 
 
 
) 
FREDERICK W. FASCENELLI et al., 
) 
 
 
) 
 
Real Parties in Interest. 
) 
___________________________________ ) 
In this case, we consider whether a fraudulent conveyance claim affects 
title to or the right to possession of specific real property and therefore supports 
the recording of a notice of pendency of action—commonly referred to as a lis 
pendens.  We conclude that it does. 
FACTS 
FasTags, Inc., (FasTags) is a manufacturer and wholesale seller of 
identification tags for pets.  Petitioner Cynthia Kirkeby and her brother Frederick 
Fascenelli developed the idea for the tags and jointly hold the patent for the 
manufacturing processes.  Frederick and his wife Diana Fascenelli (hereafter the 
Fascenellis) hold 51 percent of the outstanding stock in FasTags, and Kirkeby 
owns 39 percent.  The remaining 10 percent of FasTags’s outstanding stock is held 
by the FasTags Stock Trust, of which Kirkeby is the trustee.   
2 
After Kirkeby resigned from the FasTags board of directors in 1998, she 
alleged the Fascenellis looted the company.  According to Kirkeby, the Fascenellis 
caused FasTags to execute improper patent licenses to increase their own salaries 
and bonuses, to pay their personal expenses, and to make improper loans.  The 
Fascenellis allegedly prevented Kirkeby from seeking corporate records, canceled 
meetings so that Kirkeby could not elect a member to the board of directors, and 
appointed directors without board approval.  
Kirkeby filed the instant action in late 2001.  In the complaint, Kirkeby 
alleged 27 causes of action, including a cause of action for fraudulent conveyance, 
and sought declaratory and injunctive relief and damages in the aggregate amount 
of $4.9 million on behalf of herself and FasTags.  
In her fraudulent conveyance cause of action, Kirkeby alleged that Frederick 
obtained a $50,000 loan from FasTags by representing that he would use the 
borrowed funds to construct a building to house FasTags’s operations.  But 
Frederick did not use this loan for its stated purpose.  According to Kirkeby, 
Frederick used the loan to purchase residential income property (the Oak Street 
Property) for himself and Diana in June 2000.  After making this purchase, the 
Fascenellis immediately transferred their interest in the property to Italy & Greek 
Holdings, a family limited partnership (the Family Partnership).  
Prior to the purchase of the Oak Street Property—in May 1999—Frederick 
also transferred his interest in his family’s residence (the Clark Street Property) to 
the Fascenelli Family Trust.  Several months later, the Fascenellis—as trustees of 
that trust—transferred the trust’s interest in the Clark Street Property to the Family 
Partnership.  Kirkeby alleged that the Fascenellis made both of these transfers in 
order to defraud creditors in the collection of their claims, and requested that the 
transfers be voided to the extent necessary to satisfy the claims set forth in her 
3 
complaint.  These transfers formed the bases of Kirkeby’s fraudulent conveyance 
claim as set forth in her complaint.   
After filing her action, Kirkeby recorded a notice of lis pendens on the Oak 
Street Property and the Clark Street Property.  The Fascenellis moved to expunge 
the lis pendens.  The trial court granted the motion.  During the hearing on the 
motion to expunge, the court held that the complaint was primarily about money 
damages and that the recording of a lis pendens was not appropriate where a cause 
of action for fraudulent conveyance—Kirkeby’s only claim relating to the real 
property at issue—was made but no ownership interest or possessory interest had 
been claimed in the subject properties.   
Kirkeby filed a writ petition seeking review of the expungement order.  The 
Court of Appeal denied the petition.  The Court of Appeal held that Kirkeby’s 
complaint did not affect title to or the right to possession of real property so as to 
support her lis pendens, as required under Code of Civil Procedure section 405.4.  
The Court of Appeal determined that the basis of Kirkeby’s complaint was to 
recover money that the Fascenellis wrongfully diverted to themselves in the 
running of FasTags.  With respect to Kirkeby’s fraudulent conveyance claim, the 
Court of Appeal stated, “[w]ith the exception of the cause of action for fraudulent 
conveyance, the complaint has nothing to do with real property.  And the goal of 
the fraudulent conveyance cause of action is to make the property available for the 
collection of a judgment, not to further a claim by Kirkeby to title or possession.”   
We granted review. 
DISCUSSION 
“A lis pendens is a recorded document giving constructive notice that an 
action has been filed affecting title to or right to possession of the real property 
described in the notice.”  (Urez Corp. v. Superior Court (1987) 190 Cal.App.3d 
4 
1141, 1144.)  A lis pendens may be filed by any party in an action who asserts a 
“real property claim.”  (Code Civ. Proc., § 405.20.)1  Section 405.4 defines a  
“ ‘Real property claim’ ” as “the cause or causes of action in a pleading which 
would, if meritorious, affect (a) title to, or the right to possession of, specific real 
property . . . . ”  “If the pleading filed by the claimant does not properly plead a 
real property claim, the lis pendens must be expunged upon motion under CCP 
405.31.”  (Code com., 14 West’s Ann. Code Civ. Proc. (2004 supp.) foll. § 405.4, 
p. 239.) 
Section 405.30 allows the property owner to remove an improperly 
recorded lis pendens by bringing a motion to expunge.  There are several statutory 
bases for expungement of a lis pendens, including the claim at issue here:  
claimant’s pleadings, on which the lis pendens is based, do not contain a real 
property claim.  (See § 405.31.)2  Unlike most other motions, when a motion to 
expunge is brought, the burden is on the party opposing the motion to show the 
existence of a real property claim.  (See § 405.30.)   
The Fascenellis moved to expunge pursuant to section 405.31—lack of a 
real property claim.3  Section 405.31 provides:  “In proceedings under this 
                                             
