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`Filed 6/20/17 Stoltenberg v. Sheppard, Mullin, Richter & Hampton CA2/5
`NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
`
`California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
`not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
`has not been certified for publication or ordered published for purposes of rule 8.1115.
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`IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
`
`SECOND APPELLATE DISTRICT
`
`DIVISION FIVE
`
`
`
` B271524
`
` (Los Angeles County
` Super. Ct. No. BC556922)
`
`
`Plaintiffs and Appellants,
`
`v.
`
`HERBERT A. STOLTENBERG,
`TRUSTEE OF THE 1680
`PROPERTY TRUST, et al.,
`
`
`
`
`
`SHEPPARD, MULLIN, RICHTER, &
`HAMPTON, LLP,
`
`
`
`
`
`Defendant and Respondent.
`
`APPEAL from a judgment of the Superior Court of the
`
`County of Los Angeles. Daniel S. Murphy, Judge. Affirmed.
`
`LOVE, LLP, Richard A. Love, for Plaintiffs and Appellants.
`
`Sheppard, Mullin, Richter & Hampton, LLP, Richard W.
`
`Brunette and Robert T. Sturgeon, for Defendant and Respondent.
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`The law firm that represented the losing defendants at trial
`
`obtained a lien on specific client property to secure payment of
`
`accrued, but unpaid, legal fees. Plaintiffs/judgment creditors,
`
`unable to satisfy the judgment, sued the law firm to set aside the
`
`lien, alleging actual and constructive fraud. The trial court
`
`granted the law firm’s motion for summary judgment. We affirm.
`
`
`
`
`
`
`
`FACTUAL AND PROCEDURAL BACKGROUND
`
`A.
`
`The Underlying Action and Sheppard Mullin’s
`
`
`
`Security Interest
`
`This legal saga began in 2004 when plaintiffs1 sued
`Ampton Investments, Inc. and Laurence Strenger (the Ampton
`
`defendants) for fraud (underlying action). The Ampton
`
`defendants retained Sheppard, Mullin, Richter & Hampton
`
`(Sheppard Mullin) in February 2011, and the firm filed a formal
`
`substitution of attorneys in early March 2011.
`
`The jury trial in the underlying action began April 4, 2011.
`
`On May 4, 2011, the jury returned a special verdict in favor of
`
`plaintiffs in the amount of $8,516,704 and found the Ampton
`
`defendants acted with malice and oppression. Despite the trial
`
`court’s order that the Ampton defendants turn over financial
`
`information relating to their net worth for the punitive damage
`
`phase of the trial, the Ampton defendants only provided federal
`
` 1
`
`
`The plaintiffs and appellants are: Herbert W. Stoltenberg,
`trustee of the 1680 Property Trust; Michael L. Epsteen, trustee of
`the Michael L. Epsteen Trust; Stephen Ellis Gordon, trustee of
`the Stephen Ellis Gordon and Linda S. Gordon Revocable Trust;
`and Ruth Ann Runnels LaMonica, trustee of the LaMonica
`Family Trust. We refer to them collectively as plaintiffs.
`
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`2
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`tax returns for years 2008 and 2009. The jury did not award
`
`punitive damages.
`
`
`
`On June 9, 2011, the trial court entered judgment on the
`
`jury’s verdict. That same day, the Ampton defendants applied ex
`
`parte for an order temporarily staying enforcement of the
`
`judgment. The trial court granted a one-week stay, ordered
`
`defendant Strenger to file a declaration explaining why a
`
`temporary stay was appropriate, and set the matter for further
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`hearing on June 16, 2011.
`
`In the meantime, before judgment was entered, Sheppard
`
`Mullin began to press the Ampton defendants to pay their legal
`
`fees. According to Sheppard Mullin, as of April 30, 2011, the
`
`Ampton defendants incurred $837,702.31 in attorney fees for the
`
`defense of the underlying action, but had not made any payments
`
`to Sheppard Mullin. On June 8, 2011, the day before judgment
`
`was entered, Sheppard Mullin e-mailed Strenger a draft security
`
`agreement dated June 6, 2011, in which Strenger would grant
`
`Sheppard Mullin a security interest in two pieces of art to secure
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`the Ampton defendants’ outstanding legal fees. The cover letter
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`advised payment was expected on or before July 15, 2011; the
`
`agreement itself also provided it constituted an inducement for
`
`Sheppard Mullin “to continue to represent the [Ampton
`
`defendants] in connection with the post-trial motions in the
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`[underlying action].”
