Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06737/USCOURTS-caed-1_04-cv-06737-29/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

AMERICAN EXPRESS TRAVEL )

RELATED SERVICES COMPANY, )

INC., )

)

)

)

Plaintiff, )

)

vs. )

)

)

D&A CORPORATION dba )

BAKERSFIELD WHOLESALE FOODS, )

et al., )

)

)

Defendants. )

)

)

No. CV-F-04-6737 OWW/TAG 

MEMORANDUM DECISION GRANTING

IN PART AND DENYING IN PART

PLAINTIFF'S MOTION FOR

SUMMARY JUDGMENT (Doc. 362)

American Express Travel Related Services Company, Inc.

(hereinafter referred to as American Express) has sued Defendants

D&A Corporation dba Bakersfield Wholesale Foods (“Bakersfield

Wholesale”), Abdo Aezah (“Abdo”), Malaka M. Aezah, David Aezah

(“David”), Bakersfield Grocery Wholesale (“Bakersfield Grocery”),

David Aezah Investment, Inc. (“DAI”), and Does 1 - 100,

inclusive, by the Third Amended Complaint (TAC) filed on February

23, 2007 (Doc. 158). David, Bakersfield Grocery and DAI are

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 1 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2

sometimes referred to collectively as the “David Defendants.”

American Express moves for an order (1) granting summary

judgment against David, Bakersfield Grocery, and DAI on its

claims for fraudulent transfer, conspiracy to commit fraudulent

transfer, alter ego and successor liability; (2) directing the

payment of $1.4 million, representing the proceeds of David’s

sale of certain property in Mississippi maintained in escrow

pending the outcome of this lawsuit; and (3) dismissing all the

David Defendants’ affirmative defenses alleged in their Answer as

a matter of law. 

A. GOVERNING STANDARDS.

Summary judgment is proper when it is shown that there

exists “no genuine issue as to any material fact and that the

moving party is entitled to judgment as a matter of law.” 

Fed.R.Civ.P. 56. A fact is “material” if it is relevant to an

element of a claim or a defense, the existence of which may

affect the outcome of the suit. T.W. Elec. Serv., Inc. v.

Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th

Cir.1987). Materiality is determined by the substantive law

governing a claim or a defense. Id. The evidence and all

inferences drawn from it must be construed in the light most

favorable to the nonmoving party. Id. 

The initial burden in a motion for summary judgment is on

the moving party. The moving party satisfies this initial burden

by identifying the parts of the materials on file it believes

demonstrate an “absence of evidence to support the non-moving

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 2 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325

(1986). The burden then shifts to the nonmoving party to defeat

summary judgment. T.W. Elec., 809 F.2d at 630. The nonmoving

party “may not rely on the mere allegations in the pleadings in

order to preclude summary judgment,” but must set forth by

affidavit or other appropriate evidence “specific facts showing

there is a genuine issue for trial.” Id. The nonmoving party

may not simply state that it will discredit the moving party’s

evidence at trial; it must produce at least some “significant

probative evidence tending to support the complaint.” Id. The

question to be resolved is not whether the “evidence unmistakably

favors one side or the other, but whether a fair-minded jury

could return a verdict for the plaintiff on the evidence

presented.” United States ex rel. Anderson v. N. Telecom, Inc.,

52 F.3d 810, 815 (9 Cir.1995). This requires more than the th

“mere existence of a scintilla of evidence in support of the

plaintiff’s position”; there must be “evidence on which the jury

could reasonably find for the plaintiff.” Id. The more

implausible the claim or defense asserted by the nonmoving party,

the more persuasive its evidence must be to avoid summary

judgment.” Id. As explained in Nissan Fire & Marine Ins. Co. v.

Fritz Companies, 210 F.3d 1099, 1102-1103 (9 Cir.2000): th

The vocabulary used for discussing summary

judgments is somewhat abstract. Because

either a plaintiff or a defendant can move

for summary judgment, we customarily refer to

the moving and nonmoving party rather than to

plaintiff and defendant. Further, because

either plaintiff or defendant can have the

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 3 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

ultimate burden of persuasion at trial, we

refer to the party with and without the

ultimate burden of persuasion at trial rather

than to plaintiff and defendant. Finally, we

distinguish among the initial burden of

production and two kinds of ultimate burdens

of persuasion: The initial burden of

production refers to the burden of producing

evidence, or showing the absence of evidence,

on the motion for summary judgment; the

ultimate burden of persuasion can refer

either to the burden of persuasion on the

motion or to the burden of persuasion at

trial.

A moving party without the ultimate burden of

persuasion at trial - usually, but not

always, a defendant - has both the initial

burden of production and the ultimate burden

of persuasion on a motion for summary

judgment ... In order to carry its burden of

production, the moving party must either

produce evidence negating an essential

element of the nonmoving party’s claim or

defense or show that the nonmoving party does

not have enough evidence of an essential

element to carry its ultimate burden of

persuasion at trial ... In order to carry its

ultimate burden of persuasion on the motion,

the moving party must persuade the court that

there is no genuine issue of material fact

....

If a moving party fails to carry its initial

burden of production, the nonmoving party has

no obligation to produce anything, even if

the nonmoving party would have the ultimate

burden of persuasion at trial ... In such a

case, the nonmoving party may defeat the

motion for summary judgment without producing

anything ... If, however, a moving party

carries its burden of production, the

nonmoving party must produce evidence to

support its claim or defense ... If the

nonmoving party fails to produce enough

evidence to create a genuine issue of

material fact, the moving party wins the

motion for summary judgment ... But if the

nonmoving party produces enough evidence to

create a genuine issue of material fact, the

nonmoving party defeats the motion.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 4 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The David Defendants contend that the evidence supporting 1

this fact is inadmissible hearsay but, without waiving the

objection, assert that the fact is undisputed. There are a number

of undisputed facts with respect to which the David Defendants make

the same objection: UMF Nos. 3, 5, 6, 7, 8, 13, 15, 17, 19, 21, 22,

23, 27, 28, 30, 31, 33, 34, 35, 36, 38, 39, 40, 42, 43, 44, 45, 47,

48, 49, 50, 51, 52, 53, 56, 57, 58, and 59. Because these facts

are otherwise undisputed, the evidentiary objections do not suffice

to raise a genuine issue of material fact. 

5

B. FACTUAL BACKGROUND.

1. American Express’s Statement of Undisputed Facts.

In moving for summary judgment, American Express proffered

the following facts as undisputed. The David Defendants accept

these facts as undisputed except where noted and discussed in

this Memorandum Decision.

AE UMF 1: American Express Travel Related Services, Inc. is

a corporation organized and existing under the laws of the State

of New York, having its principal place of business at American

Express Tower, World Financial Center, New York, New York 10285.1

This fact is undisputed.

AE UMF 2: Defendant David Aezah is a natural person who

lives at 9008 Limoges Way, Bakersfield, California 93311.

This fact is undisputed.

AE UMF 3: Defendant Abdo Aezah is a natural person who lives

at 2516 El Portal Drive, Bakersfield, California 93309.

This fact is undisputed.

AE UMF 4: David and Abdo are brothers.

This fact is undisputed.

AE UMF 5: Defendant D&A Corporation dba Bakersfield

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 5 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

6

Wholesale was a corporation organized and existing under the laws

of the State of California with its principal place of business

located at 402 California Avenue, Bakersfield, California 93304. 

Bakersfield Wholesale was operated as a wholesale grocery company

that sold candy, soda, cigarettes, and other products to mini

marts and other retail grocery outlets.

This fact is undisputed.

AE UMF 6: Bakersfield Wholesale began operations on or about

January 3, 2005.

The David Defendants object to the supporting evidence as

inadmissible hearsay and assert: “Without waiving said

objections, DISPUTED. See Decl. of Marderosian, Ex. A.”

The evidentiary support for this fact is the Admitted Facts

section of the Scheduling Conference Order filed on March 7, 2007

(Doc. 243). The Admitted Facts section of this Order states that

the facts set forth “are deemed proven without further

proceedings.” Exhibit A to Mr. Marderosian’s declaration are

copies of corporate documents indicating that Bakersfield

Wholesale was incorporated and may have been doing business in

late 2003.

The David Defendants retained new counsel after the

Scheduling Conference Order was filed. The David Defendants have

not moved under Rule 16, Federal Rules of Civil Procedure, to be

relieved from the Admitted Facts set forth in the Scheduling

Conference Order. Therefore, this fact is admitted.

AE UMF 7: Defendant Dave Aezah Investment, Inc. (DAS) is a

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 6 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

7

corporation organized and existing under the laws of the State of

California with its principal place of business located at 402

California Avenue, Bakersfield, California 93304. DAI is owned

and controlled by David.

This fact is undisputed.

AE UMF 8: Bakersfield Grocery Wholesale is an unincorporated

business entity which is owned and operated by David and began

operations on or about January 3, 2005.

This fact is undisputed.

AE UMF 9: Bakersfield Wholesale’s original owner was Abdo.

The David Defendants dispute this fact to the extent that

Abdo is described as the “original owner”, referring to

Paragraphs 2-3 of David’s declaration in opposition to the motion

for summary judgment:

2. When Abdo and I executed the Declaration

in regard to my forgiveness of the loan, the

term ‘business’ did not refer to Bakersfield

Wholesale Foods. It was an expression we use

that was meant to mean Abdo should no longer

be concerned about the property and that it

was now my business, not his. I have never

owned any interest in Bakersfield Wholesale

Foods. I did not become an owner of

Bakersfield Wholesale Foods at any point. 

That business belonged exclusively to Abdo. 

I did help out on occasion when Abdo needed

it but was neither an owner, officer, or

employee.

3. I was added as a signatory on one of

Bakersfield Wholesale bank accounts; however,

this was done for convenience purposes only. 

Abdo wanted me to be able to help him if he

was busy or out of town. For some unknown

reason, after I was added as a signatory, the

bank would occasionally send me the bank

statements. This was a mistake on their part

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 7 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

In Carmen v. San Francisco Unified School District, 237 F.3d 2

1026, 1031 (9 Cir.2001), the Ninth Circuit held: th

[T]he district court may determine whether

there is a genuine issue of material fact, on

summary judgment, based on the papers

submitted on the motion and such other papers

as may be on file and specifically referred to

and facts therein set forth in the motion

papers. Though the court has discretion in

appropriate circumstances to consider other

materials, it need not do so. The district

court need not examine the entire file for

evidence establishing a genuine issue of

material fact, where the evidence is not set

forth in the opposing papers with adequate

references to that it could conveniently be

found.

8

and was not done at my request. I did not

tell the bank that I was the owner of

Bakersfield Wholesale and I was not the

primary signatory on the account. Abdo told

the bank that he was the owner of Bakersfield

Wholesale Foods so I don’t know why the bank

would send me the bank statements. 

Nevertheless, when I did receive them, I gave

them to Abdo as they pertained to his

business, not mine.

The David Defendants also refer to Abdo’s deposition transcript

but do not provide page and line references. David’s deposition 2

transcript of September 13, 2006 at pages 21-22 and 26 is also

referenced but the testimony does not provide evidentiary support

for the disputed fact. 

AE UMF 10: Bakersfield Wholesale purchased approximately

$3.6 million worth of Costco Cigarettes in November and December,

2004. 

The David Defendants object that the evidentiary support for

this fact is inadmissible hearsay. 

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 8 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

9

The evidentiary support is the Admitted Fact section of the

Scheduling Conference Order:

8. Bakersfield Wholesale purchased

approximately $3.6 million worth of Costco

Cigarettes in November and December, 2004,

using American Express corporate accounts. 

Abdo has admitted to making all such

purchases on behalf of Bakersfield Wholesale.

The hearsay objection is without merit.

The David Defendants dispute UMF 10 “to the extent that the

credit card debt was incurred by Bakersfield Wholesale and Abdo

Aezah, Malaka Aezah, and Fahd Aezah.” The David Defendants refer

to Exhibit B to Mr. Marderosian’s declaration. Exhibit B is

described as “true and correct copies of the credit applications,

the Guarantee of Payment Agreement for Individual Accounts and

the American Express credit card statements which show that Abdo

Aezah, Malaka Aezah, D & A Corporation, and Fahd Aezah incurred

the credit card debt at issue in this matter.” 

It is not reasonably disputed whether Bakersfield Wholesale

made the credit card purchases of the Costco Cigarettes. The

Scheduling Conference Order admits this fact from which the David

Defendants have not sought relief. The credit cards were issued

to Bakersfield Wholesale (actually D & A Corporation dba

Bakersfield Wholesale). Based on Exhibit B, Abdo, Malaka and

Fahd made charges on the Bakersfield Wholesale credit cards.

AE UMF 11, 12 and 13: 

Abdo regularly collects rent from apartment buildings owned

by David, then deposits monies into Abdo’s own account, with

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 9 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

10

David’s approval.

Tenants owing monies to David made checks payable directly

to Abdo.

Abdo pays taxes and other expenses for David’s buildings out

of his own personal checking account.

The David Defendants object that the supporting evidence,

which are references to David’s deposition and deposition

exhibits, are inadmissible hearsay.

Defendants dispute Facts 11, 12 and 13, referring to

Paragraph 9(a) of David’s declaration: 

... Abdo ... has collected rent on my behalf

when I was unavailable to do so. As a

result, many of the tenants know Abdo. 

Sometimes, they will make their rent checks

out to Abdo. When Abdo collects the rent, if

the tenant makes the check payable to Abdo,

Abdo may deposit the money in his account and

give me the cash. This only happens

occasionally. However, may [sic] times, even

if the check is made out to Abdo, the check

is deposited into my account because it is

rental income to me alone. I am the only

owner of these rental properties. Abdo and I

do not have any rental properties together. 

Sometimes I ask Abdo to make repairs or pay

various bills from the rent that he collects

on my behalf. The money for the repairs or

the other bills still comes directly from

money that is owed to me exclusively. 

David’s testimony, under oath, is unambiguous. Defendants also

refer to various parts of David’s deposition transcript in

disputing these facts.

AE UMFS 11, 12 and 13 are disputed.

AE UMF 14: Bakersfield Grocery Wholesale operates from the

same address and operates exactly the same business as

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 10 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

11

Bakersfield Wholesale. 

The David Defendants object that the supporting evidence is

inadmissible hearsay. The supporting evidence is David’s

response to Interrogatory No. 6 and Paragraphs 66 and 68 of the

David Defendants’ Answer filed on August 7, 2007 (Doc. 351). The

David Defendants hearsay objections are without merit. 

This evidence establishes that Bakersfield Grocery Wholesale

operates from the same address as Bakersfield Wholesale but does

not establish that the two businesses are exactly the same.

The David Defendants dispute this fact, referring to

Paragraph 9(b) of David’s declaration:

... I do not have knowledge of who all of

Bakersfield Wholesale’s customers and

suppliers were. Based on some of the

documentation I have seen in this case, it

would appear that some of my customers and

suppliers also were customers or suppliers of

Bakersfield Wholesale. However, I believe

that there are many customers and suppliers

of Bakersfield Grocery Wholesale that there

not mentioned in relation to Bakersfield

Wholesale. I am attaching a list of some of

my customers and suppliers as Exhibit ‘A.’ 

The majority of these customers and suppliers

have never been mentioned or confirmed as

customers or suppliers of Bakersfield

Wholesale during my deposition. I do not

know if they were also customers and

suppliers of Bakersfield Wholesale. Many

people on the list were people that I came

across in my long career n [sic] this

industry. Bakersfield is a small town and

many convenience store operators know one

another. 

Defendants also refer to portions of David’s deposition in

disputing Fact 14.

AE UMF 14 is disputed.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 11 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

12

AE UMF 15: On August 27, 2004, Abdo delivered a grant deed

to David, transferring title to the Warehouse to David. The

transfer was recorded with the Clerk of Kern County, California

on September 14, 2004.

This fact is undisputed.

AE UMF 16: On August 13, 2004, David was made a signatory on

the accounts of Bakersfield Wholesale. 

Defendants object that the supporting evidence is

inadmissible hearsay. The supporting evidence is David’s

deposition testimony and deposition exhibit 28.

Defendants dispute Fact 16, referring to Paragraph 9(c) of

David’s declaration: 

... It is my understanding from the documents

that have been produced that Bakersfield

Wholesale had more than one bank account with

Wells Fargo. I was only added as a signatory

on one of them.

The evidence is undisputed as to one Bakersfield Wholesale

bank account with Wells Fargo, but disputed as to other accounts

Bakersfield Wholesale may have had with Well Fargo.

AE UMF 17: As of August or September 2004, account

statements were sent to David’s mailing address, rather than to

Abdo’s mailing address. 

This fact is undisputed.

AE UMF 18: In August or September 2004, David began placing

orders for Bakersfield Wholesale and signing checks on its

behalf. 

