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

28

United States District Court 

For the Northern District of California 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

YUGEN KAISHA, Y.K.F., 

Plaintiff, 

v. 

STEPHANIE DODSON, 

Defendant.

)

)

)

)

)

)

)

)

)

Case No. 08-0225 SC 

MEMORANUM OF DECISION, 

FINDINGS OF FACT AND 

CONCLUSIONS OF LAW 

STEPHANIE DODSON, 

 Counter-Claimant, 

 

 v. 

YUGEN KAISHA, Y.K.F., 

 Counter-Defendant. 

)

)

)

)

)

)

)

)

)

)

)

MARTIN F. TRIANO, d/b/a LAW 

OFFICES OF MARTIN F. TRIANO, 

 Plaintiff Intervenor, 

 v. 

YUGEN KAISHA, Y.K.F., and 

STEPHANIE DODSON, 

 Intervenor Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

I. INTRODUCTION

 In this suit, Plaintiff Yugen Kaisha, Y.K.F. ("YKF"), seeks 

to set aside a fraudulent transfer of shares in Smart Alec's 

Intelligent Food, Inc. ("Smart Alec's") between Alexander N. Popov 

("Popov") and Defendant Stephanie Dodson ("Dodson"). Dodson 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 1 of 38
2 

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

28

United States District Court

For the Northern District of California 

contends that she entered into a share purchase agreement with 

Popov, and thereby received all of Popov's interest in Smart 

Alec's, on April 18, 2004. See Docket No. 84 ("Dodson Trial Br."). 

YKF contends that the agreement was actually executed around August 

of 2005, just weeks before Popov filed for personal bankruptcy, and 

that it was fraudulently backdated to avoid the appearance that the 

transfer was intended to protect the shares from Popov's creditors. 

See Docket No. 83 ("YKF Trial Br."); Adv. Docket No. 1 ("YKF 

Compl.").1 Dodson has asserted a counterclaim against YKF based on 

YKF's alleged bad-faith delay of a closing agreement for the 

redemption of YKF's separate Smart Alec's shares. Adv. Docket No. 

6 ("Dodson Answer"). 

 Plaintiff-Intervenor Martin F. Triano, d/b/a Law Offices of 

Martin Triano ("Triano" or "LOMT") also seeks from this Court a 

declaratory judgment, to the effect that a promissory note between 

Triano and Popov establishes an enforceable lien against the shares 

in question. Docket No. 22 ("Triano Compl."), 79 ("Triano Trial 

Br."). 

 The Court held a seven-day bench trial, lasting from January 

19, 2010, to January 27, 2010. The Court, by this memorandum of 

decision, issues its findings of fact and conclusions of law 

pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. 

For the reasons set forth below, the Court concludes that YKF has 

proven that the transfer of shares between Popov and Dodson was 

fraudulent. Dodson has failed to establish that she is entitled to 

 

1

 This case began as an adversary proceeding in bankruptcy court. 

Y.K.F. v. Dodson, Adversary Docket No. 07-3104 (Bankr. N.D. Cal.). 

Citations to documents from the underlying adversary proceeding 

will appear in the form "Adv. Docket No. XX." 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 2 of 38
3 

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

28

United States District Court

For the Northern District of California 

any relief under her counterclaim. In addition, Triano has proven 

that the shares in Smart Alec's are subject to a lien established 

by the promissory note between Triano and Popov. 

II. FINDINGS OF FACT

A. The Parties

1. Alexander Popov is an entrepreneur who started Smart 

Alec's Intelligent Foods, Inc. Smart Alec's is a fast-food 

restaurant that focuses on serving healthy foods. Popov started 

the business in 1996. It originally sold only vegetarian items, 

although it later expanded its menu to include items such as 

poultry and tuna. It is located one block from the campus for the 

University of California, Berkeley. (test. of Popov). Popov does 

not claim to currently possess any shares in Smart Alec's. 

2. YKF is a Japanese holding company that invests in a 

variety of types of businesses. In 1996, YKF invested $720,000 in 

Smart Alec's, and received 25% of the outstanding stock in Smart 

Alec's. (test. of Baymiller).2

 YKF does not currently claim to 

possess any shares in Smart Alec's. 

3. Dodson currently holds title to 3,744,000 shares of 

common stock in Smart Alec's. (test. of Dodson). As far as this 

Court is aware, she is currently Smart Alec's sole shareholder. 

4. Dodson met Popov in 1996, and joined the board of 

directors for Smart Alec's around that same year. She held various 

positions within Smart Alec's, and by 2004 she was serving as the 

 

2

 Brian Baymiller ("Baymiller") is an employee of Fuji Silysia 

Chemical Ltd., in which YKF owns a 50% interest. As discussed 

below, he later served as a director and the president of Smart 

Alec's. (test. of Baymiller). He testified as a witness for YKF 

in this trial. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 3 of 38
4 

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

28

United States District Court

For the Northern District of California 

company's vice president and secretary. She also served as the 

restaurant's operations manager, and oversaw many of the business's 

day-to-day operations. She held no shares in Smart Alec's prior to 

2004. (test. of Dodson). 

5. In 1999, Dodson and Popov began dating. They 

married each other in 2006. Id.

6. In October of 2001, Popov "caught" Barry Bonds' 

record-breaking seventy-third home run baseball.3

 The events 

surrounding the catch resulted in litigation over the ownership of 

the ball, in Popov v. Hayashi (the "Hayashi litigation"). (test. 

of Popov; test. of Triano). Popov sought and received 

representation by LOMT in this matter. (test. of Triano). 

7. As described in further detail below, during 2002 

and early 2003, Triano also represented Popov in two other matters, 

one involving Popov's separate business venture, Man.com (the 

 

3

 A trial court that later considered the matter concluded that 

Popov's "catch" was not complete enough to perfect Popov's property 

interest in the ball. To quote from the trial court that 

considered this catch: 

When the seventy-third home run ball went into 

the arcade, it landed in the upper portion of the 

webbing of a softball glove worn by Alex Popov. 

While the glove stopped the trajectory of the 

ball, it is not at all clear that the ball was 

secure. Popov had to reach for the ball and in 

doing so, may have lost his balance. [¶] Even 

as the ball was going into his glove, a crowd of 

people began to engulf Mr. Popov. He was tackled 

and thrown to the ground while still in the 

process of attempting to complete the catch. 

Some people intentionally descended on him for 

the purpose of taking the ball away, while others 

were involuntarily forced to the ground by the 

momentum of the crowd. 

Popov v. Hayashi, No. 400545, 2002 WL 31833731, *2 (Cal. Super. Ct. 

Dec. 18, 2002). The court ultimately concluded that Popov was 

entitled to a 50% ownership interest in proceeds from the ball, 

which was sold at auction. (test. of Popov). 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 4 of 38
5 

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

28

United States District Court

For the Northern District of California 

"Man.com litigation"), and the other brought by YKF against Popov, 

Dodson, and Smart Alec's (the "YKF litigation"). (test. of 

Triano). 

B. Popov's Shares in Smart Alec's

8. In 2002, YKF brought suit against Popov, Dodson, and 

Smart Alec's. To resolve this dispute, YKF entered into a 

settlement agreement with Popov, Dodson, and Smart Alec's, which 

was executed on February 6, 2004. Pl.'s Ex. 1 ("Settlement 

Agreement"). 

9. The Settlement Agreement required Popov to surrender 

all control of Smart Alec's by stepping down as an officer and 

board member of the company, and by pledging all of the voting 

rights of his shares in Smart Alec's to YKF. Id. §§ 2(b), 4. 

Smart Alec's would redeem YKF's shares (amounting to 25% of the 

total shares) for $775,000, payable from the profits of Smart 

Alec's, to be completed by December 31, 2008. See Id. Ex. A 

("Stock Redemption Agreement") § 1. The Settlement Agreement also 

granted YKF a security interest in all of Popov's Smart Alec's 

shares. Settlement Agreement § 2(b). Popov personally guaranteed 

the first $285,000 that Smart Alec's would pay to YKF for the share 

redemption. Id. § 2(c). 