`
`
`
`After sending this letter, Sheppard Mullin apparently
`
`discovered a UCC-1 financing statement evidencing a financial
`
`institution’s preexisting security interest in Strenger’s art
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`3
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`collection,2 including the two paintings that were originally
`intended to serve as the security for the payment of Sheppard
`
`Mullin’s attorney fees. Sheppard Mullin sent Strenger a revised
`
`security agreement that expanded the collateral securing the
`
`payment of past and future attorney fees to include Strenger’s
`
`entire art collection. On June 14, 2011, Strenger agreed in
`
`substance to grant Sheppard Mullin a lien on his art collection.
`
`
`
`The parties returned to court on June 16, 2011, for the
`
`hearing on the Ampton defendants’ request for a temporary stay
`
`of enforcement. Plaintiffs’ counsel voiced concern about the
`
`Ampton defendants’ transferring assets during the requested
`
`stay:
`
` Mr. Strenger talks in terms of the business of
`
`Ampton, a limited number of employees, and
`
`some obscure need for cash or credit lines for
`
`that business to go forward. For what, we don’t
`
`know.
`
`
`
` My major concern here is that there’s a
`
`substantial amount of real property and
`
`personal property unconnected to the business of
`
`Ampton which is subject to transfer in the
`
` 2
`
`
`On March 30, 2011, Strenger executed a valuation
`agreement with Sotheby’s in New York, requesting an appraisal
`of the fine art and antiques he owned. Sotheby’s issued a final
`appraisal to Strenger in December 2011, concluding 875 pieces of
`fine art and furnishings had a fair market value of $6,084,390
`and an insurance value of $13,660,960. Strenger gave Sheppard
`Mullin a draft of the appraisal during the negotiation of the
`security agreement in May and June 2011.
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`absence of either an execution or an order
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`staying transfer.
`
`
`
` So, the stay, even accommodating his request
`
`to continue business, I think should be
`
`conditioned upon an order that there is no
`
`transfer of personal property―transfer,
`
`encumbrance of personal property or real
`
`property of Mr. Strenger or Ampton, other than
`
`in the normal course of business, in terms of
`
`cash or funds that are available.
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`
`
`
`
`In response to the concerns expressed by plaintiffs’ counsel,
`
`the trial court proposed an order preventing the Ampton
`
`defendants from selling or transferring real property. When
`
`plaintiffs’ counsel reminded the trial court that Strenger owned
`
`an “extensive” art collection, “which [on] the basis on the tax
`
`returns is [valued at] $1.6 million,” court and counsel discussed
`
`possible dispositions of Strenger’s assets. Ultimately, the trial
`
`court suggested, “There’s no disposition of the real property,
`
`there’s no disposition of the art collection except as to pay
`
`attorneys, costs of bond, and ordinary expenses [of] running
`
`Ampton.” After a brief recess so the Sheppard Mullin attorney
`
`could speak with Strenger, the following colloquy ensued:
`
` [Defense counsel:] I think [Strenger has]
`
`consented to what your Honor proposed. And if I
`
`may restate it, just so I’ve got it clearly.
`
`
`
` The Court: All right.
`
`
`
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` [Defense counsel:] With respect to his real
`
`property . . . there will be no transfer of the real
`
`property for any purpose during the stay period.
`
`
`
` With respect to the personal property, which I
`
`understand to be [Strenger’s interest in certain
`
`entities] and the art collection, there will be no
`
`transfers within the stay period except for the
`
`purposes of paying legal fees and necessary
`
`business expenses of Ampton and securing an
`
`appellate bond.
`
`
`
` The Court: Sounds good to me.
`
` Plaintiff, what do you think?
`
` [Plaintiffs’ counsel:] I guess that’s fine, your
`
`Honor . . . .