Defendants object that the supporting evidence is

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 12 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

13

inadmissible hearsay. The supporting evidence is David’s

deposition testimony and copies of checks signed by David

attached to Mr. Glauber’s affidavit filed previously in this

action.

Defendants dispute Fact 18 to the extent that David “was not

the only individual that placed orders or signed checks.”

The David Defendants do not dispute that David began placing

orders for Bakersfield Wholesale and signing checks, among others

who signed, on behalf of Bakersfield Wholesale in August and

September 2004.

AE UMF 19: David and Abdo executed a written “Declaration”

dated September 19, 2004, which stated (1) that in exchange for

the satisfaction of an alleged $150,000 loan from David to Abdo,

Abdo was transferring the Warehouse building located at 402

California Avenue to David, and (2) that “[t]he borrower [Abdo]

no longer has an interest of any king [kind] in this property or

any business within it.” 

AE UMF 20: In November and December 2004, David wrote checks

drawn on the Bakersfield Wholesale account in order to make

mortgage payments on the Warehouse (which he admits owning as of

those dates).

Defendants object that the supporting evidence, which are

copies of checks signed by David attached to Mr. Glauber’s

affidavit filed previously in this action, David’s deposition

testimony, and Paragraph 50 of the Answer, are inadmissible

hearsay and “vague and ambiguous.” Fact 20 is disputed “to the

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 13 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

14

extent that David only admits to owning the Warehouse and

vehemently denies ever owning Bakersfield Wholesale.”

It is undisputed that David wrote checks drawn on the

Bakersfield Wholesale account to make mortgage payments on the

Warehouse and it is disputed whether David owned Bakersfield

Wholesale.

AE UMF 21: On December 4, 2004, Bakersfield Wholesale made

three payments to American Express which were returned for lack

of funds.

This fact is undisputed.

AE UMF 22: American Express terminated Bakersfield

Wholesale’s American Express accounts and demanded payment in

full of the total outstanding balance that was owed thereon.

This fact is undisputed.

AE UMF 23: Despite due demand, no payments on the account

were made.

This fact is undisputed.

AE UMF 24: Abdo borrowed $150,000 from David, which Abdo has

never repaid. 

Defendants object that the supporting evidence, the Answer

and David’s interrogatory responses, are inadmissible hearsay.

Defendants dispute Fact 24 “to the extent that the note for

$150,000 was forgiven in exchange for the conveyance of the

Warehouse and assumption of the mortgage on the Warehouse.”

AE UMF 24 is disputed.

AE UMF 25: Bakersfield Grocery Wholesale services the same

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 14 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

15

customers that Bakersfield Wholesale did and makes purchases from

the same suppliers.

This fact is disputed. 

AE UMF 26: David runs Bakersfield Grocery Wholesale with the

substantial assistance of his brother Abdo.

Defendants object that the supporting evidence, David’s

deposition testimony, is inadmissible hearsay.

Defendants dispute Fact 26 on the ground that the term

“substantial is vague and ambiguous”, referring to other portions

of David’s deposition testimony.

This fact is disputed.

AE UMF 27: In early 2005, David deposited checks from

Bakersfield Wholesale’s customers into Bakersfield Grocery

Wholesale’s account.

This fact is undisputed.

AE UMF 28: On January 15, 2005, David canceled a proposed

bulk sale because of the TRO obtained by American Express in this

lawsuit on January 4, 2005, which forbade transfers of assets

from Bakersfield Wholesale to third parties.

This fact is undisputed.

AE UMF 29: David did not cancel the proposed bulk sale of

the inventory until January 15, 2005.

Defendants dispute this fact “to the extent that the sale

may have been cancelled prior to January 15, 2005 but

notification was not provided until that day.” Defendants cite

no evidentiary support for this assertion.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 15 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

16

AE UMF 29 is undisputed.

AE UMF 30: On December 6, 2004, David rented a large unit at

a storage facility in Bakersfield, California, called Fortress

Self-Storage.

This fact is undisputed.

AE UMF 31: David filled out a ‘Customer Identification” form

required by Fortress Self-Storage, writing in “Bakersfield

Wholesale” as his place of employment. 

Defendants do not dispute that the Customer Identification

Form lists Bakersfield Wholesale as David’s place of employment. 

Defendants dispute that David was employed by Bakersfield

Wholesale. In so disputing, David refers to his deposition

testimony on July 9, 2007 at page 544:

Q. You list as your place of employment

Bakersfield Wholesale. Why did you list

Bakersfield Wholesale there?

A. They were asking for employment so I just

list that. It doesn’t mean I was working

there.

AE UMF 31 is undisputed. 

AE UMF 32: Abdo moved at least $3 million in Costco

Cigarettes from Bakersfield Wholesale to Fortress Self-Storage. 

The evidentiary basis for this fact is the Admitted Facts in

the Scheduling Conference Order:

16. A fire broke out on July 4, 2005, at the

Fortress Self-Storage which damaged several

units, including David’s rental unit. As

part of an insurance claim, David Aezah

submitted receipts showing the cost of the

cigarettes. The receipts submitted include

November-December 2004 receipts for the

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 16 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

17

purchase of cigarettes by Bakersfield

Wholesale at Costco, using the American

Express credit card. Based on these

receipts, the insurance carrier (Travelers)

issued a check to David, in his individual

capacity, in the amount of $341,197.28. On

or about January 11, 2006, David deposited

the check into Bakersfield Grocery

Wholesale’s account at Citibank.

Defendants dispute AE UMF 32 claiming the cited evidentiary

support does not prove these facts. Defendants assert that “[i]t

is unknown by responding defendant as to how many cigarettes were

transferred by Abdo to Fortress.” Defendants refer to David’s

deposition testimony of July 9, 2007 at page 555 where David

testified that he never learned that Abdo was storing cigarettes

at Fortress Self-Storage. Defendants also refer to Abdo’s

deposition testimony of January 15, 2007 at pages 257-260.

Although David may not have known the number of cigarettes,

he knew that he had cigarettes stored at Fortress and that the

quantity there was in excess of David’s cigarettes.

AE UMF 33: The records at Fortress show that the unit that

David was renting had been accessed at least fifteen times

between December 6, 2004, and July 4, 2005, the date of a fire at

Fortress Self-Storage.

This fact is undisputed.

AE UMF 34: A fire at Fortress Self-Storage on or about July

4, 2005, damaged several storage units, including the unit rented

by David. The renter deemed responsible for the fire was insured

by Travelers, which engaged an insurance adjuster, Cunningham

Lindsey U.S., Inc., to handle the claims. The representative of

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 17 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

18

Cunningham Lindsey was Robert Bycott, an experienced adjuster who

had investigated hundreds of fires, and at least ninety fires in

commercial buildings.

This fact is undisputed.

AE UMF 35: After the fire, David arranged to have the

remaining cigarettes removed to a container unit near the

Warehouse at 402 California Avenue.

This fact is undisputed.

AE UMF 36: In order to establish the value of the cigarettes

destroyed at Fortress, David submitted the November-December 2004

receipts for the purchase of cigarettes by Bakersfield Wholesale,

at Costco, using the American Express credit card, which showed

the cost of the cigarettes.

This fact is undisputed.

AE UMF 37: Following the fire at Fortress Self-Storage,

David transferred insurance proceeds belonging to Bakersfield

Wholesale to Bakersfield Grocery Wholesale.

The evidentiary basis for this is Admitted Facts, Paragraph

16, of the Scheduling Conference Order. 

Defendants dispute this fact, referring to Paragraph 9(f) of

David’s declaration in opposition to this motion:

As to plaintiff’s undisputed material fact

no. 37: Travelers Insurance Company issued a

check to me for $341,197.28. I deposited the

check in my account. I then gave the money

to Abdo because the insurance money was to

compensate him for the lost cigarettes.

Defendants also refer to David’s July 9, 2007 deposition

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 18 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

19

testimony at pages 612, 619-620, and 623-625.

This fact is undisputed.

AE UMF 38: David executed a release of Travelers in the

United States and personally delivered it to Bycott on December

27, 2006. Travelers issued a check to David personally in the

amount of $341,197.28.

This fact is undisputed.

AE UMF 39: On or about January 11, 2006, David deposited the

check into Bakersfield Grocery Wholesale’s account at Citibank.

This fact is undisputed.

AE UMF 40: David subsequently transferred such insurance

proceeds from Bakersfield Grocery Wholesale to Abdo.

This fact is undisputed.

AE UMF 41: On January 4, 2005, this Court signed a temporary

restraining order preventing the defendants (which at that time

did not include David) from transferring any real property that

might be available to satisfy the debt.

Defendants do not dispute this fact. However, referring to

Paragraph 9(j) of David’s declaration, Defendants assert: “in

that David was not a defendant in the matter, he was not aware of

the temporary restraining order.” However, there is no paragraph

9(j) in David’s declaration.

This fact is undisputed.

AE UMF 42: In early January 2005, following the filing of

the California Action, Abdo deeded title to his residence to

David for no consideration.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 19 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

20

This fact is undisputed.

AE UMF 43: After American Express moved to hold Abdo in

contempt for this fraudulent conveyance, the house was deeded

back to Abdo by David.

This fact is undisputed.

AE UMF 44: In January 2005, David took checks which had been

made payable to “Bakersfield Wholesale Foods,” for goods

purchased in 2004 - many of which were issued in 2004, before

Bakersfield Grocery Wholesale was formed or licensed - and

deposited them directly into the bank account of the new entity,

Bakersfield Grocery Wholesale.

Defendants do not dispute this fact. However, they assert: 

“[T]he monies for each and every check were given back to

Bakersfield Wholesale.” Defendant cite Paragraph 9(k) of David’s

Declaration as support. However, there is no Paragraph 9(k).

This fact is undisputed.

AE UMF 45: David wrote approximately $350,000.00 in checks

on his personal account and on the account of Bakersfield Grocery

Wholesale in the fall of 2005 through the spring of 2006 to

various individuals who cashed checks in Yemen.

This fact is undisputed.

AE UMF 46: In or about April 2006, the Aezahs began

negotiations for the purchase of the “Carver Village Apartments,”

a large apartment complex located at 1912 Live Oak Street,

Pascagoula, Mississippi (the “Mississippi Property”). 

Defendants dispute Fact 46, relying on Paragraph 9(g) of

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 20 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

21

David’s Declaration:

In April 2006, I began negotiations to

purchase Carver Village Apartments for my

acquisition of these apartments. Any

participation by Abdo was at my request and

did not result in or reflect any ownership

interest for Abdo.

AE UMF 46 is disputed.

AE UMF 47: In 2006, the property was listed for sale through

the real estate firm of Cumbest Realty, Inc. (“Cumbest Realty”). 

Although the investment was made in David’s name, Abdo was

personally involved in negotiations for the transaction

(including price negotiations) and Abdo traveled to Mississippi

in order to inspect the property before David purchased it.

This fact is undisputed.

AE UMF 48: In order to pay for the property, on May 9, 2006,

Abdo and an employee of Bakersfield Grocery took 6,000 $100

bills, for a total of $600,000, from a safe at 402 California and

deposited the cash into the bank account of Bakersfield Grocery

Wholesale at Citibank. Citibank’s records confirm the deposit of

6,000 $100 bills on May 9, 2006. On May 10, 2006, Abdo and the

employee deposited another $707,500 in $100 bills into the bank

account.

This fact is undisputed.

AE UMF 49: Citibank records show the deposit of more than

13,000 $100 bills by defendants, for a total of more than $1.3

million.

This fact is undisputed.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 21 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

22

AE UMF 50: Citibank records show checks written by David

Aezah with this money to the real estate firm in Mississippi to

purchase the Mississippi Property.

This fact is undisputed.

AE UMF 51: On or about May 17, 2006, David closed on the

purchase of the Mississippi Property, using the cash Abdo had

deposited into the Bakersfield Grocery Wholesale account.

This fact is undisputed.

AE UMF 52: In August 2006, David learned that it would be

difficult to develop the Mississippi Property because the

buildings in question had been condemned or were in the process

of being condemned for violations of building codes.

This fact is undisputed.

AE UMF 53: Abdo and a handyman then traveled to Mississippi

for seven to eight days and consulted with local contractors to

determine whether the apartments could be brought into compliance

with building codes.

This fact is undisputed.

AE UMF 54: David and Abdo decided not to develop the

property, and began investigating the possibility of reselling

it. 

Defendants dispute this fact, relying on Paragraph 9(h) of

David’s Declaration:

I made all decisions about the property in

Mississippi as I was the sole owner of the

property. Abdo did as I instructed. He was

helping me out as I was busy and/or otherwise

unavailable. He did not contribute

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 22 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

23

financially to the acquisition of the

property. I was the sole owner of the

property.

AE UMF 54 is disputed.

AE UMF 55: Abdo began to make arrangements to list the

property for sale through Cumbest Realty.

Defendants dispute Fact 55, relying on Paragraph 9(h) of

David’s Declaration quoted above re Fact 54.

AE UMF 55 is disputed.

AE UMF 56: Ultimately, however, David began negotiations to

sell the Mississippi Property to the Low Income Family Enrichment

Foundation (the “Life Foundation”) which had previously been

interested in the property. The parties negotiated a sale price

of $1,450,000 and entered into a contract of sale dated July 17,

2006.

This fact is undisputed.

AE UMF 57: On September 19, 2006, American Express, having

learned about the proposed transaction from bank records produced

by Citibank, brought an action in the United States District

Court for the Southern District of Mississippi (the “Mississippi

Action”) in order to enjoin its sale and prevent the loss of

proceeds of the proposed sale.

This fact is undisputed.

AE UMF 58: On November 13, 2006, American Express agreed to

lift a lis pendens it had obtained and permit the sale of the

Mississippi Property to proceed, subject to execution by David,

American Express, and the Life Foundation of an Agreement and

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 23 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

24

Escrow Instructions dated November 13, 2006, which was executed

by all parties.

This fact is undisputed.

AE UMF 59: On February 21, 2007, American Express dismissed

the Mississippi Action without prejudice, pursuant to a

stipulation signed by counsel for David and American Express, and

so ordered by the Court in this action, which provides that the

disposition of the proceeds of the sale of the Carver Village

Apartments may be determined by this Court. 

This fact is undisputed. 

2. David Defendants’ Supplemental Statement of

Undisputed and Disputed Facts.

The David Defendants set forth the following as undisputed

material facts:

DD UMF 1: In or about May 2004, Abdo Aezah applied for and

was granted a corporate credit card on behalf of Bakersfield

Wholesale.

This fact is undisputed.

DD UMF 2: In or about September 2004, Abdo Aezah applied

for and was granted a corporate credit card on behalf of D & A

Corporation.

This fact is undisputed.

DD UMF 3: Abdo requested three additional American Express

credit cards in the name of Abdo Aezah/Bakersfield Wholesale,

Malaka Aezah/Bakersfield Wholesale, Fahd Aezah/Bakersfield

Wholesale.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 24 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

25

This fact is undisputed.

DD UMF 4: American Express issued another credit card to D

& A Corporation.

This fact is undisputed.

DD UMF 5: None of the American Express cards issued were

issued to David Aezah, Bakersfield Grocery Wholesale, or Dave

Aezah Investment, Inc.

This fact is undisputed.

DD UMF 6: David did not use any of the American Express

cards that were issued.

This fact is undisputed.

DD UMF 7: By designating Abdo Aezah, Malaka Aezah and Fahd

Aezah to receive American Express cards, Bakersfield Wholesale

agreed to be bound by the terms and conditions of the Agreement

between Corporate Account and American Express and Corporate

Cardmember and American Express.

This fact is undisputed.

DD UMF 8: By accepting the corporate card, Abdo Aezah,

Malaka Aezah, and Fahd Aezah agreed to be individually

responsible for the debt incurred. David Aezah was not a party

to any of these agreements in that a card was not issued to him.

This fact is undisputed.

DD UMF 9: The American Express Agreement with its card

holders provides that the individual whose name appears on the

card is responsible for all charges.

This fact is undisputed.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 25 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

26

DD UMF 10: American Express dismissed all claims against

Fahd Aezah despite a corporate card being issued to him.

This fact is undisputed.

DD UMF 11: David Aezah has over 22 years of experience

operating or owning mini marts, liquor stores, and gas stations.

This fact is undisputed.

DD UMF 12: Prior to issuing Bakersfield Wholesale the

additional credit cards in September 2004, American Express

determined that Bakersfield Wholesale and/or Abdo Aezah were

credit risks. The account was initially coded extreme.

This fact is undisputed.

DD UMF 13: The collective limit on the credit cards issued

by American Express to Bakersfield Wholesale was supposed to be

$110,000.

This fact is undisputed.

DD UMF 14: An investigative report was prepared by American

Express’ Director of Security for the Western Region. David

Aezah’s name is not included in the report. No investigative

report was ever prepared by American Express which identified

David Aezah as a participant in any alleged fraud.

This fact is undisputed.