10. While Popov and Dodson were negotiating the 

Settlement Agreement with YKF, in a letter dated November 18, 2003, 

Popov stated that "I have discussed the timing and repayment amount 

with Ms. Dodson and we feel confident that we can repay this amount 

within the specified timeframe." Pl.'s Ex. 141 ("11/18/03 Letter") 

at 3. 

11. Pursuant to the Settlement Agreement, Popov resigned 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 5 of 38
6 

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

28

United States District Court

For the Northern District of California 

as CEO, president, and director of Smart Alec's, effective April 

30, 2004. Settlement Agreement Ex. G ("Popov Resignation"). At 

this time, Baymiller became the president of Smart Alec's. (test. 

of Baymiller). 

12. Although Dodson resigned as director, secretary, and 

vice president of Smart Alec's on February 6, 2004, she remained an 

employee of Smart Alec's and effectively ran the restaurant. 

Settlement Agreement Ex. H ("Dodson Resignation"); (test. of 

Dodson; test. of Baymiller). 

13. After Popov ceased receiving paychecks from Smart 

Alec's, he ceased to have a stable source of income. He received 

only $32,231.61 from Smart Alec's in 2004 (prior to his 

resignation), and reported no additional income that year. See

Pl.'s. Ex. 134 ("Payroll Record") at 6; Pl.'s Ex. 124 ("Second Am. 

Statement of Financial Affairs") at 2. His income was only 

$11,628.00 in 2005, which came from his work as a real estate 

broker. See Second Am. Statement of Financial Affairs at 2; (test. 

of Popov). When Popov later filed for bankruptcy in September of 

2005, he indicated that his monthly income was only $1500, but his 

expenditures amounted to $2525. Pl.'s Ex. 123 ("Bankruptcy 

Petition") at 18-19. 

14. Between April of 2004 and September of 2005, Dodson 

lent Popov between $10,000 and $13,000, which Popov never paid 

back. (test. of Popov; test. of Dodson). 

15. Baymiller gave permission for Popov to provide only 

narrow services to Smart Alec's, which were limited to issues 

related to taxes for Smart Alec's two most recent fiscal years, 

during which Popov had controlled the company. (test. of 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 6 of 38
7 

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

28

United States District Court

For the Northern District of California 

Baymiller). 

16. Over the course of 2004, the evidence demonstrates 

that Popov remained very active in Smart Alec's, in excess of the 

help authorized by Baymiller. This includes working with the 

landlord on issues related to Smart Alec's lease, and working on 

projects to increase Smart Alec's revenue, including replacing the 

menu board and introducing beef to the restaurant's menu. For 

instance, on November 29, 2004, Popov wrote to Baymiller to contest 

a particular expense that Baymiller sought to charge Smart Alec's, 

and Popov cited the "extreme efforts we have been applying over the 

last six months by working late at night and on weekends. As you 

know, I have been directly involved in adding beef items to the 

menu and creating new menu's [sic]." Pl.'s Ex. 50 ("11/29/04 

Email") at 3; see also Pl.'s Exs. 19 ("7/12/04 Email") (telling 

Baymiller that "we would like to implement improvements to grow 

Smart Alec's revenue" and naming improvements).4 

17. On or around May 20, 2005, Popov first discussed 

with Baymiller the possibility of providing Dodson with shares in 

Smart Alec's. (test. of Popov; test. of Baymiller). This 

conversation occurred by telephone, and there is no record of its 

contents. Popov proposed the idea of altering the Settlement 

Agreement, to allow Dodson (instead of Smart Alec's) to receive 

 

4

 The Court notes the tension between the facts found by this Court 

and the testimony provided by Dodson and Popov to the bankruptcy 

court on March 27, 2007 in Triano v. Popov, Adv. Adversary Docket 

No. 05-3485 (Bankr. N.D. Cal.). See Pl.'s Ex. 133 ("Test. Before 

Judge Carlson"). In that hearing, both Popov and Dodson described 

an extremely narrow scope of work that Popov provided for Smart 

Alec's, limited solely to fixing broken devices at the restaurant. 

Id. at 30:11-31:13, 74:5-11, 112:10-113:3. The tension between 

Dodson and Popov's prior testimony, and the overwhelming evidence 

on this point presented at this trial, serves to undermines the 

credibility of both Popov and Dodson. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 7 of 38
8 

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

28

United States District Court

For the Northern District of California 

YKF's shares in Smart Alec's as they were redeemed; Baymiller told 

Popov that YKF would probably not be interested in altering the 

Settlement Agreement. (test. of Baymiller). Popov contends that 

he instead told Baymiller that he had already sold the residual 

value of his shares to Dodson (at this time, YKF still possessed a 

security interest in the shares, as well as the share 

certificates). (test. of Popov). In light of the correspondences 

described below, the Court does not find Popov's testimony on this 

point to be credible. 

18. On June 20, 2005, Popov wrote to Baymiller, and 

touched upon his ongoing fee dispute with Triano. Pl.'s Ex. 54 

("6/20/05 Email") at 1. Popov stated that he was considering 

filing for personal bankruptcy if he could not come to an agreement 

with Triano soon. Id. He wrote that, "[s]ince YKF is in 

possession of my shares of stock, YKF is a secured creditor and 

those shares would not be brought into the bankruptcy proceeding." 

Id. The email does not suggest that Popov had sold his shares to 

Dodson by that time. Indeed, if Popov had already transferred the 

shares to Dodson, then there would have been no need to discuss the 

impact of YKF's possession of those shares upon the disposition of 

those shares in Popov's bankruptcy proceeding. 

19. During a meeting between Baymiller, Yasuo Ezaki 

("Ezaki")5

 and Dodson at Smart Alec's around June of 2005, Dodson 

did not indicate that she had any shares in Smart Alec's, even 

though the attendees specifically discussed the current state of 

stock ownership in the company. (test. of Ezaki). During the 

 

5

 Ezaki was also an employee of Fuji Silysia Chemical Ltd., and 

became an officer of Smart Alec's after the Settlement Agreement. 

(test. of Ezaki). 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 8 of 38
9 

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

28

United States District Court

For the Northern District of California 

meeting, Dodson indicated that she was determined to ensure that 

Smart Alec's would pay off the redemption amount to YKF, because 

she would probably marry Popov. Id. This suggests both that Popov 

and Dodson continued to have a romantic relationship in 2005, and 

that it was Popov, and not Dodson, who owned the Smart Alec's 

shares at this time. 

20. Dodson testified that, at the June 2005 meeting, 

Baymiller asked her if she had any shares of stock in Smart Alec's, 

and she answered "no." (test. of Dodson). However, she says that 

she explained to Baymiller that she held the "residual value of the 

shares of stock" that Popov had possessed, and that she would own 

the stock after Smart Alec's had completed the redemption of YKF's 

shares. Id. There is no record of this conversation. Baymiller 

denies that Dodson made this disclosure. (test. of Baymiller). 

Ezaki denies that Dodson informed them of an agreement to purchase 

Popov's shares. (test. of Ezaki). The Court does not find 

Dodson's testimony on this point to be credible. 

21. After the meeting, Popov wrote Baymiller and Ezaki 

on July 11, 2005, because Dodson had "indicated there was some 

clarification that was needed from" Popov. Pl.'s Ex. 56 ("7/11/05 

Email") at 1. In particular, he stated: 

The discussion regarding Stephanie and ownership 

of the shares is with respect to the residual 

value of my shares. Currently, my shares are 

pledged to YKF, and the Smart Alec's Corporation 

is buying back YKF's shares. After the buyback 

is complete, YKF's shares will have been 

repurchased by the corporation, my shares will 

return to me and since the corporation has bought 

back YKF's shares, the only shareholder after the 

redemption would be me. My discussion regarding 

Stephanie has to do with selling the right to own 

the shares after the redemption period, such that 

Stephanie is the only shareholder of the shares 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 9 of 38
10 

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

28

United States District Court

For the Northern District of California 

after the redemption period, not me. 

Id. at 1. Baymiller testified that he read this email to indicate 

that Popov was considering selling his interest in the shares to 

Dodson in the future. (test. of Baymiller). The Court agrees that 

this is the most natural reading of the email. Popov was 

recounting the "current" arrangement when he stated that "my shares 

will return to me and . . . the only shareholder after the 

redemption would be me." See 7/11/05 Email at 1. 