`
`
`
`
`
`With that, the court proposed to grant a stay of 70 days on
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`the following terms: “that the real property outlined and the
`
`personal property outlined not be liquidated for any purpose
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`other than securing an appellate bond, paying attorneys and
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`everyday expenses of Ampton . . . .”
`
`
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`Following the hearing, plaintiffs and the Ampton
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`defendants each submitted proposed orders specifying the terms
`
`and conditions of the stay order. Plaintiffs’ order provided in part
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`that “during the pendency of this stay, [the Ampton defendants]
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`may: [¶] Pay from cash or cash equivalents available, or
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`liquidate, encumber or sell items in the art collection, if
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`necessary, to pay the normal and customary business expense of
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`Ampton or reasonable attorney fees . . . .”
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`6
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`Instead of executing one of the submitted orders, the trial
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`court issued a minute order that provided, in pertinent part:
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`“The defendant is ordered not to transfer specific assets prior to
`
`filing an appeal bond. The court’s specific ruling is fully detailed
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`in the notes of the Official Court Reporter.”
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`
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`On June 22, 2011, Sheppard Mullin sent Strenger a revised
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`version of the security agreement. Among other things, the
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`revised version extended the due date to pay the outstanding
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`legal fees to September 30, 2011, and expanded the definition of
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`the collateral to include “all antiques, furniture and related
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`decorations, china, porcelain ceramics, and fine art, including,
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`but not limited to, items listed on Exhibit A [an itemized list of
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`the art collection] . . . .” That same day, Strenger e-mailed
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`Sheppard Mullin and attached an executed copy of the signature
`
`page of the final version security agreement. Sheppard Mullin
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`then filed UCC-1 financing statements in New York and
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`California scheduling the assets pledged as collateral under the
`
`security agreement.
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`
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`Three months later, in September 2011, in connection with
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`work it performed on a petition for writ of supersedeas seeking a
`
`waiver of a surety bond on appeal, Sheppard Mullin requested a
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`security interest in three cooperative apartments in New York
`
`City owned by 118 8th Avenue Associates, a New York
`
`partnership in which Strenger was a partner. On September 15,
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`2011, Sheppard Mullin and the Ampton defendants, among
`
`others, executed an amendment to the security agreement that
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`granted Sheppard Mullin a continuing security interest in all the
`
`shares of stock of 118 Eighth Avenue Housing Corporation. On
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`September 27, 2011, Sheppard Mullin filed an UCC-1 financing
`
`statement in New York scheduling as collateral the interest it
`
`
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`received in the shares of 118 Eighth Avenue Housing Corporation
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`under the amendment to the security agreement.
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`
`
`
`
`B. The Appeal in the Underlying Action
`
`On September 2, 2011, the Ampton defendants filed a
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`timely notice of appeal from the judgment in the underlying
`
`action, but did not post a bond to stay enforcement of that
`
`judgment. (Code Civ. Proc., § 917.1.) Instead, they petitioned for
`
`a writ of supersedeas to stay enforcement of the judgment
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`pending appeal. This court denied the petition.
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`
`
`As enforcement of the judgment was not stayed, plaintiffs
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`registered the judgment in the state of New York, where the
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`Ampton defendants were domiciled, and initiated enforcement
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`proceedings there, including the service of subpoenas on the
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`Ampton defendants for financial information. When the Ampton
`
`defendants failed to respond to the subpoenas or orders to show
`
`cause requiring compliance, a New York trial court found them in
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`contempt and fined them.
`
`
`
`When the Ampton defendants did not comply with the
`
`contempt order, plaintiffs sought the dismissal of the appeal in
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`this court based on the disentitlement doctrine. Following
`
`briefing and further proceedings in this court, we dismissed the
`
`Ampton defendants’ appeal in a published decision. (Stoltenberg
`
`v. Ampton Investments, Inc. (2013) 215 Cal.App.4th 1225.)