DD UMF 15: The promissory note that was executed by David

and Abdo Aezah to secure a loan from David to Abdo in the amount

of $150,000 identifies the warehouse located at 402 California

Avenue in Bakersfield, California as the only security for the

loan.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 26 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

This fact is undisputed.

DD UMF 16: There was a mortgage on the warehouse located at

402 California Avenue in Bakersfield, California in the amount of

$280,000 at the time the promissory note was executed.

This fact is undisputed.

DD UMF 17: Abdo Aezah/Bakersfield Wholesale agreed to pay

David Aezah rent to continue to occupy the warehouse after David

Aezah became the owner of the warehouse.

This fact is undisputed.

DD UMF 18: Abdo Aezah is the only owner of Bakersfield

Wholesale Foods identified on the papers to make David Aezah a

signatory on the Bakersfield Wholesale Foods checking account.

This fact is undisputed.

DD UMF 19: Abdo told Robert Bycott to make the insurance

settlement check out to David Aezah and Bakersfield Grocery

Wholesale.

This fact is undisputed.

DD UMF 20: The customer and supplier list of Bakersfield

Grocery Wholesale is not identical to the customer and suppliers

of Bakersfield Wholesale Foods.

This fact is undisputed.

DD UMF 21: American Express has not identified any

individual or business to testify that they acquired cigarettes

from David Aezah that were previously acquired at Costco by Abdo

Aezah.

This fact is undisputed.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 27 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

28

DD UMF 22: David was not a party to this action at the time

the temporary restraining order as to Abdo’s property was issued.

This fact is undisputed.

In addition, the David Defendants submit that the following

are disputed material facts:

1. David Aezah has never been an owner of Bakersfield 

Wholesale Foods.

This fact is disputed.

2. The David Defendants did not participate in the sale of

any Costco Cigarettes.

This fact is disputed.

3. The Mississippi Property was purchased by David Aezah

only.

This fact is disputed.

4. David had adequate funds to purchase the Mississippi

Property and did not receive any money from Abdo Aezah to acquire

the property.

This fact is disputed.

5. The money that was spent in Yemen came from David’s

various business endeavors and David’s wife. Abdo did not give

David any money that was used or cashed in Yemen.

This fact is disputed.

6. Bakersfield Wholesale Food’s inventory was auctioned off

or otherwise disposed of. Bakersfield Grocery Wholesale did not

acquire or receive any inventory from Bakersfield Wholesale

Foods.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 28 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

29

This fact is disputed.

7. David did not have any real knowledge of what was

happening between American Express and Abdo Aezah until he became

a defendant in this matter.

This fact is disputed.

C. CLAIMS FOR FRAUDULENT TRANSFER.

1. Intentional Fraudulent Transfer.

American Express seeks summary judgment on its claims

against the David Defendants for fraudulent transfer pursuant to

California Civil Code § 3439.04. 

Section 3439.04 provides in pertinent part:

(a) A transfer made or an 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

incurred, if the debtor made the transfer or

incurred the obligation as follows:

(1) With actual intent to hinder, delay, or

defraud any creditor of the debtor. 

(2) Without receiving a reasonably equivalent

value in exchange for the transfer or

obligation, and the debtor either:

(A) 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.

(B) 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 became due.

(b) In determining actual intent under

paragraph (1) of subdivision (a),

consideration may be given, among other

factors, to any or all of the following:

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 29 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

30

(1) Whether the transfer or obligation was to

an insider.

(2) Whether the debtor retained possession or

control of the property transferred after the

transfer.

(3) Whether the transfer or obligation was

disclosed or concealed.

(4) Whether before the transfer was made or

obligation was incurred, the debtor had been

sued or threatened with suit.

(5) Whether the transfer was of substantially

all the debtor’s assets.

(6) Whether the debtor absconded.

(7) Whether the debtor removed or concealed

assets.

(8) Whether the value of the consideration

received by the debtor was reasonably

equivalent to the value of the asset

transferred or the amount of the obligation

incurred.

(9) Whether the debtor was insolvent or

became insolvent shortly after the transfer

was made or the obligation was incurred.

(10) Whether the transfer occurred shortly

before or shortly after a substantial debt

was incurred.

(11) Whether the debtor transferred the

essential assets of the business to a

lienholder who transferred the assets to an

insider of the debtor.

(c) The amendment to this section made during

the 2004 portion of the 2003-04 Regular

Session of the Legislature, set forth in

subdivision (b), does not constitute a change

in, but is declaratory of, existing law, and

is not intended to affect any judicial

decisions that have interpreted this chapter.

American Express argues that there is evidence in this

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 30 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

31

action establishing all of the “badges of fraud” set forth in

Section 3439.04(a).

In re Beverly, 374 B.R. 221 (9 Cir.BAP 2007), the Ninth th

Circuit BAP held in pertinent part:

Actually fraudulent transfers are avoidable

under UFTA by present and future creditors. 

A transfer is said to be ‘actually

fraudulent’ as to a creditor if the debtor

made the transfer ‘with the actual intent to

hinder, delay, or defraud any creditor of the

debtor.’ Cal.Civ.Code § 3439.04(a)(1).

The focus is on the intent of the transferor. 

While intent to defraud is the usual rubric,

the intended effect of the transfer need only

be hindrance of a creditor or delay of a

creditor. Any of the three - intent to

hinder, intent to delay, or intent to defraud

- qualifies a transfer for UFTA avoidance,

even if adequate consideration is paid by

someone other than a good faith transferee

for reasonably equivalent value ....

Whether there is actual intent to hinder,

delay, or defraud under UFTA is a question of

fact to be determined by a preponderance of

the evidence ....

Since direct evidence of intent to hinder,

delay or defraud is uncommon, the

determination typically is made inferentially

from circumstances consistent with the

requisite intent ... Thus, UFTA lists eleven

nonexclusive factors that historically (since

the Statute of Elizabeth in 1572) have been

regarded as circumstantial ‘badges of fraud’

that are probative of intent. Cal.Civ.Code §

3439.04(b).

The UFTA list of ‘badges of fraud’ provides

neither a counting rule, nor a mathematical

formula. No minimum number of factors tips

the scales toward actual intent. A trier of

fact is entitled to find actual intent based

on the evidence in the case, even if no

‘badges of fraud’ are present. Conversely,

specific evidence may negate an inference of

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 31 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

American Express is advised that citations to cases should 3

include the specific page in the case to which reference is made,

especially when the quotation is from a footnote in the dissenting

opinion. The Court’s limited time for preparation of motions is

not well-used when the Court is required to hunt for references in

citations.

32

fraud notwithstanding the presence of a

number of ‘badges of fraud.’ ....

First, American Express contends, brothers are “indisputably

insiders.” American Express cites BFP v. Resolution Trust

Corporation, 511 U.S. 531, 533 n.5 (1994)(Souter, J.,

dissenting):3

The Court notes correctly that fraudulent

conveyance laws were directed first against

insolvent debtors’ passing assets to friends

or relatives, in order to keep them beyond

their creditors’ reach (the proverbial

‘Elizabethan deadbeat who sells his sheep to

his brother for a pittance,’ see Baird &

Jackson, Fraudulent Conveyance Law and Its

Proper Domain, 38 Vand.L.Rev. 829, 852

(1985)) ....

American Express refers to evidence that the transfers of the

assets of Bakersfield Wholesale to its successor, Bakersfield

Grocery, were actively concealed and occurred in direct violation

of the Court’s January 4, 2005 TRO prohibiting such a

transaction; that the transfer of the Costco Cigarettes was, and

continues to be, concealed from American Express, which has never

received a satisfactory explanation of the location of the Costco

Cigarettes or of the proceeds of their sale; that the transfer of

Bakersfield Wholesale’s assets occurred immediately after it had

incurred $3.6 million in debt and continued after Abdo received

notice of this lawsuit; that the transfer of the Costco

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 32 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

33

Cigarettes represented substantially all of Bakersfield

Wholesale’s assets; that Abdo and David repeatedly perjured

themselves and that Abdo inconsistently asserted the Fifth

Amendment privilege against self-incrimination in an effort to

conceal the location of the Costco Cigarettes and the proceeds

from the sale of those cigarettes; that Bakersfield Wholesale

received less than reasonably equivalent value for the transfer

of the Costco Cigarettes and other assets of Bakersfield

Wholesale to David and Bakersfield Grocery; that Bakersfield

Wholesale received nothing when David used the assets of

Bakersfield Wholesale to purchase the Mississippi Property; and

that the transfers to David and Bakersfield Grocery have rendered

Abdo and Bakersfield Wholesale insolvent. 

This evidence, American Express contends, establishes that

it is entitled to summary judgment on its claims of intentional

fraudulent transfers under California law.

The David Defendants oppose this aspect of the motion for

summary judgment, contending that there have been no fraudulent

transfers between Abdo and David. Defendants refer to evidence

that Abdo admitted he sold the Costco Cigarettes in their

entirety, that David denies selling any of the Costco Cigarettes

or accessing the storage unit containing the Costco Cigarettes;

that Abdo was the only person having a key to the Fortress Self

Storage unit; that, when Abdo lost the key, David had to have the

lock cut; that, while Robert Bycott’s evidence that David stated

that he, David, would access the storage units for the cigarettes

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 33 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

34

for his own purposes, Bycott’s evidence is mistaken and

contradicts the testimony and declarations of Abdo and David;

that American Express has not identified a witness who purchased

cigarettes from Bakersfield Grocery that came from Costco or

Bakersfield Wholesale, saw David sell any cigarettes that belong

to Bakersfield Wholesale, Costco or American Express, or that

David sold the same type of cigarettes through Bakersfield

Grocery that were acquired by Abdo from Costco; that there was

never a transfer of inventory belonging to Bakersfield Wholesale

to any of the David Defendants; that David intended to purchase

the remaining inventory of Bakersfield Wholesale but cancelled

the prospective sale when he learned of the Court’s TRO; and that

Abdo admits auctioning off the remaining inventory. The David

Defendants contend that American Express has no evidence of the

amount of inventory Abdo had in December 2004 and that American

Express’s evidence that David must have acquired the Bakersfield

Wholesale inventory because he was ready to begin conducting

business once he obtained a business license is speculation. The

David Defendants admit that Abdo conveyed his home to David, but

assert that David reconveyed the home to Abdo when David learned

of the Court’s preliminary injunction, further contending that

David was not a party to this action at that time and would have

no way of knowing about the preliminary injunction. With regard

to the Mississippi Property, the David Defendants refer to

evidence that it was purchased with David’s own funds; that

neither Abdo or Bakersfield Wholesale contributed any monies

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 34 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

35

toward that acquisition; and that defense expert Dick Nordstrom

opines that David had adequate funds to acquire the Mississippi

property. The David Defendants refer to evidence that the money

spent in Yemen came from David’s various business ventures and

from his wife; that the money did not come from Abdo or

Bakersfield Wholesale; and that defense expert Dick Nordstrom

opines that David had adequate funds, exclusive of the Costco

Cigarettes proceeds, to spend the amount spent in Yemen. With

regard to Bakersfield Grocery’s receipt of insurance proceeds

from the damage at the storage facility, the David Defendants

refer to evidence that Abdo asked that the check be made out to

David because David was the lessor of the storage facility; that

David was not entitled to the proceeds and turned the money over

to Abdo; and that Abdo spent the entire amount of the insurance

proceeds on the acquisition of a new ice cream business.

American Express replies that, although David has made a

general denial of his intent to fraudulently convey assets, where

the “badges of fraud” are present, a general denial of

culpability is unavailing to avoid summary judgment. American

Express cites In re Beverly, supra, 2007 WL 2200590. In In re

Beverly, the Ninth Circuit BAP ruled that “[t]he summary judgment

evidence in this appeal contains an extraordinary amount of

direct evidence of the requisite intent, as well as

circumstantial evidence of ‘badges of fraud.’” The Ninth Circuit

BAP referred to direct evidence in the debtor’s own words to his

spouse’s counsel and concluded:

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 35 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

36

The evidence demonstrates that the Outland

litigation was the main reason Beverly

structured the MSA [marital settlement

agreement] so as to transfer his entire

interest in the $1 million nonexempt fund. 

If there had been a simple equal division of

community assets (as presumed by California

law when a court makes the division), he

would have had about $500,000 of nonexempt

funds ($50,000 eligible to be rolled over

into a new homestead) that he knew would be

vulnerable to collection of the $424,000

Outland judgment.

In addition, there was circumstantial evidence supporting five

“badges of fraud”. The Ninth Circuit further ruled that

Beverly’s summary judgment evidence in opposition, which

consisted of his contention that a bankruptcy lawyer advised him

that his MSA transfers could not be avoided as fraudulent and his

contention that the MSA negotiations were not collusive because

the divorce was hostile and was resolved through mediation, did

not suffice to raise a genuine issue of material fact. The issue

of avoidance is a matter of California law, not bankruptcy law

even cursory research would have turned up the California Supreme

Court’s decision which exposes MSA transfers to UFTA avoidance. 

As to the MSA negotiations, both spouses had an incentive to

thwart collection of the Outland judgment and there was no

evidence regarding the extent to which the mediator was apprised

of the UFTA issues that would be triggered by the MSA. The Ninth

Circuit ruled that Mrs. Beverly, as the proponent of good faith

transferee status, did not demonstrate genuine issues of material

fact that would support such a finding, because she was copied on

the direct evidence letters from Beverly to his spouse’s attorney

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 36 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

37

and Mrs. Beverly’s attorney recognized the fraudulent aspect of

the MSA. There is nothing in In re Beverly, however, that

substantiates American Express’s contention that a general denial

of culpability is unavailing to avoid summary judgment. 

In its reply brief, American Express also argues that the

undisputed evidence shows that David acted with the intent to

hinder, delay or defraud American Express.

American Express contends that the evidence establishes that

David knew what was at the Fortress Self-Storage unit and why it

was there. In his deposition taken on July 9, 2007, David

testified in pertinent part:

Q. Have you ever learn [sic] that your

brother was storing cigarettes at Fortress?

A. No. 

Q. Did you ever learn that anybody was

storing cigarettes at Fortress?

A. No.

(David Depo, July 9, 2007, 555:16-21).

Abdo testified at his deposition taken on January 13, 2007

in pertinent part as follows:

Q. Okay. Now, did David work with you to

help you move these cigarettes to Fortress?

A. No.

Q. Did David have anything at all to do with

Fortress?

A. David, the only thing I asked him, I

asked him - I tell him, you know, can you

give me a favor, now I - my credit - American

Express messed up my credit, if I rent it -

if I need to rent the place out, you know,

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 37 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

38

they may be going to do a credit check, they

not rent it to me. But can you rent me a

place, I have left over. I tell him, I got a

little bit left over, I want to keep them

until I settle with American Express and I

pay them, and you know, then I change it to

my name, and if you ever want to use it, I

let you use it. If I remember, that’s right,

because it’s been awhile, I’m just guessing. 

The - the - you know, I’m not a hundred

percent sure. 

(Abdo Depo. p. 32:2-19). David testified at the July 25, 2007

hearing in this Court in pertinent part as follows:

Q. Can you remember one way or the other

that, when you were opening the Fortress

facility, whether your brother had told you

that he wanted to put something in there

until he settled with American Express?

A. Yes.

Q. And is that what you remember his telling

you?

A. I remember, yes, I think I remember that.

Q. And isn’t it true that the reason he told

you he wanted to put that product away until

he settled is that he was afraid American

Express would take it before a settlement?

A. I do not remember if we talked about this

or not.

Q. Isn’t it true that you understood, at the

time, that the reason he wanted to put the

product in storage until he settled with

American Express was to keep it away from

American Express?

A. I do not remember that. It was three

years ago. I’m not exactly quite sure.

(July 25, 2007 Transcript, 100:23-101:14). However, in his

Declaration dated June 21, 2007 and filed with the Court on June

21, 2007, David averred in Paragraph 13 in pertinent part:

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 38 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

39

... I rented a storage locker and Abdo asked

if he could put some of his cigarettes in the

storage locker. I did not at that point know

what was really going on with American

Express and Abdo. The storage locker was in

my name and so the check for the property

that was damaged in the fire was issued in my

name. However, I gave all of the money to

Abdo since it was his property that had been

destroyed. I did not keep or use any of that

money in any way.

American Express argues that David should not be permitted

to create an issue of fact by contradicting the averment in the

June 21, 2007 affidavit. 