22. Over several correspondences between Popov and 

Baymiller in mid-August, Popov proposed a method for eliminating 

Triano's claimed lien upon his shares, whereby YKF would foreclose 

upon the shares and Dodson would gradually earn them back over the 

following years. See Pl.'s Ex. 65 ("8/18/05 Email") at 1. 

Baymiller responded that he was not comfortable with this proposal, 

and that he expected that it would be too risky for YKF. See Pl.'s 

Ex. 69 ("8/25/05 Email") at 1. Baymiller also stated that he was 

"not convinced that we have the power to obtain your shares." Id. 

Given that the transfer of the shares was a basis for default under 

the Settlement Agreement, see Settlement Agreement Ex. C ("Stock 

Pledge Agreement") § 5(b), the Court finds that Baymiller's 

reaction supports his testimony that he was not aware of any 

transfer of shares between Popov and Dodson at that time. 

23. At some time in late summer of 2005, Popov decided 

to file for bankruptcy. To protect his interest in his Smart 

Alec's shares from his creditors, he drafted a share purchase 

agreement between himself and Dodson, which they backdated to April 

18, 2004. See Pl.'s Ex. 2 ("SPA"). 

24. The only consideration set out in the SPA was 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 10 of 38
11 

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

28

United States District Court

For the Northern District of California 

$12,500, payable in three payments: $5000 due on April 18, 2004, 

$5000 due before December 31, 2004, and $2500 due before March 31, 

2005. Id. at 1. Although it is clear that Dodson wrote three 

checks in the correct amounts dated April 18, 2004, November 16, 

2004, and January 18, 2005, Def.'s Ex. 601, the Court believes that 

these checks represented the personal loans that Dodson made to 

Popov during this period, see FF ¶ 14,6

 and not payments made under 

the SPA. The Court finds that the payment schedule set out in the 

SPA was written to coincide with the dates of these loan checks, so 

as to make it appear as though the SPA was supported by 

consideration from Dodson. 

25. Popov filed for bankruptcy on September 6, 2005. 

See Bankruptcy Petition. He indicated that his creditors' claims 

against him exceeded $1.2 million. Id. at 3. 

26. YKF and its employees first discovered the transfer 

of shares from Popov to Dodson in late 2005, through Popov's 

bankruptcy filings. (test. of Baymiller); (test. of Ezaki). In 

early October of 2005, Popov and Baymiller discussed the 

transaction, and Baymiller asked Popov to explain the situation to 

him in writing. Pl.'s Exs. 72 ("10/5/05 Email"). Popov claimed 

that he transferred his entire ownership interest to Dodson in 

order to motivate her to perform well in her position with Smart 

Alec's. Pl.'s Ex. 73 ("10/9/05 Email"). 

27. On July 30, 2007, the judge presiding over Popov's 

bankruptcy proceeding authorized and approved the bankruptcy 

trustee's assignment, to YKF, of the right to bring a suit against 

 

6

 This Order will use "FF" to refer to the paragraphs in the 

Findings of Fact section, Part II. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 11 of 38
12 

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

28

United States District Court

For the Northern District of California 

Dodson to avoid and recover the allegedly fraudulent transfer of 

shares for $30,000. Pl.'s Exs. 3, 4. 

C. Smart Alec's Redemption of YKF's Shares

28. As early as January of 2006, George Pretty 

("Pretty"), an attorney who represented YKF during much of its 

business with Smart Alec's, informed Popov that the transfer of 

shares from Popov to Dodson may be considered a default under the 

Settlement Agreement, and that YKF may foreclose on the shares and 

on the restaurant's assets because of that default. See Ex. 76 

(1/17/06 Email) at 3; (test. of Pretty). 

29. By mid-July of 2006, Smart Alec's, under Dodson's 

management, had sent a total of $305,934.33 to an account 

maintained by Baymiller that was intended to go towards the 

redemption price for the Smart Alec's shares that were owned by 

YKF. Pl.'s Ex. 78 ("7/19/06 Email") at 1, 3. 

30. At some point after learning of the transfer of 

shares between Popov and Dodson, YKF began seeking to secure a 

leasehold deed of trust on the space used by Smart Alec's, which 

represented the restaurant's single most valuable asset. (test. of 

Pretty). Although Popov was obliged to secure the leasehold for 

YKF under the Settlement Agreement, he had never done so. Id. YKF 

was able to receive the leasehold deed of trust in June of 2006. 

Id. 

31. By letter dated July 17, 2006, attorneys for YKF 

informed Smart Alec's, Dodson, and Popov that YKF considered 

Popov's transfer of shares to Dodson to be a violation of section 

5(b) of the Pledge Agreement, and therefore a default under the 

Settlement Agreement. Pl.'s Ex. 77 ("7/17/06 Letter") at 1. YKF 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 12 of 38
13 

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

28

United States District Court

For the Northern District of California 

declared the balance of Smart Alec's obligations under the 

Settlement Agreement to be immediately due and payable. Id.

32. Dodson sought to exercise her rights under section 

1(d) of the Stock Redemption Agreement, which permitted alternative 

methods by which parties to the Settlement Agreement could pay off 

the purchase price for the share redemption. See 7/19/06 Email at 

1; Stock Redemption Agreement § 1(d). Dodson and counsel for YKF 

thereafter began working on an agreement for the accelerated 

redemption of YKF's shares. 

33. On October 3, 2006, YKF filed with the recorder for 

the County of Alameda a Notice of Default and Election to Sell 

Under Deed of Trust as to Smart Alec's under the leasehold deed of 

trust. Pl.'s Ex. 92 ("Notice of Default"). 

34. In early October, Dodson made an offer to simply 

purchase (rather than redeem) YKF's shares, so that she could 

assume YKF's rights to foreclose on the majority shares. Pl.'s Ex. 

90 ("10/06/06 Email") at 1. By this time, her counsel informed YKF 

that Summit Bank had agreed to loan her funds. Id. 

35. In late November and early December, the parties 

were still working out the details of the transaction -- for 

example, whether it would be possible for Dodson to purchase YKF's 

position to preserve the power to foreclose, and whether an 

alternative escrow account could be set up to accommodate the sale. 

See, e.g., Pl.'s Exs. 95, 97. 

36. Summit Bank committed to the loan for the 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 13 of 38
14 

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

28

United States District Court

For the Northern District of California 

transaction on December 18, 2006. (test. of Jon Vaught)7; Pl.'s 

Ex. 101 ("12/18/06 Email") at 2. 

37. On January 5, 2007, YKF informed Dodson, for the 

first time, that it would also be seeking interest from the date of 

the Notice of Default (July 17, 2006), and attorney fees in 

connection with the default. Pl.'s Ex. 104 ("1/5/07 Letter") at 1-

2. This totaled roughly $48,256. Id.

38. Dodson objected to the additional fees. Pl.'s Ex. 

105 ("1/11/07 Fax"). However, she also continued to express an 

interest in purchasing YKF's position (and its power of 

foreclosure) rather than paying off the amount under the Stock 

Redemption Agreement. Pl.'s Ex. 108 ("1/29/07 Email"). 

39. On February 15, 2007, YKF informed Dodson that it 

would decline to sell Dodson its position for the amount that the 

parties had been discussing, since it concluded that it was already 

entitled to that amount as a result of Smart Alec's default, and 

that the right to foreclose upon the shares and extinguish Triano's 

potential claim would be of considerable value to Dodson. Pl.'s 

Ex. 109 ("2/15/07 Email") at 1. Dodson then declined to pay 

additional money to purchase YKF's position, and elected instead to 

"pay off the note and be done with it." Pl.'s Ex. 110 ("2/20/07 

Email") at 1. 

40. On February 21, 2007, YKF filed a Notice of 

Trustee's Sale, setting a sale date of March 20, 2007. Pl.'s Ex. 

111 ("Notice of Trustee's Sale"). 