`
`Although the Ampton defendants subsequently petitioned to
`reinstate the appeal, we denied the petition.3
`
` 3
`
`
`On March 14, 2014, the New York trial court found the
`Ampton defendants in contempt for a second time and, on June
`15, 2015, the trial court in the underlying action also found the
`
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`8
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`C. The Current Lawsuit
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`On September 8, 2014, plaintiffs sued Sheppard Mullin for
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`actual fraud, constructive fraud, and declaratory relief.
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`Sheppard Mullin filed a motion for summary judgment or,
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`alternatively, summary adjudication of issues, asserting the
`
`appellate decision in Wyzard v. Goller (1994) 23 Cal.App.4th
`
`1183, 1187 (Wyzard) controlled and the law firm was entitled to
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`judgment as a matter of law.
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`
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`The trial court took the matter under submission after the
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`hearing and issued a written ruling granting summary judgment
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`in favor of Sheppard Mullin. The trial court agreed with
`
`Sheppard Mullin that “the transfer in question was simply a
`
`preference, and there [was] no evidence of intent to hinder, delay,
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`or defraud plaintiffs.” The court concluded it was bound by
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`Wyzard, supra, 23 Cal.App.4th 1183: “Here, as was the case in
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`Wyzard, it is established and conceded that Sheppard Mullin
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`rendered legal services to [the Ampton defendants] and thus
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`earned the fee which is secured by the security interests.
`
`[Wyzard, supra, 23 Cal.App.4th at p. 1191.] Plaintiffs’ argument
`
`that the secured property is worth considerably more than the
`
`legal fees owed is unavailing. Sheppard Mullin retains a lien on
`
`the subject property―it does not own the property outright. Once
`
`the property is liquidated, Sheppard Mullin will only receive the
`
`amount to which it is entitled pursuant to the lien. [¶] At oral
`
`argument, plaintiff attempt[ed] to distinguish Wyzard by
`
`asserting that, unlike Wyzard, [Sheppard Mullin’s] attorney fees
`
`are in dispute. The court finds that the hourly rate and hours
`
`that [Sheppard Mullin] charged does not rise to a triable issue of
`
`
`Ampton defendants in contempt for failing to comply with a
`turnover order.
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`material fact . . . . Contrary to plaintiffs’ assertion, the court
`
`finds Wyzard to be dispositive. As stated previously, in Wyzard,
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`as in this case, the attorneys rendered legal services and thus
`
`earned attorney fees which were secured by the security
`
`interests.”
`
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`Plaintiffs timely appealed from the judgment.
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`DISCUSSION
`
`A.
`
`Standard of Review
`
`Our review of a summary judgment is governed by well-
`
`established principles. We independently review the trial court’s
`
`decision; Sheppard Mullin has the burden to demonstrate that
`
`plaintiffs cannot establish the elements of their causes of action;
`
`and we liberally construe plaintiffs’ evidence and resolve any
`
`evidentiary doubts in plaintiffs’ favor. (See generally, State of
`
`California v. Allstate Ins. Co. (2009) 45 Cal.4th 1008, 1017-1018.)
`
`“There is to be no weighing of evidence.” (Kids’ Universe v.
`
`In2Labs (2002) 95 Cal.App.4th 870, 880.) Summary judgment
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`will be defeated “‘based on inferences reasonably deducible from
`
`the evidence, if contradicted by other inferences or evidence,
`
`which raise a triable issue as to any material fact.’ ([Code Civ.
`
`Proc.] § 437c, subd. (c).)” (McGrory v. Applied Signal Technology,
`
`Inc. (2013) 212 Cal.App.4th 1510, 1530, fn. 14.)
`
`
`
`
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`B. Legal Principles Applicable to Debtors and
`
`Creditors
`
`In 1872, California codified the principle that “[a] debtor
`
`may pay one creditor in preference to another, or may give to one
`
`creditor security for the payment of his demand in preference to
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`another.” (Civ. Code, § 3432.) Alongside this venerable statute,
`
`California law also provides that a debtor who transfers property
`
`to a third party with the intent to “hinder, delay, or defraud” a
`
`creditor from satisfying the debt or who fails to receive “a
`
`reasonably equivalent value in exchange” makes a fraudulent
`
`conveyance. (Civ. Code, § 3439.04, subd. (a).) The creation of a
`
`lien in favor of a creditor is a transfer. (Civ. Code, § 3439.01,
`
`subd. (m).)
