PGA West Residential Assn. v. Hulven International
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Opinion
Filed 8/9/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
PGA WEST RESIDENTIAL ASSOCIATION, INC., E064270 Plaintiff and Respondent, (Super.Ct.No. INC1301359) v. OPINION HULVEN INTERNATIONAL, INC.,
Defendant and Appellant.
APPEAL from the Superior Court of Riverside County. Harold W. Hopp and
Sharon J. Waters, Judges. Reversed with directions.
Sam Walker for Defendant and Appellant.
Peters & Freedman, David M. Peters and Zachary R. Smith for Plaintiff and
Respondent.
Judge Hopp overruled the demurrer, and Judge Waters signed the judgment.
1 I.
INTRODUCTION
In its lawsuit against Hulven International, Inc. (Hulven) and various other
defendants, PGA West Residential Association, Inc. (PGA West) alleged defendant
Dempsey Mork1 tried to fraudulently insulate the equity in his condominium from
creditors by naming Hulven, a sham corporation entirely owned and controlled by Mork,
as the beneficiary of a deed of trust and note, and by later directing Hulven to foreclose
on the condominium. Hulven demurred to the complaint, arguing PGA West‟s lawsuit
was barred by the seven-year limitations period for actions under the former Uniform
Fraudulent Transfer Act.2 (UFTA or the act; § 3439 et seq.) The superior court
overruled the demurrer and, after conducting a bench trial, entered judgment for PGA
West.
In this appeal, Hulven contends the superior court erred by overruling its
demurrer. According to Hulven, the allegedly fraudulent activities by Mork and Hulven
were a “transfer” for purposes of the UFTA and, therefore, this lawsuit was governed by
1 Dempsey and Patricia Mork are not parties in this appeal. Although the Morks are both named as defendants, we understand the allegations in the complaint to relate solely to Dempsey Mork‟s conduct. Therefore, throughout this opinion references to Mork will be to Dempsey and not to his wife.
2After judgment was entered in this case, the Legislature revised the UFTA and renamed it the Uniform Voidable Transactions Act. (Stats. 2015, ch. 44, §§ 2-3, eff. Jan. 1, 2016; Nautilus, Inc. v. Yang (2017) 11 Cal.App.5th 33, 36, fn. 2.) The provisions of the former UFTA applicable to this case were not altered in substance. (See Civ. Code, § 3439.14, subd. (d).) We will cite to those provisions as they appear in the current act, but to avoid confusion we will refer to the UFTA throughout this opinion. All undesignated statutory references are to the Civil Code.
2 that act and its seven-year limitations period. Because PGA West filed its lawsuit more
than seven years after the alleged fraudulent transfer, Hulven contends PGA West‟s
claims were completely extinguished. PGA West responds there was no “transfer” in this
case because Hulven never really existed and could not be a transferee and, therefore, the
UFTA and its limitations period simply does not apply. Even if the UFTA did apply,
PGA West contends Hulven did not reargue the limitations period at trial and, therefore,
forfeited the defense. Hulven replies that transfers to dummy or sham entities constitute
a “transfer” for purposes of the UFTA and, that by arguing the limitations period in its
demurrer, Hulven preserved the defense and did not have to reargue it at trial.
We agree with Hulven that Mork‟s alleged fraudulent attempt to insulate the
equity in his condominium from creditors by naming a sham corporation as the
beneficiary on the deed of trust constituted a “transfer” for purposes of the UFTA and
that the act‟s limitations period applies here. We also agree Hulven did not forfeit its
defense, but for a different reason. The seven-year limitations period for actions under
the UFTA is not simply a procedural statute of limitations that bars a remedy and is
forfeited if not properly raised by a defendant. Rather, the UFTA‟s seven-year
limitations period is a substantive statute of repose that completely extinguishes a right or
obligation and, under the majority view that we adopt, a statute of repose is not subject to
forfeiture.
Because PGA West filed its lawsuit after the UFTA‟s statute of repose had run, its
rights under the act were completely extinguished. Therefore, we must conclude the
superior court erred as a matter of law by overruling Hulven‟s demurrer. The judgment is
3 reversed, and the matter is remanded for the superior court to vacate its order overruling
Hulven‟s demurrer, to enter a new order sustaining the demurrer without leave to amend,
and to enter a judgment dismissing the action.
II.
FACTS AND PROCEDURAL HISTORY3
A. The Complaint.
In its complaint filed on March 4, 2013, PGA West alleged the following facts:
On or about March 17, 2003, Mork purchased a condominium in the PGA West
community in La Quinta, California, for cash and took title to the property free and clear.
The fair market value of the property was between $500,000 and $600,000.
On January 28, 2004, a deed of trust was recorded against the property naming
Hulven4 as the beneficiary. There was no public record of Hulven in the United States at
the time, and the address given for Hulven was a residence in Indio, California. The
owner of that residence claimed no interest in Hulven. Hulven was a completely
fictitious entity “created and assumed by Mork,” and “Mork and [Hulven] are one in the
same.”
3 In conformity with the standard of review for an order overruling a demurrer, discussed post, § III.A.1., we set forth the factual allegations from Hulven‟s complaint and accept them as true. (See Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, 347, fn. 1.)
4 Actually, the deed of trust and other recorded documents attached to the complaint erroneously named “Hovlan International, Ltd.” as the beneficiary, not Hulven. To avoid confusion, we will refer to Hulven throughout this opinion.
4 The trust deed purported to secure a promissory note dated January 23, 2004, in
which Mork agreed to pay Hulven $450,000 in annual installments of $39,233.05,
starting in January 2005. Mork never made a payment to Hulven because “the Note was
a fake instrument created for the purposes of furthering Mork‟s scheme to protect [his]
equity in the Property and avoid creditors . . . , and . . . the Note did not impose any
obligation on Mork.”
Nine months after it was named as the beneficiary on the deed of trust, Hulven
was incorporated in Montana. Just over two years later, Hulven was involuntarily
dissolved. At all times, Mork was Hulven‟s sole officer, director, and shareholder.
On January 1, 2009, the statute of limitations expired for any claim Hulven might
have had against Mork for breach of the note. Hulven never sued Mork because Hulven
and Mork are one in the same, and the note never imposed an obligation on Mork.
On June 1, 2011, the superior court in a prior lawsuit entered a judgment against
Mork and in favor of PGA West and Mork‟s neighbors (the Wyatts) in the amounts of
$413,369.87 (PGA West) and $1,558,721.71 (Wyatts). PGA West and the Wyatts
recorded their abstracts of judgment on June 7 and June 15, 2011, respectively, which
effectuated judgment liens against the property.5
Around the time of the prior judgment, Mork abandoned the property and moved
to Henderson, Nevada. As of the date of the complaint, no amount was paid on the
Free access — add to your briefcase to read the full text and ask questions with AI
Filed 8/9/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
PGA WEST RESIDENTIAL ASSOCIATION, INC., E064270 Plaintiff and Respondent, (Super.Ct.No. INC1301359) v. OPINION HULVEN INTERNATIONAL, INC.,
Defendant and Appellant.
APPEAL from the Superior Court of Riverside County. Harold W. Hopp and
Sharon J. Waters, Judges. Reversed with directions.
Sam Walker for Defendant and Appellant.
Peters & Freedman, David M. Peters and Zachary R. Smith for Plaintiff and
Respondent.
Judge Hopp overruled the demurrer, and Judge Waters signed the judgment.
1 I.
INTRODUCTION
In its lawsuit against Hulven International, Inc. (Hulven) and various other
defendants, PGA West Residential Association, Inc. (PGA West) alleged defendant
Dempsey Mork1 tried to fraudulently insulate the equity in his condominium from
creditors by naming Hulven, a sham corporation entirely owned and controlled by Mork,
as the beneficiary of a deed of trust and note, and by later directing Hulven to foreclose
on the condominium. Hulven demurred to the complaint, arguing PGA West‟s lawsuit
was barred by the seven-year limitations period for actions under the former Uniform
Fraudulent Transfer Act.2 (UFTA or the act; § 3439 et seq.) The superior court
overruled the demurrer and, after conducting a bench trial, entered judgment for PGA
West.
In this appeal, Hulven contends the superior court erred by overruling its
demurrer. According to Hulven, the allegedly fraudulent activities by Mork and Hulven
were a “transfer” for purposes of the UFTA and, therefore, this lawsuit was governed by
1 Dempsey and Patricia Mork are not parties in this appeal. Although the Morks are both named as defendants, we understand the allegations in the complaint to relate solely to Dempsey Mork‟s conduct. Therefore, throughout this opinion references to Mork will be to Dempsey and not to his wife.
2After judgment was entered in this case, the Legislature revised the UFTA and renamed it the Uniform Voidable Transactions Act. (Stats. 2015, ch. 44, §§ 2-3, eff. Jan. 1, 2016; Nautilus, Inc. v. Yang (2017) 11 Cal.App.5th 33, 36, fn. 2.) The provisions of the former UFTA applicable to this case were not altered in substance. (See Civ. Code, § 3439.14, subd. (d).) We will cite to those provisions as they appear in the current act, but to avoid confusion we will refer to the UFTA throughout this opinion. All undesignated statutory references are to the Civil Code.
2 that act and its seven-year limitations period. Because PGA West filed its lawsuit more
than seven years after the alleged fraudulent transfer, Hulven contends PGA West‟s
claims were completely extinguished. PGA West responds there was no “transfer” in this
case because Hulven never really existed and could not be a transferee and, therefore, the
UFTA and its limitations period simply does not apply. Even if the UFTA did apply,
PGA West contends Hulven did not reargue the limitations period at trial and, therefore,
forfeited the defense. Hulven replies that transfers to dummy or sham entities constitute
a “transfer” for purposes of the UFTA and, that by arguing the limitations period in its
demurrer, Hulven preserved the defense and did not have to reargue it at trial.
We agree with Hulven that Mork‟s alleged fraudulent attempt to insulate the
equity in his condominium from creditors by naming a sham corporation as the
beneficiary on the deed of trust constituted a “transfer” for purposes of the UFTA and
that the act‟s limitations period applies here. We also agree Hulven did not forfeit its
defense, but for a different reason. The seven-year limitations period for actions under
the UFTA is not simply a procedural statute of limitations that bars a remedy and is
forfeited if not properly raised by a defendant. Rather, the UFTA‟s seven-year
limitations period is a substantive statute of repose that completely extinguishes a right or
obligation and, under the majority view that we adopt, a statute of repose is not subject to
forfeiture.
