Court Opinion

ID: 8482420
Source: CourtListenerOpinion
Date Created: 2022-11-09 00:01:35.662772+00
Date Added: 2024-06-11T16:49:38.837859
License: Public Domain

Filed 11/8/22 Los Angeles Federal Credit Union v. Ahmad CA2/8
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                      DIVISION EIGHT

LOS ANGELES FEDERAL                                            B317230
CREDIT UNION,
                                                               Los Angeles County
         Plaintiff and Appellant,
                                                               Super. Ct. No. 18TRCV00201
         v.

TANVIR M. AHMAD et al.,
     Defendants and
Respondents.

     APPEAL from a judgment of the Superior Court of Los
Angeles County, Deirdre Hill, Judge. Affirmed.

      Anaya Law Group, Alana B. Anaya and Joseph P. Graziano
for Plaintiff and Appellant.

     Yates Litigation and John R. Yates for Defendants and
Respondents.

                                 _______________________
      The trial court found brothers Tanvir and Wasim Ahmad
(the Ahmads) not liable for a judgment entered against their
deceased father, Chaudhry Muhammad. In a previous action,
Los Angeles Federal Credit Union (LAFCU) had obtained a
judgment in its favor against Muhammad for debts he owed on
loan and credit card agreements with LAFCU. Muhammad died
before paying the judgment. LACFU then tried to enforce the
judgment against the brothers by alleging they had fraudulently
conspired with Muhammad to transfer his assets to themselves.
      LAFCU contends the trial court erred in requiring it to
show malice and direct intent to defraud in order to collect from
the Ahmads on their father’s judgment. It also argues the
evidence is insufficient to support the finding that the Ahmads
had no actual intent to hinder, delay or defraud LAFCU. We
affirm the judgment.
                         BACKGROUND
      In late 2016, Muhammad, who was in his late 80’s, became
seriously ill with an infection and was hospitalized for two to
three weeks, 10 days of which were in an intensive care unit.
Soon after his recovery, in March 2017, after stating that his
health was not good, Muhammad gave the Ahmads $229,000
from a revocable trust for their use and the use of their children.
This left no money in the trust account. Muhammad also
transferred three pieces of real property which he owned into an
irrevocable trust, with the Ahmads as co-trustees. The Ahmads
were not present when Muhammad met with the lawyer to create

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the irrevocable trust and they had no input into its terms.1 After
these transfers were complete, Muhammad was left with a
monthly income of $5,780 from Social Security and his City of Los
Angeles pension. Muhammad had lived on this income for at
least 10 years. The transfers of the real estate to the trust
increased the amount of disposable income available to
Muhammad, as the yearly costs of the two rental properties
exceeded their rental income.
       Around 2016, Muhammad hired Tina Hao to be his
caregiver. He initially paid her $2,000 a month. At some point,
he married her. Between January 2016 and Muhammad’s death
in February 2020, Hao obtained $138,000 from Muhammad,
about $42,000 more than she would have received at her initial
rate of pay of $2,000 per month. Forty-four thousand dollars of
the total was received in the last year of Muhammad’s life. Some
of this money was transferred by check, some by cash back from
credit card transactions. Some of the checks did not appear to be
in Muhammad ‘s handwriting.
       In June 2016, Muhammad obtained a personal loan from
LAFCU with an initial balance of $4,800 on which he made
payments. He also had a credit card through LAFCU which had
a small credit balance on it. In April 2017, he took a cash
advance of $7,000 on the credit card. By March 2018,

1     The value of these three properties is not clear from the
record on appeal. Two were rental properties and the expenses of
the properties exceeded the rental income. Two of the three
properties had mortgages. One of the mortgaged properties was
sold after Muhammad’s death for less than $400,000, but there is
no information about the amount of the mortgage.

                                3
Muhammad had taken out about $15,000 more in cash advances,
and incurred charges of about $10,000, for a total debt of about
$32,000.
      In March 2018, Muhammad stopped making payments to
LAFCU on his personal loan. In August 2018, he stopped making
payments on his LAFCU credit card account. He continued
paying on an auto loan and other credit cards until his death in
February 2020.
      LAFCU sued Muhammad on his overdue credit card
account and in March 2019 obtained a default judgment in the
amount of $37,258.05. LAFCU subsequently brought this action
to enforce the judgment against the Ahmads pursuant to the
Uniform Voidable Transfers Act, specifically Civil Code section
3439.04.2 The matter was tried by the court, which found in
favor of the Ahmads.
                           DISCUSSION
       Section 3439.04, subdivision (a), provides: “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: [¶] (1) With actual
intent to hinder, delay, or defraud any creditor of the debtor.”
Subdivision (b) provides a list of factors which may be considered
in determining actual intent under subdivision (a)(1).