In Foster v. Arenta Assocs., Inc., 772 F.2d 1453, 1462 (9th

Cir. 1985) and Radobenko v. Automated Equipment Corp., 520 F.2d

540, 544 (9 Cir. 1973), the Ninth Circuit held that a party th

should not be able to substitute an affidavit alleging helpful

facts for earlier deposition testimony harmful to its case in

order to avoid summary judgment. This rule applies to conflicts

between affidavits and interrogatory responses as well. School

Dist. No. IJ, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1264

(9 Cir, 1993). However, in Kennedy v. Allied Mut. Ins. Co. 952 th

F.2d 262, 266-267 (9 Cir. 1991), the Ninth Circuit held: th

We conclude that the Foster-Radobenko rule

does not automatically dispose of every case

in which a contradictory affidavit is

introduced to explain portions of earlier

deposition testimony. Rather, the Radobenko

court was concerned with ‘sham’ testimony

that flatly contradicts earlier testimony in

an attempt to ‘create’ an issue of fact and

avoid summary judgment. Therefore, before

applying the Radobenko sanction, the district

court must make a factual determination that

the contradiction was actually a ‘sham.’

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 39 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

40

Examples of contradictory testimony that does not amount to a

“sham” include clarification where the deponent was confused at

the deposition and the affidavit explains those aspects of the

deposition testimony, lack of access to material facts at the

time of the deposition and the affidavit sets forth the newlydiscovered evidence. See Kennedy v. Allied Mut. Ins. Co., 952

F.2d 262, 266 (9 Cir.1991). th

David’s Declaration dated September 10, 2007 and filed in

opposition to the motion for summary judgment avers in Paragraph

1:

1. ... I am originally from Yemen. I do

speak English but I don’t speak it that well. 

I do understand some English but I also get

confused and do not always understand it that

well especially when I am not given a chance

to explain what I mean. I am able to read

some English but I do not read it that well.

David unequivocally admitted that Abdo transferred

cigarettes to the Fortress storage and is bound by this

testimony. He disclaims full knowledge of American Express’s

proceedings at the time of the transfer. From the record, it

does not appear David’s testimony that he was not aware of the

extent of the legal proceedings against Abdo at the time of the

transfer is a sham intended to create an issue of fact to avoid

summary judgment. 

American Express contends in its reply brief that David kept

the inventory at the Fortress Self-Storage unit even after David

learned the details of this lawsuit. Although David now claims

that he did not know all of the details of the legal dispute

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 40 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

41

between American Express and Abdo when the Fortress storage unit

was rented on December 6, 2004, American Express contends that

David was fully on notice of American Express’ claims against

Abdo by January 15, 2005. American Express refers to David’s

deposition testimony on September 13, 2007 concerning the grant

deed dated January 6, 2005:

MR. GLAUBER: Q. And this I’ll represent to

you was the transfer of Abdo’s house to

yourself. What were the circumstances

leading up to your brother Abdo transferring

title to his house to you?

A. Well, one day Abdo, he come to me and he

say, ‘I want to transfer my house to your

name’ and I said, ‘That’s fine.’ And then he

told me why, you know, the situation between

American Express and all that and I said,

‘Fine.’ And then also after that I find out

that I be in trouble doing that. [¶] One week

later, two weeks later, I can’t remember

exactly, I called Jan Shine and make

appointment with her, and I took Abdo, and I

re-transfer it back to him.

...

Q. Right. Do you remember American Express

had brought in an application to hold your

brother in contempt of court and isn’t that

why the title to the house was transferred

back to him?

A. Exactly, that way I won’t be in trouble. 

But I don’t remember exactly how long. But

all I know is I did transfer it back to him

after I heard that he’s – with American

Express.

Q. Let’s go back to January 6, 2005 ... Your

brother transferred title to his house on El

Portal Road to you, did you pay any money for

that transfer?

A. No, no.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 41 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Although referred to by the parties as a “temporary 4

restraining order”, what was actually filed on January 4, 2006

(Doc. 6) is an “Order to Show Cause” why a writ of attachment

should not issue. The Order to Show Cause further ordered in

pertinent part:

ORDERED that pending the hearing and

determination of this motion, defendants, all

persons owing any debt to defendants, and all

other persons and garnishees, be and hereby

are restrained and prohibited from

transferring or paying any assets of the

defendants or any real or personal property in

which the defendants have an interest, or any

debt owed to defendants to the following

extent: i) as to defendant Bakersfield

Wholesale, to the extent of $3,683,320,97; ii)

as to defendant Abdo Aezah, to the extent of

42

Q. Well, why was it that your brother wanted

to transfer title to his home to you?

A. Well, I don’t know what he was going

through - with American Express. Maybe he

think that American Express would take it

away from him. We never run into this

before, I mean, this kind of idea, this kind

of situation like this one before. [¶] But

all I know is about myself, that I find out

that it’s not going to be good for me, not

going to benefit for me, it’s bad for me, so

I transfer it back to him. I insist to him,

I said, ‘Hey, take your house back, I don’t

want to get into trouble with nobody.’

(David Depo., September 13, 2006 73:15-75:10). American Express

also refers to the statement in David’s opposition brief,

referring to David’s deposition testimony on September 13, 2006

at pages 65-71, that he cancelled the proposed bulk sale of

Bakersfield Wholesale’s assets to him in early January 2005

“because he learned that American Express has [sic] a temporary

restraining order in effect preventing any such disposition of

assets.” Even though David knew in early January 2005 of the 4

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 42 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

$351,384.38 ....

43

existence of the Court’s order preventing Bakersfield Wholesale

and Abdo from disposing of assets, at no time did David surrender

the inventory at Fortress to the Court or to American Express,

and, according to his most recent version of events, gave Abdo 

continued access to the Bakersfield Wholesale inventory, even

after David was named as a party to this lawsuit on or about

March 23, 2005.

American Express further contends that David has admitted

that he used the inventory stored at the Fortress Self-Storage

unit in Bakersfield Grocery. American Express refers to David’s

deposition testimony on October 9, 2006:

MR. MOORE: Q. And, Mr. Aezah, this is a

check drawn to you personally in the amount

of $341,000 and change from Travelers

Indemnity. Why did you receive this check

from them?

A. This from when I used to have a storage,

has product in it. So it burn up because of

next door neighbor, he caused the problems,

and these people, they reimburse me for it.

Q. All right. So are you saying you owned a

storage facility?

A. I didn’t own it. I rent it.

Q. You rented a storage facility?

A. Yes.

Q. And where was that storage facility

located, what’s the address?

A. In Bakersfield.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 43 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

44

Q. And at what street address?

A. I don’t know.

Q. You had $300,000 worth of property at a

place you don’t know where it is?

A. No, I can’t remember. It’s not like that

I know it by heart.

Q. What part of town is it in?

...

A. I think southwest.

Q. And when was the fire?

A. I don’t remember when the fire was.

Q. Well, was it 2003, was it 2004?

A. In 2005, I think it is.

Q. And is this property that you owned

individually?

A. Yes.

Q. And did you own it through Bakersfield

Grocery or just directly.

A. I didn’t get it.

Q. Was this somehow connected with the

inventory for Bakersfield Grocery? What did

you have stored there?

A. Yeah, in case I have product, extra

product, somebody just put them in there.

(David Depo., October 9, 2006, 312:18-314:7). In his Declaration

dated September 10, 2007 and filed in opposition to the motion

for summary judgment, David avers in Paragraphs 9(e) and (f) in

pertinent part as follows:

e. ... I do not have any first hand knowledge

as to the value of the cigarettes that were

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 44 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

45

stored in Fortress Storage or where they came

from. I secured the storage facility because

Abdo asked me to. He had not provided me

much information about what was really going

on with American Express. I rented the

storage unit and gave him the key. As a

result of this lawsuit, I have learned that a

significant amount of cigarettes were sold to

A N J Mini Mart. I do not know how many

cigarettes were sold by Abdo prior to

December 6, 2006. I do not know the exact

value of the cigarettes that were stored or

what Abdo did with all of the cigarettes.

f. ... Travelers Insurance Company issued a

check to me for $341,197.28. I deposited the

check in my account. I then gave the money

to Abdo because the insurance money was to

compensate him for the lost cigarettes.

This testimony is highly significant, because American Express

had not yet learned of David’s involvement with Fortress, and was

examining him concerning the insurance check alone. David

contended unequivocally that the insurance payment was for

“extra” cigarette inventory that he had been storing for use by

Bakersfield Grocery Wholesale, his successor business. David Tr.

312-14.

American Express again argues that David should not be

permitted to manufacture an issue of fact by contradicting his

previous testimony. The issue presented is whether David’s most

recent declaration is a sham intended to create an issue of fact

to withstand summary judgment. There is no contention made by

David that his English language skills caused him to be confused

with this testimony or that he discovered additional evidence -

his later testimony is diametrically opposed to his early

description that he accepted transfer of Abdo’s and Bakersfield

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 45 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

46

Wholesale’s cigarettes. Although the issue is close, it is

concluded that David’s testimony is not a sham intended to create

an issue of fact to avoid summary judgment. Ultimately the right

to jury trial on the issue of credibility should endure. 

American Express contends that David admitted using the

inventory during his discussions with the insurance adjustor,

Robert Bycott. American Express refers to Bycott’s deposition

testimony of January 16, 2007:

Q. All right. And what did he say to you

and what did you say to him, as best you can

recall?

A. On the initial visit?

Q. Yes. And after you exhaust your

recollection, I’ll let you look at your

notes. And I realize this is not a memory

test, but I’m just trying to see what you can

remember.

A. As far - as far as I recall, and what -

what would seem reasonable, based on a first

- first meeting, is he discussed the damage

to his - his cigarettes at the storage

facility due to the fire, and - and I recall

that it was - he said it was causing him some

hardship, because he lost quite a bit of

product, and - and he wanted to try to be -

remedy it as soon as possible in order not to

lose income, I guess, or -

Q. Did he explain to you why it was causing

hardship?

A. I - from what I recall, I think, you

know, he’d have clients - from what I recall,

is he would rotate stock from the storage

facility to his business on California on an

as-needed basis. He didn’t have an inventory

to draw from there, so his clients coming in

to acquire or purchase the cigarettes, he

wasn’t able to - or he was having difficulty

in providing their - what they needed.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 46 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

47

(Bycott Depo., January 16, 2007, 33:13-34:16). 

In his Declaration dated September 10, 2007 filed in

opposition to the motion for summary judgment, David avers:

4. I did not participate in the sale or

disposition of any of the cigarettes acquired

by Abdo from Costco with American Express

credit cards. I know that Robert Bycott

indicated that I told him that I would access

the storage facility so that I could sell the

cigarettes, however, that was a mistake. It

seems to me that the actions described by Mr.

Bycott in his file are referencing Abdo. I

did not say or do the things he identified as

they pertained to accessing the storage

facility or selling the cigarettes contained

therein that came from Costco.

David refers to Bycott’s January 16, 2007 deposition testimony:

Q. Okay. All right. When David was in

Yemen, and your notes don’t indicate the

first date he went there, but I’ll represent

that you actually skipped over the date, I

don’t know if you saw that or not, but you

have one entry in your work log that you knew

that he was out of the country on October

12 .

th

A. Okay.

Q. And I believe he got back near the end of

December, correct?

A. I believe so.

Q. During that time period, did you attempt

to contact David in Yemen? Did you pass a

message along?

A. No, I - I - I never tried to call him in

Yemen.

Q. And did you pass a message to Abdo

saying, hey, I need to talk to David, could

you have him call me?

A. I recall meeting with David before he

left, he indicated he was going to be going

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 47 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

48

to Yemen and asked that I direct any calls

while he was out to his - to Abdul [sic], -

Q. Okay.

A. - which I did. I don’t recall ever

trying to call him, or I just ran everything

through Abdul [sic] to relay to David.

...

Q. Turning to Exhibit 99. Do you recognize

this document? I believe you’ve already

testified to it.

A. Yes.

...

Q. This letter is actually addressed to both

David and Abdul [sic]. Do you remember

informing them, or writing that David must

execute the Release despite Abdul [sic]

having the Power of Attorney?

A. Yes.

Q. Okay. After you executed that letter,

informing them that David needed to sign it

and that Abdul [sic] could not act on his

behalf, did you attempt to contact David

after that point?

A. No, I believe the purpose of that letter

was to put it in writing, because David was

out of the country.

Q. Okay. Did you request that Abdul [sic]

have David contact you after you informed him

that he could not use this Power of Attorney?

A. Not that I recall.

Q. Okay.

A. That’s why I’m requesting that David sign

it.

Q. Turning to Exhibit 89, page two ... Do

you remember if the receipts that were

provided by Costco referred to the exact

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 48 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

49

cigarettes that were lost?

A. No, I believe that they were presented by

David to show his acquisition price that he

pays for them.

Q. Okay. So, the cigarettes lost did not

necessarily reflect the cigarettes in the

receipts?

A. Right. As far as I recall.

Q. Okay. Did anyone, at any time, either

David or Abdul [sic], say that they were coowners of Bakersfield Grocery Wholesale?

A. I don’t recall ever being told that.

...

Q. Okay. Did David Aezah ever tell you

specifically to put the name Bakersfield

Grocery Wholesale on the check?

A. I don’t recall.

Q. Okay. On the 29 [of November] - did we th

- I think we already covered that Abdul was

the one who said it. 

...

A. Yes.

Q. Okay. And you did not speak to David on

that date?

A. No.

(Bycott Depo., January 16, 2007, 102:20-108:13). 

David argues that Bycott’s testimony should be disregarded

in resolving this motion because his testimony relied on his

written notes. 

However, as American Express notes, Bycott’s deposition

testimony was made without refreshing his recollection by

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 49 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

50

reviewing his notes.

American Express argues that Bycott’s testimony concerning

the statements made to him by David concerning David’s ownership

and use of the product stored at the Fortress cannot be

undermined by the speculation that Bycott had confused David with

Abdo during this initial meeting over the insurance claim. 

Bycott had no contact with Abdo until several months into the

negotiations, in October 2005, when David was out of the country.

Bycott testified at his January 16, 2007 deposition:

Q. Okay. Did David Aezah ever mention his

brother, Abdo or Abdul Aezah?

A. Yes.

Q. Did he ever say that he was in business

with his brother?

A. I don’t recall that.

Q. What did he say about his brother?

A. The only thing I recall is that he -

David, at one point during the claim, it

seemed to me that towards the end of the

claim, had gone to Yemen, and there was a

document we needed him to sign, a Proof of

Loss, to get it finalized, and he asked me to

deal with his brother.

Q. And did you ever meet his brother faceto-face?

A. I believe so.

Q. And can you tell the difference between

David Aezah and his brother, Abdo, at the

time?

A. Yeah, I was able to tell a difference. I

mean, I couldn’t describe them right now, but

I don’t - I don’t recall them standing out as

being twins or anything. 

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 50 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

51

MR. MORRISON: Just to clarify, we’re talking

about being face-to-face, you were able to

tell the difference between both of them?

MR. MOORE: Yes. Yes.

Q. And were your dealings in July of 2004

with David, rather than Abdo?

A. I believe so.

(Bycott Depo., January 16, 2007, 48:15-49:18). American Express

also refers to David’s deposition testimony on July 9, 2007:

Q. Did you tell ... the insurance

investigator [that you purchased cigarettes

from Costco and put them in Fortress]?

A. I do not remember.

Q. Did you tell the insurance investigator

that when you needed more cigarettes you got

them from the Fortress facility?

A. I don’t recall.

...

Q. All right. I’d like to show you a

document that was previously marked as

Defendants’ [sic] Exhibit 88. I represent

that this is a report that Mr. Bycott made to

St. Paul Traveler’s on or about July 27,

2005. That was his testimony. I’d like you

to turn to Page 4, and I’d like you to read

through Page 4 and the top of Page 5 until

you get to a discussion of the next Claimant. 

Just read it to yourself.

...

A. Okay.

Q. All right. Now, does this help you

remember telling anything to Mr. Bycott?

...

A. No, it does not help me.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 51 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

52

(David Depo., July 9, 2007, 565:10-18, 576:1-578:12). American

Express notes that David now denies under penalty of perjury that

he made any such statements to Mr. Bycott as opposed to not

remembering if he did during his deposition. American Express

argues that, under the sham affidavit doctrine, David should not

be permitted to change his testimony in order to avoid summary

judgment.

This may be true, however, a jury should make this

credibility determination. 

The motion for summary judgment as to the fraudulent

transfer of the Costo-acquired cigarettes is DENIED.

2. Constructive Fraudulent Transfers.

American Express seeks summary judgment on its claim that

Abdo and David were engaged in “constructive” fraudulent

transfers. 

Section 3439.04(a)(2) provides that a transfer is fraudulent

if the debtor made the transfer or incurred the obligation:

(2) Without receiving a reasonably equivalent

value in exchange for the transfer or

obligation, and the debtor either:

(A) 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.

(B) 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 became due.

California Civil Code § 3439.05 provides:

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 52 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

53

A transfer made or an obligation incurred by

a debtor is fraudulent as to a creditor whose

claim arose before the transfer was made or

the obligation was incurred if the debtor

made the transfer or incurred the 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.

American Express argues that summary judgment on this claim

is appropriate because of evidence that Abdo and David

transferred all of Bakersfield Wholesale’s assets to Bakersfield

Grocery and David, without reasonably equivalent value which 

rendered Bakersfield Wholesale insolvent. 