Because PGA West filed its lawsuit after the UFTA‟s statute of repose had run, its
rights under the act were completely extinguished. Therefore, we must conclude the
superior court erred as a matter of law by overruling Hulven‟s demurrer. The judgment is
3 reversed, and the matter is remanded for the superior court to vacate its order overruling
Hulven‟s demurrer, to enter a new order sustaining the demurrer without leave to amend,
and to enter a judgment dismissing the action.
II.
FACTS AND PROCEDURAL HISTORY3
A. The Complaint.
In its complaint filed on March 4, 2013, PGA West alleged the following facts:
On or about March 17, 2003, Mork purchased a condominium in the PGA West
community in La Quinta, California, for cash and took title to the property free and clear.
The fair market value of the property was between $500,000 and $600,000.
On January 28, 2004, a deed of trust was recorded against the property naming
Hulven4 as the beneficiary. There was no public record of Hulven in the United States at
the time, and the address given for Hulven was a residence in Indio, California. The
owner of that residence claimed no interest in Hulven. Hulven was a completely
fictitious entity “created and assumed by Mork,” and “Mork and [Hulven] are one in the
same.”
3 In conformity with the standard of review for an order overruling a demurrer, discussed post, § III.A.1., we set forth the factual allegations from Hulven‟s complaint and accept them as true. (See Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, 347, fn. 1.)
4 Actually, the deed of trust and other recorded documents attached to the complaint erroneously named “Hovlan International, Ltd.” as the beneficiary, not Hulven. To avoid confusion, we will refer to Hulven throughout this opinion.
4 The trust deed purported to secure a promissory note dated January 23, 2004, in
which Mork agreed to pay Hulven $450,000 in annual installments of $39,233.05,
starting in January 2005. Mork never made a payment to Hulven because “the Note was
a fake instrument created for the purposes of furthering Mork‟s scheme to protect [his]
equity in the Property and avoid creditors . . . , and . . . the Note did not impose any
obligation on Mork.”
Nine months after it was named as the beneficiary on the deed of trust, Hulven
was incorporated in Montana. Just over two years later, Hulven was involuntarily
dissolved. At all times, Mork was Hulven‟s sole officer, director, and shareholder.
On January 1, 2009, the statute of limitations expired for any claim Hulven might
have had against Mork for breach of the note. Hulven never sued Mork because Hulven
and Mork are one in the same, and the note never imposed an obligation on Mork.
On June 1, 2011, the superior court in a prior lawsuit entered a judgment against
Mork and in favor of PGA West and Mork‟s neighbors (the Wyatts) in the amounts of
$413,369.87 (PGA West) and $1,558,721.71 (Wyatts). PGA West and the Wyatts
recorded their abstracts of judgment on June 7 and June 15, 2011, respectively, which
effectuated judgment liens against the property.5
Around the time of the prior judgment, Mork abandoned the property and moved
to Henderson, Nevada. As of the date of the complaint, no amount was paid on the
5 In an unpublished decision, we affirmed the judgment in part and reversed in part. (PGA West Residential Association, Inc. v. Mork (Oct. 21, 2014, E054276) [nonpub. opn.].)
5 judgment and Mork avoided all attempts to enforce it. “Mork is highly skilled in
avoiding creditors and hiding assets,” and he conducted business under the name
Whitehall Montague assisting clients manage debts, modify loans, defend against
foreclosures and collections, and protect assets.
On November 15, 2012, a substitution of trustee was recorded naming California
Trustee Services, Inc., as trustee of the deed of trust. The substitution was signed on
behalf of Hulven by its purported president. Hulven‟s purported president was actually
the assistant to a Dana Point, California, attorney who specialized in “penny stock
companies and reverse mergers,” and who acted as a filing agent before the United States
Securities and Exchange Commission (SEC). Over the years, that attorney represented
Mork and a number of entities that Mork registered with the SEC, and the attorney acted
in various capacities for those entities.
On the same day the substitution of trustee was recorded—seven years after Mork
defaulted on the note and three years after the statute of limitations ran on any claim
Hulven might have had against Mork for breach of the note—the trustee recorded and
served a notice of default against the property on behalf of Hulven. The notice of default
stated the default was in the amount of $209,934.25, as of January 1, 2005, the day Mork
was supposed to start making payments on the note, which only represented the unpaid
interest. The default amount did not reflect the true amount purportedly owed on the
note. The notice of default stated the trustee and Hulven shared a San Diego, California,
address.
6 On or about February 15, 2013, the trustee served a notice of trustee‟s sale to take
place on March 14, 2013. The notice of sale identified the unpaid balance under the note
as $676,328.
Mork received no consideration from Hulven for the deed of trust, and Mork
incurred no obligation under the note. The deed of trust was recorded against the
property “to defeat any creditor‟s claims, and to launder Mork‟s title if necessary.” The
nonjudicial foreclosure was also an attempt by Mork to launder the title to the property
and free it from adverse claims, specifically PGA West‟s and the Wyatt‟s judgment liens.
In its first cause of action for declaratory relief, PGA West alleged the deed of
trust was invalid, and it did not create an interest in the property superior to PGA West‟s
interest via the judgment lien because Mork never incurred an obligation under the note.
PGA West again alleged Mork and Hulven were indistinguishable and that their interests
merged upon execution of the deed of trust. The deed of trust “was a fraudulent
obligation incurred by Mork in an attempt to protect Mork‟s equity in the Property and
defeat creditor‟s claims against the same.”
In the second cause of action for injunctive relief, PGA West alleged the
foreclosure proceedings Hulven initiated were an attempt by Mork to “launder title to the
Property” and free it of all adverse claims. Mork and Hulven‟s conduct was wrongful
and unlawful because the deed of trust was unenforceable.
PGA West‟s third cause of action for fraudulent conveyance once again alleged
that Mork and Hulven were “one in the same.” The foreclosure sale, if permitted to
proceed, would constitute a fraudulent transfer of the property by Mork and Hulven to
7 deprive creditors of their ability to collect. Mork and Hulven conspired with other named
and unnamed defendants to defraud PGA West through the foreclosure sale.
The fourth cause of action for constructive trust again alleged that the foreclosure
sale, if permitted to proceed, would constitute a fraudulent transfer.
The fifth and final cause of action requested appointment of a receiver to oversee
the proceeds of the foreclosure sale in the event the sale were to proceed before PGA
West‟s claims were adjudicated.
PGA West requested (1) a judicial determination of the parties‟ rights and a
declaration that its judgment lien was superior to and took priority over any purported
interest under the deed of trust, (2) a temporary restraining order and injunction to
prevent the foreclosure sale, (3) a decree setting aside and declaring void the transfer of
the property should the foreclosure sale proceed, (4) general and punitive damages, and
(5) interest and costs.
B. Temporary Restraining Order and Preliminary Injunction.
After conducting an ex parte hearing, the trial court issued a temporary restraining
order and set a hearing for a preliminary injunction barring defendants from proceeding
with the foreclosure sale.
Hulven opposed the preliminary injunction, arguing PGA West‟s lawsuit was
barred by the seven-year limitations period for claims under the UFTA. (§ 3439.09,
subd. (c), hereafter § 3439.09(c).) The trial court granted the preliminary injunction,
concluding (1) PGA West had a reasonable probability of succeeding in its argument that
8 the deed of trust was not a transfer for purposes of the UFTA and, therefore, its causes of
action were not barred, and (2) the balance of hardships weighed in favor of PGA West.
C. The Demurrer.
Hulven demurred to the complaint, again arguing the lawsuit was barred. It
argued (1) the January 2004 deed of trust constituted a “transfer” for purposes of the
UFTA, and (2) the UFTA‟s seven-year limitations period under section 3439.09(c) is
absolute, extinguishes any claim to void a fraudulent transfer, and applies to all claims
related to a fraudulent transfer whether they are brought under the UFTA or not. Because
PGA West‟s March 2013 complaint related to a fraudulent transfer and was filed more
than seven years after that transfer, Hulven argued this lawsuit is completely barred.
PGA West opposed the demurrer, contending (1) the deed of trust did not
constitute a “transfer” for purposes of the UFTA, (2) the nature of its claims were in
determining interests in real property and not in voiding a fraudulent transfer, and (3) the
only fraud related claims had to do with the pending foreclosure sale and not the deed of
trust.
The trial court overruled the demurrer. Its order stated: “This is an action to
determine priorities in liens against the property for which the statute of limitations has
not expired. Furthermore, a sale of property under the deed of trust will trigger a
fraudulent transfer action with a new statute of limitations.”
9 D. Trial and Judgment.
Hulven answered PGA West‟s complaint asserting various defenses, among them
that the causes of action were barred by various limitations periods including section
3439.09.
When the case proceeded to trial, Hulven did not reargue that PGA West‟s causes
of action were barred by the limitations period under section 3439.09 and the trial court
made no findings regarding that defense. After conducting a bench trial, the trial court
concluded the deed of trust was “fraudulent, void, unenforceable, of no force and effect,
and shall be cancelled,” and that PGA West‟s interest in the property was superior to any
purported interest in the deed of trust. The court entered judgment declaring the deed of
trust to be void and cancelling it.
Hulven timely appealed.
III.
DISCUSSION
A. The UFTA Applies to PGA West’s Claims.
On appeal, the parties revive the arguments they made in relation to Hulven‟s
demurrer. We conclude the deed of trust was a “transfer” for purposes of the UFTA and,
therefore, PGA West‟s causes of action were subject to the limitations period under
section 3439.09(c).
1. Standard of Review.
An order overruling a demurrer is not directly appealable, but it may be reviewed
on appeal from a final judgment. (San Diego Gas & Electric Co. v. Superior Court
10 (1996) 13 Cal.4th 893, 912-913; Casterson v. Superior Court (2002) 101 Cal.App.4th
177, 182; see Code Civ. Proc., §§ 904.1, 906.) We review an order overruling a demurrer
de novo.6 (Boy Scouts of America National Foundation v. Superior Court (2012)
206 Cal.App.4th 428, 438; Cryolife, Inc. v. Superior Court (2003) 110 Cal.App.4th 1145,
1152; Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971.)
“In reviewing the sufficiency of a complaint against a general demurrer, we are
guided by long-settled rules. „We treat the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law.
[Citation.] We also consider matters which may be judicially noticed.‟ [Citation.]
Further, we give the complaint a reasonable interpretation, reading it as a whole and its
parts in their context. [Citation.]” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
In addition, we consider the complaint‟s exhibits. (Moncada v. West Coast Quartz Corp.
