Court Opinion

ID: 9637428
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:06:51.834054+00
Date Added: 2024-06-11T13:39:11.227296
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF IDAHO

                                          Docket No. 49136

 DOUGLAS A. BAGBY,                                     )
                                                       )
      Plaintiff-Appellant,                             )        Boise, January 2023 Term
                                                       )
 v.                                                    )        Opinion filed: May 22, 2023
                                                       )
 JOSEPH D. DAVIS, HILARY DAVIS,                        )        Melanie Gagnepain, Clerk
                                                       )
      Defendants-Respondents.                          )
                                                       )

         Appeal from the District Court of the Fifth Judicial District of the State of Idaho,
         Blaine County. Ned C. Williamson, District Judge.

         The decision of the district court is affirmed.

         Law Offices of Douglas A. Bagby, Los Angeles, CA, for Appellant pro se.
         Douglas A. Bagby argued.

         Luboviski, Wygle, Fallowfield & Ritzau, P.A, Ketchum, for Respondent Joseph D.
         Davis. Stanek Law, PLLC, Hailey, for Respondent Hilary Davis. Benedon &
         Serlin, LLP, Woodland Hills, CA, for Respondents Joseph D. Davis and Hilary
         Davis. Mark Schaeffer, Pro Hac Vice, argued.

ZAHN, Justice.
         This appeal arises following a court trial in which Appellant Douglas Bagby argued that a
transaction between Respondents Joseph and Hilary Davis was intended to hinder, delay, or
defraud Bagby in his efforts to collect on a $5 million judgment against Joseph. The district court
concluded that Bagby failed to meet his burden on several causes of action arising under
California’s version of the Uniform Voidable Transactions Act. Bagby appeals many of the district
court’s findings and conclusions. For the reasons discussed below, we affirm the district court’s
judgment dismissing Bagby’s claims.
                  I.   FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background.
       Bagby, a California resident, obtained a default judgment for $5,000,000 against Joseph, a
former California lawyer who now resides in Florida. In this action, Bagby seeks to set aside a
transaction between Joseph and Hilary in which Joseph transferred his one-half interest in real
property located in Ketchum, Idaho, to Hilary. Joseph and Hilary maintain the purpose of the
transaction was to settle claims that Hilary had against Joseph, while Bagby asserts the transaction
was intended to hinder or delay his ability to collect on his judgment.
   1. Joseph’s and Hilary’s pending dissolution of marriage action.
       Joseph and Hilary were married in 1993. In 2003, the couple separated, but it was not until
2005 that Hilary filed a petition for dissolution of marriage. Bagby, a family law attorney, briefly
represented Joseph in the dissolution action. The divorce proceedings continued for many years,
and Joseph and Hilary remained legally married at the time of the 2021 trial in this case.
       Relevant to this appeal are several claims that Joseph and Hilary asserted in the divorce
action. First, Hilary asserted a claim against Joseph for $1,277,717, representing her share of
attorney fees for the successful contingency fee cases that Joseph earned between the date of the
parties’ marriage and their separation. Joseph calculated the amount of these attorney fees by
estimating time worked on each case before and after the parties’ separation and apportioning the
fees earned accordingly.
       Hilary also asserted a claim against Joseph for attorney fees he earned during their
marriage, which were converted into annuity contracts. Hilary claimed a right to half of these
annuities in the divorce action, but Joseph maintained they were separate property. At trial, Joseph
testified that 20% of the annuity payments were likely community property because the annuity
contracts were purchased during the marriage, although the work was done prior to the marriage.
This resulted in a community property allocation of $6,000 per month in fixed payments that would
continue until Joseph’s death. Based on Joseph’s life expectancy, he estimated that Hilary’s claim
related to the annuity contracts totaled $600,000.
       Finally, Joseph had a potential claim in the amount of $2.138 million for reimbursement
under California Family Code section 2640. This claim was based on the theory that proceeds from
the sale of a home owned by Joseph as separate property (the “Perugia House”) could be traced to
the acquisition of another property (the “Mapleton Drive Property”) during Joseph’s and Hilary’s