41. On March 12, 2007, the parties entered a Closing 

 

7

 Jon Vaught ("Vaught") was the attorney who represented Dodson 

during the redemption negotiations, and he testified for Dodson at 

trial. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 14 of 38
15 

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

28

United States District Court

For the Northern District of California 

Agreement re Payoff of Secured Redemption Promissory Note. Pl.'s 

Ex. 121 ("Closing Agreement"). Dodson or Smart Alec's paid a total 

of $88,072.37 in attorney's fees and interest accumulated since the 

Notice of Default had been filed. See id. at 1-2; (test. of 

Dodson). 

42. The shares that were not redeemed as part of the 

agreement, which are owned by Dodson, were turned over to Summit 

Bank as security for a loan of $420,000, which financed the Closing 

Agreement, and which Dodson and Smart Alec's have both guaranteed. 

(test. of Dodson); Def.'s Ex. 591 ("Business Loan Agreement"), 592 

("Summit Promissory Note"). 

43. Summit Bank still possesses the physical 

certificates for Dodson's shares, and holds them as security for 

its loan. (test. of Dodson). 

D. Triano's Promissory Note

44. When Popov approached LOMT to secure representation 

for the Hayashi Litigation in October of 2001, he signed a fee 

agreement for the representation. PI Ex. 301;8

 (test. of Byrne).9 

The fee agreement set out hourly billing rates, and it identified 

the scope of representation as the "recovery of property" matter 

related to Barry Bonds' record-breaking baseball. Id. at 1, 5. It 

also provided Triano with "a lien on any and all claims or causes 

of action that are the subject of the Attorney's representation 

under this Contract." Id. at 2. 

 

8

 This Order will use the prefix "PI" (for "Plaintiff-Intervenor") 

to designate exhibits presented by Triano. 

9

 Mark D. Byrne ("Byrne") is an attorney who works at LOTM, who 

represented Popov during the Hayashi litigation, Man.com 

litigation, and YKF litigation. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 15 of 38
16 

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

28

United States District Court

For the Northern District of California 

45. While the Hayashi litigation was still ongoing, 

Popov was sued in the Man.com litigation, which involved 

allegations that Popov had committed fraud in connection with a 

failed dot-com enterprise. (test. of Popov; test. of Triano). In 

January of 2002, Popov asked LOMT to represent him in the Man.com 

litigation, and because the matter was scheduled to go to trial in 

March or April of 2002, LOMT "jumped right in." (test. of Triano). 

LOMT and Popov never executed a fee agreement for the Man.com 

litigation. (test. of Triano; test. of Byrne). 

46. Around March of 2002, Triano began discussing with 

Popov his concern regarding Popov's payment, and ability to pay, 

the accumulating attorney fees. (test. of Triano). Because the 

parties were in frequent contact regarding the Hayashi and Man.com 

litigation, it is not now clear exactly when these discussions 

occurred. Id. At some point, Triano stated that LOMT would 

require some security for the accumulating legal fees, and in late 

March or early April, Triano and Popov began discussing the use of 

Popov's shares in Smart Alec's as security. Id.

47. LOMT provided Popov with a copy of a Promissory Note 

on April 15, 2002. PI Ex. 304 ("Promissory Note"); (test. of 

Byrne; test. of Triano). Byrne went through the Promissory Note 

with Popov and pointed out its various provisions, including a 

provision that instructed Popov of his right to seek the advice of 

separate counsel before he agreed to its terms. (test. of Byrne). 

He specifically told Popov that Popov should seek the advice of an 

attorney, Gene Farber, whom Popov had previously worked with in 

relation to the Man.com litigation. Popov took the Promissory Note 

home with him, and returned to LOMT with it on April 17, 2002. Id. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 16 of 38
17 

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

28

United States District Court

For the Northern District of California 

Popov signed the Promissory Note at that time. Promissory Note at 

2, 3. 

48. The Promissory Note states that it is for 

$45,648.54. Id. at 1. This figure represents the total charges 

that accumulated as of April 1, 2002, in both the Hayashi and 

Man.com Litigation, when taken together with a $10,000 write-off 

applied to Popov's account on April 1 in the Man.com litigation. 

Id. at 1; PI Ex. 306 ("Proof of Claim") Ex. C ("Hayashi Bills") at 

46; Def.'s Ex. 513 ("Man.com March Bill") at 1, 8. The Promissory 

Note covers this total "together with such additional sums which 

may accrue from legal services being provided by the [sic] Martin 

F. Triano dba Law Offices of Martin Triano." Promissory Note at 1. 

The Note is secured by "All shares held in Smart Alecs Restaurant 

[sic]." Id. The Promissory Note also states that, in the event 

that LOMT brought any action to enforce the Promissory Note 

(including foreclosure), the prevailing party would be entitled to 

attorney fees. Id. at 2. 

49. Popov claims that when he signed the Promissory Note 

in April of 2002, the first page (which does not contain his 

signature) stated that the Promissory Note only covered the 

attorney fees related to the Man.com matter. He claims that Triano 

has since altered the first page of their agreement in order to 

assert a security interest in Popov's Smart Alec's shares for the 

fees accumulated in the Hayashi Litigation. (test. of Popov). 

Popov does not have a copy of the Promissory Note that he claims to 

have signed. Triano and Byrne both contend that the Promissory 

Note produced at trial, which clearly covers fees for both the 

Hayashi and Man.com litigation, is a true and correct copy of the 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 17 of 38
18 

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

28

United States District Court

For the Northern District of California 

Promissory Note that Popov signed. (test. of Triano; test. of 

Byrne). Aside from Popov's testimony, which this Court finds to 

lack credibility, there is no evidence to suggest that the 

Promissory Note has been altered in any way material to this 

litigation since Popov signed it.10 The Court finds that Popov 

signed the Promissory Note that was produced at trial, which covers 

fees for both the Hayashi and Man.com litigation. 

50. The Man.com litigation was ultimately resolved in 

Popov's favor, (test. of Popov; test. of Triano), and LOMT ceased 

billing hours for the Man.com litigation in July of 2002. Def.'s 

Ex. 517 ("Man.com July Bill") at 2. In August of 2002, Popov fully 

paid LOMT the legal fees due for work performed in connection with 

the Man.com litigation. Def.'s Ex. 518 ("Man.com August Bill") at 

1. 

51. In August of 2002, LOMT began representing Popov, 

Dodson, and Smart Alec's in the dispute that had arisen with YKF 

regarding certain uses of Smart Alec's funds (this is the dispute 

that eventually resulted in the Settlement Agreement of February, 

2004, between YKF on the one hand and Popov, Dodson, and Smart 

Alec's on the other). (test. of Triano); Proof of Claim Ex. E 

 

10 It is clear that LOMT did waive certain rights that were 

included in the original Promissory Note, such as a requirement 

that Popov use his shares to place Triano on the board of Smart 

Alec's, and a requirement that Triano be periodically apprised of 

the restaurant's significant business developments. There are 

several different versions of the Promissory Note that have these 

provisions crossed out, but although the specific markings on these 

amended copies differ from copy to copy, the underlying text and 

substance of the Promissory Note has not changed. See PI Ex. 305; 

Def.'s Ex. 538 at 5-6. The Court does not believe that there was 

ever a version that covered solely the fees for the Man.com 

litigation, to the exclusion of fees for the Hayashi litigation. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 18 of 38
19 

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

28

United States District Court

For the Northern District of California 

("YKF Bills") at 1.11 

52. In late 2002, the court in the Hayashi Litigation 

ordered that the baseball be sold in auction, and that Popov 

receive fifty percent of the proceeds. This amounted to $225,000. 

(test. of Popov). 

53. When Popov finally discharged LOMT in May of 2003, 

Popov still owed Triano a substantial amount of money for the 

Hayashi Litigation (bills issued by LOMT stated the amount as 

$473,402.65). See Hayashi Bills at 157. When Popov filed for 

bankruptcy in September of 2005, he still owed Triano the same 

amount. Proof of Claim Ex. A ("Statement of Claim") at 2. 

54. Popov's share of the baseball proceeds were held in 

escrow, until they were paid towards Triano's claims against him by 

the bankruptcy court. (test. of Triano; Test. of Popov). A total 

of $238,192.75 was paid to Triano as a secured creditor. See Pl.'s 

Ex. 131 ("Trustee's Report of Distribution") at 2. 