(2013) 221 Cal.App.4th 768, 791-792; Hoffman v. Smithwoods RV Park, LLC (2009)
179 Cal.App.4th 390, 400.)
6 In its main brief, PGA West contends we must apply the substantial evidence standard of review because the trial court made a factual finding that no transfer occurred that would implicate the UFTA. PGA West places the cart before the horse. Before we may reach the question of whether the trial court‟s factual findings in its statement of decision are supported by substantial evidence, we must first address Hulven‟s argument that the trial court erred as a matter of law by overruling its demurrer. As stated in the text, the standard of review for an order overruling a demurrer is de novo. Because we conclude the trial court erred by overruling the demurrer, and we reverse the judgment and remand for the trial court to sustain the demurrer without leave to amend and to enter a judgment of dismissal, we do not reach Hulven‟s additional argument that the judgment is not supported by substantial evidence.
11 2. The UFTA.
“The UFTA permits defrauded creditors to reach property in the hands of a
transferee.” (Mejia v. Reed (2003) 31 Cal.4th 657, 663.) “The UFTA was enacted in
1986; it is the most recent in a line of statutes dating to the reign of Queen Elizabeth I.
„This Act, like its predecessor and the Statute of 13 Elizabeth, declares rights and
provides remedies for unsecured creditors against transfers that impede them in the
collection of their claims.‟ (Legis. Com. com., 12A [pt. 2] West‟s Ann. Civ. Code
([2016] ed.) foll. § 3439.01, p. [253].) Under the UFTA, a transfer is fraudulent, both as
to present and future creditors, if it is made „[w]ith actual intent to hinder, delay, or
defraud any creditor of the debtor.‟ (Civ. Code, § 3439.04, subd. (a)[(1)].) Even without
actual fraudulent intent, a transfer may be fraudulent as to present creditors if the debtor
did not receive „a reasonably equivalent value in exchange for the transfer‟ and „the
debtor was insolvent at that time or the debtor became insolvent as a result of the transfer
or obligation.‟ (Civ. Code, § 3439.05[, subd. (a)].)” (Mejia v. Reed, at p. 664.)
“In order for a fraudulent transfer to occur, among other things, there must be a
transfer of an asset as defined in the UFTA. (Civ. Code, § 3439.04; [citation].)”
(Fidelity National Title Ins. Co. v. Schroeder (2009) 179 Cal.App.4th 834, 841.) “On its
face, the UFTA applies to all transfers. Civil Code, section § 3439.01, subdivision [(m)]
defines „[t]ransfer‟ as “every mode, direct or indirect, absolute or conditional, voluntary
or involuntary, of disposing of or parting with an asset or an interest in an asset . . . .‟
The UFTA excepts only certain transfers resulting from lease terminations or lien
enforcement. (Civ. Code, § 3439.08, subd. (e).)” (Mejia v. Reed, supra, 31 Cal.4th at
12 p. 664, italics added.) With exceptions not applicable here, “„[a]sset‟ means property of a
debtor.” (§ 3439.01, subd. (a).)
Section 3439.07 provides the remedies available to a creditor in an action “against a
transfer or obligation.” (§ 3439.07, subd. (a).) These remedies include: avoidance of the
transfer “to the extent necessary to satisfy the creditor‟s claim”7 (§ 3439.07, subd. (a)(1));
attachment or any other provisional remedy against the asset or the property of the
transferee under applicable law (id., subd. (a)(2)); injunctive relief against the debtor or
transferee, or both, to prevent further transfer of the asset or property (id., subd. (a)(3)(A));
appointment of a receiver over the asset or property of the transferee (id., subd. (a)(3)(B));
and “[a]ny other relief the circumstances may require” (id., subd. (a)(1)(C)).
As relevant here, a claim under the UFTA must be filed within seven years of a
fraudulent transfer. Section 3439.09(c) provides: “Notwithstanding any other provision
of law, a cause of action under this chapter with respect to a transfer or obligation is
7 “„A transfer that would otherwise be voidable as intentionally fraudulent under section 3439.04, subdivision (a)[(1)], is not voidable against a transferee who took in good faith and for a reasonably equivalent value. (Civ. Code, § 3439.08, subd. (a).)‟ [Citation.]” (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 122.)
13 extinguished if no action is brought or levy made within seven years after the transfer
was made or the obligation was incurred.”8
The UFTA supplements existing law. (Civ. Code, § 3439.12.) “[A] suit under the
UFTA is not the exclusive remedy by which fraudulent transfers may be attacked.
Principles of law and equity, including estoppel, fraud, misrepresentation „or other
validating or invalidating cause,‟ are available to supplement an action under UFTA.
[Citations.]” (Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 755.) “If and as such
[a common law] action is brought, the applicable statute of limitations is [Code of Civil
Procedure] section 338[, subdivision] (d) and, more importantly, the cause of action
accrues not when the fraudulent transfer occurs but when the judgment against the debtor
is secured (or maybe even later, depending upon the belated discovery issue).” (Macedo
v. Bosio (2001) 86 Cal.App.4th 1044, 1051 (Macedo).)
However, “even if belated discovery can be pleaded and proven” with respect to
the statute of limitations applicable to common law remedies for fraudulent transfers, “in
8 Section 3439.09 provides in its entirety: “A cause of action with respect to a transfer or obligation under this chapter is extinguished unless action is brought pursuant to subdivision (a) of Section 3439.07 or levy made as provided in subdivision (b) or (c) of Section 3439.07: “(a) Under paragraph (1) of subdivision (a) of Section 3439.04, not later than four years after the transfer was made or the obligation was incurred or, if later, not later than one year after the transfer or obligation was or could reasonably have been discovered by the claimant. “(b) Under paragraph (2) of subdivision (a) of Section 3439.04 or Section 3439.05, not later than four years after the transfer was made or the obligation was incurred. “(c) Notwithstanding any other provision of law, a cause of action under this chapter with respect to a transfer or obligation is extinguished if no action is brought or levy made within seven years after the transfer was made or the obligation was incurred.”
14 any event the maximum elapsed time for a suit under either the UFTA or otherwise is
seven years after the transfer. [Citation.]” (Macedo, supra, 86 Cal.App.4th at p. 1050,
fn. 4.) This conclusion logically follows from the language of section 3439.09(c). “[B]y
its use of the term „[n]otwithstanding any other provision of law,‟ the Legislature clearly
meant to provide an overarching, all-embracing maximum time period to attack a
fraudulent transfer, no matter whether brought under the UFTA or otherwise.” (Macedo,
at pp. 1050-1051, fn. 4.)
Although the language just quoted from Macedo was technically dicta, we agree
with two lower federal courts9 applying the UFTA that it is “well-considered dicta.”
(Roach v. Lee (C.D. Cal. 2005) 369 F.Supp.2d 1194, 1199; In re JMC Telecom LLC
(C.D. Cal. 2009) 416 B.R. 738, 743; see California Clean Energy Committee v. City of
San Jose (2013) 220 Cal.App.4th 1325, 1345, fn. 8 [“Though we are not bound by
precedents created by other appellate courts, we may find the reasoning set forth in their
decisions, including dicta, persuasive as to the facts we are presented with on appeal.”
(Italics added.)].) As one of those federal courts wisely concluded, “it would be
inordinate to bar [UFTA] fraudulent transfer claims after seven years while allowing
common law fraudulent transfer claims to be brought „scores of years after the transfer.‟”
(Roach v. Lee, at p. 1199, quoting Macedo, supra, 86 Cal.App.4th at p. 1050, fn. 4.)
9 Decisions of lower federal courts are not binding on us on matters of state law. (People v. Gonzales and Soliz (2011) 52 Cal.4th 254, 296.) “But that certainly does not stop us from relying upon [lower] federal court opinions for their cogent reasoning and persuasive value.” (McCann v. Lucky Money, Inc. (2005) 129 Cal.App.4th 1382, 1396.)
15 3. PGA West Pleaded a Claim Under the UFTA.
To determine whether section 3439.09(c) barred PGA West‟s claims against
Hulven, we must determine whether this lawsuit was an attempt “to attack a fraudulent
transfer, no matter whether brought under the UFTA or otherwise.” (Macedo, supra, 86
Cal.App.4th at pp. 1050-1051, fn. 4.) PGA West contends the UFTA does not apply to
its lawsuit because it did not allege a “transfer” in its complaint and, more importantly,
no such transfer occurred. Instead, PGA West argues the trial court correctly ruled, after
trial, that the deed of trust was fictitious, the beneficiary of the trust deed never existed,
and Mork never incurred an obligation to Hulven. In addition, PGA West contends the
UFTA does not apply because its lawsuit merely sought a declaratory judgment to
determine interests in the real property, and not to void a fraudulent transfer.
In its complaint, PGA West alleged the foreclosure sale of the property, should it
proceed in the future, would constitute a fraudulent transfer by Mork and Hulven to
deprive their creditors of the ability to collect on the judgment liens. PGA West did not
allege that the 2004 deed of trust was itself a fraudulent transfer from Mork to Hulven.
That PGA West did not expressly plead an already executed fraudulent transfer or
specifically allege claims under the UFTA is not dispositive when determining whether
section 3439.09(c) applies to this lawsuit. “To determine the statute of limitations which
applies to a cause of action it is necessary to identify the nature of the cause of action,
i.e., the „gravamen‟ of the cause of action. [Citations.] „[T]he nature of the right sued
upon and not the form of action nor the relief demanded determines the applicability of
the statute of limitations under our code.‟ [Citation.]” (Hensler v. City of Glendale
16 (1994) 8 Cal.4th 1, 22-23; accord, Bank of New York Mellon v. Citibank, N.A. (2017) 8
Cal.App.5th 935, 943; Smith v. Ben Bennett, Inc. (2005) 133 Cal.App.4th 1507, 1525.)
Therefore, we must look to the complaint as a whole to determine the gravamen of PGA
West‟s claims.
Read liberally (Code Civ. Proc., § 452), the complaint alleged: Hulven was a
completely fictitious entity created and controlled by Mork with a bogus address; Hulven
did not even exist when the deed of trust was recorded; Mork and Hulven were one in the
same and indistinguishable, and their separate interests (if any) were merged through the
deed of trust. The note purportedly secured by the deed of trust was a fake instrument
created for the express purpose of advancing Mork‟s scheme to protect the equity in his
condominium from creditors; Mork received no consideration from Hulven for the deed
of trust; and Mork incurred no obligation whatsoever under the note and made no
payments to Hulven to satisfy any obligation. Despite this clear breach of the note,
Hulven did not act to enforce the purported obligation under the note within the
applicable statute of limitations.