 
1 
Unless otherwise indicated, all further statutory references are to the Code 
of Civil Procedure.   
2 
Other bases for expungement include:  (1) claimant’s failure to comply 
with the recording, service or filing requirements of section 405.22 (see § 405.23); 
(2) claimant’s failure to establish the probable validity of a real property claim by 
a preponderance of the evidence (see § 405.32); (3) claimant is secured by a 
property owner filing an undertaking (see § 405.33); and (4) claimant’s failure to 
file an undertaking ordered by the court as a condition to maintaining a lis pendens 
(see § 405.34). 
3 
At oral argument, counsel for the Fascenellis stated that, in addition to 
section 405.31, the motion to expunge was also brought pursuant to section 
405.32.  Kirkeby’s counsel disputed this statement.  Upon our review of the 
 
(footnote continued on next page) 
5 
chapter, the court shall order the notice expunged if the court finds that the 
pleading on which the notice is based does not contain a real property claim.”  In 
making this determination, the court must engage in a demurrer-like analysis.  
“Rather than analyzing whether the pleading states any claim at all, as on a general 
demurrer, the court must undertake the more limited analysis of whether the 
pleading states a real property claim.”  (Code com., 14 West’s Ann. Code Civ. 
Proc., supra, foll. § 405.31, at p. 249.)  Review “involves only a review of the 
adequacy of the pleading and normally should not involve evidence from either 
side, other than possibly that which may be judicially noticed as on a demurrer.”  
(Code com., 14 West’s Ann. Code Civ. Proc., supra, foll. § 405.30, at p. 248.)  
Therefore, review of an expungement order under section 405.31 is limited to 
whether a real property claim has been properly pled by the claimant.  (Code com., 
14 West’s Ann. Code Civ. Proc., supra, foll. § 405.31, at p. 249.) 
Because only Kirkeby’s fraudulent conveyance claim relates to real 
property, we must now determine whether that claim, as pled, affects “title to, or 
the right to possession of, specific real property.”  (§ 405.4.)  We conclude it does.   
A fraudulent conveyance claim is set forth in the Uniform Fraudulent 
Transfer Act (UFTA), which is codified in Civil Code section 3439 et seq.  “A 
fraudulent conveyance is a transfer by the debtor of property to a third person 
undertaken with the intent to prevent a creditor from reaching that interest to 
satisfy its claim.”  (Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 
13.)  A transfer under the UFTA is defined as “every mode, direct or indirect, 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
record, it is clear that the motion to expunge was brought solely under section 
405.31.   
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absolute or conditional, voluntary or involuntary, of disposing of or parting with 
an asset . . . , and includes payment of money, release, lease, and creation of a lien 
or other encumbrance.”  (Civ. Code, § 3439.01, subd. (i).)  “A transfer of assets 
made by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose 
before or after the transfer, if the debtor made the transfer (1) with an actual intent 
to hinder, delay, or defraud any creditor, or (2) without receiving reasonably 
equivalent value in return, and either (a) was engaged in or about to engage in a 
business or transaction for which the debtor’s assets were unreasonably small, or 
(b) intended to, or reasonably believed, or reasonably should have believed, that 
he or she would incur debts beyond his or her ability to pay as they became due.  
[Citations.]”  (Cortez v. Vogt (1997) 52 Cal.App.4th 917, 928, fns. omitted; see 
also Civ. Code, § 3439.04.)4   
Civil Code section 3439.075 sets forth the remedies in a fraudulent 
conveyance action.  Under subdivision (a)(1) of that section, a creditor who makes 
                                             