2       Further undesignated statutory references are to the Civil
Code.

                                  4
        Under section 3439.04, subdivision (a)(1), appellant was
required to prove: 1) it had a right to payment from Muhammad;
2) Muhammad transferred property to his sons; 3) Muhammad
transferred the property with the intent to hinder, delay, or
defraud appellant; 4) appellant was harmed; and 5) Muhammad’s
conduct was a substantial factor in causing appellant’s harm.
(CACI No. 4200.) To prove intent to hinder, delay, or defraud
creditors, it is not necessary to show that Muhammad had a
desire to harm appellant. Appellant need only show that
Muhammad intended to remove or conceal assets to make it more
difficult for appellant to collect payment. (Ibid.)
        At the conclusion of the bench trial, after considering
several factors, including those listed in section 3439.04,
subdivision (b), the court found there was “insufficient finding of
actual intent to hinder, delay or defraud creditors. The judgment
is for the defense.”

A.     The Trial Court Correctly Found LAFCU Was Required to
       Show Muhammad Had an Actual Intent to Defraud It.
       LAFCU contends the trial court erred in finding that
LAFCU had to show Muhammad acted maliciously and had a
“direct” intent to defraud a creditor. LAFCU sometimes uses
“direct intent” to mean malicious intent and at other times uses it
in the phrase “direct intent to defraud.” The trial court did not
use the terms malice or maliciously and did not state that
LAFCU had failed to prove “direct” intent (or to provide direct
evidence of intent). Thus, it is far from clear what LAFCU means
by “maliciously” and “direct” intent when applied to the trial
court’s actual findings. Because the trial court did not consider
the concept of “malice” in making its findings, we find a further
discussion of malice irrelevant.

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        We discern LAFCU contends the phrase “actual intent to
. . . defraud” in section 3439.04, subdivision (a)(1), means only a
sole intent to transfer assets, as long as that transfer results,
whether intentionally or not, in a creditor being unable to reach
those assets. LAFCU relies on Economy Refining & Service Co. v.
Royal Nat. Bank of New York (1971) 20 Cal.App.3d 434 (Economy
Refining) to support its interpretation of the term “actual intent
to defraud.” We are not persuaded. Indeed, we find Economy
Refining supports the analysis of the trial court.
        As the appellate court in Economy Refining cautioned
before discussing the issue of intent, “The kind of case which is
before us presents an unusual, if not unique, aspect of intent.”
(Economy Refining, supra, 20 Cal.App.3d at p. 441.)
Significantly, the transferor in Economy Refining admitted he
made the transfer to avoid the debt. As the court put it, “the
requisite intent to defraud is demonstrated by admission in the
testimony of Mr. Marcus.” (Id. at p. 439.) “Mr. Marcus testified
that his decision was difficult and he knew that he was hurting
Royal National Bank by his action.” (Id. at p. 441.)
        In finding this admission showed the requisite intent, the
court of appeal explained: “Under the circumstances of this case,
as related above, we conclude that actual intent to defraud
consisted of the intent to do just what was done, that is, to
remove the assets and to make impossible the collection of
appellant's judgment . . . . The fact, therefore, that the trial judge
evidently believed that Mr. Marcus was not actuated by an evil
motive is not sufficient to remove the fact that what he intended
to do was objectively wrong and fraudulent.” (Economy Refining,
supra, 20 Cal.App.3d at p. 442, italics and underscoring added.)
We understand the court of appeal’s statement to indicate that

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two intents are required: 1) an intent to transfer the assets; and
2) an intent “to make impossible the collection of appellant’s
judgment.” This second intent is actual intent to hinder, delay or
defraud the creditor.
        Our conclusion that there must be an intent to transfer and
an intent to hinder, delay, or defraud the creditor (as opposed to a
consequential and unintended disadvantage to the creditor) is
reinforced by the court of appeal’s discussion of Marcus’s
“defense,” which was that he transferred the assets to satisfy
other creditors. The court of appeal acknowledged that a creditor
preference could be a proper use of transferred assets, that is,
some transfers are permissible even when they make one
creditor’s collection impossible. The court pointed out that
Marcus did not in fact satisfy any other creditors with the
transferred assets. Instead, he simply protected his own personal
creditor claims by transferring reachable assets to another
corporation. The court looked not merely at what Marcus did
(transfer the assets), but also his reasons for doing it. “Malice”,
which the court defined as to act with “evil motive” or “the desire
of causing harm” was not a part of the equation in proving
“actual intent to defraud.” (Economy Refining, supra,
20 Cal.App.3d at pp. 441–442.)
        We note it is far from clear that the court of appeal in
Economy Refining was relying on any provision of the former
Uniform Fraudulent Conveyance Act (now Uniform Voidable
Transfer Act) (Act). The court of appeal did not cite to that Act
and appeared to rely on the common law rule that “[t]ransfers of
all of the assets of a person or corporation in straitened
circumstances, without fair consideration, to a corporation having
substantially the same ownership, by which the just claims of

                                 7
creditors are defeated, are of such fraudulent nature that the new
corporation may be held to the debt of the old.” (Economy
Refining, supra, 20 Cal.App.3d at p. 439.)3

B.     There Is Substantial Evidence to Support the Judgment in
       Favor of the Ahmads.
       LAFCU contends that the judgment in favor of the Ahmads
was not supported by substantial evidence.
       In assessing a claim of insufficiency of the evidence, we
“must view the whole record in a light most favorable to the
judgment, resolving all evidentiary conflicts and drawing all
reasonable inferences in favor of the decision of the trial court.
[Citation.] We may not substitute our view of the correct findings
for those of the trial court; rather we must accept any reasonable
interpretation of the evidence which supports the trial court’s
decision.” (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 833
(Filip).) The evidence must be “reasonable in nature, credible,
and of solid value.” (Ibid.) We do not, however, reweigh the
evidence. (Flores v. Liu (2021) 60 Cal.App.5th 278, 296 (Flores).)