American Express refers to evidence that, in November and

December 2004, Bakersfield Wholesale charged $3.6 million to its

American Express cards for the purchase of Costco Cigarettes and

that, after American Express commenced this lawsuit against Abdo

and Bakersfield Wholesale on December 21, 2004, David created a

successor business, Bakersfield Grocery, and took possession of

all inventory, accounts receivable and goodwill, without

providing Bakersfield Wholesale any consideration. American

Express refers to evidence that David and Abdo transferred at

least $3 million in Costco Cigarettes from Bakersfield Wholesale

to Fortress Self-Storage, at a time when American Express

contends that Bakersfield Wholesale owed $3.6 million to American

Express and would be rendered insolvent by the transfer; that

David subsequently drew down on the Costco Cigarettes stored at

Fortress Self-Storage on an “as needed” basis for sale at

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 53 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

54

Bakersfield Grocery; that, following the fire at Fortress SelfStorage, David transferred insurance proceeds belonging to

Bakersfield Wholesale (and at a time when Bakersfield Wholesale

was insolvent) to Bakersfield Grocery and subsequently

transferred the insurance proceeds from Bakersfield Grocery to

Abdo. American Express further contends that Abdo and David

purchased the Mississippi Property in David’s name with $1.3

million in cash proceeds from the Costco Cigarettes belonging to

Bakersfield Wholesale and laundered through Bakersfield Grocery;

and that David transferred an additional $350.000 in cash

proceeds from sales of Costco Cigarettes to parties in Yemen. 

The David Defendants contend that genuine issues of material

fact preclude summary judgment for American Express on the

constructive fraudulent conveyances claim. They refer to their

evidence that David did not know that Abdo had incurred any debt

with American Express until several months after the fact; that

David never used any of the American Express cards; that David

did not sell the Costco Cigarettes acquired with the American

Express cards; that David gave Abdo the insurance proceeds owed

to Abdo and proceeds from accounts receivable; that David did not

acquire any of Bakersfield Wholesale’s inventory or property;

that Abdo’s house was reconveyed from David to Abdo when David

learned to the potential ramifications of that transfer; and that

David claims that the monies for the acquisition of the

Mississippi Property and transfers to Yemen came from his own

sources. 

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 54 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

55

In its reply brief, American Express asserts that the

undisputed facts of what transpired during the month of December

2004 alone mandate summary judgment against David on the claim of

constructive fraudulent conveyance. American Express contends

that it is undisputed that in November and December 2004, Abdo,

who had the authority to use the Bakersfield Wholesale credit

cards, used them to purchase $3.6 million of cigarettes from

Costco; that, immediately thereafter, Bakersfield Wholesale

defaulted on the credit card accounts because of a series of

bounced checks; that Bakersfield Wholesale refused to pay the

$3.6 million owed to American Express despite due demand; that

Abdo (with or without the assistance of David) arranged to

physically remove the Costco Cigarettes from the Bakersfield

Wholesale warehouse (“Warehouse”), and that, at that time,

Bakersfield Wholesale was insolvent because of its debt to

American Express; that, on December 6, 2004, David rented a

storage facility at Fortress Self-Storage, to which the Costco

Cigarettes were then transported; and that the value of the

Costco Cigarettes which were stored at Fortress Self-Storage was

$3 million. 

These undisputed facts, American Express contends, satisfy

the statutory requirements quoted above: “The transfer to

Fortress occurred at a time when Bakersfield Wholesale was

insolvent. David has never contended that he provided

Bakersfield Wholesale with any consideration for any of the

cigarettes which were stored at the Fortress unit.” American

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 55 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

56

Express cites California Civil Code § 3439.07(a)(1):

In an action for relief against a transfer or

obligation under this chapter, a creditor,

subject to the limitations in Section

3439.08, may obtain:

(1) Avoidance of the transfer or obligation

to the extent necessary to satisfy the

creditor’s claim.

American Express also cites Section 3439.08(b)(1):

Except as otherwise provided in this section,

to the extent a transfer is voidable in an

action by a creditor under paragraph (1) of

subdivision (a) of Section 3439.07, the

creditor may recover judgment for the value

of the asset transferred, as adjusted under

subdivision (c), or the amount necessary to

satisfy the creditor’s claim, whichever is

less. The judgment may be entered against

the following:

(1) The first transferee of the asset or the

person for whose benefit the transfer was

made.

American Express contends that David, who leased the Fortress

Self-Storage space to which the Costco Cigarettes were

transferred, was the “first transferee” of those cigarettes and

is liable to American Express for their $3 million value. With

regard to David’s argument that there was no transfer from

Bakersfield Wholesale to the Fortress unit because David

permitted Abdo access to the Costco Cigarettes stored there,

American Express refers to the definition of “transfer” set forth

in California Civil Code § 3439.01(i):

‘Transfer’ means 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,

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 56 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

57

and creation of a lien or other encumbrance.

American Express contends:

[T]he fact that the transfer might have been

‘conditional,’ and made with the expectation

that David would ultimately provide his

brother Abdo access to the inventory, does

not provide David with a safe haven to avoid

liability. It is undisputed that David had

personal control over the Costco Cigarettes. 

He could have opened the facility in the name

of Bakersfield Wholesale, but chose not to do

so, putting the unit at Fortress in his own

name. Although David contends that he gave

his brother a key to the unit, it was David

who controlled the unit: he admits that when

his brother lost the key, it was only David

who could regain access to the facility. The

fact that Abdo might have been permitted to

remove the Costco Cigarettes from the unit

does not provide a defense to a fraudulent

conveyance action. 

In so arguing, American Express cites the “badge of fraud” set

forth in Section 3439.04(b)(2)(“Whether the debtor retained

possession or control of the property transferred after the

transfer”). American Express refers to the evidence that, when

the remainder of the inventory was destroyed by fire in July

2005, David made the insurance claim and David received the

insurance proceeds from the insurance company by check made out

to David personally. American Express notes that David did not

turn over the proceeds to Bakersfield Wholesale or its creditor,

American Express, but to Abdo personally. American Express

contends that David did not hold the Bakersfield Wholesale

inventory in trust for Bakersfield Wholesale:

Instead, he either used the inventory for his

own business (which is what he told an

insurance investigator after the fire at

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 57 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

58

Fortress) or he gave his brother carte

blanche to keep the inventory out of the

reach of Bakersfield Wholesale’s creditors. 

From this, American Express asserts that David, as the first

transferee of the Costco Cigarettes, is liable for their $3

million value as a matter of law.

American Express argues that David’s attempt to avoid

liability by contending that he received the inventory at the

Fortress unit without knowing the exact nature or extent of

American Express’s claims against Bakersfield Wholesale can not

withstand summary judgment. American Express asserts that “good

faith” is not a defense to “first transferee” liability under

Section 3439.08(b)(1), but is only available to a “subsequent

transferee” under Section 3439.08(b)(2) who obtains the asset for

consideration and in good faith. Section 3439.08(b) provides:

Except as otherwise provided in this section,

to the extent a transfer is voidable in an

action by a creditor under paragraph (1) of

subdivision (a) of Section 3439.07, the

creditor may recover judgment for the value

of the asset transferred, as adjusted under

subdivision (c), or the amount necessary to

satisfy the creditor’s claim, whichever is

less. The judgment may be entered against

the following:

(1) The first transferee of the asset or a

person for whose benefit the transfer was

made.

(2) Any subsequent transferee other than a

good faith transferee who took for value or

from any subsequent transferee.

American Express cites an unpublished decision from the

Sixth Circuit Court of Appeals, Tareco Properties, Inc. v.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 58 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

59

Morriss, 2006 WL 2457064 (6 Cir.2006). th

Tareco Properties involved Tennessee’s Uniform Fraudulent

Transfer Act (UFTA). Tenn.Code.Ann. § 66-3-308(a)(1) provides

that a creditor, in an action to recover a fraudulent transfer,

may obtain “[a]voidance of the transfer or obligation to the

extent necessary to satisfy the creditor’s claim.” To the extent

such a transfer is voidable, the creditor may obtain a judgment

against “[t]he first transferee of the asset or the person for

whose benefit the transfer was made.” Tenn.Code.Ann. § 66-3-

309(b)(1). The Sixth Circuit held:

Because Steve Morriss fraudulently conveyed

money into the Amy Morriss account, and

because Amy Morriss Lowry, as owner of the

account, was the ‘first transferee,’ Amy

Morriss Lowry is liable for the transferred

money.

The defendants’ argument - that Amy Morriss

Lowry should not have been held liable

because the district court found that she

‘lacked the requisite intent to be a coconspirator’ - is without merit. There is

nothing in the Uniform Act requiring

fraudulent intent; the statute is silent as

to scienter. Cf. Bowlin v. Comm’r, 273 F.2d

610, 611 (6 Cir.1960)(holding without th

discussing intent, that a wife who received

cash from her insolvent husband was a

transferee and thus liable under a previous

Tennessee fraudulent conveyance statute). 

Moreover, courts interpreting identical

statutes from other jurisdictions have held

that there is no intent requirement for

transferee liability. See, e.g., Warfield v.

Byron, 436 F.3d 551, 557-58 (5th

Cir.2006)(holding that Washington’s Uniform

Fraudulent Transfer Act ‘permits entry of

judgment even without proof that the

transferee knowingly accepted property and

intended to assist the debtor in evading the

creditor’). The district court therefore

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 59 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

60

properly found Amy Morriss Lowry liable as a

transferee despite its finding that she did

not intend to participate in a fraudulent

conveyance.

Here, the extent to which David became a transferee is

unclear. He allowed the Bakersfield Wholesale assets to be

housed at his Fortress storage locker and apparently co-mingled

those assets with his own cigarette inventory. The remaining

stored cigarettes were destroyed by fire. David received

insurance proceeds on the remaining stored cigarettes and

transferred the proceeds to Abdo after he knew of American

Express’s lawsuit against Abdo. 

Because the extent to which David became a transferee is

disputed and because the facts underlying American Express’s

claim of constructive fraudulent transfer are disputed, the

motion for summary judgment on this ground is DENIED.

3. Conspiracy to Fraudulently Transfer.

American Express moves for summary judgment on its claim

that David is liable as a co-conspirator for Abdo’s fraudulent

conveyances.

California recognizes conspiracy to commit fraudulent

transfers. See Taylor v. S & M Lamp Co., 190 Cal.App.2d 700, 706

(1961)(“[A] debtor and those who conspire with him to conceal his

assets for the purpose of defrauding creditors are guilty of

committing a tort and each is liable in damages”); Qwest

Communications Corp. v. Weisz, 278 F.Supp.2d 1188, 1192

(S.D.Cal.2003). As explained in Applied Equipment Cor. v. Litton

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 60 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

61

Saudi Arabia Ltd., 7 Cal.4th 503, 510-511 (1994):

Conspiracy is not a cause of action, but a

legal doctrine that imposes liability on

persons who, although not actually committing

a tort themselves, share with the immediate

tortfeasors a common plan or design in its

perpetration ... By participation in a civil

conspiracy, a coconspirator effectively

adopts as his or her own the torts of other

coconspirators within the ambit of the

conspiracy ... In this way, a coconspirator

incurs tort liability co-equal with the

immediate tortfeasors.

Standing alone, a conspiracy does no harm and

engenders no tort liability. It must be

activated by the commission of an actual

tort. ‘”A civil conspiracy, however

atrocious, does not give rise to a cause of

action unless a civil wrong has been

committed resulting in damage.”’ ... ‘A bare

agreement among two or more persons to harm a

third person cannot injure the latter unless

and until acts are actually performed

pursuant to the agreement. Therefore, it is

the acts done and not the conspiracy to do

them which should be regarded as the essence

of the civil action.’ ....

“The elements of civil conspiracy are the formation and

operation of the conspiracy and damage resulting to the

plaintiff.” Monastra v. Konica Business Machines, U.S.A., Inc.,

43 Cal.App.4th 1628 1644-1645 (1996).

An element of a civil conspiracy is an agreement between the

alleged conspirators to commit a tortious act. As explained in

Kidron v. Movie Acquisition Corp., 40 Cal.App.4th 1571, 1582

(1995):

Accordingly, ‘[t]he basis of a civil

conspiracy is the formation of a group of two

or more persons who have agreed to a common

plan or design to commit a tortious act.’

....

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 61 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

62

However, actual knowledge of the planned

tort, without more, is insufficient to serve

as the basis for a conspiracy claim. 

Knowledge of the planned tort must be

combined with intent to aid in its

commission. ‘The sine qua non of a

conspiratorial agreement is the knowledge on

the part of the alleged conspirators of its

unlawful objective and their intent to aid in

achieving that objective.’ ... ‘This rule

derives from the principle that a person is

generally under no duty to take affirmative

action to aid or protect others.’ ....

While knowledge and intent ‘may be inferred

from the nature of the acts done, the

relation of the parties, the interest of the

alleged conspirators, and other

circumstances’ ..., ‘”[c]onspiracies cannot

be established by suspicions. There must be

some evidence. Mere association does not

make a conspiracy. There must be evidence of

some participation ro interest in the

commission of the offense.’ ... An inference

must flow logically from other facts

established in the action.

Defendants argue that summary judgment for American Express

must be denied because of evidence that David was not informed of

what was happening between Abdo and American Express until David

was served as a defendant in this action. Moreover, conspiracy

is only established where an alleged co-conspirator has the

requisite intent to achieve an unlawful purpose. Intent raises

an issue of fact.

In reply, American Express argues that the evidence

establishes David’s knowledge:

[B]y December 6, 2005, the date of the

Fortress rental, David knew that Abdo wanted

to keep inventory from Bakersfield Wholesale

in storage, and to keep it away from American

Express, at least until the parties

“settled.” Even if (as David contends), he

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 62 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

63

did not know the “details” concerning

American Express’ claim, he knew from the

very beginning that his brother was shutting

Bakersfield Wholesale down, had a dispute

with a creditor, American Express, and was

trying to keep inventory away from it.

Moreover, by his own admission, David was

fully on notice of American Express’ claims

by January 15, 2005, by which time he learned

that American Express has a temporary

restraining order preventing any disposition

of Bakersfield Wholesale assets. Of course,

on March 23, 2005, when he was named as a

party to this lawsuit, David was fully

knowledgeable about each and every detail of

American Express’ claims. 

Throughout this entire period of time, David

provided substantial assistance to his

brother in secreting the assets, by: (1)

continuing to maintain the Fortress storage

unit in his name and provide his brother

unfettered access to it; (2) by pursuing an

insurance claim, beginning in July 2005, in

his own name, for the $340,000 of Bakersfield

Wholesale inventory destroyed by fire; and

(3) accepting a check from Travelers for the

funds, depositing the funds into the

Bakersfield Grocery Wholesale account, and

turning over the cash to his brother. Under

California law, this knowing and continuing

participation in his brother’s wrongful

conduct makes him jointly liable with his

brother for the fraudulent transfers, in

their entirety.

American Express cites De Vries v. Brumback, 53 Cal.2d 643, 648-

650 (1960):

It is the settled rule that ‘to render a

person civilly liable for injuries resulting

from a conspiracy of which he was a member,

it is not necessary that he should have

joined the conspiracy at the time of its

inception; every one who enters into such a

common design is in law a party to every act

previously or subsequently done by any of the

others in pursuance of it.’ ... Having been

found to have joined and actively

participated in the continuing conspiracy to

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 63 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

64

convert, appellant became liable for the

previous acts of his coconspirators under the

rules relating to civil liability, and the

fact that some of the missing goods may never

have come into his possession would not

absolve him from liability.

...

There is a clear distinction in the law of

conspiracy as applied to criminal as

differentiated from civil cases ... The gist

of the crime of conspiracy is the agreement

to commit the unlawful act ..., while the

gist of the tort is the damage resulting to

the plaintiff from an overt act or acts done

pursuant to the common design ... In tort,

‘the major significance of the conspiracy

lies in the fact that it renders each

participant in the wrongful act responsible

as a joint tortfeasor for all damages ensuing

from the wrong, irrespective of whether or

not he was a direct actor and regardless of

the degree of activity.’ ....

Here the findings establish that appellant,

within a few hours after the robbery, joined

the continuing conspiracy to convert and with

full knowledge of the prior acts of his

coconspirators, actively participated in the

overall purpose to convert all of the stolen

property to their use and benefit. As such

active participant, appellant was a joint

tortfeasor liable for the entire damage done

in pursuance of the common design. In such

circumstances, the question of whether or not

all or any part of the unrecovered stolen

property ever came into appellant’s personal

possession is immaterial.

The David Defendants contend that there is no evidence that

David owed any duty to American Express. In Applied Equipment

Corp. v. Litton Saudi Arabia Ltd., supra, 7 Cal.4th at 511, the

California Supreme Court explained:

By its nature, tort liability arising from

conspiracy presupposes that the coconspirator

is legally capable of committing the tort,

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 64 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

65

i.e., that he or she owes a duty to plaintiff

recognized by law and is potentially subject

to liability for breach of that duty.