 
4 
Civil Code section 3439.04 provides:  “A transfer made or obligation 
incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim 
arose before or after the transfer was made or the obligation was incurred, if the 
debtor made the transfer or incurred the obligation as follows:  [¶]  (a) With actual 
intent to hinder, delay, or defraud any creditor of the debtor.  [¶]  (b) Without 
receiving a reasonably equivalent value in exchange for the transfer or obligation, 
and the debtor:  [¶]  (1) Was engaged or was about to engage in a business or a 
transaction for which the remaining assets of the debtor were unreasonably small 
in relation to the business or transaction; or  [¶]  (2) Intended to incur, or believed 
or reasonably should have believed that he or she would incur, debts beyond his or 
her ability to pay as they become due.” 
5 
Civil Code section 3439.07 provides in relevant part:  “(a) In an action for 
relief against a transfer or obligation . . . a creditor. . . may obtain:  [¶]  (1) 
Avoidance of the transfer or obligation to the extent necessary to satisfy the 
creditor’s claim.  [¶]  (2) An attachment or other provisional remedy against the 
asset transferred or its proceeds . . . .  [¶]  (3) Subject to applicable principles of 
equity and in accordance with applicable rules of civil procedure, the following:  
[¶]  (A) An injunction against further disposition by the debtor . . . of the asset 
 
(footnote continued on next page) 
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a successful fraudulent conveyance claim may obtain “[a]voidance of the transfer 
or obligation to the extent necessary to satisfy the creditor’s claim.”  Therefore, a 
fraudulent conveyance claim requesting relief pursuant to Civil Code section 
3439.07, subdivision (a)(1), if successful, may result in the voiding of a transfer of 
title of specific real property.  By definition, the voiding of a transfer of real 
property will affect title to or possession of real property.  Therefore, a fraudulent 
conveyance action seeking avoidance of a transfer under subdivision (a)(1) of 
Civil Code section 3439.07 clearly “affects title to, or the right to possession of” 
(Code Civ. Proc., § 405.4) real property and is therefore a real property claim for 
the purposes of the lis pendens statutes.   
Hunting World, Inc. v. Superior Court (1994) 22 Cal.App.4th 67 (Hunting 
World), offers additional support for this conclusion.  In Hunting World, the 
plaintiff filed a federal court action for trademark infringement seeking money 
damages and the imposition of a constructive trust on profits obtained as a result 
of the infringement.  After being served with the lawsuit, the defendant 
quitclaimed his interest in his family’s residence to his wife.  The plaintiff then 
brought a fraudulent conveyance action in state court to set aside the conveyance 
and recorded a lis pendens against the property.  On appeal, the Court of Appeal 
reversed the trial court’s order granting the defendant’s motion to expunge the lis 
pendens.  Using the same reasoning we use here, the Court of Appeal held that an 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
transferred or its proceeds.  [¶]  (B) Appointment of a receiver . . . .  [¶]  (C) Any 
other relief the circumstances may require.  [¶]  (b) If a creditor has commenced an 
action on a claim against the debtor, the creditor may attach the asset transferred 
or its proceeds . . . .  [¶]  (c) If a creditor has obtained a judgment on a claim 
against the debtor, the creditor may levy execution on the asset transferred or its 
proceeds.” 
8 
action to set aside a fraudulent conveyance fell within the “clear wording of the 
‘real property claim prong’ of lis pendens law.”  (Id. at p. 73.)   
Nonetheless, like the defendants in Hunting World, the Fascenellis contend 
a court “must look through the pleadings to ascertain the purpose of the party 
seeking to maintain notice of lis pendens.”  (Hunting World, supra, 22 
Cal.App.4th at p. 73.)  In support, the Fascenellis cite Urez Corp v. Superior 
Court, supra, 190 Cal.App.3d 1141, and several other cases.6  The Fascenellis’ 
argument fails based on the plain language of the applicable statute.  Nowhere in 
the language of section 405.31, or in its legislative history, is the court directed to 
conduct such an examination during its demurrer-like analysis.  Indeed, the 
legislative history expressly requires courts to consider only the specific claim as 
pled and to determine whether that claim is a real property claim:  “This section 
concerns pleading.  Prior law became confused because of failure of the courts to 
distinguish between allegations (pleadings) and evidence.  This section concerns 
judicial examination of allegations only.  Judicial examination of factual evidence 
is separately governed by CCP 405.32.  [¶]  . . . This section . . . mandates 
expungement if the pleading does not contain a real property claim.  The analysis 
required by this section is analogous to, but more limited than, the analysis 
undertaken by a court on a demurrer. . . . [T]he court must undertake the more 
limited analysis of whether the pleading states a real property claim.”  (Rep. on 
                                             