III. CONCLUSIONS OF LAW

A. Fraudulent Transfer

 YKF asserts a number of different causes of action to avoid 

and recover the fraudulent transfer of Smart Alec's shares between 

Popov and Dodson. YKF Compl. ¶¶ 12-32. The Court begins its 

discussion with YKF's claim that Popov and Dodson violated 

 

11 Popov alleges that Triano's claimed security interest in Smart 

Alec's created a conflict of interest, such that he could not 

ethically represent the company, Dodson, or Popov in the YKF 

Litigation. (test. of Popov). Because the Court ultimately 

concludes that the Promissory Note does not include fees 

accumulated for the YKF Litigation, infra, the Court need not make 

any findings of fact with respect to this representation. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 19 of 38
20 

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

28

United States District Court

For the Northern District of California 

California Civil Code section 3439.04 ("section 3439.04"). YKF 

Compl. ¶¶ 21-22. Having purchased from the bankruptcy trustee the 

right to bring suit to recover the shares, YKF can assert this 

cause of action as a creditor under 11 U.S.C. § 544(b)(1). See

Kupetz v. Wolf, 845 F.2d 842, 845 (9th Cir. 1988) ("Section 544(b) 

of the Bankruptcy Code permits the Trustee to stand in the shoes of 

a creditor to assert any state law claims that a creditor may 

have."). 

 Under section 3439.04, "[a] transfer made or obligation 

incurred by a debtor is fraudulent as to a creditor . . . if the 

debtor made the transfer or incurred the obligation . . . [¶] 

[w]ith actual intent to hinder, delay, or defraud any creditor of 

the debtor." Cal. Civ. Code § 3439.04(a). Fraudulent intent under 

this section may be proven on the basis of circumstantial evidence. 

See AFI Holding, Inc. v. Mackenzie, 525 F.3d 700, 704 (9th Cir. 

2008). The section recounts a number of helpful factors that "may" 

be given consideration; this list "is meant to provide guidance to 

the trial court . . . ." Filip v. Bucurenciu, 129 Cal. App. 4th 

825, 834 (2005). The factors include: 

(1) Whether the transfer or obligation was to an 

insider. 

(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. 

(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 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 20 of 38
21 

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

28

United States District Court

For the Northern District of California 

the obligation was incurred. 

(10) Whether the transfer occurred shortly before 

or shortly after a substantial debt was incurred. 

Cal. Civ. Code § 3439.04(b). 

 The transfer in this case was made to an insider. The Ninth 

Circuit has recognized that "a special relationship between the 

debtor and the transferee" is one of the "more common 

circumstantial indicia of fraudulent intent." In re Acequia, Inc., 

34 F.3d 800, 806 (9th Cir. 1994) (italics omitted) (quoting Max 

Sugarman Funeral Home, Inc. v. A.D.B. Investors, 926 F.2d 1248, 

1254 (1st Cir. 1991)). This can include a "family, friendship, or 

close associate relationship." Max Sugarman Funeral Home, 926 F.2d 

at 1254 (quoting In re May, 12 Bankr., 618, 627 (N.D. Fla. 1980)). 

At the time the transfer was made, Dodson was a person who was 

deeply involved in Smart Alec's, and at the very least, a long-time 

friend of Popov. FF ¶¶ 3-5. Dodson and Popov both claimed that 

their romantic relationship ended in early 2004 and did not begin 

again until the end of 2005 -- even if this testimony is to be 

believed, there can be no doubt that they retained a close 

relationship during this period, as Dodson loaned Popov as much as 

$13,000 over this period and never required repayment. Id. ¶ 14. 

 The transfer clearly occurred in the shadow of a lawsuit 

against Popov by Triano, and at a time when Popov was insolvent. 

In correspondences from Popov in the months leading up to his 

bankruptcy, he indicated: "If I cannot come to an agreement with 

Triano in the next couple of weeks I may file personal bankruptcy." 

Id. ¶ 18; 6/20/05 Email at 1. Moreover, Popov reported that he had 

either no income or little income after he left Smart Alec's 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 21 of 38
22 

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

28

United States District Court

For the Northern District of California 

payroll in April of 2004. FF ¶ 13. His debts were significant. 

Id. ¶ 25. 

 The transfer occurred without reasonable consideration. This 

Court finds that the transfer occurred for exactly no 

consideration. Id. ¶ 24. Although the SPA references three 

payments totaling $12,500, this was merely a reference to prior 

loans made by Dodson to Popov, which were recharacterized to create 

the illusion of consideration. Id. Even assuming that the $12,500 

payment schedule set out by the SPA was an accurate statement of 

consideration, this amount was not significant in relation to the 

value of the shares. Smart Alec's was generating significant 

revenue, which it was using to pay down its redemption obligation 

to YKF. Id. ¶ 28. Even though the shares were encumbered by YKF's 

lien, and a purported interest by Triano, Popov had claimed that 

both he and Dodson were "confident that we can repay this amount 

within the specified timeframe." Id. ¶ 10; 11/18/03 Letter at 3. 

The Court does not believe that Dodson and Popov could have 

reasonably valued the shares at only $12,500. 

 Finally, assuming arguendo that the share transfer took place 

in April of 2004, as Popov and Dodson contend, the transfer of 

shares was deliberately hidden from others. Id. ¶¶ 17-22. Neither 

Popov nor Dodson claim to have told anyone about the transfer for 

more than a year after it took place, and even then, the only 

disclosures that they claim to have made (to Baymiller and Ezaki) 

are disputed and disbelieved by this Court. Id. ¶¶ 17, 20. It is 

much more likely that the transaction occurred in August of 2005, 

while Popov was preparing to file for bankruptcy, and the SPA was 

fraudulently backdated to reduce the impact of the suspicious 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 22 of 38
23 

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

28

United States District Court

For the Northern District of California 

timing of the transaction.12 Id. ¶¶ 23-24. In either case, the 

surreptitious nature of the transaction is a clear and compelling 

indicator of fraud. 

 "The presence of a single badge of fraud may spur mere 

suspicion; the confluence of several can constitute conclusive 

evidence of actual intent to defraud, absent 'significantly clear' 

evidence of a legitimate supervening purpose." In re Acequia, 

Inc., 34 F.3d at 806. Dodson provides an alternative explanation 

for the transfer of stock, in an attempt to put a legitimate face 

on the transaction. She claims that after entering the Settlement 

Agreement in early 2004, Popov wished to provide Dodson with an 

incentive to continue working with Smart Alec's, both to help 

Dodson and to help the restaurant wipe out his personal guarantee 

for the first $285,000 of the redemption amount to YKF. While this 

account is not wholly implausible, it is not credible. Popov 

transferred 100% of his interest in the restaurant. Popov could 

have provided Dodson an incentive to work hard at Smart Alec's by 

transferring a smaller percentage of his interest in the shares. 

The Court does not believe that he would have entirely walked away 

from his interest in April of 2004, just after he had spent over a 

year trying to protect that interest through settlement 

negotiations with YKF. Dodson's explanation is also inconsistent 

with the fact that neither Dodson nor Popov discussed the 

 

12 Dodson argues that the bankruptcy court previously resolved this 

issue, and this Court may not revisit it because of the doctrine of 

collateral estoppel. The Court does not accept this argument, as 

it was not raised until Dodson's closing arguments after trial. 

"Res judicata and collateral estoppel [issue preclusion] are 

affirmative defenses that must be pleaded." Rivet v. Regions Bank, 522 U.S. 470, 476 (1998) (quoting Blonder-Tongue Lab. v. Univ. of 

Ill. Found., 402 U.S. 313, 350 (1971)) (brackets in Rivet). 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 23 of 38
24 

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

28

United States District Court

For the Northern District of California 

transaction with anybody until after Popov filed for bankruptcy in 

the fall of 2005. 

 The Court finds that YKF has met its burden of establishing 

that Popov intended to hinder, delay or defraud his creditors, and 

there is no "significantly clear" evidence of a legitimate purpose 

behind the transfer. 

