When trying to collect judgments in California, creditors often learn that debtors have fraudulently transferred assets to their spouses, relatives, trusts, and business entities. Creditors should understand the remedies available to them in dealing with fraudulent transfers.
In California, any person who assists a debtor in concealing assets from a creditor may be liable both civilly and criminally. Under the Uniform Voidable Transactions Act, a transfer of property to a third person made with intent to prevent a creditor from reaching and satisfying his or her claim to judgment is avoidable. Furthermore, a court has multiple means at its disposal to fashion a remedy. The statute itself includes the following remedies:
(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim.
(2) An attachment or other provisional remedy against the asset transferred or other property of the transferee.
(3) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or other property of the transferee.
(4)) Appointment of a receiver to take charge of the asset transferred or other property of the transferee.
(5) Any other relief the circumstances may require.
In Filip v. Bucurenciu, a court not only set aside transfers of property made by a creditor to his ex-wife and daughter, the court entered a money judgment against those women to the extent necessary to satisfy creditor’s underlying judgment. 129 Cal. App. 4th 825 (2005).
Relief is also available at common law. In enacting the UVTA, the California legislature noted that the remedies afforded by Civil Code § 3439 are cumulative and not meant to take away any rights to relief under the “old way” of unwinding fraudulent transfers. Even more plentiful remedies may be available using a common law fraudulent transfer claim, including consequential and punitive damages against not only a debtor, but also the people who assisted him in concealing monies meant to satisfy a judgment. Berger v. Varum, 35 Cal. App.5th 1013 (2019).
Additionally, people who aid a debtor in concealing assets may be liable under a conspiracy theory. “Civil liability for conspiracy to commit a tory has long been recognized in this state… it is contrary to public policy for a debtor to convey or conceal his property for the purpose of defrauding creditors.” Taylor v. S & M Lamp. Co. 190 Cal. App.2d 700, 705 (1961).
Importantly, debtors who knowingly conceal assets from creditors may also be criminally liable under California Penal Code §§ 154-155. Such crime is a misdemeanor punishable by jail time up to one year and fines. Individuals who assist debtors in fraudulent transfers may be liable under a theory of criminal conspiracy as well. A recent 9th Circuit decision even endorsed the idea that there might be relief for creditors under “RICO” — the Racketeering Influenced Corrupt Organizations Act — to pursue a cause of action against persons assisting a debtor in fraudulently concealing assets. Smagin v. Yegiazaryan, 37 F.4th 562 (2022).