To underscore the fraudulent nature of the transactions between Mork and Hulven,
PGA West alleged the deed of trust naming Hulven as the beneficiary was recorded to
defeat potential creditor‟s claims and “to launder Mork‟s title” to the property. (Italics
added.) Indeed, PGA West specifically alleged the deed of trust “was a fraudulent
obligation incurred by Mork in an attempt to protect Mork‟s equity in the Property and
defeat creditor‟s claims against the same.” (Italics added.)
17 The complaint also alleged that ever since PGA West and the Wyatts recorded
their abstracts of judgment, Mork made no payments to satisfy the judgments and
avoided all attempts to enforce them. Mork and Hulven conspired with others to ensure
Mork‟s scheme to elude creditors and “launder” his title to the property succeeded by
substituting a trustee of the deed of trust and having an employee of Mork‟s business
associate pose as Hulven‟s president and initiate nonjudicial foreclosure proceedings
against Mork, despite the fact Hulven never tried to collect on the note when Mork failed
to make even one payment.
Reading the complaint as a whole, and ignoring the labels given to the claims by
PGA West, we conclude the gravamen of those claims is that the 2004 deed of trust was a
transfer or obligation executed and recorded “[w]ith actual intent to hinder, delay, or
defraud” potential creditors such as PGA West and the Wyatts. (§ 3439.04, subd. (a)(1).)
Moreover, although PGA West‟s complaint did not request a decree cancelling the 2004
deed of trust as void, it did pray for a declaration that the deed of trust was void and
unenforceable and that PGA West‟s interest in the property had priority over any interest
claimed under the deed of trust. Therefore, notwithstanding that PGA West might have
pursued remedies other than those provided by the UFTA, we must conclude PGA
West‟s claims are a common law attack on a fraudulent deed of trust and, therefore, are
subject to section 3439.09(c)‟s seven-year “overarching, all-embracing maximum time
period to attack a fraudulent transfer.” (Macedo, supra, 86 Cal.App.4th at p. 1051, fn. 4.)
PGA West argues the UFTA does not apply because the deed of trust never
actually transferred an interest in the property and, therefore, is not a “transfer.” Because
18 Mork and Hulven were one and the same and had no distinguishable interests in the
property, and because the note and deed of trust never imposed a real obligation on the
part of Mork, PGA West contends “[t]here was no transfer to invalidate.” We disagree.
In claims brought under the UFTA, plaintiffs often allege the transfer at issue was
made by the debtor to a “sham” corporate entity to hide assets from creditors. (See, e.g.,
Renda v. Nevarez (2014) 223 Cal.App.4th 1231, 1234 [judgment debtor transferred assets
“to various sham entities” to avoid judgment enforcement]; Kraft Power Corp. v. Merrill
(Mass. 2013) 981 N.E.2d 671, 677 [transfer to “sham corporations”]; Vaughan v. Graves
(Okla. 2012) 291 P.3d 623, 625 [“sham corporation”]; Sterquell v. Scott (Tex.App. 2004)
140 S.W.3d 453, 460 [“sham entities”].) Transfers to bogus corporations that are wholly
owned and controlled by the debtor are “transfers” for purposes of the UFTA. (National
Loan Investors, L.P. v. World Properties, LLC (Conn.App.Ct. 2003) 830 A.2d 1178,
1180-1182 [summary judgment for plaintiff affirmed on UFTA claim alleging fraudulent
transfer to bogus corporation wholly owned by debtor]; Goldberg v. Chong (S.D. Fla.
July 11, 2007, No. 07-20931-CIV-HUCK) 2007 U.S. Dist. Lexis 49980, *4-*5 [summary
judgment granted to receiver on UFTA claim alleging employee of receivership entity
fraudulently entered into employment contract between receivership entity and a bogus
corporation of which she was “the found[ing], sole member,” “that never actually did any
business,” and “had no office and had no employees”]; Woodell v. TransFlorida Bank
19 (Fla.Dist.Ct.App. 1998) 717 So.2d 108, 110 [UFTA applied to “shell entities known to be
acting as alter-egos or agents of the judgment debtors”].)10
Moreover, the Legislature envisioned that the type of transaction that occurred in
this case would constitute a transfer.11 The legislative commentary to section 3439.04,
subdivision (b), provides that when considering the so-called “badges of fraud” to
determine whether a transfer was made with the actual intent to hinder, delay, or defraud
a creditor, “a court should evaluate all the relevant circumstances involving a challenged
transfer or obligation. Thus the court may appropriately take into account all indicia
negativing as well as those suggesting fraud, as illustrated in the following reported
cases: [¶] (a) Whether the transfer or obligation was to an insider: Salomon v. Kaiser
(In re Kaiser), 722 F.2d 1574, 1582-83 (2d Cir. 1983) (insolvent debtor‟s purchase of two
residences in the name of his spouse and the creation of a dummy corporation for the
purpose of concealing assets held to evidence fraudulent intent).” (Assem. Com. on
10 We are not bound by decisions of sister state courts. (Armijo v. Miles (2005) 127 Cal.App.4th 1405, 1418.) However, “[i]t is well settled that decisions of sister state courts are particularly persuasive when those decisions construe similar statutes or a uniform act. [Citation.]” (San Jose Crane & Rigging, Inc. v. Lexington Ins. Co. (1991) 227 Cal.App.3d 1314, 1321.)
11 On the court‟s own motion, we took judicial notice of legislative history materials related to Senate Bill No. 2150 (1985-1986 Reg. Sess.), which adopted the UFTA (Stats. 1986, ch. 383). (Evid. Code, §§ 452, 459.) (See May 26 & June 5, 2017 orders, attachments A-G.)
20 Finance and Insurance, Rep. on Sen. Bill No. 2150 (1985-1986 Reg. Sess.) 5 Assem. J.
(1985-1986 Reg. Sess.) pp. 8577-8578 (Assem. Com. Report),12 excerpts reprinted at
12A pt. 2 West‟s Ann. Civ. Code (2016 ed.) foll. § 3439.04, pp. 276-277.) The
Legislature‟s reliance on Salomon v. Kaiser is strong evidence that transfers to sham
entities with no interest separate from the debtor, in a scheme to defraud creditors, qualify
as transfers under the UFTA.
Therefore, although Mork never incurred a real obligation to Hulven under the
deed of trust and note, and Hulven apparently never really existed as a corporate entity,
Mork‟s fraudulent attempt to transfer the equity in his condominium to Hulven to insulate
that asset from potential creditors constitutes a “transfer” as defined in section 3439.01,
subdivision (m).
B. PGA West’s Claims Were Extinguished by the UFTA’s Seven-year Statute
or Repose.
Hulven contends the judgment must be reversed because PGA West‟s lawsuit
was filed after the expiration of the seven-year limitations period set forth in
12 See May 26, 2017 order, ante, fn. 11, attachment E. Normally, legislative committee comments are only persuasive authority when determining the Legislature‟s intent. (McMullen v. Haycock (2007) 147 Cal.App.4th 753, 759.) However, the committee comments quoted in this opinion were taken verbatim from the Uniform Laws commissioners‟ commentary. (7A pt. II West‟s U. Laws Ann. (2006) U. Fraudulent Transfer Act, com. to § 4, p. 60; see id., com. to § 9, p. 195, cited post.) Therefore, we give substantial weight to the official legislative commentary about the UFTA. (See Lundahl v. Telford (2004) 116 Cal.App.4th 305, 315-316.)
21 section 3439.09(c). PGA West responds that, even if Mork‟s fraudulent attempt to
insulate the equity in his condominium constitutes a “transfer” and triggers the UFTA‟s
limitations period, Hulven “waived”13 the limitations defense by not rearguing it at
trial.14
To determine whether Hulven forfeited its defense under section 3439.09(c), we
must determine whether that time limitation is a traditional statute of limitations or a
statute of repose. “„Statutes of repose and statutes of limitations are often confused,
though they are distinct.‟ [Citation.]” (Federal Housing Finance Agency v. UBS
“[T]he correct term is „forfeiture‟ rather than „waiver,‟ because the former term 13 refers to a failure to object or to invoke a right, whereas the latter term conveys an express relinquishment of a right or privilege. [Citations.] As a practical matter, the two terms on occasion have been used interchangeably. [Citations.]” (In re Sheena K. (2007) 40 Cal.4th 875, 880, fn. 1.) In a number of the decisions that we cite in this opinion, the court used the term “waiver” when referring to a failure to object or invoke a right. Except for when quoting from those decisions, we will use the more precise term “forfeiture” when addressing those decisions.
There is some authority to support Hulven‟s position that raising section 14 3439.09(c) in its demurrer was sufficient to preserve the issue on appeal. (McCauley v. Howard Jarvis Taxpayers Assn. (1998) 68 Cal.App.4th 1255, 1263-1264 [party that raised statute of limitations defense in unsuccessful demurrer did not need to reargue it at trial to preserve the defense on appeal].) But there is also authority that cuts the other way. (See RRLH, Inc. v. Saddleback Valley Unified School Dist. (1990) 222 Cal.App.3d 1602, 1605-1606, fn. 2 [stating, in dicta, that a statute of limitations defense pleaded in an answer but not argued at trial was forfeited]; Van Buskirk v. Todd (1969) 269 Cal.App.2d 680, 690 [defendant forfeited statute of limitations defense pleaded in answer by not including the defense in a pretrial conference order of issues to be decided at trial].) Because we conclude section 3439.09(c) is a statute of repose that may not be forfeited, we need not decide whether Hulven properly preserved the defense by asserting it in a demurrer and pleading it in an answer.
22 Americas Inc. (2d Cir. 2013) 712 F.3d 136, 140.) We conclude section 3439.09(c) is a
statute of repose that is not subject to forfeiture, and that PGA West‟s claims were
completely extinguished when the seven-year period expired.15
1. Statutes of limitations versus statutes of repose.
“„Statute of limitations‟ is the „collective term . . . commonly applied to a great
number of acts,‟ or parts of acts, that „prescribe the periods beyond which‟ actions „may
not be brought.‟ [Citation.]” (Regents of University of California v. Superior Court
(1999) 20 Cal.4th 509, 532; see 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 430,
p. 546.) “There are several policies underlying such statutes. One purpose is to give
defendants reasonable repose, thereby protecting parties from „defending stale claims,
where factual obscurity through the loss of time, memory or supporting documentation
may present unfair handicaps.‟ [Citations.] A statute of limitations also stimulates
plaintiffs to pursue their claims diligently. [Citations.] A countervailing factor, of
course, is the policy favoring disposition of cases on the merits rather than on procedural
15 In its main briefs, Hulven cited lower federal court decisions for the proposition that section 3439.09(c) is a statute of repose, but it did not address how that characterization affected PGA West‟s forfeiture argument. For its part, PGA West ignored the decisions cited by Hulven and characterized section 3439.09(c) as a statute of limitations that is “waived,” i.e., forfeited, if not timely asserted in the trial court. We directed the parties to file supplemental briefs addressing: (1) whether section 3439.09(c) is a statute of limitations or a statute of repose, and (2) whether a statute of repose is subject to the forfeiture doctrine.