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marriage. This claim was initially asserted during settlement negotiations between Joseph and
Hilary, and the record indicates that the last mention of this claim was in April 2008. Bagby, while
representing Joseph, identified “tracing issues” with this claim. These “tracing issues” stemmed
from the proceeds from the sale of the Perugia House being commingled with approximately $4.8
million in income in a joint bank account.
   2. Bagby’s $5 million judgment against Joseph.
       In 2013, Bagby was seriously injured in a motorcycle accident. Bagby retained Joseph,
who was a personal injury attorney, to represent Bagby in a California lawsuit to recover for his
injuries. Bagby’s suit was unsuccessful and Bagby perceived the lack of success as being due to
Joseph’s malpractice. In May 2017, Bagby sued Joseph in California for legal malpractice. Joseph
failed to answer the complaint and his default was entered in August 2017. In September 2018, a
default judgment in the amount of $27,146,021.41 was entered against Joseph. In February 2020,
following an appeal, the default judgment was reduced to $5 million.
   3. The Ketchum House transfer.
       In 2004, after their separation but prior to their divorce, Joseph and Hilary purchased a
home together in Ketchum, Idaho (the “Ketchum House”). The record shows that they each owned
a one-half interest in the Ketchum House as tenants in common. Both Joseph and Hilary testified
that in 2016, they discussed an agreement whereby Joseph would transfer his interest in the
Ketchum House to Hilary in satisfaction of her claims against him for attorney fees he earned
during their marriage. Two years later, in December 2018 (about three months after the default
judgment was entered), Joseph and Hilary met in Ketchum, Idaho, where they executed a quitclaim
deed and a warranty deed conveying Joseph’s one-half interest in the Ketchum House to Hilary.
       Joseph testified at the trial that he was looking forward to retiring, wanted to limit his
exposure to expenses associated with the Ketchum House, and wanted to resolve Hilary’s claim
for the attorney fees earned during their marriage. Hilary, a real estate agent, valued the Ketchum
House at between $2.3 and $2.4 million, which was near the $2,132,327 assessed value of the
property in 2018. The Ketchum House transfer occurred approximately three months after Bagby
obtained his initial default judgment against Joseph. Bagby did not record an abstract of any
judgment, lien, or encumbrance based on the judgment in his legal malpractice action against the
title to the Ketchum House before it was transferred to Hilary.

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   4. Joseph’s actions following Bagby’s lawsuit.
       At the time of the Ketchum House transfer in December 2018, Joseph owned assets with
an estimated value of between $5 and $10 million. Approximately $6 million in earned attorney
fees were deposited into accounts at City National Bank during 2018. In June 2019, Joseph
appeared for a debtor’s examination in Los Angeles, California. Joseph closed his bank accounts
at City National Bank about a month prior to the debtor’s examination. Joseph then opened a new
bank account following the debtor’s examination.
       Between September 2018 and June 2019, Joseph prepaid several expenses. These expenses
included a year of lease payments for his office space, a year of lease payments on his automobile,
and a year’s worth of dues to multiple country clubs in which Joseph was a member.
       In May 2019, Joseph invested $3.5 million in a Nevis Island limited liability company
called, “Blue Globe Finance.” Joseph testified that Blue Globe is a hedge fund. Joseph was asked
whether he was aware if Blue Globe was a haven for debtors, and Joseph responded no. Joseph
testified that he learned about Blue Globe at an investment seminar.
       In the first half of 2020, Joseph transferred the title to a 2003 Range Rover located in Idaho
to Hilary. Joseph testified that he transferred the Range Rover to Hilary because he was no longer
going to be in Idaho. The value of the Range Rover was not established.
       In June 2020, Joseph moved to Florida. He testified that he decided to move to Florida after
Bagby’s attorney told him that Bagby was going to foreclose on his California home and that
Joseph should find a new place to live. Joseph then stated that he had family in Florida, and it
made sense to move there for that reason. Hilary testified that Joseph told her that, by moving to
Florida, the contingent fee annuities would be exempt from execution. Joseph denied having told
Hilary that he would obtain an exemption from execution on the annuities by moving to Florida.
B. Procedural background.
       In May 2019, Bagby sued Joseph and Hilary in Idaho, asserting claims for actual and
constructive fraudulent transfer under California’s Uniform Voidable Transactions Act
(“UVTA”). Bagby alleged that the transfer of the Ketchum House was intended to hinder, delay,
or defraud Bagby in his attempt to collect on the $5 million judgment. Joseph and Hilary generally
denied the allegations, and they asserted an affirmative defense under the UVTA that Hilary was
a good faith purchaser for value. The affirmative defense was based on their assertion that Joseph
transferred the Ketchum House to Hilary in satisfaction of her claims against him in the dissolution

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action for her share of attorney fees he earned prior to their separation. The parties agreed to apply
California substantive law to the claims and affirmative defense. A court trial was held in the
matter at which only three witnesses testified: Joseph, Hilary, and Bagby. Other than having local
counsel question him when he called himself as a witness, Bagby represented himself at trial.
        In its written findings and conclusions, the district court found Joseph and Hilary to be
credible witnesses. The district court also found that Hilary provided consistent testimony that had
not been impeached. And the district court found that Joseph was credible on the key issues in the
case. Although Bagby cross-examined Joseph at length attempting to impeach Joseph’s testimony,
the district court found that these attempts did not rise to the level of impeaching Joseph on the
material issues being tried.
        On Bagby’s first claim for actual intent to hinder, delay, or defraud, the district court
analyzed each of the “badges of fraud” that arise under the relevant section of California’s UVTA.
See Cal. Civ. Code § 3439.04(a)(1). The district court found that some badges of fraud weighed
for and some against a finding of actual intent, but ultimately concluded that Bagby had not met
his burden of proving actual intent to hinder, delay, or defraud.
        On Bagby’s second claim for constructive fraud under the UVTA, which required proof
that a transfer was made without reasonably equivalent value between the parties, the district court
found that the Ketchum House transfer was for reasonably equivalent value. Specifically, the
district court concluded that Joseph’s one-half interest in the Ketchum House, valued at between
$1.15 and $1.2 million, was reasonably equivalent to Hilary’s claims for attorney fees earned by
Joseph prior to separation ($1.277 million in fees and $600,000 in Hilary’s share of the annuities).
Because of this, the district court concluded Bagby had not met his burden.
        On Bagby’s third claim, which required proof of the absence of reasonably equivalent
value and the insolvency of the transferor, the district court found that Bagby had met his burden
of establishing that Joseph was insolvent at the time the Ketchum House was transferred. However,
for the same reasons it discussed on the second claim, the court concluded Bagby had not
established a lack of reasonably equivalent value.
        Finally, on the affirmative defense, the district court found that Hilary acted in good faith
and that the parties received reasonably equivalent value for the Ketchum House transfer. The
district court found that Hilary did not learn of Bagby’s judgment against Joseph until after the
transfer.