 
6 
The other cases cited are:  BGJ Associates, LLC v. Superior Court (1999) 
75 Cal.App.4th 952; Lewis v. Superior Court (1994) 30 Cal.App.4th 1850; 
La Paglia v. Superior Court (1989) 215 Cal.App.3d 1322; Wardley Development 
Inc. v. Superior Court (1989) 213 Cal.App.3d 391; Moseley v. Superior Court 
(1986) 177 Cal.App.3d 672; Deane v. Superior Court (1985) 164 Cal.App.3d 292; 
Burger v. Superior Court (1984) 151 Cal.App.3d 1013. 
9 
Assem. Bill No. 3620 (1991-1992 Reg. Sess.) 3 Assem. J. (1993-1994 Reg. Sess.) 
p. 4281.)  
Lewis v. Superior Court, supra, 30 Cal.App.4th 1850, is inapposite and 
actually supports our conclusion.  In Lewis, the real party in interest “merely 
allege[d] that [seller] wrongfully took [real party in interest’s] money and used the 
money to buy—not convey—the property.”  (Id. at p. 1865.)  The Court of Appeal 
concluded that the real party in interest had simply realleged its constructive trust 
claim, which could not support a lis pendens.  (Ibid.)  The court therefore held that 
although a fraudulent conveyance claim may support a lis pendens, the complaint 
in that case did not allege a conveyance of real property.  (Ibid.)7   
By contrast, Kirkeby adequately pled a fraudulent conveyance claim by 
alleging that the Fascenellis transferred title of the subject properties with the 
intent to defraud.  Specifically, she alleged “that Defendants made these transfers 
with the actual intent to hinder, delay, and/or defraud all of their creditors in the 
collection of their claims. . . .”  Kirkeby also asked the court to void the transfers 
of both properties to the extent necessary to satisfy the claims in her complaint.  
As such, her fraudulent conveyance claim, if successful, will affect title to specific 
real property.  Accordingly, her lis pendens was improperly expunged based on 
section 405.31.   
In reaching this conclusion, we recognize that the lis pendens statute may 
be abused.  “While the lis pendens statute was designed to give notice to third 
parties and not to aid plaintiffs in pursuing claims, the practical effect of a 
recorded lis pendens is to render a defendant’s property unmarketable and 
                                             