23 grounds. [Citations.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.)
Generally speaking, a garden variety16 statute of limitations is procedural and
merely affects a remedy and not a substantive right or obligation. (Mitchell v. Auto. etc.
Underwriters (1941) 19 Cal.2d 1, 4; Nelson v. Flintkote Co. (1985) 172 Cal.App.3d 727,
733; 3 Witkin, Cal. Procedure, supra, Actions, § 432, pp. 549-550.) Because a statute of
limitations is an affirmative defense, it is forfeited if it is not properly asserted in a
general demurrer or pleaded in an answer. (Minton v. Cavaney (1961) 56 Cal.2d 576,
581; Vitkievicz v. Valverde (2012) 202 Cal.App.4th 1306, 1314.) Moreover, statutes of
limitations are subject to statutory and equitable tolling. (3 Witkin, Cal. Procedure,
supra, Actions, § 432, p. 550.)
“For various reasons of policy, some time provisions, although in form similar to
statutes of limitations, are treated as conditions on the substantive right, i.e., they cause
the right that previously arose and on which an action could have been maintained, to
expire. [Citations.]” (3 Witkin, Cal. Procedure, supra, Actions, § 441, p. 561; see
Williams v. Pacific Mutual Life Ins. Co. (1986) 186 Cal.App.3d 941, 949.) One such
class of time limitations are statutes of repose. “Statutes of repose effect a legislative
judgment that a defendant should „be free from liability after the legislatively determined
period of time.‟ [Citations.] Like a discharge in bankruptcy, a statute of repose can be
said to provide a fresh start or freedom from liability.” (CTS Corp. v. Waldburger (2014)
573 U.S. ___, ___ [134 S.Ct. 2175, 2183] (CTS Corp.).) As the United States Supreme
16 See Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 373.
24 Court recently explained, whereas statutes of limitations are designed to encourage
plaintiffs to act diligently in prosecuting known injuries or claims, and normally provide
that a cause of action accrues when the plaintiff is injured or discovers an injury, “statutes
of repose are enacted to give more explicit and certain protection to defendants. These
statutes „effect a legislative judgment that a defendant should be free from liability after
the legislatively determined period of time.‟” (California Public Employees’ Retirement
System v. ANZ Securities, Inc. (2017) ___ U.S. ___, ___ [137 S.Ct. 2042, 2049]
(ANZ Securities), quoting CTS Corp., at p. 2183.) “For this reason,” the court continued,
“statutes of repose begin to run on „the date of the last culpable act or omission of the
defendant.‟” (ANZ Securities, at p. 2049, quoting CTS Corp., at p. 2182.)
“„[W]hile a statute of limitations normally sets the time within which proceedings
must be commenced once a cause of action accrues, [a] statute of repose limits the time
within which an action may be brought and is not related to accrual. Indeed, “the injury
need not have occurred, much less have been discovered. Unlike an ordinary statute of
limitations which begins running upon accrual of the claim, [the] period contained in a
statute of repose begins when a specific event occurs, regardless of whether a cause of
action has accrued or whether any injury has resulted.” [Citation.]‟” (McCann v. Foster
Wheeler LLC (2010) 48 Cal.4th 68, 78-79, fn. 2, quoting Giest v. Sequoia Ventures, Inc.
(2000) 83 Cal.App.4th 300, 305; accord, Cossman v. DaimlerChrysler Corp. (2003)
108 Cal.App.4th 370, 379, fn. 8.)
Whereas statutes of limitations affect a remedy, statutes of repose extinguish a
right of action after the period has elapsed. (Stuart v. Am. Cyanamid Co. (2d Cir. 1998)
25 158 F.3d 622, 627; 51 Am.Jur.2d (2011) Limitation on Actions, § 354, pp. 762-763
[“a statute of repose . . . nullifies both the right and the remedy”]; id. § 24, p. 507 [statute
of repose “extinguishes the action, or terminates any right to action, after a fixed period
of time has elapsed” (fns. omitted)].) The effect of a statute of repose “„is [thus] harsher
than a statute of limitations in that it cuts off a right of action after a specified period of
time, irrespective of accrual or even notice that a legal right has been invaded.
[Citation.]‟” (McCann v. Foster Wheeler LLC, supra, 48 Cal.4th at p. 78, fn. 2, quoting
Giest v. Sequoia Ventures, Inc., supra, 83 Cal.App.4th at p. 305.) Put another way, a
statute of repose “„does not cut off an existing right of action, but rather provides that
nothing which happens thereafter can be a cause of action.‟” (San Diego Unified
School Dist. v. County of San Diego (2009) 170 Cal.App.4th 288, 301, quoting Inco
Development Corp. v. Superior Court (2005) 131 Cal.App.4th 1014, 1020; accord,
CTS Corp., supra, 573 U.S. at p. ___ [134 S.Ct. at p. 2187] [a statute of repose “mandates
that there shall be no cause of action beyond a certain point, even if no cause of action
has yet accrued. Thus, a statute of repose can prohibit a cause of action from coming into
existence.”].)
Although the defendant must plead a statute of limitations defense to avoid
forfeiture, it is the plaintiff who must plead facts showing their substantive right has not
been extinguished by a statute of repose. (Williams v. Pacific Mutual Life Ins. Co.,
supra, 186 Cal.App.3d at pp. 949-950; 3 Witkin, Cal. Procedure, supra, Actions, § 441,
p. 561; 51 Am.Jur.2d, supra, Limitation on Actions, §§ 377-378, pp. 786-787.) And
unlike a procedural statute of limitations, substantive statutes of repose are generally not
26 subject to statutory or equitable tolling. (ANZ Securities, supra, ___ U.S. at pp. ___
[137 S.Ct. at pp. 2050-2051; CTS Corp., supra, 573 U.S. at pp. ___ [134 S.Ct. at
pp. 2183, 2187]; Burroughs v. Precision Airmotive Corp. (2000) 78 Cal.App.4th 681,
689-690; Turner & Banke, Cal. Practice Guide: Civil Procedure Before Trial Statutes of
Limitations (The Rutter Group 2017) ¶ 1:32, p. 1-4.)
2. Section 3439.09(c) is a statute of repose.
When determining whether section 3439.09(c) is a statute of limitations or a
statute of repose, we must apply standard rules of statutory interpretation. “Statutory
interpretation is a question of law that we review de novo. [Citation.] „Our fundamental
task in interpreting a statute is to determine the Legislature‟s intent so as to effectuate the
law‟s purpose. We first examine the statutory language, giving it a plain and
commonsense meaning. We do not examine that language in isolation, but in the context
of the statutory framework as a whole in order to determine its scope and purpose and to
harmonize the various parts of the enactment. If the language is clear, courts must
generally follow its plain meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend. If the statutory language permits more than
one reasonable interpretation, courts may consider other aids, such as the statute‟s
purpose, legislative history, and public policy.‟ [Citation.]” (Bruns v. E-Commerce
Exchange, Inc. (2011) 51 Cal.4th 717, 724.)
Whether section 3439.09(c) is a procedural statute of limitations or a statute of
repose is an issue of first impression in California. Courts of this state have tended to
refer to section 3439.09 in its entirety as a statute of limitations. (See, e.g., Macedo,
27 supra, 86 Cal.App.4th at p. 1047; Monastra v. Konica Business Machines, U.S.A., Inc.
(1996) 43 Cal.App.4th 1628, 1645; Cortez v. Vogt (1997) 52 Cal.App.4th 917, 926
(Cortez).)17
Lower federal courts applying California‟s UFTA, however, have been more
careful when addressing section 3439.09‟s different subdivisions. “Cal. Civ. Code
§ 3439.09(a) and (b) are statutes of limitation requiring a plaintiff to file a fraudulent
transfer action within four years of the transfer or, for an intentional fraud, within one
year after the transfer was or could reasonably have been discovered.” (Rund v. Bank of
Am. Corp. (In re EPD Inv. Co., LLC) (Bankr. 9th Cir. 2015) 523 B.R. 680, 685, citing
In re JMC Telecom LLC, supra, 416 B.R. at p. 742 & Macedo, supra, 86 Cal.App.4th at
p. 1050, fn. 4.) “In contrast to subdivisions (a) and (b), the seven year time limitation set
17 CACI No. 4208 and its use notes, which PGA West cites in its supplemental brief, refers to section 3439.09 in its entirety as a statute of limitations and an “affirmative defense.” (Judicial Council of Cal., Civ. Jury Instns. (2017 ed.) CACI No. 4208, p. 975.) Although official jury instructions adopted by the Judicial Council are entitled to some weight (see Cal. Rules of Court, rule 2.1050), they are not authoritative. “„[J]ury instructions, whether published or not, are not themselves the law, and are not authority to establish legal propositions or precedent. They should not be cited as authority for legal principles.‟” (LAOSD Asbestos Cases (2016) 5 Cal.App.5th 1022, 1049, quoting People v. Morales (2001) 25 Cal.4th 34, 48 fn. 7.)
28 forth in Cal. Civ. Code § 3439.09(c) is a statute of repose.” (Rund v. Bank of Am. Corp.
(In re EPD Inv. Co., LLC), supra, 523 B.R. at p. 686, citing Donell v. Keppers (S.D. Cal.
2011) 835 F.Supp.2d 871, 877.)18
We agree with the federal courts that have concluded section 3439.09(c) is a
statute of repose. That section provides that a cause of action to void a fraudulent
transfer is “extinguished” if it is not filed “within seven years after the transfer was made
or the obligation was incurred.” (§ 3439.09(c), italics added.) On its face,
section 3439.09(c) is ambiguous with regard to what is extinguished by the passage of the
seven-year period—the remedy or the right of action itself. But the legislative history
makes clear the Legislature intended expiration of the limitations period to extinguish the
right or obligation involved. “Its purpose is to make clear that lapse of the statutory
periods prescribed by [section 3439.09] bars the right and not merely the remedy.”