Chavers v. Gatke Corp., 107 Cal.App.4th 606, 614 (2003), holds:

As we read Applied Equipment and the

antecedent authorities on which it builds, in

California a civil conspiracy to commit

tortious acts can, as a matter of law, only

be formed by parties who are already under a

duty to the plaintiff, the breach of which

will support a cause of action against them -

individually and not as conspirators-in-tort

... Restated, in cases where the plaintiff

alleges the existence of a civil conspiracy

among the defendants to commit tortious acts,

the source of substantive liability arises

out of a preexisting legal duty and its

breach; liability can not arise out of

participation in the conspiracy alone. 

Moreover, according to these authorities, it

makes no difference in the analysis whether

the underlying duty is imposed by statute (as

in Doctor’s Co.) or by the common law (as in

Applied Equipment). A duty, however,

independent of the conspiracy itself, must

exist in order for substantive liability to

attach.

See also Ferris v. Gatke Corp., 107 Cal.App.4th 1211, 1225

(2003).

However, as American Express notes, the David Defendants

cite no case involving fraudulent transfers. In Qwest

Communications Corp., supra, 278 F.Supp.2d at 1192-1193, the

Southern District held:

[I]t does not follow that a non-transferee

cannot engage in a conspiracy to violate the

UFTA. Although conspiracy is a theory of

liability rather than an independent tort.

the chief function of the theory is to extend

liability beyond the principals who actually

committed the tort. The sole caveat is that

the coconspirator must be ‘legally capable of

committing the tort, i.e., that he or she

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 65 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

66

owes a duty to plaintiff recognized by law

and is potentially subject to liability for

breach of that duty.” Applied Equip. Corp.,

7 Cal.4th at 511 ... (emphasis added). No

doubt, Jonathan Weisz was legally capable of

committing a fraudulent conveyance in

violation of the UFTA. As president of the

debtor corporation, New Media, Weisz had a

duty not to commit a fraud upon the creditor,

Qwest. If he had transferred the subject

funds to his own bank account (thereby

becoming the transferee), there is no doubt

that would be a proper defendant in this

action. If, as alleged, he conspired to

transfer the funds to his father’s control,

then he can be held to account on a

conspiracy theory. See Taylor v. S & M Lamp

Co., 190 Cal.App.2d 700, 706 ... (1961)(‘[A]

debtor and those who conspire with him to

conceal his assets for the purpose of

defrauding creditors are guilty of committing

a tort and each is liable for damages.’). 

The David Defendants’ contention that they owed no duty to

American Express is without merit.

David refers to evidence that he was not an owner of

Bakersfield Wholesale or responsible for incurring any of the

debt owed by Abdo to American Express. In addition, the David

Defendants refer to evidence disputing American Express’s

evidence of fraudulent conveyances. See discussion supra. 

Finally, the David Defendants argue that summary judgment on this

claim must be denied because of evidence that harm to American

Express was caused solely by Abdo. 

However, even if David’s version of the facts is accepted

and Abdo alone benefitted from the fraudulent transfers, David is

not absolved of liability because, if a conspirator, he is liable

for all damages foreseeably caused by the fraudulent transfers.

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 66 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

67

Because the issue of David’s intent cannot be decided as a

matter of law, summary judgment on conspiracy must be DENIED.

D. Successor Liability.

American Express moves for summary judgment on its claims

against the David Defendants based on successor liability.

In Ray v. Alad Corp., 19 Cal.3d 22, 28 (1977), the

California Supreme Court discussed imposition of successor

liability, holding in pertinent part:

Our discussion of the law starts with the

rule ordinarily applied to the determination

of whether a corporation purchasing the

principal assets of another corporation

assumes the other’s liabilities. As

typically formulated the rule states that the

purchaser does not assume the seller’s

liabilities unless (1) there is an express or

implied agreement of assumption, (2) the

transaction amounts to a consolidation or

merger of the two corporations, (3) the

purchasing corporation is a mere continuation

of the seller, or (4) the transfer of assets

to the purchaser is for the fraudulent

purpose of escaping liability for the

seller’s debts.

At issue here are exceptions 3 and 4. “Eliminating the

exceptions requires disproving at least one element of each

exception or showing that at least one element cannot be

established.” Fisher v. Allis-Chalmers Corp. Prod. Liab. Trust,

95 Cal.App.4th 1182, 1188 (2002). 

Under California law, a corporation acquiring the assets of

another corporation is the latter’s mere continuation only upon a

showing that “(1) no adequate consideration was given for the

predecessor corporation’s assets and made available for meeting 

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 67 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

68

the claims of its unsecured creditors,” or “(2) one or more

persons were officers, directors, or stockholders of both

corporations.” Ray v. Alad Corp., supra, 19 Cal.3d at 29.

American Express argues that it has submitted “irrefutable

evidence” that Bakersfield Grocery and DAI are a continuation of

Bakersfield Wholesale. American Express refers to evidence that

Bakersfield Grocery operates from the same address and operates

the same business as Bakersfield Wholesale; that Bakersfield

Grocery services the same customers and makes purchases from the

same suppliers; that David runs Bakersfield Grocery with the

substantial assistance of Abdo; that Abdo operated Bakersfield

Wholesale with the substantial assistance of David; that

Bakersfield Wholesale transferred all of its assets to

Bakersfield Grocery for no consideration; that David deposited

checks from Bakersfield Wholesale’s customers into Bakersfield

Grocery’s business account; that David sold the Costco Cigarettes

purchased by Bakersfield Wholesale through Bakersfield Grocery;

and that David used Bakersfield Grocery business accounts to

launder money for the purchase of the Mississippi Property. 

American Express refers to David’s interrogatory response that

DAI has taken over the assets of Bakersfield Grocery for no

consideration. American Express further argues that these

transfers were clearly intended to avoid American Express’s

collection of its debt from Bakersfield Wholesale:

As Bakersfield Wholesale closed, David opened

Bakersfield Grocery Wholesale, just as

American Express was preparing to obtain a

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 68 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

69

judgment against Abdo and Bakersfield

Wholesale. There was no reason for the

company to re-open under a slightly different

name, except that American Express was

actively pursuing Abdo and Bakersfield

Wholesale.

The David Defendants argue that summary judgment on this

claim is inappropriate. Although conceding that both businesses

operated from the same address, Defendants refer to evidence that

David acquired the property from Abdo when Abdo was unable to

repay a $150,000 loan from David and to evidence that David

assumed a $288,000 mortgage on the property. Defendants argue

that the transaction was at arms length and for a fair

consideration. Defendants admit that Bakersfield Grocery

deposited a “small number” of checks payable to Bakersfield

Wholesale but that “these checks were deposited and then the full

amount of cash was distributed to the owner of Bakersfield

Wholesale, unless some amount was owed to Bakersfield Grocery or

its sole owner” and contend that Bakersfield Grocery did not

retain any monies belonging to Bakersfield Wholesale. Defendants

further dispute American Express’s evidence that Bakersfield

Wholesale transferred all of its inventory to Bakersfield

Grocery, referring to evidence that the proposed bulk sale was

cancelled when David learned of the Court’s Order; that Abdo sold

the remaining inventory at auction and to various third parties;

that Abdo denies selling inventory to David and David denies

buying any inventory. Defendants concede that Bakersfield

Wholesale and Bakersfield Grocery have “some” similar customers

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 69 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

70

and suppliers and sold similar items. Defendants refer to

evidence that Abdo did not provide David with customer or

supplier lists or identify for David what David should sell; that

David had extensive experience in the mini mart industry; and

that some overlap in customers and suppliers is expected given

the small size of the Bakersfield mini mart industry. 

Defendants further argue that summary judgment is unfounded

because American Express cannot demonstrate common officers,

directors or stockholders of the two companies:

Abdo ... owned Bakersfield Wholesale Foods. 

David would occasionally help Abdo out

because they are brothers. Abdo ... was the

sole officer, director, and shareholder. 

When David started Bakersfield Grocery

Wholesale, he was the sole officer, director,

and stockholder. Abdo ... did not own any

portion of Bakersfield Grocery Wholesale. 

The fact that Abdo would help out at

Bakersfield Grocery Wholesale does not make

him an owner or employee. The David

Defendants were not able to find any case law

(and plaintiff has not identified any) to

support any assertion that by helping out at

a brother’s business, that would make the

brothers co-owners of a business, which is in

essence what American Express is asking the

Court to find.

American Express replies that, because Bakersfield Grocery

was never incorporated, David’s assertion that he was the sole

officer, director and shareholder of Bakersfield Grocery is

“absurd.” American Express cites Nash-De Camp Co. v. Nakata

Farms, Inc., 2006 WL 539569 (2006). There Five Star Partners

LLC, Five Star Depot Ltd. and Hanuye Nakata were found to be

successors to Nakata Farms because “[t]hey carried on the same

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 70 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

71

business and substantially the same people operated and managed

the Five Star businesses as operated Nakata Farms.” American

Express argues:

David has run Bakersfield Grocery Wholesale

with substantial assistance of his brother

Abdo. Abdo in turn once operated Bakersfield

Wholesale with the substantial assistance of

his brother David. Thus, there is a

substantial overlap in management, which

fully justifies the imposition of successor

liability. 

With regard to successor liability based on fraudulent

conveyances, Defendants dispute that such conveyances occurred. 

These disputes over intent and identity of the conduct of

business of Bakersfield Wholesale and Bakersfield Grocery cannot

be resolved as credibility is in issue as to Abdo and David.

Summary judgment on successor liability is DENIED.

E. Alter Ego Liability.

American Express seeks summary judgment on its claim for

alter ego liability. 

As explained in Roman Catholic Archbishop v. Superior Court,

15 Cal.App.3d 405, 411 (1971):

The terminology ‘alter ego’ or ‘piercing the

corporate veil’ refers to situations where

there has been an abuse of corporate

privilege, because of which the equitable

owner of a corporation will be held liable

for the actions of the corporation ... The

requirements for applying the ‘alter ego’

principle are thus stated: ‘”[I]t must be

made to appear that the corporation is not

only influenced and governed by that person

[or other entity], but that there is such a

unity of interest and ownership that the

individuality, or separateness, of such

person and corporation has ceased, and the

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 71 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

72

facts are such that an adherence to the

fiction of the separate existence of the

corporation would, under the particular

circumstances, sanction a fraud or promote

injustice.’ ... Among the factors to be

considered in applying the doctrine are the

commingling of funds and other assets of the

two entities, the holding out by one entity

that it is liable for the debts of another,

identical equitable ownership in the two

entities, use of the same offices and

employees, and use of one as a mere shell or

conduit for the affairs of the other ....

American Express argues that the facts show that David was

the real owner of Bakersfield Wholesale when the American Express

debt was incurred, even though the stock was in Abdo’s name; that

Abdo, David and Bakersfield Wholesale were alter egos of each

other; and that Bakersfield Wholesale and its successor entity,

Bakersfield Grocery, are shell entities that are insufficiently

capitalized, fail to observe corporate formalities, are used for

fraudulent purposes, and are so totally dominated and controlled

by Abdo and David as to have no separate and independent

existence of their own.

One of the requirements for alter ego liability is that

“there be such unity of interest and ownership that the separate

personalities of the corporation and the individual no longer

exist”. Mid-Century Ins. Co. v. Gardner, 9 Cal.App.4th 1205,

1212 (1992). A threshold question is whether the alleged alter

ego had an ownership interest in the corporation. If there is no

ownership interest, there is no alter ego liability. Riddle v.

Leuschner, 51 Cal.2d 574, 580 (1959); see also SEC v. Hickey, 322

F.3d 1123, 1128 (9 Cir.2003)(“Ownership is a prerequisite to th

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 72 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

73

alter ego liability, and not a mere ‘factor’ or ‘guideline.’”);

Firstmark Capital Corp. v. Hempel Financial Corp., 859 F.2d 92,

94 (9 Cir.1988)(“Ownership of an interest in the corporation is th

an essential part of the element of unity of ownership and

interest. If an individual’s ownership is not established, the

corporation’s obligations cannot be imposed on him or her.”).

The David Defendants argue that summary judgment on this

claim should be denied because David was never an owner of

Bakersfield Wholesale. David argues that American Express is

attempting to proceed against him because Abdo is judgment proof,

that American Express has not demonstrated that he had any

ownership interest in Bakersfield Wholesale and has merely

alleged facts from which it may be inferred that David

“essentially acted as a periodic manager or employee of

Bakersfield Wholesale.” David cites Riddle v. Leuschner, supra,

51 Cal.2d 574, 580:

It is undisputed that he held none of the

stock, and there is no evidence that he had

any interest as an owner in the business

operated by either of the two corporations or

that he had a right to share in any of the

profits they might make. Instead, he

received a monthly salary. Under all the

circumstances, he is to be regarded as having

been a managing employee of the two

companies, and his control over their affairs

must be treated as that which would be

exercised by a managing agent rather than

that of a shareholder or owner. 

American Express responds that David’s motion is based on

the contention that Abdo is the nominal owner of 100% of the

corporate shares of Bakersfield Wholesale. However, American

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 73 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

74

Express contends, in order to be held liable as an alter ego, the

defendant need only have an equitable ownership in the relevant

entity. See Minton v. Cavaney, 56 Cal.2d 576, 580 (1961):

The evidence is ... undisputed that Cavaney

was not only the secretary and treasurer of

the corporation but was also a director. The

evidence that Cavaney was to receive onethird of the shares to be issued supports an

inference that he was an equitable owner (see

Riddle v. Leuschner, supra, 51 Cal.2d 574,

580), and the evidence that for a time the

records of the corporation were kept in

Cavaney’s office supports an inference that

he actively participated in the conduct of

the business. The trial court was not

required to believe his statement that he was

only a ‘temporary’ director and officer for

‘accommodation.’ 

See also Roman Catholic Archbishop v. Superior Court, supra, 15

Cal.App.3d at 411 (“The terminology ‘alter ego’ or ‘piercing the

corporate veil’ refers to situations where there has been an

abuse of corporate privilege, because of which the equitable

owner of a corporation will be held liable for the actions of the

corporation.”); Sonora Diamond Corp. v. Superior Court, 83

Cal.App.4th 523, 538 (2000)(“Under the alter ego doctrine ... the

courts will ignore the corporate entity and deem the corporations

acts to be those of the persons or organizations actually

controlling the corporation, in most instances the equitable

owners.”); Tri-State Equipment v. United States, 1997 WL 375264

(E.D.Cal.1997)(“[E]quitable ownership has been inferred, despite

the individual’s lack of actual or substantial ownership of

shares, provided other indicia of control are present.”).

The David Defendants argue that the language in the

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 74 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

75

Declaration dated September 19, 2004 which stated that in

exchange for the satisfaction of a $150,000 loan from David to

Abdo, Abdo was transferring the Warehouse to David, and that

“[t]he borrower [Abdo] no longer has an interest of any king

[kind] in this property or any business within it” is vague and

ambiguous and subject to multiple interpretations. David avers

in his Declaration in opposition to this motion for summary

judgment:

2. When Abdo and I executed the Declaration

in regard to my forgiveness of the loan, the

term ‘business’ did not refer to Bakersfield

Wholesale Foods. It was an expression we use

that was meant to mean that Abdo should no

longer be concerned about the property and

that it was now my business, not his. I have

never owned any interest in Bakersfield

Wholesale Foods. I did not become an owner

of Bakersfield Wholesale Foods at any point. 

That business belonged exclusively to Abdo. 

I did help out on occasion when Abdo needed

it but was neither an owner, officer, or

employee.

Defendants argue that the language in the Declaration is “vague

and ambiguous” and “subject to multiple interpretations”. 

Defendants contend:

Under the general principles of contract law,

it is necessary to examine the intent of the

parties that executed the agreement. Based

on the deposition testimony of David and

Abdo, it is clear that it was not the

intention of either Abdo or David to convey

any ownership interest in Bakersfield

Wholesale Foods.

As explained in Falkowski v. Imation Corp., 132 Cal.App.4th

499, 505-506 (2005):

When faced with a dispute over the meaning of

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 75 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

76

a contractual provision, the court must first

determine whether the provision is ambiguous,

i.e., whether, on its face, the language of

the provision is capable of different, yet

reasonable interpretations ... If an

ambiguity is found, the court must determine

which of the plausible meanings the parties

actually intended ... When the parties offer

no extrinsic evidence concerning the meaning

of the contractual language, or when the

extrinsic evidence offered is not in

conflict, ascertaining the intended meaning

is solely the duty of the court ....

In determining which of the plausible

meanings was intended, we are required to

deduce the parties’ intent from the language

of the contract alone, if possible ...