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       Based on the foregoing findings, the district court concluded that Bagby failed to establish
a right to recover under any of his claims and entered judgment in favor of Joseph and Hilary and
dismissed Bagby’s claims. After trial, Bagby moved the district court to reconsider, to amend the
findings of fact and judgment, and for a new trial (collectively, “post-trial motions”). The district
court denied Bagby’s motions to reconsider and for a new trial. The district court granted Bagby’s
motion to amend four of its findings of fact, none of which altered its conclusions regarding
Bagby’s claims. Bagby timely appealed.
                                     II.    ISSUES ON APPEAL
   1. Did the district court abuse its discretion when it declined to adopt an adverse inference
      due to evidence not produced or destroyed by Joseph and Hilary?
   2. Are the district court’s findings of fact supported by substantial and competent evidence,
      and do its conclusions of law follow therefrom?
   3. Are Joseph and Hilary entitled to attorney fees on appeal?
                              III.         STANDARD OF REVIEW
       “Review of a trial court’s conclusions following a [court] trial is limited to ascertaining
whether the evidence supports the findings of fact, and whether the findings of fact support the
conclusions of law.” McCarthy Corp. v. Stark Inv. Grp., LLC, 168 Idaho 893, 902, 489 P.3d 804,
813 (2021) (quoting Caldwell Land & Cattle, LLC v. Johnson Thermal Sys., Inc., 165 Idaho 787,
795, 452 P.3d 809, 817 (2019)). “It is in the province of the district judge acting as trier of fact to
weigh conflicting evidence and testimony and to judge the credibility of the witnesses.” Cook v.
Van Orden, 170 Idaho 46, 57, 507 P.3d 119, 130 (2022) (quoting Clayson v. Zebe, 153 Idaho 228,
232, 280 P.3d 731, 735 (2012)). “This Court will not set aside a trial court’s findings of fact unless
the findings are clearly erroneous.” McCarthy Corp., 168 Idaho at 902, 489 P.3d at 813 (citation
omitted). Clear error does not “exist if the findings are supported by substantial and competent,
though conflicting, evidence.” State, Dep’t of Health & Welfare v. Roe, 139 Idaho 18, 21, 72 P.3d
858, 861 (2003). “Evidence is regarded as substantial if a reasonable trier of fact would accept it
and rely upon it in determining whether a disputed point of fact had been proven.” Kenworth Sales
Co. v. Skinner Trucking, Inc., 165 Idaho 938, 942, 454 P.3d 580, 584 (2019) (quoting Turcott v.
Estate of Bates, 165 Idaho 183, 188, 443 P.3d 197, 202 (2019)).
       This Court exercises “free review over the trial court’s conclusions of law to determine
whether the trial court correctly stated the applicable law and whether its legal conclusions are

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sustained by the facts found.” Burns Concrete, Inc. v. Teton County, 168 Idaho 442, 451, 483 P.3d
985, 994 (2020) (citing Kunz v. Nield, Inc., 162 Idaho 432, 438, 398 P.3d 165, 171 (2017)).
                                      IV.     ANALYSIS
A. The district court did not abuse its discretion by declining to draw an adverse inference
   from documents not produced or destroyed.
       Bagby initially argues that the district court should have viewed evidence produced by
Joseph and Hilary with distrust because the evidence admitted at trial showed that they either failed
to produce or destroyed relevant documents. Bagby essentially argues that the court should have
drawn an inference that the documents that were not produced or destroyed were damaging to
Joseph’s and Hilary’s case. Bagby relies on both California and Idaho authority to support these
arguments. Given that Bagby has cited both California and Idaho authority on this claim, it is first
necessary to determine whether Idaho or California law applies to Bagby’s argument.
       “Even where a court is applying the laws of another state, the procedural law of the forum
court will still apply.” Carroll v. MBNA Am. Bank, 148 Idaho 261, 267, 220 P.3d 1080, 1086
(2009) (citing Houston v. Whittier, 147 Idaho 900, 911–12, 216 P.3d 1272, 1283–84 (2009)).
“[P]rocedural matters to which forum law will be applied include forms of action, pleading and
conduct of proceedings before the court, allocation of burdens of proof, and admissibility and
sufficiency of evidence.” Id. (citing Restatement (Second) of Conflict of Laws §§ 124, 127, 133–
35, 138 (1971)).
       We hold that Idaho law applies to Bagby’s argument that he was entitled to an adverse
inference due to the destruction or failure to produce documents. Bagby is essentially advocating
for a spoliation inference. He argues, primarily citing California law, that the district court should
have viewed the evidence that Joseph and Hilary did produce with distrust because they had access
to additional evidence that had either been destroyed or was not produced by Joseph and Hilary.
“The spoliation doctrine is a general principle of civil litigation which provides that upon a
showing of intentional destruction of evidence by an opposing party, an inference arises that the
missing evidence was adverse to the party’s position.” Courtney v. Big O Tires, Inc., 139 Idaho
821, 824, 87 P.3d 930, 933 (2003) (citation omitted). The spoliation doctrine thus applies to the
conduct of proceedings before the trial court. As a result, Idaho law applies. See Carroll, 148 Idaho
at 267, 220 P.3d at 1086.
       We now turn to the question of whether the district court abused its discretion in declining
to adopt an adverse inference. The trial court exercises its discretion when determining whether to