18 Accord, Jenner v. Neilson (In re Slatkin) (9th Cir. 2007) 222 Fed.Appx. 545, 547; Forum Ins. Co. v. Comparet (9th Cir. 2003) 62 Fed.Appx. 151, 152; Ezra v. Seror (In re Ezra) (Bankr. 9th Cir. 2015) 537 B.R. 924, 934-935; McFarland v. Cal. Bank & Trust (In re Int’l Mfg. Grp., Inc.) (Bankr. N.D. Cal. Dec. 6, 2016, No. 14-25820-D-11) 2016 Bankr. Lexis 4192, *39; Luria v. Wolff (C.D. Cal. Apr. 11, 2016, No. CV 15-09191- RSWL-GJSx) 2016 U.S. Dist. Lexis 49231, *12; Weil v. U.S. (In re Tag Entertainment Corp.) (Bankr. C.D. Cal. Mar. 29, 2016, No. 1:09-bk-26982-VK) 2016 Bankr. Lexis 982, *45; Donell v. Mojtahedian (C.D. Cal. 2013) 976 F.Supp.2d 1183, 1189 (applying § 3439.09(c), but mislabeling it § 3439.09, subd. (a)); Internet Direct Response, Inc. v. Buckley (C.D. Cal. Mar. 7, 2011, No. SA CV 09-1335 ABC (MLG)) 2011 U.S. Dist. Lexis 28344, *20-*21; In re JMC Telecom LLC, supra, 416 B.R. at p. 742; Rooz v. Kimmell (In re Kimmel) (Bankr. N.D. Cal. 2007) 367 B.R. 166, 169; see Pilmer & Cramer, Swindlers’ List (June 2009) 32 L.A. Lawyer 22, 27 (“California law provides a seven-year statute of repose for intentionally fraudulent transfer claims”).
29 (Assem. Com. Report, supra, 5 Assem. J. (1985-1986 Reg. Sess.) p. 8586, italics added,
excerpts reprinted at 12A pt. 2 West‟s Ann. Civ. Code, supra, foll. § 3439.09, p. 386;
see 7A pt. II West‟s U. Laws Ann., supra, U. Fraudulent Transfer Act, com. to § 9,
p. 195.)19
Moreover, on its face, section 3439.09(c) does not provide for tolling. As one
United States District Court concluded: “„The phrase “notwithstanding any other
provision of law” [in section 3439.09(c)] is a “term of art” that “expresses a legislative
intent to have the specific statute control despite the existence of other law which might
otherwise govern.”‟ [Citation.] Therefore, 3439.09(c)‟s seven-year backstop „is
absolute,‟ and „it cannot be tolled or otherwise extended.‟ [Citations.]” (Donell v.
Keppers, supra, 835 F.Supp.2d at p. 878.)
PGA West argues section 3439.09(c) is not a statute of repose because it is not a
substantive limit on the plaintiff‟s right of action. Citing Regents of University of
California v. Hartford Acc. & Indem. Co. (1978) 21 Cal.3d 624 (Hartford) (superseded
by statute), PGA West compares section 3439.09(c) to Code of Civil Procedure
section 337.15 and argues both are procedural statute of limitations. Code of Civil
Procedure section 337.15, when construed with Code of Civil Procedure sections 337 and
19 The Assembly Committee comments also indicate that, prior to the adoption of section 3439.09, limitations periods applicable to actions to void fraudulent transfers varied widely. Section 3439.09 was adopted to “mitigate the uncertainty” that resulted from such a diversity of limitations periods. (Assem. Com. Report, supra, 5 Assem. J. (1985-1986 Reg. Sess.) pp. 8586-8587, excerpts reprinted at 12A pt. 2 West‟s Ann. Civ. Code, supra, foll. § 3439.09, p. 386; see 7A pt. II West‟s U. Laws Ann., supra, U. Fraudulent Transfer Act, com. to § 9, p. 195.)
30 338, provides a “two-step limitation: actions founded upon a latent defect in the
development of real property must be filed within three or four years of discovery,
depending on whether the action rests on breach of warranty or negligence, but in any
case within ten years of the date of substantial completion of the improvement.”
(Hartford, at p. 641.)
The Supreme Court in Hartford, supra, 21 Cal.3d 624, rejected the argument that
Code of Civil Procedure section 337.15 is a substantive limitation on a plaintiff‟s right of
action as opposed to a procedural statute of limitations. (Hartford, at pp. 639-640.) In
passing, the court noted, “An identical argument . . . could be raised with respect to every
statute of limitations.” (Id. at p. 640.) According to PGA West, section 3439.09 is
similar to Code of Civil Procedure section 337.15 in that both provide for shorter
limitations periods that accrue when the plaintiff learns of the injury, but they nonetheless
provide a longer, overarching limitations period in which the plaintiff must file suit.
Because the Supreme Court concluded Code of Civil Procedure section 337.15 is a run-
of-the-mill statute of limitations, PGA West contends we should do the same with respect
to section 3439.09(c).
A closer look at Hartford, supra, 21 Cal.3d 624, shows it is inapt. “The issue
there was whether the surety on a contractor‟s bond—then not among the persons
specifically mentioned in the statute—nonetheless could claim the protection of [Code
Civil Procedure] section 337.15‟s 10-year limitations period. The [Hartford] majority
answered that question no. [Citation.] The dissenters argued that because [Code Civil
Procedure] section 337.15 was a substantive limit on legal rights and duties, it precluded
31 the plaintiff, in any suit brought after expiration of the 10-year period, from proving a
contractor‟s breach of duty which the surety must make good. [Citation.]” (Lantzy v.
Centex Homes, supra, 31 Cal.4th at p. 381.) It was in that specific context that the
Supreme Court rejected the argument that Code of Civil Procedure section 337.15 was a
substantive limitation on the plaintiff‟s right of action. (Lantzy, at p. 381.) Courts have
since limited the reach of the language from Hartford that PGA West relies upon, for
example, concluding it does not provide support for the proposition that the 10-year
limitation period under Code of Civil Procedure section 337.15 is subject to equitable
tolling. (Lantzy, at p. 381; FNB Mortgage Corp. v. Pacific General Group (1999) 76
Cal.App.4th 1116, 1131-1132.) Moreover, whereas section 3439.09(c) completely
extinguishes a plaintiff‟s right of action and not merely the remedy of setting aside a
fraudulent transfer, which is one of the hallmarks of a statute of repose, nothing in
Hartford suggested that Code of Civil Procedure section 337.15 similarly extinguished a
plaintiff‟s right of action. Therefore, we conclude Hartford provides no support for PGA
West‟s position that section 3439.09(c) is a run-of-the-mill statute of limitations.
Next, PGA West cites Cortez, supra, 52 Cal.App.4th 917 and Macedo, supra,
86 Cal.App.4th 1044, for the proposition that section 3439.09(c) is subject to tolling and,
therefore, is not a statute of repose. Again, we are not persuaded.
In Cortez, supra, 52 Cal.App.4th 917, the defendant made a fraudulent transfer in
August 1987 while an underlying lawsuit to establish its liability was still pending but
before the judgment became final. (Id. at p. 920-924.) The plaintiff‟s action to set aside
the fraudulent transfer was filed in April 1993. (Id. at p. 924.) The issue there was
32 whether the four-year statute of limitations under section 3439.09, subdivision (a), to set
aside a fraudulent transfer began to run when the fraudulent transfer was made, or
whether the time to challenge a fraudulent transfer was tolled until the judgment
establishing the underlying debt became final. (Cortez, at p. 929.) The Court of Appeal
concluded: the UFTA is cumulative to existing common remedies to set aside fraudulent
transfers; common law remedies to set aside fraudulent transfers are governed by the
three-year statute of limitations under Code of Civil Procedure section 338,
subdivision (d), which provides for tolling until the party challenging the transfer obtains
a final judgment on the underlying debt; and the tolling principle applicable to common
law actions to set aside fraudulent transfers applies equally to the four-year statute of
limitations under section 3439.09, subdivision (a). (Cortez, at pp. 930-937.) Because the
lawsuit to set aside the fraudulent transfer was filed less than four years after the
underlying judgment became final, the court concluded the lawsuit was not time-barred
under section 3439.09, subdivision (a). (Cortez, at p. 937.)
Cortez, supra, 52 Cal.App.4th 917, is not particularly helpful here because in that
case the lawsuit to set aside a fraudulent transfer was filed less than seven years after the
transfer was made. Although the Court of Appeal mentioned and quoted
section 3439.09(c) in passing (Cortez, at pp. 919, 926-927), it had no occasion
whatsoever to decide whether the common law tolling principle applicable to
section 3439.09, subdivision (a), applied to section 3439.09(c) as well. Moreover, the
fact that section 3439.09 includes shorter statutes of limitations, which are subject to
regular discovery and tolling rules, and a longer statute of repose, which is not subject to
33 those rules, is not anomalous in the least. “The pairing of a shorter statute of limitations
and a longer statute of repose is a common feature of statutory time limits. [Citation.]
The two periods work together: The discovery rule gives leeway to a plaintiff who has
not yet learned of a violation, while the rule of repose protects the defendant from an
interminable threat of liability. [Citation.]” (ANZ Securities, supra, ___ U.S. at pp. ___
[137 S.Ct. at pp. 2049-2050.)
As for Macedo, supra, 86 Cal.App.4th 1044, the fraudulent transfers in that case
were made in September and December 1993, after the underlying June 1992 judgment
was entered but before it was completely satisfied. (Id. at p. 1046.) The plaintiff filed
suit in July 1999 to set aside the fraudulent transfers, and the defendant argued the suit
was barred by the four-year statutes of limitations under section 3439.09, subdivisions (a)
and (b). (Macedo, at p. 1048.) Applying the reasoning from Cortez, the court concluded:
the UFTA supplements common law causes of action to challenge fraudulent transfers;
and a common law cause of action is governed by the three-year statute of limitations
under Code Civil Procedure section 338, subdivision (d), which does not begin to run
until the underlying judgment establishing liability becomes final. (Macedo, at pp. 1048-
1052.)