 YKF also claims that they can recover against Dodson under 11 

U.S.C. § 548(a)(1)(A), which allows a bankruptcy trustee (or in 

this case, a party that has purchased the relevant rights of a 

trustee) to: 

avoid any transfer . . . of an interest of the 

debtor in property . . . , that was made or 

incurred on or within 2 years before the date of 

the filing of the petition, if the debtor 

voluntarily or involuntarily [¶] made such 

transfer . . . with actual intent to hinder, 

delay, or defraud any entity to which the debtor 

was . . . indebted . . . . 

11 U.S.C. § 548(a)(1). The federal bankruptcy law uses the same 

language as California's fraudulent transfer provision: Both 

statutes define "an actually fraudulent transfer as one made with 

'actual intent to hinder, delay, or defraud a creditor.'" In re 

Turner, 335 B.R. 140, 145 (Bankr. N.D.Cal. 2005). The Ninth 

Circuit has referred to § 548(a)(1) as the "analog" to 

§ 3439.04(a). AFI Holding, 525 F.3d at 704. The Court has already 

found that Popov and Dodson entered into the transfer with the 

actual intent to deprive Popov's creditors of access to the Smart 

Alec's shares. YKF has therefore met its burden of proving that 

the transfer of shares from Popov to Dodson is voidable. 

 The Court therefore finds that judgment for YKF on YKF's first 

and second causes of action for fraudulent transfer is 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 24 of 38
25 

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

28

United States District Court

For the Northern District of California 

appropriate.13 The transfer of shares between Popov and Dodson is 

void, and any interest that Dodson now holds in the Smart Alec's 

shares at issue is hereby transferred to YKF. Although YKF has 

requested additional relief, preventing Dodson from dissipating the 

shares, or frustrating the transfer of the restaurant or the 

shares, YKF Trial Br. at 9, the Court is not persuaded that any 

specific involvement by the Court is necessary at this time. 

Should any party engage in behavior that interferes with the 

resolution and execution of the terms of the Judgment in this 

matter, the parties may seek redress at that time. 

B. Dodson's Counterclaim

Dodson claims that YKF, deliberately and in bad faith, delayed 

closing the redemption transaction with Dodson in 2006 and early 

2007, thereby forcing Dodson to incur additional interest and 

attorney fees to which YKF was not entitled. Adv. Docket No. 6 

("Dodson Answer") at 7-8. The Court finds that Dodson has not met 

her burden of showing that any of the fees demanded by YKF were 

unwarranted under the Settlement Agreement, or that the delay by 

YKF was in bad faith. 

 YKF was entitled to file a Notice of Default after it learned 

of the transfer of shares from Popov to Dodson, because the 

Settlement Agreement explicitly states that Popov's transfer of 

shares would constitute a default. See Stock Pledge Agreement 

§ 5(b) ("Pledgor will not . . . transfer . . . the Collateral."); 

Settlement Agreement § 12(d) (stating that breach of Stock Pledge 

 

13 Because the Court finds YKF's first two causes of action to be 

meritorious, it need not reach YKF's alternative theories. This 

includes YKF's third cause of action under 11 U.S.C. 

§ 548(a)(1)(B), and YKF's fourth cause of action under 11 U.S.C. 

§ 544(b)(1) and California Civil Code § 3439.05. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 25 of 38
26 

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

28

United States District Court

For the Northern District of California 

Agreement and other agreements would constitute default of 

Settlement Agreement). The balance became due at that time. 

Settlement Agreement § 13. YKF was entitled to interest from the 

date of default, because, "[i]f a contract . . . does not stipulate 

a legal rate of interest, the obligation shall bear interest at a 

rate of 10 percent per annum after a breach." Cal. Civ. Code 

§ 3289(b). Moreover, YKF was entitled to fees under the Settlement 

Agreement, which stated that Smart Alec's had to pay for expenses 

incurred to compel payment. See Stock Redemption Agreement Ex. A 

("Secured Redemption Promissory Note") § 6(e). This is the 

position that YKF took when it demanded these fees from Dodson, see

1/5/07 Letter at 1-2, and Dodson has not presented any contrary 

arguments to show that these demands were unlawful. The Court does 

not accept Dodson's argument that the transfer was not a default 

simply because it was "harmless." The Court declines to rewrite 

the contract to allow for such an exception to the Settlement 

Agreement's prohibition on transference. 

 Dodson has also failed to show that any delay by YKF was due 

to bad faith. Instead, the evidence indicates that for much of the 

alleged "delay," the parties were in fact still working out the 

details of the transaction. In particular, the correspondences 

reflect a continued interest by Dodson not just to redeem the 

shares as set out in the Settlement Agreement, but to purchase 

YKF's position so that she could go forward with the foreclosure on 

the shares and eliminate Triano's claimed security interest in the 

shares. FF ¶¶ 34-35,38-39. 

 Finally, even assuming arguendo that Dodson has stated a 

plausible claim on these facts, she has not shown that she has been 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 26 of 38
27 

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

28

United States District Court

For the Northern District of California 

personally damaged by YKF's alleged delays. Instead, it is not 

clear how much of the fees and interest were paid by Smart Alec's, 

and how much were paid personally by Dodson. At best, Dodson has 

established that she, jointly and severally with Smart Alec's, had 

to borrow an additional $88,072.37 from Summit Bank. At this time, 

any suggestion that Summit Bank may actually seek to collect this 

from her remains mere speculation. If it does not, or if it is 

able to collect from Smart Alec's, then Dodson's recovery would be 

a windfall. This failure to establish damages to a certainty also 

defeats Dodson's claim. 

C. Triano's Declaratory Judgment Claim 

 Triano requests that this Court formally recognize the lien in 

the shares of Smart Alec's that Popov held in April of 2002, 

established by the Promissory Note. Triano Trial Br. at 2. Triano 

claims that the Promissory Note is secured by the shares, and 

covers the total remaining balance for fees accrued through 

Triano's representation of Popov in three different matters: the 

Hayashi litigation, the Man.com litigation, and the YKF litigation. 

On its face, the Promissory Note covers the fees accumulated in the 

Hayashi litigation and the Man.com litigation as of April 1, 2002, 

and purports to extend to "such additional sums which may accrue 

from legal services being provided by the Martin F. Triano dba Law 

Offices of Martin Triano." Promissory Note at 1; FF ¶ 47. 

Triano's claim raises several legal issues, which the Court 

addresses in turn below. 

 1. Res Judicata 

 Triano claims that he has already vindicated his lien on the 

shares by filing a proof of claim during Popov's bankruptcy, which 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 27 of 38
28 

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

28

United States District Court

For the Northern District of California 

went unopposed. Triano Trial Br. at 13-14. According to Triano, 

his unopposed claim has a res judicata effect as to the validity of 

the lien and the amount claimed. Id. at 14-19. "The doctrines of 

res judicata and collateral estoppel operate to preclude 

relitigation of claims or issues in a subsequent action between the 

same parties or those in privity with them." A & A Concrete, Inc. 

v. White Mountain Apache Tribe, 781 F.2d 1411, 1417 (9th Cir. 1986) 

(citation omitted). If Triano is correct, then this Court is bound 

by the claim filed in the bankruptcy proceeding. 

 Triano relies heavily upon the case of Seigel v. Federal Home 

Loan Mortgage Corp., 143 F.3d 525 (9th Cir. 1998). In Seigel, a 

panel for the Ninth Circuit considered the question of whether a 

party could challenge a property foreclosure that had been brought 

by Freddie Mac, where Freddie Mac had filed proofs of claim as to 

notes and deeds of trust with respect to the property in an earlier 

bankruptcy proceeding, and where no party to the bankruptcy had 

objected to the proofs of claim. Id. at 527-28. The panel noted 

that the allowance or disallowance of a claim in bankruptcy is 

generally binding, and reasoned that, because a claim that is not 

objected to is "deemed allowed" under 11 U.S.C. § 502(a), a proof 

of claim could have a res judicata effect even in the absence of a 

separate order by the bankruptcy court ruling on the claim in 

question. Id. at 528, 530. 