Accordingly, at least in the first instance,

contractual interpretation turns on ‘what was

intended by what was said - not what a party

intended to say.’ ... In evaluating the

contractual language, however, we also

‘”tak[e] into account all the facts,

circumstances and conditions surrounding the

execution of the contract.”’ ....

American Express has not established the seminal requirement

that David had any actual or constructive ownership interest in

the shares of Bakersfield Wholesale. Evidence as to other

aspects of corporate or business operations are inconclusive. 

Alter ego liability cannot be determined as a matter of law. The

motion for summary judgment on this claim is DENIED.

G. Affirmative Defenses.

American Express moves for summary judgment on each of the

affirmative defenses to liability pleaded in the Answer. 

American Express contends that each affirmative defense “is

wholly defective for its failure to include factual allegations”

and that “[a]s a matter of law, none of them raise a genuine

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 76 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

77

issue of material fact sufficient to defeat a motion for summary

judgment, and each of them should be dismissed as a matter of

law.”

To the extent that American Express seeks summary judgment

because the Affirmative Defenses do not plead specific facts,

summary judgment is DENIED. The issue on summary judgment is

whether Defendants can support the affirmative defenses with

evidence.

1. First Affirmative Defense.

Summary judgment is GRANTED with regard to the First

Affirmative Defense of failure to state a claim upon which relief

can be granted. It is a pleading defense. Because Defendants’

motion to dismiss the Third Amended Complaint for failure to

state a claim was denied, this Affirmative Defense is without

merit. 

2. Second, Sixth and Twelfth Affirmative Defenses.

The Second Affirmative Defense is captioned “Acts of Other

Persons” and alleges that “the damages alleged in the complaint

[sic] were caused in whole or in part by other persons including

but not limited to the plaintiff and/or third parties.” The

Sixth Affirmative Defense is captioned “Apportionment of

Fault/Comparative Fault” and alleges:

[A]t the time and place of the events

described in the complaint [sic], persons and

entities as yet unknown to the David

Defendants were careless, negligent, in

breach of contract, in breach of fiduciary

duty, in breach of warranty, express or

implied, strictly liable and/or otherwise

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 77 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

78

legally at fault in and about the matters and

things alleged in the complaint [sic] which

comparative negligence, breach of contract,

breach of fiduciary duty, breach of warranty,

strict liability and/or other legal fault

proximately caused or contributed to the

injuries and damages complained of, if any

there were or are, and that liability, if any

should be apportioned among David and said

persons and entities based upon their

respective percentages of comparative fault.

The Twelfth Affirmative Defense alleges that “Plaintiff assumed

the risk of its damages herein.” 

American Express contends that the David Defendants

suggested during the course of depositions that American Express

was negligent in erroneously permitting Bakersfield Wholesale to

exceed its credit limits and that this should relieve the David

Defendants of any liability for fraudulent conveyances. American

Express argues that it is entitled to summary judgment with

respect to this claim because “[i]t is well established under

California law that the principles of comparative fault are not

applicable to reduce the liability of a party guilty of

intentional misconduct, like the fraudulent transfer of assets

and conspiracy to fraudulently transfer assets at issue in this

lawsuit.”

In Cardoza v. Dar Side, Inc., 2005 WL 605448 (2005), the

California Court of Appeals held at * 14:

Statutorily, the law provides that a

tortfeasor who has intentionally injured a

person is not entitled to contribution from

any other tortfeasors. (Code Civ. Proc. §

875, subd. (d).) A number of cases have held

that a defendant who commits an intentional

tort against the plaintiff is not entitled to

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 78 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 Miscited by American Express as 2004 WL 26692792. 5

79

a reduction of the judgment based on the

plaintiff’s contributory negligence. (See

Allen v. Sundean (1982) 137 Cal.App.3d 216,

226-227; Godfrey v. Steinpress (1982) 128

Cal.App.3d 154, 176.)

See also Kologe v. Boyd, 2004 WL 2669272 (2004) at * 11 n.9:5

As stated in Carroll v. Gava, supra, 98

Cal.App.3d 892, ‘[w]hatever [the] trend

[toward comparative fault analysis] may be

[citation], the concept has no place in the

context of ordinary business transactions. 

The modern law of misrepresentation evolved

from the “action on the case of deceit” in

business transactions. [Citations.] Business

ethics justify reliance upon the accuracy of

information imparted in buying and selling,

and the risk of falsity is on the one who

makes a representation. [Citation.] This

straightforward approach provides an

essential predictability to parties in the

multitude of everyday exchanges; application

of comparative fault principles, designed to

mitigate the often catastrophic consequences

of personal injury, would only create

unnecessary confusion and complexity in such

transactions.’ (Id. at p.897.). 

The doctrine of comparative fault does not apply to American

Express’s claims of successor liability or alter ego. In

Considine Co. v. Shadle, Hunt & Hagar, 187 Cal.App.3d 760, 770-

771 (1986), the Court held:

In light of the deference we must afford the

reasonable expectations of contracting

parties, we believe that where the alleged

breach of an express promise gives rise to a

claim for implied indemnity, principles of

contract law should control. Thus, where one

party has promised to perform a particular

act, upon breach the injured promisee should

not face a comparative negligence defense. 

(See Bear Creek Planning Com. v. Title Ins. &

Trust Co. (1985) 164 Cal.App.3d 1227, 1239

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 79 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

80

... Rather, the only limitation on indemnity

should be the traditional contract rule which

completely bars indemnity to those whose

active participation in the injury has gone

beyond simple negligence. (Id. at p. 1241). 

Thus, in cases such as Nomellini and Bear

Creek, where the indemnitor was charged with

breach of an express promise, indemnity could

be barred, but only upon a showing of

participation beyond the mere failure to

perform the duty imposed by law.

However, when indemnity is based, not upon

breach of a promise, but upon breach of a

duty of care, the principles of comparative

fault set forth in Li v. Yellow Cab Co. .... 

See also C.I. Engineers & Constructors, Inc. v. Johnson ..., 140

Cal.App.3d 1011, 1017 (1983): “Here, the legal obligation of the

indemnifying subcontractor, if any, is predicated upon express

contract indemnity and not upon the application of the

comparative fault doctrine which springs from common law tort

principles.” 

As American Express contends, the David Defendants have not

and cannot point to any case or statute holding that a debtor’s

exceeding a credit limit imposed by the lender is a defense to

the debt. American Express cites, inter alia, Edwards v. Modoc

County Bank, 135 Cal.App. 550, 554 (1933)(“The fact that a bank

might loan beyond its statutory limit does not absolve the debtor

or raise any presumptions against the truth of the testimony

given”). Indemnity is not sought by any party in this case. 

American Express seeks to establish direct liability against the

David Defendants.

In Lipson v. Superior Court, 31 Cal.3d 362, 376 n.8 (1982),

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 80 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

81

the California Supreme Court explained:

In this state, the defense of assumption of

risk arises when the plaintiff voluntarily

undertakes to encounter a specific known risk

by defendant’s conduct. (Grey v. Fibreboard

Paper Products Co. (1966) 65 Cal.2d 240, 245

...; see also 4 Witkin, Summary of Cal. Law

(8 ed.1974) Torts, § 722, pp. 3011-3012.) th

Assumption of risk normally operates as a

complete defense to a plaintiff’s claim of

strict liability. However, when a

plaintiff’s voluntary encounter with a known

risk is also unreasonable, his conduct is in

reality a form of contributory negligence. 

(Li v. Yellow Cab Co. (1975) 13 Cal.3d 804,

824 ....) To the extent that the assumption

of risk doctrine overlaps with contributory

negligence, the former has been abolished as

a separate and complete defense. The burden

of plaintiff’s loss is divided between the

parties in proportion to the percentage of

fault attributable to each of them. (Daly v.

General Motors Corp. (1978) 20 Cal.3d 725,

742 ....)

These authorities establish that the affirmative defenses of

comparative fault, apportionment of fault and assumption of the

risk do not provide a defense to American Express’s claims of

fraudulent transfer, conspiracy to fraudulently transfer, alter

ego or successor liability.

Defendants do not respond specifically to the legal

authority cited by American Express. They contend, however, that

damages sustained by American Express were caused solely by the

actions of third parties, including American Express and Abdo. 

Noting that Abdo personally guaranteed the loan, the David

Defendants argue that, because American Express has determined

Abdo to be judgment proof, American Express is attempting to

collect the entire amount of the debt from the David Defendants

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 81 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

82

and that “[t]here is no basis for the imposition of liability on

the David Defendants in light of the actions taken by the other

parties.” In addition, the David Defendants assert, Fahd Aezah

is personally liable as a card holder for the debt incurred on

the credit card issued to him but that, for some reason, American

Express dismissed Fahd Aezah as a defendant in this action.

As American Express contends, parties can be jointly and

severally liable. Further, the David Defendants do not contend

that Fahd Aezah is an indispensable party to this litigation.

Summary judgment for American Express on the Second, Sixth

and Twelfth Affirmative Defenses is GRANTED.

3. Third and Fifth Affirmative Defenses.

The Third Affirmative Defense, captioned “Set Off”, alleges

that, to the extent the David Defendants are liable for American

Express’s damages, the David Defendants “are entitled to set off

those damages against any amounts owed by Plaintiff or other

parties to him.”

Based on the concession by the David Defendants at the

hearing that they have no facts to support set-off, summary

judgment for American Express on the Third Affirmative Defense is

GRANTED.

 The Fifth Affirmative Defense, captioned “Failure to

Mitigate Damages”, alleges that American Express, “with the

exercise of reasonable diligence and effort, could have mitigated

the damages, if any, alleged in the complaint [sic].”

The doctrine of mitigation of damages is set forth in Valle

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 82 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

83

de Oro Bank v. Gamboa, 26 Cal.App.4th 1686, 1691 (1994):

The doctrine of mitigation of damages holds

that ‘[a] plaintiff who suffers damage as a

result of either a breach of contract or a

tort has a duty to take reasonable steps to

mitigate those damages and will not be able

to recover for any losses which could have

been thus avoided.’ ... A plaintiff may not

recover for damages avoidable through

ordinary care and reasonable exertion ... The

duty to mitigate damages does not require an

injured party to do what is unreasonable or

impracticable ... ‘The rule of mitigation of

damages has not application where its effect

would be to require the innocent party to

sacrifice and surrender important and

valuable rights.’ ....

Typically, the rule of mitigation of damages

comes into play when the event producing

injury or damage has already occurred and it

then has become the obligation of the injured

or damaged party to avoid continuing or

enhancing damages through reasonable efforts. 

For example, a landowner should avoid the

certain loss of trees and crops by reasonably

irrigating the land while a dispute over the

contract price of water is resolved ... An

owner’s recovery for deprivation of use of a

damaged vehicle is limited to the time

reasonably required for making the necessary

repairs ... One has an obligation to avoid an

unwarranted enhancement of damages ‘through

passive indifference or stubborn insistence

upon a conceived legal right ....’ ...

Indeed, BAJI Nos. 14.67 (Damages-Personal

Injury-Duty to Mitigate) and 14.68 (DamagesPersonal Property-Duty to Mitigate) impose

the duty to mitigate upon ‘a person who has

been injured,’ or ‘whose property has been

damaged ....’

In Millikan v. American Spectrum Real Estate Services California,

Inc., 117 Cal.App.4th 1094, 1105 (2004), cited by American

Express, the Court of Appeals explains:

‘The burden of proving that losses could have

been avoided by reasonable effort and expense

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 83 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

84

must always be borne by the party who has

broken the contract ... Inasmuch as the law

denies recovery for losses that can be

avoided by reasonable effort and expense,

justice requires that the risks incident to

such effort should be carried by the party

whose wrongful conduct makes them necessary

... Therefore, special losses that a party

incurs in a reasonable effort to avoid losses

resulting from a breach are recoverable as

damages.’ ....

American Express contends that there is no evidence in the

record that American Express owes any of the David Defendants any

money or that American Express failed to mitigate its damages.

Referring to “Defenses Based on Mitigation”, the David

Defendants assert that American Express concedes that the

collective credit limit for the cards issued to Bakersfield

Wholesale was supposed to be $110,000 and that internal glitches

allowed Abdo in incur $3.5 million in excess of that credit

limit, and that Abdo was considered a high credit risk. The

David Defendants argue: “American Express failed to mitigate its

damages in this case by failing to properly monitor their cards

and have adequate measures in place to limit the damages.”

The David Defendants were given leave to file a supplemental

brief providing legal authority in support of their mitigation

defense.

The David Defendants cite Thrifty-Tel Inc. v. Bezenek, 46

Cal.App.4th 1559 (1996). In Thrifty-Tel, Thrifty-Tec, a

telephone long distance carrier, sued the Bezenek’s, parents of

sons who used computer technology to crack Thrifty-Tel’s access

and authorization codes and made long distance telephone calls

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 84 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

85

without paying for them, for fraud and conversion and prevailed. 

On appeal, the Court of Appeals ruled in pertinent part:

At least four months before Thrifty-Tel sued,

it knew the hacking occurred in the Bezenek

home. But plaintiff neither notified the

Bezeneks nor attempted to prevent a

recurrence. Myron Bezenek’s testimony that

he would have stopped it immediately had he

been advised of his children’s activities

was, not surprisingly, unrebutted. 

Accordingly, the Bezeneks complain plaintiff

failed to mitigate its damages and insist

they should not be liable for any losses

suffered in the February 1992 escapade. We

agree.

A plaintiff has a duty to mitigate damages

and cannot recover losses it could have

avoided through reasonable efforts. (Shaffer

v. Debbas (1993) 17 Cal.App.4th 33, 41 ....) 

Citing Service v. Trombetta (1963) 212

Cal.App.2d 313, 320 ..., Thrifty-Tel’s only

response is that mitigation does not

‘”require a complex series of doubtful acts

and expenditures.”’ Picking up the telephone

to reach out and touch the Bezeneks or

sending them a letter was complex, doubtful,

or expensive? Based on Myron Bezenek’s

unchallenged testimony, we must presume that

simple expedient would have avoided the

second hacking episode. Accordingly,

Thrifty-Tel is not entitled to recover

damages for the February 1992 event.

46 Cal.App.4th at 1568-1569.

The David Defendants argue that American Express, like

Thrifty-Tel, could have used reasonable efforts to limit the

amount of damages/amount that was charged by Abdo on the credit

cards, contending that American Express had knowledge that the

credit limits were being exceeded but did nothing to limit or

stop the incurrence of the debt. 

American Express argues that a lender has no duty to

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 85 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

86

mitigate damages when it is owed a debt. American Express refers

to Valle de Oro Bank v. Gamboa, supra, 26 Cal.App.4th 1686.

In Valle de Oro Bank, the Bank brought an action for damages

for the balance due on a promissory note executed by Gamboa in

consideration for a loan to purchase a motor home (also referred

to as the vehicle). The motor home was destroyed by fire when

the unpaid balance on the loan exceeded the insurance coverage

obtained by Gamboa on the motor home. On appeal, the issue was

whether the trial court erred in allowing the jury to consider

the doctrine of mitigation of damages against the Bank by virtue

of the Bank’s failure to procure comprehensive insurance coverage

on the motor home. The Court of Appeals held it was error to

allow the jury to consider and apply the doctrine of mitigation

of damages, holding:

The issue of mitigation of damages in this

case arises in a unique context. Although no

reported California case has dealt with

application of the doctrine of mitigation of

damages to a lender’s action to collect on a

contractual obligation for the repayment of a

loan where the collateral to a loan was

destroyed and the lender did not exercise a

contractual option to insure against the

loss, case law analysis discloses the

doctrine is used sparingly in the contract or

commercial context.

In Seaboard Music Co. v. Germano, ... 24

Cal.3d 618, the lessor of a jukebox and pool

table sued a tavern owner for damage for

failure to make lease payments. The argument

the lessor was required to mitigate damages

by releasing the equipment it received back

was rejected by the court. The court

reasoned one who is engaged in the business

of leasing equipment is not required to

sacrifice additional leases it might

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 86 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

87

negotiate so that repossessed equipment may

be released. As the Seaboard court

articulated, ‘... the rule of mitigation of

damages has no application where its effect

would be to require the innocent party to

sacrifice and surrender important and

valuable rights.’ (Id. at p. 623.)

In Capaldi v. Levy (1969) 1 Cal.App.3d 274

..., defendant contracted to purchase all the

corporate stock of a company. Defendant made

a down payment, took possession of the

corporate property, but thereafter refused to

pay the balance of the purchase price and

abandoned the property. The Capaldi court

rejected defendant’s argument the sellers

were required to mitigate damages: ‘Appellant

contends that it was the duty of the sellers

to mitigate damages from and after the time

when he repudiated the purchase agreement and

abandoned the property. The sellers,

however, having fully performed their

obligations under the written agreement and

escrow instructions, had no further duty with

respect to the operation of the corporation,

the books, records and assets of which had

been delivered to appellant. It is obvious

that the doctrine requiring mitigation of

damages has no application to the facts of

this case.’ (Id. at p. 282.)