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apply the spoliation doctrine to a given situation. Bromley v. Garey, 132 Idaho 807, 812, 979 P.2d
1165, 1170 (1999). In determining whether a court has abused its discretion, this Court asks
“[w]hether the trial court: (1) correctly perceived the issue as one of discretion; (2) acted within
the outer boundaries of its discretion; (3) acted consistently with the legal standards applicable to
the specific choices available to it; and (4) reached its decision by the exercise of reason.”
Lunneborg v. My Fun Life, 163 Idaho 856, 863, 421 P.3d 187, 194 (2018) (citation omitted).
        The district court addressed Bagby’s spoliation argument in its oral findings of fact and
conclusions of law. The district court recognized that all the parties to this case had either destroyed
or failed to produce documents. The district court noted that Hilary testified that she shredded
some older documents, but retained the ones she thought were important. Bagby admitted he had
destroyed documents pursuant to a document retention policy, although the parties stipulated that
no inference could be drawn from this destruction. Finally, the district court stated that, “for
[Joseph], I don’t think there’s any evidence necessarily in the record about his destruction of
evidence, however, there are certainly inferences in arguments and questions were asked of
[Joseph] about why he didn’t have certain documents.” Ultimately, the district court declined to
draw an adverse inference, stating that Joseph’s and Hilary’s divorce “has drug [sic] on for some
time. The parties have been separated for over – about 20 years now. It has drug [sic] on, and it
doesn’t surprise the Court that the parties have not been able to produce all the records as
requested.”
        The district court did not err in declining to draw an adverse inference against Joseph or
Hilary. The district court perceived the issue as one of discretion, acted within the outer bounds of
its discretion, and acted consistently with the applicable legal standard. Further, the district court
also reached its decision by an exercise of reason because, after analyzing the evidence, it
determined that it was to be expected that the parties would not keep every document over the
course of a nearly 20-year divorce case. Accordingly, the district court did not abuse its discretion
in declining to adopt an adverse inference.
B. The district court’s findings of fact on the affirmative defense are supported by
   substantial and competent evidence and its legal conclusions follow from those findings
   of fact.
        Bagby asserted three different claims under California’s UVTA that were addressed at trial,
and Joseph and Hilary asserted one affirmative defense under the same act. The thrust of Bagby’s
argument on appeal is that many of the district court’s factual findings are clearly erroneous. In

                                                   8
light of the erroneous factual findings, Bagby argues the district court erred in dismissing his
UVTA claims against Joseph and Hilary. We need not address Bagby’s claims of error because
the district court correctly concluded that Joseph and Hilary prevailed on their affirmative defense.
   1. California’s UVTA.
       California, like many states, has adopted a version of the Uniform Voidable Transactions
Act, which allows a creditor to set aside a debtor’s transfer of property under certain circumstances.
See Cal. Civ. Code §§ 3439–3439.14. “The purpose of the UVTA is to prevent debtors from
placing, beyond the reach of creditors, property that should be made available to satisfy a debt.”
Chen v. Berenjian, 245 Cal. Rptr. 3d 378, 382 (Cal. Ct. App. 2019) (citation omitted). “The UVTA
applies on its face to all transfers.” Id. (citation omitted). A creditor who successfully demonstrates
either actual or constructive fraud may obtain a remedy such as avoidance of the transfer. Cal. Civ.
Code § 3439.07(a). The present appeal involves three causes of action that arise under the UVTA.
See Cal. Civ. Code §§ 3439.04(a)(1) and (a)(2), 3439.05(a).
       Bagby’s first cause of action is an actual fraud claim. California Civil Code section
3439.04(a)(1) allows a creditor to set aside a transfer that was made with “actual intent to hinder,
delay, or defraud” the creditor. See Universal Home Improvement, Inc. v. Robertson, 264 Cal.
Rptr. 3d 686, 689–90 (Cal. Ct. App. 2020). To determine whether a creditor has proven a claim
for actual fraud, California courts consider eleven non-exhaustive factors often referred to as the
“badges of fraud.” Id. at 690 (citation omitted).
       The UVTA provides an affirmative defense to an actual fraud claim when the transferee
(1) took in good faith and (2) for reasonably equivalent value:
       A transfer or obligation is not voidable under paragraph (1) of subdivision (a) of
       Section 3439.04, against a person that took in good faith and for a reasonably
       equivalent value given the debtor or against any subsequent transferee or obligee.
Cal. Civ. Code § 3439.08(a). The party asserting this affirmative defense has the burden of proving
good faith and reasonably equivalent value by a preponderance of the evidence. Cal. Civ. Code §
3439.08(f)(1), (g).
       The second cause of action is a constructive fraud claim. See Cal. Civ. Code §§
3439.04(a)(2), 3439.05(a). California Civil Code section 3439.04(a)(2) states:
       (a) A transfer made or obligation incurred by a debtor is voidable as to a creditor,
       whether the creditor’s claim arose before or after the transfer was made or the
       obligation was incurred, if the debtor made the transfer or incurred the obligation
       as follows:

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        ...
        (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 the debtor
        would incur, debts beyond the debtor’s ability to pay as they became due.
        The third cause of action is a different type of constructive fraud claim. California Civil
Code section 3439.05(a) requires a showing that (1) the transfer was made without receiving a
reasonably equivalent value and (2) the debtor was insolvent at the time of the transfer or became
insolvent as a result of the transfer:
        A transfer made or obligation incurred by a debtor is voidable 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.
Cal. Civ. Code § 3439.05(a).
        Critical here, each of the constructive fraud claims arising under the UVTA share a
common element: that the debtor or transferee must receive “reasonably equivalent value” under
the transaction. See Annod Corp. v. Hamilton & Samuels, 123 Cal. Rptr. 2d 924, 929–30 (Cal. Ct.
App. 2002). Thus, under the UVTA’s constructive fraud provisions, “[i]f the debtor received
reasonably equivalent value, the inquiry ends there.” Id. at 930. Whether a transfer is made with
actual intent, whether a transferee acted in good faith, and whether there was reasonably equivalent
value are questions of fact. Nautilus, Inc. v. Yang, 217 Cal. Rptr. 3d 458, 463 (Cal. Ct. App. 2017)
(citing Annod Corp., 123 Cal. Rptr. 2d at 929); Aghaian v. Minassian, 273 Cal. Rptr. 3d 561, 567
(Cal. Ct. App. 2020) (citations omitted). A creditor seeking to void a transaction under the UVTA’s
constructive fraud provisions has the burden of proving actual or constructive fraud by a
preponderance of the evidence. Cal. Civ. Code § 3439.04(c).
        Given the UVTA’s framework, a showing of good faith and reasonably equivalent value—
the elements of the affirmative defense—defeats a creditor’s claims for actual or constructive
fraud. See Annod Corp., 123 Cal. Rptr. 2d at 929–30 (explaining that the affirmative defense, if
proven, is dispositive of actual and constructive fraud claims under the UVTA). Therefore, we first

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examine whether the district court erred in concluding that Hilary had proven the affirmative
defense set out in section 3439.08. If the district court correctly reached this conclusion, then it
correctly dismissed all of Bagby’s claims in this case.
    2. Notwithstanding the conflicting evidence, the district court’s finding that Hilary acted in
       good faith is supported by substantial and competent evidence.
        Bagby asserts that the district court’s finding that Hilary acted in good faith is not supported
by substantial and competent evidence. He argues that the evidence shows Hilary knew that Bagby
had sued Joseph for malpractice before the transfer of the Ketchum House, which shows Hilary
was not acting in good faith. He also asserts that Hilary knew Joseph did not owe her any unpaid
attorney fees earned during the marriage, although Bagby does not cite to the record to support
this assertion.
        Joseph and Hilary argue the district court properly concluded Hilary acted in good faith.
They argue that the critical issue regarding Hilary’s intent was her lack of knowledge of the
judgment at the time of the Ketchum House transfer, rather than her knowledge of the lawsuit.
Joseph and Hilary also argue that Bagby relies on speculation rather than evidence adduced at trial
to support his argument regarding Hilary’s good faith.
        The district court found Hilary to be a credible witness and was persuaded by Hilary’s
testimony that she was unaware of Bagby’s judgment entered against Joseph at the time of the
Ketchum House transfer. Relying principally on its finding that Hilary lacked any knowledge of
the judgment against Joseph at the time of the transfer, the district court found that Hilary acted in
good faith.
        “‘[G]ood faith’ means that the transferee acted without actual fraudulent intent and that he
or she did not collude with the debtor or otherwise actively participate in the fraudulent scheme of
the debtor.” Nautilus, Inc., 217 Cal. Rptr. 3d at 464 (quoting Cal. Civ. Code § 3439.08, Legis.
Comm. Cmt. 1 (West 2016)). Further, “[t]he transferee’s knowledge of the transferor’s fraudulent
intent may, in combination with other facts, be relevant on the issue of the transferee’s good
faith[.]” Id.
        Here, Hilary testified that she was unaware of the judgment against Joseph at the time of
the transfer of the Ketchum House in December 2018. She also testified that she did not learn of
the judgment until she had been served a subpoena in April 2019—several months after the
transfer. After receiving the subpoena, she learned from Joseph that Bagby had obtained a
judgment against him. Hilary also testified that she and Joseph first spoke in 2016 about