 YKF argues that Triano's proof of claim should not have a res 

judicata effect. During its closing arguments, counsel for YKF 

made one particularly compelling point: There was simply no reason 

to litigate this matter in Popov's bankruptcy proceeding. Due to 

the fact that Popov had fraudulently transferred the shares to 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 28 of 38
29 

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

28

United States District Court

For the Northern District of California 

Dodson prior to filing for bankruptcy, the shares now at issue were 

not presumed to be a part of the bankruptcy estate. Any interest 

that Triano had under the Promissory Note was therefore unsecured, 

and any objection or subsequent litigation over Triano's interest 

in the Promissory Note would have therefore been largely academic. 

This stands in stark contrast to the facts in Seigel. In that 

case, the Ninth Circuit panel observed that the issues raised by 

the unopposed proof of claim went to "the heart and soul of the 

bankruptcy." Id. at 531. It was the claimant's asserted debt that 

had forced the bankrupt into bankruptcy, and therefore the bankrupt 

"had good reason to exert himself" because "he could have 

benefitted, and could even have come out solidly solvent had he 

prevailed." Id. 

Put otherwise, the parties to Popov's bankruptcy proceeding 

simply had no compelling incentive to litigate the enforceability 

of Triano's Promissory Note in Popov's bankruptcy proceeding. As 

other circuits have noted, "res judicata should not be applied 

where one or both parties have 'little motivation' or 'little 

incentive' to fully litigate an issue." In re Ladd, 450 F.3d 751, 

753 (8th Cir. 2006); Sil-Flo, Inc. v. SFHC, Inc., 917 F.2d 1507, 

1521 (10th Cir. 1990) ("Often, the inquiry will focus on whether 

there were significant procedural limitations in the prior 

proceeding, whether the party had the incentive to litigate fully 

the issue, or whether effective litigation was limited by the 

nature or relationship of the parties."); see also Parklane Hosiery 

Co. v. Shore, 439 U.S. 322, 329-30 (1979) (considering related 

question of offensive collateral estoppel; noting that it may be 

unfair to allow estoppel against party who had little incentive to 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 29 of 38
30 

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

28

United States District Court

For the Northern District of California 

litigate point in earlier suit). The Court concludes that it would 

be unfair to bar Dodson and YKF from litigating Triano's asserted 

lien, which is a central aspect of this dispute, simply because no 

party objected to it at a time when it was of only hypothetical 

interest. 

 The Court also notes that Triano's decision to raise his res 

judicata argument on the eve of trial (and in an offensive posture, 

to preclude YKF and Dodson from defending against his claimed lien 

in the shares)14 defeats the very purpose of the doctrine. Res 

judicata "has the dual purpose of protecting litigants from the 

burden of relitigating an identical issue with the same party or 

his privy and of promoting judicial economy by preventing needless 

litigation." Parklane Hosiery Co., 439 U.S. at 326. Although 

Triano did claim to possess a valid proof of claim in his 

complaint, Triano clearly articulated his res judicata argument for 

the first time in his pretrial brief, and by this time YKF and 

Dodson had little choice but to litigate the entire matter over the 

course of the trial. At this point, to apply the doctrine in the 

name of judicial economy would be as effective as wishing the 

toothpaste back into the tube. 

 2. Statute of Limitations

 YKF contends that the relevant statute of limitations is set 

out in section 337 of the California Civil Code, which creates a 

four-year statute of limitations for actions brought under a 

written obligation. YKF Trial Br. at 12. The Promissory Note 

 

14 Significantly, if Triano had been asserting his proof of claim 

to defend the validity of the Promissory Note, then he would have 

been required to include his res judicata theory in his pleadings, 

or else they would have been deemed waived. See Fed. R. Civ. P. 

8(c). 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 30 of 38
31 

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

28

United States District Court

For the Northern District of California 

between Triano and Popov became due on April 30, 2003. Promissory 

Note at 1.15 There has been repeated litigation between Triano and 

Popov (and Dodson and Smart Alec's) over the last seven years -- in 

particular, Triano has raised a claim for declaratory relief 

against Dodson as to the Promissory Note in a suit filed in Alameda 

County Superior Court on April 26, 2007, and the parties have 

represented to this Court that the suit ("Alameda Action") is 

ongoing. On September 5, 2007, several months after the statute of 

limitations on the Promissory Note had expired, YKF filed the suit 

that is now before this Court, and Triano first sought to intervene 

in this action on November 11, 2007, before the matter was 

transferred here from bankruptcy court. See YKF Compl.; Adv. 

Docket No. 12 ("First Triano Mot. to Intervene"). 

 The Court notes that it would have been impossible for Triano 

to intervene in the present suit before the statute of limitations 

had run on the Promissory Note. Triano had brought a timely 

declaratory judgment against the party who ostensibly held the 

shares (Dodson) in the Alameda Action, and only after that, and 

after the statute of limitations had expired, did YKF file this 

suit to undo the fraudulent transfer by which Dodson had received 

those shares. Given these peculiar facts, this Court deems the 

statute of limitations tolled for the purpose of the immediate 

suit. "In certain circumstances . . . a California court will give 

effect in the action before it to the tolling of the statute of 

limitations in an action pending in another forum." Rumberg v. 

 

15 Triano argues that no breach actually occurred until Popov 

discharged Triano on May 14, 2003. Triano Trial Br. at 20. While 

this Court disagrees, the difference between these dates is 

immaterial, as both dates were more than four years prior to 

Triano's efforts to intervene in this matter. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 31 of 38
32 

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

28

United States District Court

For the Northern District of California 

Weber Aircraft Corp., 424 F. Supp. 294, 299 (C.D. Cal. 1976). 

Indeed, "courts have adhered to a general policy which favors 

relieving plaintiff from the bar of a limitations statute when, 

possessing several legal remedies he, reasonably and in good faith, 

pursues one designed to lessen the extent of his injuries or 

damage." Addison v. State, 21 Cal. 3d 313, 317-18 (1978). The 

doctrine of equitable tolling can be invoked when "a first action, 

embarked upon in good faith, is found to be defective for some 

reason." McDonald v. Antelope Valley Community College Dist., 45 

Cal. 4th 88, 100 (2008). This doctrine may apply wherever there is 

"timely notice, and lack of prejudice, to the defendant, and 

reasonable and good faith conduct on the part of the plaintiff." 

Id. at 102. 

 YKF clearly bought and brought this cause of action with full 

knowledge of Triano's claim in the shares.16 FF ¶¶ 18,22. There 

is no indication that YKF will be prejudiced by tolling the 

limitations period, or that Triano acted in bad faith when it 

brought suit against Dodson before the statute of limitations 

expired. At this stage, it is not clear to this Court whether or 

not Triano will be able to vindicate his lien through the Alameda 

Action, given YKF's newly-proven interest in the shares that this 

Court recognizes by this Order. In the face of this uncertainty, 

it would be unjust for this Court to offhandedly deny Triano his 

requested relief in spite of his diligence in filing the Alameda 

 

16 It is indisputable that YKF has known about Triano's asserted 

interest in the shares well before it brought this suit, or 

purchased the right to bring this suit. Indeed, the Settlement 

Agreement, entered into in February of 2004, clearly reflects that 

YKF was cognizant of Triano's claim, as it made explicit allowances 

for Triano's interests. See Stock Pledge Agreement § 5(b). 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 32 of 38
33 

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

28

United States District Court

For the Northern District of California 

Action, the lack of prejudice to YKF, and YKF's long-standing 

awareness of Triano's claim.17 The Court finds that the statute of 

limitations must be tolled for the sake of the present trial. 

3. Compliance with the Rules of Professional Conduct 

 Because the Promissory Note purports to grant Triano a 

security interest in Popov's Smart Alec's shares, the Promissory 

Note represents "a business transaction with a client" by which 

Triano "knowingly acquire[d] [a] . . . security interest adverse to 

a client . . . ," within the meaning of California Rule of 

Professional Conduct ("Rule") 3-300. See Fletcher v. Davis, 33 

Cal. 4th 61, 69-70 (2004). Courts will not enforce such notes 

between attorneys and their clients, unless the attorney has 

strictly complied with the requirements of Rule 3-300. Shopoff & 

Cavallo LLP v. Hyon, 167 Cal. App. 4th 1489, 1522 (Ct. App. 2009). 

