Court Opinion

ID: 4236903
Source: CourtListenerOpinion
Date Created: 2018-01-16 21:00:27.708268+00
Date Added: 2024-06-11T14:42:50.270138
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JAN 16 2018
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

ATTEBURY GRAIN LLC, a limited                   No.    16-55729
liability company,
                                                D.C. No.
                Plaintiff-Appellee,             2:15-cv-05258-R-PJW

 v.
                                                MEMORANDUM*
GRAYN COMPANY, a corporation,

                Defendant,

and

VICENTE CORTEZ, an individual,

                Defendant-Appellant.

ATTEBURY GRAIN LLC, A limited                   No.    16-55746
liability company,
                                                D.C. No.
                Plaintiff-Appellee,             2:15-cv-05258-R-PJW

 v.

GRAYN COMPANY, a corporation,

                Defendant-Appellant,

and

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
VICENTE CORTEZ, an individual,

                Defendant.

                   Appeal from the United States District Court
                      for the Central District of California
                    Manuel L. Real, District Judge, Presiding

                       Argued and Submitted December 7, 2017
                                Pasadena, California

Before: WARDLAW and GOULD, Circuit Judges, and COLLINS,** Chief
District Judge.

      Vicente Cortez and Grayn Co. appeal the district court’s entry of summary

judgment against them for intentional fraudulent transfer, constructive fraudulent

transfer, and unjust enrichment. We affirm in part, reverse in part, and remand for

further proceedings.

      Cortez sold Superior Grain, a corn processing company, to his adult children

in 2009. Under their management, Superior went broke and did not pay more than

$825,000 owed for corn purchased on credit from Attebury Grain. Attebury filed

an arbitration action against Superior for breach of contract. Two months later,

Cortez paid Superior $140,000 for assets appraised at $306,900 plus “a certain

quantity of corn that was there.” Cortez then founded a new company to do the

      **
              The Honorable Raner C. Collins, Chief United States District Judge
for the District of Arizona, sitting by designation.

                                         2
same type of business that had been handled by Superior. His new company,

named Grayn, used Superior’s assets and retained Superior’s customers,

employees, and directors. Attebury prevailed on its arbitration claim and obtained

a judgment lien against Superior, prompting Superior to file for bankruptcy.

Attebury now seeks to recover its unpaid debt from Cortez and Grayn.

      The district court properly entered summary judgment against Cortez and

Grayn on the intentional fraudulent transfer claim. Under California law, a

transaction may be voided if a debtor makes a transfer with the intent to “hinder,

delay, or defraud” its creditors. Cal. Civ. Code § 3439.04(a)(1). This intent can be

inferred based on consideration of the statute’s non-exhaustive list of eleven

badges of fraud. See id. § 3439.04(b). Here, the first, third, fourth, eighth, ninth,

and tenth factors weigh in favor of finding that Superior transferred assets and

inventory to Cortez with the intent to defraud its creditors, while the remaining

factors are at most neutral. See id. Grayn admits it acquired the assets and

inventory for free, so it has not carried its burden of showing that it was a good

faith transferee of Cortez. See id. § 3439.08(a), (f). Any reasonable juror would

have to conclude that Superior’s transfer was made with actual intent to defraud

Attebury, and that Attebury can avoid the transfers from Superior to Cortez and

from Cortez to Grayn.

      In addition, the district court properly entered summary judgment against

                                           3
Cortez and Grayn on the alternative constructive fraudulent transfer claim. Under

California law, a transfer is voidable if the transferor did not receive reasonably

equivalent value and it believed, or should have believed, that it would incur debts

beyond its ability to pay. Id. § 3439.04(a)(2)(b). Cortez contends that he paid

$140,000 and extinguished a security interest against Superior’s assets worth

$250,000 “[i]n 2012.” But Cortez presented no evidence of this transaction, and

we see none in the record. Based on the available evidence, any reasonable juror

would have to find that Cortez’s payment of $140,000 was not reasonably

equivalent value for the $306,900 worth of assets plus an unspecified value of corn

inventory that he received. And any reasonable juror would also have to find that

Superior either believed, or should have believed, that it was about to be

bankrupted by an adverse judgment in Attebury’s breach of contract action.

      Finally, the district court erred by granting summary judgment for Attebury

on its legally deficient unjust enrichment claim. Attebury’s theory of unjust

enrichment does not lie against Cortez or Grayn as alter egos of or successors to

Superior for Superior’s unpaid debt. Attebury’s relationship with Superior was

defined by contract, so Attebury cannot advance a quasi-contract action premised

on Superior’s breach of that contract. See Paracor Fin., Inc. v. Gen. Elec. Capital

Corp., 96 F.3d 1151, 1167 (9th Cir. 1996). Nor can Attebury bring an unjust

enrichment claim against Cortez or Grayn for their receipt of Superior’s assets

                                          4
without having given adequate payment. This theory describes a viable fraudulent

transfer claim, which displaces an unjust enrichment cause of action. See

Hernandez v. Lopez, 103 Cal. Rptr. 3d 376, 381 (Cal. Ct. App. 2009). Unjust

enrichment is a valuable basis for a claim to “fill in the cracks” where other causes

of action fail to achieve justice, but because the fraudulent transfer claim could be

presented here, and was presented successfully, there were no cracks to be filled by

this unjust enrichment claim. See id. Besides, restitution would return Cortez and

Grayn’s unfair benefit to the now-defunct Superior, not to Superior’s creditors or

other third parties with a claim against Superior. See FDIC v. Dintino, 84 Cal.

Rptr. 3d 38, 49 (Cal. Ct. App. 2008).

      On remand, the district court should dismiss Attebury’s claim for unjust

enrichment, see Fed. R. Civ. P. 8(a)(2), and determine the amount of damages due

on the fraudulent transfer claims alone.

      Each party shall bear its own costs on appeal. See Fed. R. App. P. 39(a)(4).

      AFFIRMED in part, REVERSED in part, and REMANDED.

                                           5