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transferring his interest in the Ketchum House to her in order to resolve her claim for attorney fees,
which predated Bagby’s lawsuit.
       The district court’s finding that Hilary acted in good faith is supported by substantial and
competent evidence. “Evidence is regarded as substantial if a reasonable trier of fact would accept
it and rely upon it in determining whether a disputed point of fact had been proven.” Kenworth
Sales Co., 165 Idaho at 942, 454 P.3d at 584 (quoting Turcott, 165 Idaho at 188, 443 P.3d at 202).
A reasonable trier of fact could rely on Hilary’s testimony to conclude that she acted in good faith
by accepting Joseph’s one-half interest in the Ketchum House in lieu of the attorney fees Joseph
owed her in the divorce action. The district court found it significant that both Joseph and Hilary
testified that they spoke about transferring the Ketchum House in 2016, which was before Bagby
filed his lawsuit against Joseph. The district court also found that Hilary was credible and had not
been impeached. Although it is true that Hilary knew about Bagby’s lawsuit prior to the Ketchum
House transfer, this evidence did not preclude the district court from relying on other evidence of
Hilary’s intent. See, e.g., Roe, 139 Idaho at 21, 72 P.3d at 861 (“[C]lear error will not be deemed
to exist if the findings are supported by substantial and competent, though conflicting, evidence.”).
The district court was able to observe Hilary first-hand and, unlike this Court, had the benefit of
perceiving her demeanor, tone, and affect. Therefore, we will not second-guess the district court’s
credibility determination. Accordingly, we conclude that the district court did not err in finding
that Hilary was not aware of Bagby’s judgment prior to the Ketchum House transfer and that she,
therefore, acted in good faith.
       Bagby also asserts that the district court erred because the evidence demonstrated that
Hilary “knew Joseph did not owe Hilary any amount as of December 27, 2018, as they both knew
they had not yet executed any agreement which would have created a legal obligation for Joseph
to make any payments to Hilary.” Bagby does not refer to any evidence in the record to support
this assertion. Rather, the record reveals that Hilary testified that she believed she had claims
against Joseph for reimbursement of attorney fees he collected during their marriage. The
testimony shows that, at the time of the Ketchum House transfer, Hilary believed that Joseph owed
her a minimum of $1.275 million. Although Bagby argues that Joseph was not legally obligated to
pay Hilary for the attorney fees earned during marriage, the record demonstrates that Hilary had a
good faith belief that she was owed the amounts she claimed. Therefore, we are unpersuaded by

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Bagby’s argument that Hilary was acting in bad faith because she knew Joseph did not owe her
money for the attorney fees.
    3. The district court’s finding that the transfer of the Ketchum House provided reasonably
       equivalent value is supported by substantial and competent evidence.
          Bagby asserts that the evidence at trial was not sufficient to allow the district court to find
that Hilary had a claim against Joseph of reasonably equivalent value to his one-half interest in the
Ketchum House. Bagby argues that California Family Code section 2550 required any settlement
between Joseph and Hilary to be in writing, which he argues did not occur here. Bagby also asserts
that the district court erred in finding that Joseph’s $2.138 million reimbursement claim was not
viable.
          Joseph and Hilary assert the district court’s conclusion on reasonably equivalent value was
supported by substantial and competent evidence. They also argue that Bagby’s reliance on
California Family Code section 2550 is inapt because that provision does not apply outside a
divorce proceeding. Joseph and Hilary next maintain that the district court properly concluded the
$2.138 million reimbursement claim was not viable because Bagby recognized tracing issues
himself when he represented Joseph in the dissolution action.
          The district court concluded that the Ketchum House transfer provided reasonably
equivalent value. The district court found that Hilary’s claim for attorney fees valued at between
$1.277 and $1.877 million was reasonably equivalent to the $1.15 to $1.2 million value of Joseph’s
share of the Ketchum House. The district court found that California Family Code section 2550
did not require a written agreement for the transfer between Joseph and Hilary to provide
reasonably equivalent value because that statute only applies in a divorce proceeding. As for
Joseph’s $2.138 million reimbursement claim, the district court concluded that this claim was an
early pre-litigation settlement offer that Joseph eventually and reasonably abandoned.
          As previously stated, the elements of constructive fraud and the affirmative defense
available under California’s version of the UVTA all require a showing of reasonably equivalent
value. See Cal. Civ. Code §§ 3439.04(a)(2), 3439.05(a), 3439.08(a). California Civil Code section
3439.03 provides that “[v]alue is given for a transfer or an obligation if, in exchange for the transfer
or obligation, property is transferred or an antecedent debt is secured or satisfied[.]” California’s
UVTA defines “debt” as “liability on a claim.” Cal. Civ. Code § 3439.01(d). “Claim” is defined
as “a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or

