Filip v. Bucurenciu
2005 Daily Journal DAR 6030, 28 Cal.Rptr.3d 884, 129 Cal. App. 4th 825 (2005)
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Rule of Law:
The Uniform Fraudulent Transfer Act (UFTA) applies to property transfers made pursuant to a marital dissolution and property settlement agreement. Such transfers can be set aside as fraudulent if they are made with the actual intent to hinder, delay, or defraud a creditor.
Facts:
- In 1997, Marin Filip filed a fraud lawsuit against Petra (Peter) Bucurenciu.
- Shortly after the lawsuit was filed, Peter and his wife, Marioara (Mary) Bucurenciu, created a family trust to hold four parcels of their real estate.
- In November 1998, a trial court announced its tentative decision to award Filip damages against Peter.
- On December 2, 1998, Peter and Mary entered into a property settlement agreement for their divorce, which divided their properties between them.
- On December 9, 1998, Mary and her daughter, Roxanne, formed a corporation, Loomis Land, Inc. (LLI), in which they were the sole stockholders.
- On December 15, 1998, the family trust transferred property to LLI, including one parcel that had been allocated to Peter in the settlement agreement.
- After the settlement agreement, Peter and Mary continued to co-sign financing statements for a construction project, and some statements listed a shared address.
- In 2001, LLI sold one of the properties to third parties (the Bujdeis) for a $400,000 promissory note, which was significantly less than its appraised value of $530,000, plus $75,000 in equipment.
Procedural Posture:
- In a prior action, Marin Filip obtained a judgment for $366,388.77 against Petra (Peter) Bucurenciu in a state trial court.
- Unable to collect, Filip filed a new complaint in a state trial court against Peter, Mary Bucurenciu, Roxanne Bucurenciu, and their company LLI, alleging conspiracy and seeking to set aside property transfers under the Uniform Fraudulent Transfer Act (UFTA).
- The trial court found in favor of Filip, ruling that the defendants had engaged in a conspiracy to defraud him and that the property transfers were fraudulent under the UFTA.
- The trial court entered a judgment setting aside the transfers and allowing Filip to foreclose on the properties to satisfy his original judgment.
- Defendants Mary Bucurenciu and LLI (as appellants) appealed the trial court's judgment to the California Court of Appeal, with Filip's estate as the appellee.
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Issue:
Does the Uniform Fraudulent Transfer Act (UFTA) apply to property transfers made pursuant to a marital dissolution and property settlement agreement, allowing a creditor to challenge such transfers as fraudulent?
Opinions:
Majority - Hull, J.
Yes, the Uniform Fraudulent Transfer Act (UFTA) applies to property transfers made pursuant to a marital dissolution and property settlement agreement. The court rejected the argument that the transfers were protected because they were part of a valid Nevada divorce decree. Citing the California Supreme Court's decision in Mejia v. Reed, the court reasoned that the Legislature did not intend to grant married couples a 'one-time-only opportunity to defraud creditors' by including a fraudulent transfer within a marital settlement agreement. The court also held that the Full Faith and Credit Clause does not bar the UFTA claim, because Nevada, the state that issued the divorce decree, has also adopted the UFTA and would permit a challenge to a fraudulent settlement agreement. The court found substantial evidence of 'actual intent to defraud,' pointing to the timing of the transfers, the transfers to insiders (a family-owned corporation), and the finding that Mary was not an 'innocent spouse' but an active participant in the scheme to hide assets from Filip.
Analysis:
This decision reinforces the principle established in Mejia v. Reed that marital property settlements are not shielded from fraudulent transfer claims under the UFTA. It clarifies that the Full Faith and Credit Clause does not compel a state to honor the property division of a sister state's divorce decree if the transfer was intended to defraud a creditor and the rendering state would also permit such a challenge. This prevents the use of divorce proceedings as a legal mechanism to shield assets from creditors, ensuring that the substance of a transaction (intent to defraud) is prioritized over its form (a court-approved settlement). The case solidifies a creditor's ability to look behind a divorce decree to recover assets that were fraudulently conveyed.