Such contracts, like attorney fee agreements, should be "strictly 

construed against the attorney," Alderman v. Hamilton, 205 Cal. 

App. 3d 1033, 1037 (Ct. App. 1988), because "in civil cases, there 

are no transactions respecting which courts are more jealous and 

particular, than dealings between attorneys and their clients." 

Fletcher, 33 Cal. 4th at 67 (citation, internal quotation marks, 

and ellipses omitted). The burden is therefore on the attorney to 

"refute the presumption of voidability in transactions between an 

attorney and a client . . . ." Mayhew v. Benninghoff, 53 Cal. App. 

4th 1365, 1370 (Ct. App. 1997). 

 Rule 3-300 creates the following requirements for this sort of 

transaction: 

 

17 The Court does not reach the question of whether Triano may be 

barred by the statute of limitations in any later-filed suits to 

enforce the Promissory Note. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 33 of 38
34 

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

28

United States District Court

For the Northern District of California 

(A) The transaction or acquisition and its terms 

are fair and reasonable to the client and are 

fully disclosed and transmitted in writing to the 

client in a manner which should reasonably have 

been understood by the client; and 

(B) The client is advised in writing that the 

client may seek the advice of an independent 

lawyer of the client's choice and is given a 

reasonable opportunity to seek that advice; and 

(C) The client thereafter consents in writing to 

the terms of the transaction or the terms of the 

acquisition. 

Rule 3-300. 

The Court finds that the Promissory Note in this case creates 

a valid lien against the Smart Alec's shares that Popov held on 

April 17, 2002. As Byrne testified, he went through the terms of 

the Promissory Note with Popov, including the requirement that 

Popov have an opportunity to consult with outside counsel, two days 

prior to Popov's date of signature. FF ¶ 47. The Court also 

believes that, when narrowly construed, the terms of the Promissory 

Note were fair and reasonable to Popov. Given Popov's 

sophistication and familiarity with similar security instruments, 

the terms should have been reasonably clear to him. The Court does 

not believe that a separate written explanation of the terms of the 

Promissory Note, in addition to the oral explanation provided by 

Byrne, were necessary. 

The Promissory Note is not without its problems, however. On 

its face, it is ambiguous as to the scope of the representational 

matters to which it applies. It does not explicitly mention either 

of the matters that Triano was working on for Popov at the time the 

Note was executed, i.e., the Man.com litigation and the Hayashi 

litigation. However, it does state a specific sum that exactly 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 34 of 38
35 

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

28

United States District Court

For the Northern District of California 

matched the fees already accrued in both matters as of April 1, 

2002. Id. ¶ 48. This lends credibility to the testimony of both 

Triano and Byrne, stating that they discussed with Popov the need 

for a security interest to cover the legal fees in both suits. 

Although Popov claims that Triano already had a security interest 

in the subject of the Hayashi litigation, recovery of the baseball 

remained uncertain at the time the Promissory Note was executed, 

and the Court finds it quite plausible that Triano would seek, and 

that Popov would agree to, security for his present and future fees 

in both matters. This Court finds that the Promissory Note, when 

read with the contemporaneous bills for Triano's services in both 

the Hayashi litigation and Man.com litigation, presents compelling 

evidence that the parties discussed and agreed to a security 

interest to cover the fees for both matters. 

 Although Triano submitted sufficient evidence to establish 

that the Promissory Note covered both the Hayashi litigation and 

the Man.com litigation, and that this was sufficiently explained to 

and understood by Popov, all other ambiguities in the Promissory 

Note must be construed against LOMT. Triano claims that the 

Promissory Note also covers the fees accumulated in the YKF 

litigation. The Court finds no support for this contention, either 

on the face of the Promissory Note or in any of the relevant 

testimony. The YKF litigation did not begin until several months 

after Popov signed the Promissory Note. Id. ¶ 51. This means that 

the parties clearly did not have the matter in mind when the 

Promissory Note was drafted or executed. There is no evidence 

that, when the parties executed the agreement, anyone disclosed to 

Popov that the Promissory Note would extend Triano's interest in 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 35 of 38
36 

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

28

United States District Court

For the Northern District of California 

the shares by any amount accumulated in future matters. In 

addition, the representation that Triano provided in the YKF 

litigation was unique, in that Triano was representing not just 

Popov, but also Smart Alec's and Dodson. Id. It is not clear that 

Popov was willing to pledge his shares as security for services 

provided to all three parties, without similar pledges from those 

parties to defray the risk of foreclosure.18 

 Dodson argues that the Promissory Note is voidable because 

there was no fee agreement between Popov and Triano for the Man.com 

litigation. However, Popov has testified that he completely paid 

off the debt owed Triano with respect to the Man.com litigation, 

and the record clearly confirms this. FF ¶ 50. Triano does not 

purport that his fees for the Man.com litigation make up any 

portion of the lien that he is now seeking to establish. The Court 

therefore need only find that Popov and Triano executed a valid fee 

agreement for the Hayashi litigation. FF ¶ 44. 

 The Court concludes that Triano has a valid lien on the Smart 

Alec's shares that Popov possessed at the time he executed the 

Promissory Note, in April of 2002. The value of this lien may not 

exceed the amount owed Triano for the legal representation that 

 

18 The Court does not reach the separate question of whether the 

Smart Alec's shares attach as security to the additional fees that 

accumulated in later actions, in which Triano attempted to enforce 

the Promissory Note against Popov. The Court does not reach this 

question because 1) the issue has not been fully briefed by the 

parties; 2) counsel for YKF conceded in oral argument that, if 

Triano can establish collection costs that were incurred in 

connection with appropriate actions against Popov, then the 

security interest would attach to that, and 3) Triano has not even 

attempted to prove before this Court the amount accrued in 

attempting to enforce the Promissory Note. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 36 of 38
37 

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

28

United States District Court

For the Northern District of California 

LOMT provided Popov in connection with the Hayashi litigation.19 

IV. CONCLUSION

 Judgment is entered for Plaintiff Yugen Kaisha, Y.K.F. 

("YKF"), and against Defendant Stephanie Dodson ("Dodson"), with 

respect to YKF's first two causes of action for fraudulent 

transfer. The transfer of 3,744,000 shares of Smart Alec's 

Intelligent Food, Inc. ("the Shares"), from Alexander N. Popov to 

Dodson, is deemed fraudulent, and is hereby rendered void. All 

interest that Dodson possesses in the Shares is hereby transferred 

to YKF. YKF's interest in the Shares is subordinate to the 

interest of Martin Triano d/b/a Law Offices Of Martin F. Triano 

("LOMT") and Summit Bank. The Court need not reach YKF's third or 

fourth causes of action, as these are alternative theories of 

recovery. 

 Judgment is entered for Counter-defendant YKF and against 

Counter-claimant Dodson as to Dodson's counterclaim. 

 Judgment is entered in favor of LOMT as to LOMT's claim for 

declaratory judgment. LOMT has a valid lien on the Shares. The 

value of this lien may not exceed the amount owed LOMT for the 

legal representation that LOMT provided Popov in connection with 

the Hayashi litigation, as described in this Order. This Court 

 

19 The parties have not fully addressed the issue of whether 

Triano's interest should be subordinate to the interest of Summit 

Bank. Although Triano argues that Dodson informed Summit of 

Triano's claim before it received its interest in the Smart Alec's 

shares, see, e.g., Triano Proposed Findings of Fact and Conclusions 

of Law, Docket No. 78, ¶ 33, no testimony to this effect was 

elicited at trial. More importantly, Summit Bank is not a party to 

these proceedings. The Court therefore declines to resolve the 

question of whether Triano's interest is senior or subordinate to 

the interest held by Summit Bank. 

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 37 of 38
38 

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

28

United States District Court

For the Northern District of California 

does not reach the issue of whether LOMT's lien is junior or senior 

to the lien held by Summit Bank. 

IT IS SO ORDERED. 

Dated: February 19, 2010 

UNITED STATES DISTRICT JUDGE

Case 3:08-cv-00225-SC Document 111 Filed 02/19/10 Page 38 of 38