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unsecured.” Cal. Civ. Code § 3439.01(b). Further, a “creditor” is “a person that has a claim[.]”
Cal. Civ. Code § 3439.01(c).
       Applying these code provisions to this case, we hold that the district court’s finding that
the Ketchum House was transferred for reasonably equivalent value is supported by substantial
and competent evidence. The district court found two claims by Hilary that were relevant to its
determination of reasonably equivalent value: (1) the claim in the amount of $1.277 million for
Hilary’s share of attorney fees earned during the marriage, and (2) Hilary’s claim for her $600,000
portion of Joseph’s annuities, which were funded from attorney fees earned prior to their
separation. Joseph and Hilary produced two exhibits at trial showing the breakdown of
contingency fee cases Joseph earned prior to his and Hilary’s separation, totaling $1.277 million.
Joseph also testified that he calculated the $1.277 million in attorney fees by estimating the
percentage of time worked on each case prior to his and Hilary’s separation to estimate Hilary’s
share of the fees.
       In a similar vein, Joseph testified that the two cases that settled during his and Hilary’s
marriage resulted in annuities for which he received payments of $30,000 per month. Joseph
testified that it was his understanding that Hilary had claimed a right to one-half of the annuity
income in the divorce action. The district court found that Joseph’s estimation of time spent on
each case along with the supporting documentation in the record was sufficient. Further,
documents in the record reveal that Bagby himself, while he was representing Joseph, identified
claims that Hilary had for contingency fees Joseph earned during the marriage.
       In light of the evidence discussed above, the district court’s findings on the amount of
Hilary’s claim for attorney fees were not clearly erroneous. The district court found that Hilary
had a $1.277 million claim for her share of attorney fees for successful contingency fee cases and
a $600,000 claim from the annuities and that these claims were satisfied in exchange for Joseph’s
$1.15 to $1.2 million one-half interest in the Ketchum House. The district court’s conclusion that
each party received reasonably equivalent value follows from these findings.
       Bagby challenges several aspects of the district court’s finding regarding Hilary’s claim
for attorney fees, despite the evidence discussed above. He argues that Joseph’s estimation of the
attorney fees owed to Hilary did not include deductions for taxes and expenses for unsuccessful
contingency fee cases. Bagby argues that failing to consider these deductions shows the district
court’s valuation of Hilary’s claim was seriously flawed. The district court directly addressed

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Bagby’s argument on this point, finding that “Bagby did not present any evidence establishing an
appropriate reduction [to the attorney fees owed to Hilary].” The district court stated that it relied
on the evidence in the record:
       Ultimately, what may or may not be the correct Amount [for attorney fees], we
       don’t have an expert accountant to sit up there and tell the Court, you know, this is
       the appropriate way to account for these thirteen cases, how to deduct taxes,
       whether you deduct taxes, whether you deduct expenses, whether Ms. Davis should
       have been -- had expenses for nonsuccessful [sic] claims deducted from these total
       amounts, whether she should have recovered on expenses that were recovered in
       the successful cases. There’s no accountant here to provide any information to the
       Court about what the appropriate way to calculate these fees is and, therefore, the
       only number before this Court is the $1.277 million that the Court can consider.
The record supports the district court’s finding that, although Joseph may have been entitled to
deductions, evidence of the amount that should have been deducted was not presented. The district
court’s findings on this issue are supported by substantial and competent evidence.
       Bagby also takes issue with the district court’s finding that Joseph’s potential
reimbursement claim for $2.138 million was an early, pre-litigation settlement offer that Joseph
reasonably abandoned. Bagby asserts the district court should not have allowed Joseph to abandon
this claim for reimbursement because it eliminated any offset Joseph had against Hilary’s claims
and made her a creditor of Joseph.
       The district court concluded that any claim Joseph had for reimbursement was not borne
out by the record. Joseph testified that a home he owned as separate property, the Perugia House,
had been sold in 2000. Joseph also testified that $2.138 million from the sale of the Perugia House
was then deposited into a joint bank account along with approximately $4.8 million in income
from the year 2000. Bagby, while representing Joseph, identified “tracing issues” with this claim.
The district court ultimately found that Joseph’s potential claim for reimbursement was not
supported by the evidence presented at trial:
       I do have to say that the testimony of both [Hilary] and [Joseph] is consistent when
       I look at their testimony as it relates to the $2.138 million reimbursement claim.
       Both of them are saying that [Joseph] was not seeking reimbursement of the $2.138
       million. Both are saying [Hilary] never asked for reimbursement by [Joseph]. So
       that’s -- the Court finds that that’s unrebutted testimony. The evidence also shows,
       as I mentioned earlier, that the $2.138 million was placed into a joint account along
       with approximately $4.8 million of income in 2000, thereby commingling any
       separate property that [Joseph] would be entitled to receive with community
       income. Really, at the end of the day, the Court is left with one request for the
       $2.138 million and that was back in 2004 when [Bagby] was representing [Joseph],

