Facts
- Cynthia Kirkeby and her brother, Frederick Fascenelli, were shareholders of FasTags, Inc.; Frederick and his wife Diana held a controlling interest, and Kirkeby also served as trustee for a stock trust holding additional shares.
- Kirkeby alleged that after she resigned from the company’s board, Frederick and Diana mismanaged and looted corporate assets through improper licenses, compensation, expense payments, and loans, while obstructing her access to corporate governance and records.
- Kirkeby sued asserting numerous claims, including a cause of action under the Uniform Fraudulent Transfer Act (UFTA).
- The UFTA claim alleged Frederick obtained a $50,000 corporate loan on a false pretext and used it to buy a specific parcel of real property (the Oak Street property) for himself and Diana, then transferred it to a family limited partnership.
- The claim also alleged transfers of another specific parcel (the Clark Street property) through a family trust to the same family limited partnership.
- Kirkeby alleged these transfers were made with intent to hinder, delay, or defraud creditors and sought to avoid the transfers so the properties could be reached to satisfy claims.
- Kirkeby recorded notices of pendency of action (lis pendens) against the identified properties.
- The trial court granted a motion to expunge the lis pendens, and the Court of Appeal denied writ relief, concluding the complaint did not assert a qualifying “real property claim.”
Issues
- Whether a UFTA cause of action seeking to avoid allegedly fraudulent transfers of identified real property is a “real property claim” because, if meritorious, it would affect title to or the right to possession of that property, thereby supporting a lis pendens.
Decision
- The California Supreme Court reversed the Court of Appeal.
- The court held that a fraudulent transfer cause of action under UFTA that seeks to set aside transfers of specific real property qualifies as a “real property claim” and can support recording a lis pendens.
- The court rejected the view that the presence of other claims for money damages defeats lis pendens relief where the particular cause of action seeks relief that would change title or possessory rights in identified parcels.
- The court noted policy concerns about lis pendens misuse but relied on statutory safeguards such as expungement procedures, probable-validity requirements, and potential fee awards.
Legal Principles
- A “real property claim” is determined claim-by-claim: a cause of action qualifies if, if successful, it would affect title to or the right to possession of specific real property.
- A UFTA claim that seeks avoidance of a transfer of identified real property directly affects title and therefore falls within the lis pendens statutes.
- A lawsuit’s overall characterization as primarily seeking money damages does not negate a properly pleaded real property claim seeking to set aside a real-property transfer.
- Concerns about abusive lis pendens filings are addressed through the statutory expungement framework and related remedies, not by judicially excluding categories of claims that meet the statutory definition.
Conclusion
The court held that a creditor-style UFTA claim to avoid allegedly fraudulent transfers of identified parcels of real property is a real property claim under California’s lis pendens statutes, so a lis pendens may be recorded and should not be expunged on the theory that the case is merely for money damages.