 
7  
Because it is not presented in this case, we do not address the question of 
whether a claim that seeks to impose a constructive trust or equitable lien may be a 
basis for a lis pendens.   
10 
unsuitable as security for a loan.  The financial pressure exerted on the property 
owner may be considerable, forcing him to settle not due to the merits of the suit 
but to rid himself of the cloud upon his title.  The potential for abuse is obvious. 
[Citations.]”  (La Paglia v. Superior Court, supra, 215 Cal.App.3d at p. 1326, 
abrogated on another ground by Lewis v. Superior Court (1999) 19 Cal.4th 1232, 
1258, fn. 17.)  Because of the effect of a lis pendens, “[t]he history of the lis 
pendens legislation indicates a legislative intent to restrict rather than broaden the 
application of the remedy.”  (Urez v. Superior Court, supra, 190 Cal.App.3d at  
p. 1145.)  Our courts have followed suit by restricting rather than broadening the 
application of a lis pendens.  (Ibid.)  
Nonetheless, we cannot ignore the plain language of the statute, which 
clearly establishes that fraudulent conveyance claims may support a lis pendens 
where the plaintiff seeks to void a fraudulent transfer.  If this is problematic, it is 
up to the Legislature—and not this court—to change the law.  In any event, there 
are many other grounds for expunging a lis pendens.  For example, under section 
405.32, the court is required to expunge a lis pendens “if the court finds that the 
claimant has not established by a preponderance of the evidence the probable 
validity of the real property claim.”  Section 405.32—unlike section 405.31—
“expressly concerns factual merit.  Provision for a demurrer-like review of the 
pleadings is preserved in CCP 405.31.”  (Code com., 14 West’s Ann. Code Civ. 
Proc., supra, foll. § 405.32, at p. 250.)  Section 405.32 therefore requires a 
“judicial evaluation of the merits” of a claimant’s case.  (Code com., 14 West’s 
Ann. Code Civ. Proc., supra, foll. § 405.32, at p. 250.)  Under Section 405.33, 
even if a claimant shows a probably valid claim, the court may still order a lis 
pendens expunged if adequate relief for the claimant may be secured by the giving 
of an undertaking.  In addition, “the property owner . . . may be entitled to attorney 
fees and costs if successful” in expunging a lis pendens, and “[t]rial courts should 
11 
liberally impose these sanctions upon any who file fraudulent transfer actions and 
record notices of lis pendens before uncovering credible evidence of fraud.”  
(Hunting World, supra, 22 Cal.App.4th at p. 74.)  The availability of these 
statutory alternatives and the possible imposition of attorney fees and sanctions 
should discourage abuse of the lis pendens statute. 
Finally, we consider the Fascenellis’ argument that the UFTA does not 
allow a lis pendens as a remedy.  The UFTA expressly provides for remedies such 
as attachments, injunctions, and the appointment of receivers.  With respect to a lis 
pendens as a remedy, “[a]lthough [the UFTA] does not provide for notices of lis 
pendens, it does not exclude them either.”  (Hunting World, supra, 22 Cal.App.4th 
at p. 73.)  Support for including a lis pendens as a remedy is found in Civil Code 
section 3439.07, subdivision (a)(3)(C), which entitles a creditor bringing a UFTA 
claim to “[a]ny other relief the circumstances may require.”  We believe that this 
broad language allows a lis pendens remedy.  In addition, Civil Code section 
3439.10 and its accompanying legislative comments also provide a basis for 
supporting a lis pendens remedy in a fraudulent conveyance action.  Civil Code 
section 3439.10 provides that “the principles of law and equity” supplement the 
provisions of the UFTA.  The committee comment notes, “Among the remedies 
preserved by this section are the following:  [¶]  1. The recordation of a lis 
pendens in an appropriate case.”  (Leg. Com. com., 12A West’s Ann. Civ. Code 
(1997 ed.) foll. § 3439.10, p. 364.) 
12 
DISPOSITION 
We reverse the judgment of the Court of Appeal and remand for further 
proceedings consistent with this opinion.   
 
 
 
 
 
 
 
BROWN, J. 
 
WE CONCUR: 
 
 
GEORGE, C.J. 
 
KENNARD, J. 
 
BAXTER, J. 
 
WERDEGAR, J. 
 
CHIN, J. 
 
MORENO, J. 
13 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Kirkeby v. Orange Superior Court 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 109 Cal.App.4th 1275 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S117640 
Date Filed: July 22, 2004 
__________________________________________________________________________________ 
 
Court: Superior 
County: Orange 
Judge: Thomas N. Thrasher 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Law Office of Rick Augustini and Rick Augustni for Petitioner. 
 
 
 
 
 
__________________________________________________________________________________ 
 
Attorneys for Respondent: 
 
No appearance for Respondent. 
 
Callahan & Blaine, Jim P. Mahacek, Michael J. Sachs and Kathleen L. Dunham for Real Parties in Interest. 
 
 
 
14 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Rick Augustini 
Law Office of Rick Augustini 
19900 MacArthur Blvd., Suite 850 
Irvine, CA  92612 
(949) 553-5093 
 
Jim P. Mahacek 
Callahan & Blaine 
3 Hutton Centre Drive, Suite 900 
Santa Ana, CA  92707 
(714) 241-4444