Although the lawsuit to set aside the fraudulent transfers in Macedo was filed less
than seven years after the transfers were made, as noted ante, the Court of Appeal did
have occasion to discuss, albeit in dicta, the effect of section 3439.09(c) on all lawsuits to
challenge fraudulent transfers. Although the appellate court agreed with the plaintiff that
section 3439.09 was not the exclusive statute of limitations applicable to fraudulent
34 transfer actions, the court made clear that “even if belated discovery can be pleaded and
proven” with respect to section 3439.09, subdivision (a), and the statute of limitations
applicable to common law remedies for fraudulent transfers, “in any event the maximum
elapsed time for a suit under either the UFTA or otherwise is seven years after the
transfer. [Citation.]” (Macedo, supra, 86 Cal.App.4th at p. 1050, fn. 4.) The court‟s
conclusion followed ineluctably from the plain language of section 3439.09(c). “[B]y its
use of the term „[n]otwithstanding any other provision of law,‟ the Legislature clearly
meant to provide an overarching, all-embracing maximum time period to attack a
fraudulent transfer, no matter whether brought under the UFTA or otherwise.” (Macedo,
at pp. 1050-1051, fn. 4.) For the reasons stated, ante, we agree with Macedo‟s “well-
considered dicta” (Roach v. Lee, supra, 369 F.Supp.2d at p. 1199; In re JMC Telecom
LLC, supra, 416 B.R. at p. 743) and decline PGA West‟s invitation to read Macedo as
suggesting the seven-year limitation under section 3439.09(c) is subject to tolling.20
The legislative history to section 3439.09 supports our conclusion that the seven-
year limitation under section 3439.09(c) was intended as an absolute limit on actions to
challenge fraudulent transfers that cannot be tolled or otherwise extended. As introduced,
the bill that adopted the UFTA in California included almost verbatim the limitations
20 PGA West also relies on Fidelity National Financial, Inc. v. Friedman (C.D. Cal. Apr. 27, 2009, No. CV 06-4271 CAS (JWJx)) 2009 U.S. Dist. Lexis 40732, *40- *46, where the federal district court applied the reasoning of Cortez to conclude section 3439.09(c) is subject to tolling. The court there ignored the contrary dicta in Macedo and the reasoned conclusions of other district courts that section 3439.09(c) was intended to be an absolute limit on fraudulent transfer actions and is not subject to further extension by tolling. For the reasons stated in the text, we respectfully disagree with Fidelity National.
35 period recommended by the Uniform Laws commissioners, which did not include an all-
encompassing statute of repose. At that stage, section 3439.09 read as follows: “A cause
of action with respect to a fraudulent transfer or obligation under this chapter is
extinguished unless action is brought: [¶] (a) Under paragraph (1) of subdivision (a) of
Section 3439.04 within, four years after the transfer was made or the obligation was
incurred or, if later, within one year after the transfer or obligation was or could
reasonably have been discovered by the claimant. [¶] (b) Under paragraph (2) of
subdivision (a) of Section 3439.04 or subdivision (a) of Section 3439.05, within four
years after the transfer was made or the obligation was incurred. [¶] (c) Under
subdivision (b) of Section 3439.05, within one year after the transfer was made or the
obligation was incurred.” (Sen. Bill No. 2150 (1985-1986 Reg. Sess.) as introduced
Feb. 20, 1986, p. 9;21 see 7A pt. II West‟s U. Laws Ann., supra, U. Fraudulent Transfer
Act, § 9, p. 194.)
A committee of the Business Law Section of the State Bar of California, which
studied the UFTA, had expressed concern that the limitations period recommended by the
Uniform Laws commissioners (Section 9, which became Civ. Code, § 3439.09)
overlooked future creditors and did not include an “absolute termination date for creditors
to challenge the transfer, especially since it is unknown when a future creditor will
discover the fraud.” (Report of the Ad Hoc Committee of the Business Law Section of
21 See May 26, 2017 order, ante, fn. 11, attachment A.
36 the State Bar of California on the Proposed Adoption in California of the Uniform
Fraudulent Transfer Act (Dec. 12, 1985) pp. 18-19 (Business Law Section Report), italics
added.)22 “[T]o provide certainty for parties dealing with transferees,” the bar committee
recommended that “an absolute deadline of ten years be imposed on any creditor’s right
to challenge any transfer.” (Business Law Section Report, at p. 19, italics added.) The
bar committee proposed an entirely new subdivision (c): “Notwithstanding anything
herein to the contrary, a cause of action with respect to a fraudulent transfer or obligation
is extinguished if no action is brought or levy made within ten years after the transfer was
made or the obligation was incurred.” (Ibid.)
While the Senate Judiciary Committee was considering Senate Bill No. 2150, the
State Bar forwarded the Business Law Section Report to the author of the bill and to the
Judiciary Committee. (State Bar of California Legislative Representative Judith A.
Harper, letter to Senator Robert Beverly, May 1, 1986.)23 In response, the Judiciary
Committee amended Assembly Bill No. 2150 to include a seven-year limitation period in
language substantially similar to that proposed by the bar committee. (Sen. Bill No. 2150
22 See May 26, 2017 order, ante, fn. 11, attachment B.
23 See May 26, 2017 order, ante, fn. 11, attachment C.
37 (1985-1986 Reg. Sess.) as amended May 8, 198624; Sen. Com. on Judiciary, Analysis of
Sen. Bill No. 2150 (1985-1986 Reg. Sess.) as introduced Feb. 20, 1986, pp. 4-5;25
Sen. Final History (1985-1986 Reg. Sess.) p. 138126.) As amended, section 3439.09(c)
read: “Notwithstanding any other provision of law, a cause of action with respect to a
fraudulent transfer or obligation is extinguished if no action is brought or levy made
made [sic] within seven years after the transfer was made or the obligation was incurred.”
(Sen. Bill No. 2150 (1985-1986 Reg. Sess.) as amended May 8, 1986, p. 8, italics
omitted.) That language remained unchanged when the Legislature adopted and the
Governor signed the UFTA into law. (Stats. 1986, ch. 383, § 2, p. 1593.) Minor
amendments have been made to section 3439.09(c) since then, but in substance its
language has remained the same. (Stats. 2005, ch. 34, § 2 [deleting extra word “made”];
Stats. 2015, ch. 44, § 11 [making technical, nonsubstantive changes].)
Interpreting section 3439.09(c) to provide for tolling, as suggested by PGA West,
would undermine the certainty to debtors that the absolute seven-year limitation was
intended to afford. Therefore, we must reject that interpretation. Because
24 See May 26, 2017 order, ante, fn. 11, attachment D.
25 See June 5, 2017 order, ante, fn. 11, attachment G.
26 See May 26, 2017 order, ante, fn. 11, attachment F.
38 section 3439.09(c) was intended to completely extinguish a right of action and not merely
a remedy, and because it does not provide for tolling or delayed discovery, we conclude
that limitations period is a statute of repose and not merely a statute of limitations.27
3. Statutes of repose cannot be forfeited.
As noted, ante, traditional statutes of limitations are considered affirmative
defenses that are subject to the forfeiture doctrine. We have found no published
California decision addressing whether a statute of repose is also subject to forfeiture.28
The majority view among other jurisdictions, which we adopt, holds that statutes of
repose cannot be forfeited.
27 Hulven relied exclusively on section 3439.09(c) in its demurrer and on appeal, so we have no occasion to decide whether section 3439.09, subdivisions (a) and (b), are also statutes of repose.
28 As PGA West points out in its supplemental brief, there is considerable California authority for the proposition that a party may contractually agree to modify the length of a statute of repose. (E.g., Brisbane Lodging, L.P. v. Webcor Builders, Inc. (2013) 216 Cal.App.4th 1249, 1262-1263; Zamora v. Lehman (2013) 214 Cal.App.4th 193, 205-211; Moreno v. Sanchez (2003) 106 Cal.App.4th 1415, 1430-1431; Hambrecht & Quist Venture Partners v. American Medical Internat., Inc. (1995) 38 Cal.App.4th 1532, 1548; see 3 Witkin, Cal. Procedure, supra, Actions, § 441, p. 562.) That line of decisions relied on Tebbets v. Fidelity and Casualty Co. (1909) 155 Cal. 137, which characterized statutes of limitations as statutes of repose that were mere personal rights and could be contractually bargained away. (Id. at p. 139.) Neither Tebbets nor the decisions following it discussed the differences between procedural statutes of limitations that merely bar a remedy and are subject to tolling, and statutes of repose that completely extinguish a right or obligation and are not subject to tolling. We need not question in this case whether those cases were correctly decided because they addressed a knowing “waiver” (see, ante, fn. 13) of a limitations period by contract and are, therefore, not authority for the proposition that a statute of repose is subject to forfeiture. To the extent Hambrecht suggested in dicta that a statute of repose is subject to forfeiture if a defendant does not timely raise it in the trial court (Hambrecht, at p. 1548, fn. 16, citing Minton v. Cavaney, supra, 56 Cal.2d at p. 581), we respectfully decline to follow that decision.
39 A minority of jurisdictions adhere to the rule that statutes of repose, like statutes of
limitations, are affirmative defenses that are subject to the forfeiture doctrine.
(E.g., Pratcher v. Methodist Healthcare Memphis Hospitals (Tenn. 2013) 407 S.W.3d
727, 737-738; McRaith v. BDO Seidman, LLP (Ill.App.Ct. 2009) 909 N.E.2d 310, 327;
Johnston v. Hudlett (Fl.Dist.Ct.App. 2010) 32 So.3d 700, 704; see Dominguez v. Lanham
Machinery Co., Inc. (W.D. Mich. 2000) 122 F.Supp.2d 852, 853 [collecting cases];
54 C.J.S. (2010) Limitations of Actions, § 28, p. 45 & fn. 15 [relying on Illinois decisions
for proposition that “[s]tatutes of repose are affirmative defenses subject to forfeiture if
not asserted”].)
“[T]he prevailing rule,” however, “is that a statute of repose is not an affirmative
defense that needs to be pleaded in a defendant‟s answer to avoid waiver [i.e.,
forfeiture].” (Chang-Williams v. U.S. (D.Md. 2013) 965 F.Supp.2d 673, 694, fn. 9, citing
Roskam Baking Co., Inc. v. Lanham Mach. Co. (6th Cir. 2002) 288 F.3d 895, 902-904 &
Am. Fed’n of Teachers, AFL-CIO v. Bullock (D.D.C. 2009) 605 F.Supp.2d 251, 261.)29
In fact, the lower federal courts have adopted the majority rule against forfeiture of
statutes of repose when applying section 3439.09(c) and other state‟s versions of the
UFTA. (Weil v. U.S. (In re Tag Entertainment Corp.), supra, 2016 Bankr. Lexis 982
29 Accord, Lewis v. Russell (E.D. Cal. 2012) 838 F.Supp.2d 1063, 1069; Whittaker v. Todd (N.C.Ct.App. 2006) 625 S.E.2d 860, 862; Trax-Fax, Inc. v. Hobba (Ga.Ct.App. 2006) 627 S.E.2d 90, 95-96; Ray & Sons Masonry Contractors, Inc. v. U.S. Fidelity & Guaranty Co. (Ark. 2003) 114 S.W.3d 189, 199-200; G&P Trucking v. Parks Auto Sales Service & Salvage, Inc. (S.C.Ct.App. 2003) 591 S.E.2d 42, 45; Vargo v. Koppers Co., Inc. (Penn. 1998) 715 A.2d 423, 425, footnote 1; see 51 Am.Jur.2d, supra, Limitation on Actions, section 352, at page 767, section 345, at pages 762-763, and section 385, at page 792.
