Berger v. Varum
248 Cal. Rptr. 3d 51
| Cal. Ct. App. 5th | 2019Background
- Berger obtained ~ $2.7M judgment against Varum defendants for construction/design defects; appeal affirmed and judgment later paid by Varum defendants.
- While appeal was pending, Berger sued alleging the Varum defendants had fraudulently transferred assets to related persons/entities to hinder collection.
- After the judgment was paid, Berger amended to assert common-law fraudulent transfer and conspiracy claims seeking consequential and punitive damages for harms caused by the delay and the transfers.
- Defendants demurred, arguing satisfaction of the judgment (and remedies under the Enforcement of Judgments Law/UVTA) precluded recovery beyond the judgment amount and enforcement costs.
- Trial court sustained the demurrer without leave to amend; Berger appealed.
- Court of Appeal reversed, holding Berger stated viable common-law fraudulent transfer and conspiracy claims permitting consequential and punitive damages (subject to proof).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the UVTA/EJL bars a common-law fraudulent transfer action seeking consequential/punitive damages after judgment satisfaction | Berger: UVTA supplements, not displace, common-law fraud; he may recover consequential and punitive damages for postjudgment tortious transfers | Defendants: UVTA/EJL and postjudgment interest/enforcement remedies are exclusive; satisfaction makes plaintiff whole and precludes extra damages | Court: UVTA is cumulative; EJL/postjudgment interest does not preclude separate tort damages; common-law claim permitted |
| Whether Berger sufficiently alleged injury to support fraudulent transfer damages | Berger: alleged specific financial harms (liens/interest, lost rents, IRA penalties, credit damage, increased financing fees, foreclosure fees, emotional distress) | Defendants: any injury is speculative or duplicates the original judgment; no recoverable injury alleged | Court: Allegations state cognizable, specific damages for demurrer purposes; injury element satisfied at pleading stage |
| Whether recovery would constitute impermissible double recovery of the prior judgment | Berger: seeks distinct consequential harms caused by defendants’ concealment/delay, not duplicate of judgment amount | Defendants: damages would duplicate the prior judgment and thus be barred | Court: As pleaded, damages are for separate harms and not necessarily duplicative; double recovery not established on demurrer |
| Whether conspiracy/aiding-and-abetting liability attaches to non-debtor transferees | Berger: defendants knowingly participated in transfers to frustrate collection and can be liable | Defendants: contest liability beyond debtor/transferee core | Court: California recognizes aiding/abetting and conspiracy liability for intentional torts like fraudulent transfers; conspiracy claim adequately pleaded |
Key Cases Cited
- Brown v. Deutsche Bank Nat. Trust Co., 247 Cal.App.4th 275 (review of demurrer; standards for pleading) (discusses de novo review and demurrer leave-to-amend standard)
- Macedo v. Bosio, 86 Cal.App.4th 1044 (UVTA remedies are cumulative and do not supplant common-law remedies)
- Wisden v. Superior Court, 124 Cal.App.4th 750 (UVTA intended to supplement preexisting fraudulent-conveyance remedies)
- Mehrtash v. Mehrtash, 93 Cal.App.4th 75 (fraudulent-transfer relief requires an affirmative showing of injury to creditor)
- Renda v. Nevarez, 223 Cal.App.4th 1231 (creditor cannot obtain duplicate money judgment against debtor in fraudulent transfer action; distinguishes consequential-damages claims)
- Maxwell v. Fire Ins. Exchange, 60 Cal.App.4th 1446 (delay in payment alone does not automatically establish compensable economic loss absent proof of distinct financial harm)