3     The only reference to that Act was to section 3439.03,
which defines “value” and is not relevant here. (Economy
Refining, supra, 20 Cal.App.3d at p. 441.) The trial court used
the phrase “actual intent to hinder, delay or defraud the
creditors,” (similar to language found in current section 3439.04)
and the court of appeal discussed the trial court’s findings on
actual intent, but it also used language consistent with current
section 3439.05), which do not require an actual intent to
defraud.

                                 8
       Specifically, with regard to actions brought pursuant to
section 3439.04, “[t]here is no minimum number of factors that
must be present before the scales tip in favor of finding of actual
intent to defraud. This list of factors is meant to provide
guidance to the trial court, not compel a finding one way or the
other.” (Filip, supra, 129 Cal.App.4th at p. 834.) The trial court
is not limited to the specific factors listed in section 3439.04
subdivision (b). (See Lyons v. Security Pacific Nat. Bank (1995)
40 Cal.App.4th 1001, 1021, fn. 3.)
       “Where, as here, it is the plaintiff asserting on appeal that
a defense verdict is not supported by the evidence, it is the
plaintiff’s burden to show on appeal that there is no substantial
evidence to support that defense verdict, and not merely that
substantial evidence would have supported a verdict in her
favor.” (Flores, supra, 60 Cal.App.5th at p. 297.)
       Here, the trial court made several factual findings which
support a defense verdict. The court found: 1) At the time of the
transfers Muhammad had only a modest debt in the form of a
personal loan on which he had been making regular payments;
2) Muhammad continued to make payments to LAFCU for at
least a year after the transfer of his assets; 3) There was an
innocent explanation for transfers: Muhammad believed his
health was bad and he wanted to give the money to his sons
while he still alive; 4) The Ahmads had no knowledge of
Muhammad’s financial situation and did not influence the
creation of the irrevocable trust; 5) Muhammad had income
sufficient to pay his living expenses and make payments on his
debts as he had been living on his pension and social security for
quite some time; 6) The transfer of the real property increased
rather than diminished Muhammad’s cash flow; 7) Muhammad’s

                                  9
cash flow was diminished by unauthorized transactions by his
wife.
       There is substantial evidence for the first two findings in
the testimony of LAFCU’s own witnesses and for the next four
findings in the form of testimony by the Ahmads. As for the
seventh finding, concerning the caregiver/wife, the court relied in
part on financial documents and in part on the Ahmads’
testimony about those documents. The court clearly found the
Ahmads credible, and we may not substitute our assessment of
credibility for that of the trial court. Further, LAFCU did not
offer any evidence contradicting the Ahmads’ testimony.
       These findings support a conclusion that Muhammad
transferred his assets either due to his failing health and a desire
to give his money to his children while he was still alive or to
protect the assets from his caregiver/wife. The trial court was
permitted to infer from its factual findings that Muhammad was
not motivated by any effort to hinder creditors. Substantial
evidence supports the verdict in favor of respondents.

C.    There Is No Evidence the Trial Court Misunderstood the
      Concept of Insolvency.
      Finally, LAFCU contends the trial court misunderstood the
concept of insolvency, and this misunderstanding was
prejudicial.4 LAFCU points to the trial court’s statement that the
“contention that [Muhammad] had nothing is not accurate. He
had a pension and . . . social security coming in. He was making

4     Subdivision (b)(9) of section 3439.04 lists a debtor’s
insolvency as a factor which may be considered in determining
intent.

                                10
payments on certain bills, certain bills he was not, over periods of
time.”
       In context, this statement is a response to LAFCU’s closing
argument. In closing argument, LAFCU contended that after the
transfers Muhammad became insolvent and had “no money left”
and that was why he took cash advances, and “when he died he
only had a little over $800 to his name.”
       The Ahmads responded by acknowledging that after the
transfers Muhammad was technically insolvent because his
pension and social security were not collectible by creditors, but
they argued this factor was not significant as a practical matter
because Muhammad had a substantial income and voluntarily
used that income to make payments to his creditors.
        The trial court’s statement after closing argument is most
reasonably understood as a response to LAFCU’s argument that
Muhammad had “no money” after the transfer and thus needed
to take the cash advances. This was quite literally untrue, as the
trial court was pointing out. It does not show that the trial court
failed to understand the concept of insolvency. Nor did it show
that the trial court did not agree that Muhammad was
technically insolvent, a situation which the Ahmads expressly
conceded.

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                          DISPOSITION
     The judgment is affirmed. Respondents are awarded costs
on appeal.

      NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                           STRATTON, P. J.

We concur:

             WILEY, J.

             HARUTUNIAN, J.

     Judge of the San Diego Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

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