40 at *45, quoting Donell v. Keppers, supra, 835 F.Supp.2d at p. 877 [“„Unlike a traditional
statute of limitations, a statute of repose cannot be waived [i.e., forfeited].‟”]; Warfield v.
Alaniz (D.Ariz. 2006) 453 F.Supp.2d 1118, 1130 [“Unlike a traditional statute of
limitations, the statute of repose contained in the [Arizona] UFTA cannot be waived [i.e.,
forfeited].”]; see Klein v. Capital One Financial Corp. (D.Idaho July 29, 2011, No. 4:10-
CV-00629-EJL) 2011 U.S. Dist. Lexis 83905, *22, fn. 5 [quoting Warfield as persuasive
authority when interpreting statute of repose under Idaho‟s UFTA].)
As one leading decision adopting the majority view explained: “„While the
running of a statute of limitations will nullify a party‟s remedy, the running of a statute of
repose will extinguish both the remedy and the right. The statute of limitations is
therefore a procedural mechanism, which may be waived [i.e., forfeited]. On the other
hand, the statute of repose is a substantive provision which may not be waived [i.e.,
forfeited] because the time limit expressly qualifies the right which the statute creates.‟”
(Roskam Baking Co., Inc. v. Lanham Mach. Co., supra, 288 F.3d at pp. 902-903, quoting
Cheswold Volunteer Fire Co. v. Lambertson Constr. Co. (Del. 1985) 489 A.2d 413, 421.)
We find the reasoning behind the majority view to be persuasive. As noted,
expiration of the seven-year repose period in section 3439.09(c) completely extinguishes
a party‟s right, not just the remedy of voiding a fraudulent transfer. (Assem. Com.
Report, supra, 5 Assem. J. (1985-1986 Reg. Sess.) p. 8586, excerpts reprinted at 12A
pt. 2 West‟s Ann. Civ. Code, supra, foll. § 3439.09, p. 386.) That maximum limitation
period is absolute and is not subject to tolling or delayed discovery. To hold that an
otherwise extinguished right is resurrected, Lazarus-like, simply because a defendant fails
41 to timely assert the limitations period would frustrate the goal of providing defendants
with complete repose once the statutory period expires. (See CTS Corp., supra,
573 U.S. at p. ___ [134 S.Ct. at p. 2183].) Therefore, we conclude a statute of repose is
not subject to forfeiture.
Because a statute of repose cannot be forfeited, we must reject PGA West‟s
argument that Hulven forfeited its defense under section 3439.09(c) by not arguing it at
trial.
4. PGA West sued Hulven more than seven years after the deed of trust
was executed.
Having concluded section 3439.09(c) is a statute of repose that may not be
forfeited, we must also conclude that PGA West‟s claims with respect to the deed of trust
were extinguished before it filed suit. The deed of trust was recorded on January 28,
2004. The absolute last day an action could have been filed to attack the deed of trust,
under the UFTA or not, was January 27, 2011. (§ 3439.09(c); Macedo, supra,
86 Cal.App.4th at pp. 1050-1051, fn. 4.) PGA West did not file its complaint until
42 March 4, 2013, more than nine years after the deed of trust was recorded.30 In other
words, PGA West‟s right of action on the deed of trust had already been completely
extinguished.
PGA West contends our conclusion will lead to absurd results because it is “a
license to commit fraud.” We must, of course, interpret statutes to avoid anomalous or
absurd results that the Legislature could not have intended and that would frustrate the
Legislature‟s intent. (Metropolitan Water Dist. v. Superior Court (2004) 32 Cal.4th 491,
522; People v. Birkett (1999) 21 Cal.4th 226, 231.) But “[w]e must exercise caution
using the „absurd result‟ rule; otherwise, the judiciary risks acting as a „“super-
Legislature”‟ by rewriting statutes to find an unexpressed legislative intent. [Citation.]”
(California School Employees Assn. v. Governing Bd. of South Orange County
Community College Dist. (2004) 124 Cal.App.4th 574, 588.) In any event, although the
30 Relying on the United States Supreme Court‟s recent explication that a statute of repose does not begin to run until the defendant‟s “„last culpable act‟” (ANZ Securities, supra, ___ U.S. at p. ___ [137 S.Ct. at p. 2049], quoting CTS Corp., supra, 573 U.S. at p. ___ [134 S.Ct. at p. 2182]), counsel for PGA West seemed to suggest during oral argument that a statute of repose does not begin to run until the very last act or omission by the defendant of any kind, which in this case would be acts allegedly committed by Hulven and Mork years after the deed of trust was recorded. We disagree. By culpable act, we assume the high court meant the last act or omission giving rise to the cause of action tied to the relevant statute of repose, which in this case is a fraudulent transfer. (§§ 3439.04, subd. (a)(1), 3439.01, subd. (m), 3439.09(c).) The only fraudulent transfer alleged in the complaint is the deed of trust recorded against the property by Mork that named Hulven as the beneficiary. Therefore, the deed of trust is the last culpable act for purposes of this case, and it triggered the seven-year statute of repose under section 3439.09(c).
43 result in this case is lamentable, the legislative history discussed above demonstrates it is
not absurd or unanticipated.31 (See People v. Lee (2017) 11 Cal.App.5th 344, 352
[“Neither the Attorney General nor [the defendant] discuss the statute‟s legislative
history. After conducting our own review, we conclude the Legislature intended the
result the Attorney General characterizes as „absurd‟ or „inconsistent.‟”]; Jackson v. Doe
31 While this appeal was pending, Hulven petitioned this court for a writ of supersedeas to prevent PGA West from foreclosing on a lien placed on the property for delinquent homeowner‟s association assessments. We denied the petition without prejudice to Hulven requesting a stay from the trial court. Either Hulven did not request a stay in the trial court or the trial court denied the stay, because during oral argument before this court counsel for PGA West informed us that it foreclosed on the property and now owns it. Counsel for Hulven did not contradict this assertion of fact. Normally we are limited to the facts in the record on appeal and we will not consider events that occur after the judgment (Haworth v. Superior Court (2010) 50 Cal.4th 372, 379, fn. 2; Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3), but for the limited purpose of this footnote we assume it to be true that PGA West now owns the property. PGA West presumably intends to sell the property to at least partially satisfy its judgment against Mork, but it argues the result in this case will somehow provide Hulven with a sword it can use to regain ownership of the property in a quiet title action. We fail to follow the logic behind this argument. The running of the statute of repose under section 3439.09(c) merely barred PGA West from setting aside the deed of trust as a fraudulent transfer. Although we need not address theoretical steps Hulven might take to recover the property, the UFTA and its statute of repose had no effect whatsoever on PGA West‟s ability to lawfully foreclose on the property for a reason completely unrelated to the fraudulent deed of trust, and the fact that PGA West may not set aside the deed of trust in no way provides Hulven with a basis for recovering the property in a quiet title action. Neither party to this appeal has argued the foreclosure sale rendered this appeal moot. To the extent the appeal is moot, we have exercised our discretion to retain jurisdiction to decide the important issues of public interest raised herein. (Los Angeles County Metropolitan Transportation Authority v. Alameda Produce Market, LLC (2011) 52 Cal.4th 1100, 1106.)
44 (2011) 192 Cal.App.4th 742, 752 [“Our review of the legislative history does not indicate
our interpretation of the statute would „defeat legislative intent or produce an absurd
result.‟”].)
By enacting a statue of repose, which completely extinguishes a right of action to
void a fraudulent transfer after seven years; which was intended to provide absolute
protection to transferors against claims filed many years later by future creditors; and
which is not subject to tolling or to extension for delayed discovery, the Legislature had
to have anticipated that at least some unscrupulous debtors would reap the windfall of
their fraudulent schemes.32 Therefore we must conclude the trial court erred as a matter
of law by overruling Hulven‟s demurrer. Because PGA West‟s right of action with
respect to the deed of trust was already extinguished, the trial court should have sustained
Hulven‟s demurrer.
Lastly, at oral argument, PGA West argued that, if we reverse the order overruling
Hulven‟s demurrer, it should be given leave to amend its complaint. PGA West did not
request leave to amend in its principal or supplemental briefs. “„We will not consider an
issue not mentioned in the briefs and raised for the first time at oral argument.‟
[Citation.]” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150,
1185.) By waiting until oral argument to address the issue of leave to amend, PGA West
forfeited it.
32Whether the policy behind section 3439.09(c) “is desirable or wise is not our duty to decide; our role is to construe the statute as enacted by our Legislature.” (Mercer v. Department of Motor Vehicles (1991) 53 Cal.3d 753, 761.)
45 Moreover, PGA West has not shown “there is a reasonable possibility of an
amendment that would cure the complaint‟s legal defect or defects. [Citation.]”
(Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924.) “„The plaintiff
bears the burden of proving there is a reasonable possibility of amendment.
[Citation.] . . . [¶] To satisfy that burden on appeal, a plaintiff “must show in what
manner he can amend his complaint and how that amendment will change the legal effect
of his pleading.” [Citation.] The assertion of an abstract right to amend does not satisfy
this burden. [Citation.] The plaintiff must clearly and specifically set forth the
“applicable substantive law” [citation] and the legal basis for amendment, i.e., the
elements of the cause of action and authority for it. Further, the plaintiff must set forth
factual allegations that sufficiently state all required elements of that cause of action.
[Citations.] Allegations must be factual and specific, not vague or conclusionary.
[Citations.]‟” (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1491.)
PGA West merely asserted it should be granted leave to amend without explaining how it
would actually be able to plead viable, timely causes of action against Hulven or Mork.
Therefore, we decline to direct the superior court to grant PGA West leave to amend the
complaint.
46 IV.
DISPOSITION
The judgment is reversed. The cause is remanded for the superior court to vacate
its order overruling Hulven‟s demurrer and to enter a new order sustaining the demurrer
without leave to amend. The superior court shall then enter a judgment of dismissal.
Hulven shall recover its costs on appeal.
McKINSTER J. We concur:
RAMIREZ P. J.
CODRINGTON J.
Related
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