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       and that’s found in the letters shown as Exhibits 37, 39, and 42. Of course, Exhibit
       42 is later, but in that particular letter [Bagby] states in Exhibit 42 that [Joseph] has
       tracing issues involving the $2.138 million, so there is a recognition that there may
       be some difficulty proving it. And, of course, the parties are not asking for it now
       and the $2.138 million request was last brought up by [Bagby].
       The district court did not err in rejecting Bagby’s argument on this point. Although the
record reveals that Bagby—in a letter to Hilary’s counsel during the divorce settlement
negotiations in 2004—identified a potential $2.138 million reimbursement claim, the record also
reveals that there were tracing issues with this claim. Bagby acknowledged the tracing issues in a
letter to Joseph. Joseph and Hilary also testified that the $2.138 million was placed in a joint bank
account along with community funds. While there was conflicting evidence presented at trial, the
district court’s finding that the $2.138 million reimbursement claim was not a viable claim is
supported by substantial and competent evidence. See Roe, 139 Idaho at 21, 72 P.3d at 861.
       Finally, Bagby argues that before Joseph and Hilary could resolve Hilary’s claims with the
transfer of the Ketchum House, California Family Code section 2550 required Joseph and Hilary
to make a written agreement settling their divorce claims or make an oral stipulation in open court
concerning the resolution. Because there had been no such agreement, Bagby asserts Joseph did
not owe Hilary anything on the date of the transfer.
       California Family Code section 2550 requires a district court to divide community property
evenly absent a written agreement or oral stipulation in court from the parties:
       Except upon the written agreement of the parties, or on oral stipulation of the parties
       in open court, or as otherwise provided in this division, in a proceeding for
       dissolution of marriage or for legal separation of the parties, the court shall, either
       in its judgment of dissolution of the marriage, in its judgment of legal separation of
       the parties, or at a later time if it expressly reserves jurisdiction to make such a
       property division, divide the community estate of the parties equally.
“The requirement of section 2550 that an agreement either be written or orally stated in open court
is strictly construed.” In re Marriage of Huntley, 216 Cal. Rptr. 3d 904, 910 (Cal. Ct. App. 2017)
(citing In re Marriage of Dellaria & Blickman-Dellaria, 90 Cal. Rptr. 3d 802 (Cal. Ct. App.
2009)). Thus, a division of marital property in an action between former spouses for dissolution or
separation must be in writing or stipulated to in open court to be enforceable. Id.
       The crux of Bagby’s argument on this point is that Hilary’s “claim” for attorney fees could
not have truly been a claim until the parties entered into a written agreement or provided an oral
stipulation. However, California Civil Code section 3439.03 provides that “value” is given when

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an “antecedent debt” is satisfied. Section 3439.01(d) defines “debt” as “liability on a claim.” And
section 3439.01(b) defines “claim” as “a right to payment, whether or not the right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured.” The broad definition of “claim” in the UVTA does not
require that Hilary’s claim be reduced to writing to establish reasonably equivalent value.
Moreover, California Family Code section 2250 expressly applies to legal actions for dissolution
or separation, not claims pursuant to the UVTA. The district court did not err in finding that
satisfaction of Hilary’s claim for contingency fees could provide reasonably equivalent value,
regardless of the requirements set out in California Family Code section 2550.
       Based on the foregoing, we hold that the district court’s findings that Hilary acted in good
faith and that the transfer of the Ketchum House provided reasonably equivalent value were
supported by substantial and competent evidence. Thus, the district court’s conclusion that Hilary
had met her burden of establishing the affirmative defense set out in California Civil Code section
3439.08 is affirmed. Because this affirmative defense precludes a claim for actual fraud under
California Civil Code section 3439.04(a)(1), we need not address whether the district court erred
in dismissing Bagby’s claim for actual fraud. Likewise, because the district court did not err in
finding reasonably equivalent value, we need not address Bagby’s constructive fraud claims.
C. Joseph and Hilary are not entitled to attorney fees on appeal.
       Joseph and Hilary assert they are entitled to attorney fees on appeal pursuant to Idaho Code
section 12-121. Bagby does not seek attorney fees on appeal. Instead, he argues that Joseph and
Hilary should not be awarded attorney fees because his position on appeal was taken in good faith
based on the facts and applicable law.
       Initially, we must determine what law applies to Joseph’s and Hilary’s claim for attorney
fees. “If the award of attorney fees is a discretionary matter governed by statute, then it is
considered to be procedural, requiring application of the forum law.” Carroll, 148 Idaho at 270,
220 P.3d at 1089 (citing Houston, 147 Idaho at 911, 216 P.3d at 1283). An award of attorney fees
under Idaho Code section 12-121 is discretionary. Michalk v. Michalk, 148 Idaho 224, 235, 220
P.3d 580, 591 (2009) (citation omitted). We thus conclude that Idaho law applies to Joseph’s and
Hilary’s claims for attorney fees on appeal.
       Idaho Code section 12-121 states that attorney fees may be awarded to the prevailing party
when “the case was brought, pursued or defended frivolously, unreasonably or without

                                                17
foundation.” “Generally, an appeal is considered frivolous where it disputes the trial court’s factual
findings and simply asks the Court to reweigh the evidence.” In re Doe II, 166 Idaho 47, 57, 454
P.3d 1130, 1140 (2019) (citing In re Doe, 164 Idaho 511, 518, 432 P.3d 60, 67 (2018)).
       Although we have concluded that the district court did not err, we cannot conclude that
Bagby brought this appeal frivolously, unreasonably or without foundation. Bagby presented valid
arguments concerning the application of California law and the district court’s factual findings.
                                     V.     CONCLUSION
       The district court’s findings that Hilary acted in good faith, and that the Ketchum House
transfer provided reasonably equivalent value, are supported by substantial and competent
evidence. As a result, the district court did not err in concluding that Hilary established the
affirmative defense set out in California Civil Code section 3439.08. Accordingly, we affirm the
district court’s judgment dismissing Bagby’s claims. As the prevailing parties, Joseph and Hilary
are awarded their costs on appeal pursuant to Idaho Appellate Rule 40; however, we decline to
award them attorney fees on appeal.
       Chief Justice BEVAN, and Justices BRODY, STEGNER, and MOELLER CONCUR.

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