In Vitagraph, Inc. v. Liberty Theatres Co.

(1925) 197 Cal. 694 ..., a distributor of

photoplays sued to recover damages resulting

from defendant’s failure to pay the agreed

film rental value. While upholding the trial

court’s ruling defendant had failed to prove

facts in mitigation of damages, the court

noted: ‘No case has been called to our

attention wherein this rule as to the duty to

minimize the damages has been applied to a

situation in which the defendant’s breach of

duty consisted solely of the failure or

refusal to pay a liquidated sum of money when

due, and it may perhaps be doubted that the

rule is applicable to such a case. It would

seem that the situation of the respondent is

in this respect analogous to that of a lessor

whose lessee has repudiated the lease and

given notice that he will not perform it. It

is held in such case that the lessor may

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 87 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

88

elect to stand upon his contract and may

recover the full rent for the term, when it

becomes due, in accordance with the terms of

the contract, or he may elect to treat the

contract as abandoned and relet the premises

to another tenant, in which event he can

recover as damages only the difference

between the rent he was to receive and the

rent actually received from the subsequent

tenant ....’ (Id. at pp. 698-699.)

Other California cases have dealt with the

issue of whether there exists under certain

circumstances a general or common law duty to

procure insurance coverage. In Morales v.

Fansler (1989) 209 Cal.App.3d 1581 ..., it

was held a lessor had no duty to an injured

third party to ensure a tenant’s compliance

with a lease provision requiring $500,000 in

liability coverage. Similarly, in Sutake v.

Orange County Federal Credit Union (1986)

..., the lender and legal owner financing the

purchase of an automobile owed no duty to an

injured motorist to procure liability

insurance on the vehicle where the registered

owner/driver had failed to do so. (Accord,

Altman v. Morris Plan Co. (1976) 58

Cal.App.3d 951, 956-959 ...; Skerlec v. Wells

Fargo Bank (1971) 18 Cal.App.3d 1003, 1006

....)

By contrast, where a lender orally agrees or

represents it will maintain its practice of

procuring insurance for the financed vehicles

of its long-time customer, an action for

breach of the agreement can be maintained for

fire damage to a vehicle for which no

insurance coverage was in fact provided. 

(Sawyer v. Bank of America (1978) ... In this

case, of course, there was no evidence of any

such practice or representation ....

Perhaps no California case better captures

the spirit of the equities which exist in

favor of the Bank in this case than Ash v.

Soo Sing Lung (1918) 177 Cal. 356 ... In Ash,

the defendant agreed to purchase, harvest,

and market a crop of peaches on the

plaintiff’s property. The defendant failed

to tie up tree limbs as he was obligated to

do and the plaintiff sustained damage to his

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 88 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

89

trees as a result. Because the plaintiff

discovered some tree damage but did not avert

further damage by tying the trees himself,

the trial court instructed the jury on

mitigation of damages. The jury’s verdict

was in favor of the defendant. The Supreme

Court reversed judgment for defendant and

held: ‘Conceding that the rule contended for

by the defendant requiring one threatened

with injury to his property through the

breach of an obligation respecting the same

undertaken by another, to do all in his power

to prevent or minimize the loss to himself

impending upon such breach, to be a correct

statement of the law, it must be apparent

that the foregoing instruction went far

beyond the boundaries of this rule; for in

effect it charged the jury that the plaintiff

could recover no damages from the defendant

for injuries arising from the latter’s breach

of his obligation if the plaintiff could have

done himself what the defendant ought to have

done, but failed to do under the terms of his

contract. A rule of law thus broadly stated

would place a premium upon the defendant’s

breach of his agreement, and results in

entirely transferring to the plaintiff’s

shoulders the burden of the defendant’s

violated obligation.’ (Id. at pp. 361-362.) 

In this case, the trial court erred in

allowing the doctrine of mitigation of

damages to defeat the Bank’s right to recover

the unpaid balance on the note executed by

Gamboa. Use of the doctrine in this case did

not provide a shield against the unwarranted

piling up of damages, but rather constituted

a sword against the Bank’s contractual right

to recover damages resulting from Gamboa’s

admitted breach of contract. The Bank had

fully performed under the contract by

disbursing loan proceeds of $79,000 to

Gamboa. The contractual obligation to secure

comprehensive insurance on the vehicle was

Gamboa’s, not that of the Bank. When Gamboa

allowed his insurance coverage to lapse and

when he thereafter arranged for renewal of

coverage for less than the amount of the loan

balance, no damage-producing event had yet

occurred. The vehicle which collateralized

the loan still existed and Gamboa continued

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 89 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

90

to make scheduled loan payments. Simply put,

there was no damage for the Bank to mitigate,

and it was still the Bank’s contractual

option, not obligation, to secure its own

insurance coverage.

Under the circumstances of this case, it was

error to allow the jury to consider and apply

the doctrine of mitigation of damages. The

Bank was entitled to recover the unpaid

balance of the promissory note executed by

Gamboa together with interest.

26 Cal.App.4th at 1691-1694.

American Express argues that Thrifty-Tel has no application

to a debt to a corporate borrower in a liquidated amount, which

forms the basis of American Express’ contract claims. Further,

American Express contends that mitigation of damages has no

application to the claims against the David Defendants for

fraudulent transfer or conspiracy to fraudulently transfer:

... American Express has shown that David

actively participated in transfers of

Bakersfield Wholesale property after the

entire $3.7 million in debt owed by

Bakersfield Wholesale had been incurred. 

Thus, the damage caused by David (that is,

the transfer, on or after December 6, 2007,

of $3 million in inventory from Bakersfield

Wholesale to the Fortress storage unit, as

well as subsequent transfers) could not have

been prevented by any action of American

Express: American Express did not even learn

of such transfers to Fortress until after

this lawsuit was initiated.

To hold otherwise would be to permit the

David Defendants to assert a comparative

negligence defense, permitting them to assert

that their intentional wrongdoing should be

weighed against American Express’ purported

negligence in permitting Bakersfield

Wholesale to incur the $3.7 million debt in

the first place. As the Court properly

observed during the summary judgment

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 90 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

91

argument, the State of California does not

permit an intentional tortfeasor to assert a

claim of comparative negligence.

American Express replies that Defendants’ position is not a

proper application of the mitigation of damages doctrine. 

American Express cites Pacific Can Co. v. Hewes, 95 F.2d 42, 46

(9 Cir.1938): “The duty resting on appellee to minimize his th

damages, would not operate until he knew, that he was suffering

damages, by breach of the contract by appellant.” American

Express also cites White v. Atlantic Richfield Co., 945 F.2d

1130, 1133-1134 (9 Cir.1991): th

... A nondefaulting party must act reasonably

under the circumstances so as ‘not to

unnecessarily enlarge damages caused by

default.’ ... We think White’s refusal to

take back the lease was, under the

circumstances, reasonable. White only

learned of ARCO’s breach in October, 1986,

well after the price of oil had fallen. By

that time, the lease was worth considerably

less than in November of 1985, when Arco

failed to notify White of its decision not to

make the delay rental payment. The Whites

should not be expected to absorb the loss

caused by Arco’s breach.

Even if American Express was remiss in permitting

Bakersfield Wholesale to incur the debt, the doctrine of

mitigation of damages has no application in this case. The debt

was incurred rapidly, even if by mistake. American Express’s own

alleged negligence in failing to police credit extended to Abdo

and his relatives, other than David, cannot be an offset if

American Express prevails against David. 

American Express’s motion for summary judgment as to the

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 91 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The Tenth Affirmative Defense appears to be a typographical 6

error.

92

Third and Fifth Affirmative Defenses is GRANTED. No evidence has

been submitted by the David Defendants that American Express’s

duty to the David Defendants was breached, exacerbating the

damages. 

4. Fourth, Ninth and Tenth Affirmative Defenses.

The Fourth Affirmative Defense, captioned “Estoppel”,

alleges that American Express “is estopped from asserting the

claims alleged in the complaint [sic] by virtue of its own acts,

conduct, or omissions.” The Ninth Affirmative Defense, captioned

“Waiver”, alleges “that as a result of the acts, conduct, and

omissions of Plaintiff, the latter has waived its right to assert

each purported claim for relief in the complaint [sic].” The

Tenth Affirmative Defense, captioned “Unjust Enrichment”, alleges

“that as a result of the acts, conduct, and omission of

Plaintiff, the latter has waived its right to assert each

purported claim for relief in the complaint [sic].”6

American Express argues that it is entitled to summary

judgment on these affirmative defenses because Defendants do not

set forth any facts to support them. In so arguing, American

Express cites Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1,

31 (1995):

Case law is clear that ‘”[w]aiver is the

intentional relinquishment of a known right

after knowledge of the facts.” ... The burden

... is on the party claiming a waiver of a

right to prove it by clear and convincing

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 92 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

93

evidence that does not leave the matter to

speculation, and “doubtful cases will be

decided against a waiver.” ... The waiver may

be either express, based on the words of the

waiving party, or implied, based on conduct

indicating an intent to relinquish the right

....

Although American Express cites no case authority for the

estoppel affirmative defense, the Court’s research indicates that

equitable estoppel has four elements that must be proved:

“‘Four elements must ordinarily be proved to

establish and equitable estoppel: (1) The

party to be estopped must know the facts; (2)

he must intend that his conduct shall be

acted upon, or must so act that the party

asserting the estoppel had the right to

believe that it was so intended; (3) the

party asserting the estoppel must be ignorant

of the true state of facts; and (4) he must

rely upon the conduct to his injury.’”

Spray, Gould & Bowers v. Associated Internat. Ins. Co., 71

Cal.App. 4 1260, 1268 (1999). th

Defendants did not respond to this section of the motion for

summary judgment and presented no evidence or facts at the

hearing from which a genuine of issue of material fact relevant

to these affirmative defenses could be inferred. 

Summary judgment for American Express as to the Fourth,

Ninth and Tenth Affirmative Defenses is GRANTED.

5. Second, Sixth and Seventh Affirmative Defenses.

The Second Affirmative Defense, captioned “Acts of Other

Persons”, alleges that the damages “were caused in whole or part

by other persons including but not limited to the plaintiff

and/or third parties.” The Sixth Affirmative Defense captioned

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 93 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

94

“Apportionment of Fault/Comparative Fault” is quoted supra. The

Seventh Affirmative Defense, captioned “Equitable

Indemnification”, alleges that “should Plaintiff recover damages

from him [sic], he is entitled to indemnification, either in

whole or in part, from all persons or entities whose negligence

and/or fault proximately contributed to Plaintiff’s damages, if

any.” No third parties have been joined as defendants.

American Express moves for summary judgment on these

affirmative defenses, contending that “[p]otential claims against

unidentified third-parties, whom the David Defendants have not

even attempted to implead into this litigation, cannot defeat

American Express’ right to summary judgment ....”

The David Defendants oppose this aspect of the motion,

contending:

Abdo ... was responsible for the sale of the

cigarettes to A N J mini mart. The amount of

cigarettes that were sold the A N J may be as

high as $2,000,000 based on Abdo’s ...

deposition testimony or as low as $600,000

based on the fraudulent checks that were

received by Bakersfield Wholesale Foods. 

David was not a party to those transactions. 

David was not an owner of Bakersfield

Wholesale. David should not be culpable for

the transactions with A N J. American

Express has as little to do with the sale of

cigarettes to A N J as David ... did. 

American Express should pursue A N J for

recovery of their property in this regard

rather than trying to impose this burden

completely on David ... who had nothing to do

with the acquisition of the credit card debt

or the sale of the Costco cigarettes.

As American Express contends, however, “parties may be

jointly and severally liable, and the David Defendants do not

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 94 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

95

contend that any of the missing parties are indispensable parties

to this lawsuit.” 

Summary judgment for American Express on the Second, Sixth

and Seventh Affirmative Defenses is GRANTED.

6. Eighth and Eleventh Affirmative Defenses.

The Eighth Affirmative Defense, captioned “Laches”, alleges

that, “by virtue of Plaintiff’s unreasonable delay in commencing

this action, which delay has caused prejudice to the David

Defendants, the complaint [sic] and each purported claim for

relief asserted therein are barred by the doctrine of laches.” 

The Eleventh Affirmative Defense, captioned “Statute of

Limitations”, alleges that the TAC is barred by the applicable

statute of limitations.

In Miller v. Eisenhower Medical Center, 27 Cal.3d 614, 624

(1980), the California Supreme Court, citing Conti v. Board of

Civil Service Commissioners, 1 Cal.3d 351 (1969), explained:

[T]he affirmative defense of laches requires

unreasonable delay in bringing suit ‘plus

either acquiescence in the act about which

the plaintiff complains or prejudice to the

defendant resulting from the delay.’ ...

Prejudice is never presumed; rather it must

be affirmatively demonstrated by the

defendant in order to sustain his burdens of

proof and the production of evidence on the

issue ... Generally speaking, the existence

of laches is a question of fact to be

determined by the trial court in light of all

of the applicable circumstances, and in the

absence of manifest injustice or a lack of

substantial support in the evidence its

determination will be sustained.

American Express contends that there is “absolutely no

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 95 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

96

evidence that American Express delayed the assertion of claims in

this action, or that the David Defendants have been prejudiced by

any such delay.” No evidence of delay prejudicing the David

Defendants has been shown. All Defendants’ predecessor counsel

endeavored to delay progress of this lawsuit. 

American Express contends that it is entitled to summary

judgment on the statute of limitations affirmative defense. This

action was commenced on December 21, 2004. The First Amended

Complaint naming David as a defendant was filed on March 22,

2005. The Third Amended Complaint naming Bakersfield Wholesale

Grocery and DAI as defendants was filed on February 23, 2007. 

American Express notes that the lawsuit is based on conduct that

occurred in December 2004 and continued throughout the course of

the litigation, which American Express contends is well within

the applicable statutes of limitations. The statute of

limitation on a written contract is four years; for fraud, three

years from the time of discovery; and for breach of oral

contract, two years.

The David Defendants did not respond to this section of the

motion for summary judgment and conceded at the hearing that

there was no evidence to support these affirmative defenses.

Summary judgment for American Express on the Eighth and

Eleventh Affirmative Defenses is GRANTED.

7. Thirteenth, Fourteenth and Seventeenth Affirmative

Defenses.

The Thirteenth Affirmative Defense, captioned “Good

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 96 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

97

Faith/Reasonably Equivalent Value”, alleges that the David

Defendants “took certain fixtures of Bakersfield Wholesale in

good faith and for a reasonably equivalent value.” The

Fourteenth Affirmative Defense, captioned “Preference”, alleges

that “Abdo Aezah paid him, and/or transferred certain fixtures of

Bakersfield Wholesale to him in lawful preference over Plaintiff,

for adequate consideration.” The Seventeenth Affirmative

Defense, captioned “Cumulative Liability Limited”, alleges that

the David Defendants’ “cumulative liability herein is limited

pursuant to the value of certain fixtures transferred by

Bakersfield Wholesale to him.” 

At the hearing Defendants conceded summary judgment for

American Express on these affirmative defenses.

Summary judgment for American Express on the Thirteenth,

Fourteenth and Seventeenth Affirmative Defenses is GRANTED.

8. Fifteenth and Sixteenth Affirmative Defenses.

The Fifteenth Affirmative Defense alleges that “certain

fixtures of Bakersfield Wholesale conveyed to him are exempted

pursuant to Civil Code § 3440.1. The Sixteenth Affirmative

Defense alleges that the sale of certain fixtures of Bakersfield

Wholesale are excluded under Commercial Code §§ 6103(c) and 6107.

These statutory provisions pertain to bulk sales. The

evidence establishes that the attempted bulk sale under the

California Code by Abdo to David was reversed. Defendants

conceded at oral argument that this defense is not applicable.

Summary judgment for American Express on the Fifteenth and

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 97 of 98
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

98

Sixteenth Affirmative Defenses is GRANTED.

9. Eighteenth Affirmative Defense.

The Eighteenth Affirmative Defense reserves the right to

assert additional affirmative defenses. None has been asserted.

The pleadings and discovery in this action are closed. 

Summary judgment for American Express on this affirmative defense

is GRANTED.

 CONCLUSION

For the reasons stated above:

1. American Express’s motion for summary judgment IS

GRANTED IN PART AND DENIED IN PART:

a. Summary judgment is DENIED as to American Express’s 

claims for intentional fraudulent transfer, constructive

fraudulent transfer, conspiracy to fraudulently transfer,

successor liability, and alter ego liability.

b. Summary judgment is GRANTED as to the David 

Defendants’ affirmative defenses.

2. Counsel for American Express shall prepare and lodge a

form of order that the rulings set forth in this Memorandum

Decision within five (5) days following the date of service of

this decision.

IT IS SO ORDERED.

Dated: October 29, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

Case 1:04-cv-06737-AWI-JLT Document 415 Filed 10/29/07 Page 98 of 98