`
`
`
`In 1994, Division Four of this District rendered its decision
`
`in Wyzard, supra, 23 Cal.App.4th 1183. Our colleagues described
`
`the “principal issue” in that appeal as “whether a preferential
`
`transfer, if made for proper consideration . . . but with recognition
`
`that the transfer will effectively prevent another creditor from
`
`collecting on his debt, is one made with ‘actual intent to hinder,
`
`delay, or defraud’ that creditor.” (Id. at p. 1189.) Our colleagues
`
`concluded, “the transfer to [the attorney], in payment for his legal
`
`services, while a preference, is not for that reason a transfer
`
`made to ‘hinder, delay or defraud’ [the judgment creditor]” (id. at
`
`p. 1191) and affirmed summary judgment for the attorney.
`
`
`
`When Wyzard, supra, 23 Cal.App.4th 1183 was decided, the
`
`“badges of fraud” enumerated in the Uniform Fraudulent
`
`Conveyance Act had not yet been incorporated into Civil Code
`
`section 3439.04. That occurred in 2004, with the addition of
`subdivision (b).4 Nonetheless, the Wyzard court discussed the
`
` 4
`
`
`California law now tracks the Uniform Fraudulent
`Conveyance Act and includes the 11 “badges.” Civil Code section
`3439.04, subdivision (b) provides: “In determining actual intent
`under paragraph (1) of subdivision (a), consideration may be
`given, among other factors, to any or all of the following:
`(1) Whether the transfer or obligation was to an insider.
`
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`11
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`badges and accepted them “‘merely [as] evidence from which an
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`inference of fraudulent intent may be drawn.’” (Ibid.) Wyzard
`
`concluded none of the “badge” inferences at issue in that case
`
`raised a triable issue of material fact because “[i]t was
`
`established and conceded that [the attorney] had rendered the
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`services he claimed to have rendered, and thus had earned the
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`fee secured by the encumbrances.” (Ibid.)
`
`
`
`
`
`
`
`C. Analysis
`
`In Wyzard, supra, 23 Cal.App.4th at page 1186 the
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`defendant’s attorney was a “longtime friend [of] and attorney” for
`
`the debtor defendant. (Id. at p. 1186.) Here, Sheppard Mullin
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`attorney James McCarney, who tried the underlying action on
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`
`
`(2) Whether the debtor retained possession or control of the
`property transferred after the transfer.
`(3) Whether the transfer or obligation was disclosed or concealed.
`(4) Whether before the transfer was made or obligation was
`incurred, the debtor had been sued or threatened with suit.
`(5) Whether the transfer was of substantially all the debtor's
`assets.
`(6) Whether the debtor absconded.
`(7) Whether the debtor removed or concealed assets.
`(8) Whether the value of the consideration received by the debtor
`was reasonably equivalent to the value of the asset transferred or
`the amount of the obligation incurred.
`(9) Whether the debtor was insolvent or became insolvent shortly
`after the transfer was made or the obligation was incurred.
`(10) Whether the transfer occurred shortly before or shortly after
`a substantial debt was incurred.
`(11) Whether the debtor transferred the essential assets of the
`business to a lienor that transferred the assets to an insider of
`the debtor.”
`
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`12
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`behalf of the Ampton defendants, worked closely with Strenger to
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`try to ensure the law firm’s bills would be paid before plaintiffs
`
`recovered anything on their judgment. McCarney and the law
`
`firm continued to represent the Ampton defendants in a variety
`
`of postjudgment matters and continued to bill for their services.
`
`The subsequent real property lien was to secure payment of
`
`attorney fees that accrued after the trial in the underlying action
`
`concluded.
`
`
`
`Plaintiffs contend Sheppard Mullin’s apparent failure to
`
`attempt to enforce the lien reflects collusion with the Ampton
`
`defendants and is an indicia of fraud that should have defeated
`
`summary judgment. But as judgment creditors, plaintiffs did not
`
`need to wait for Sheppard Mullin to act. Plaintiffs could have
`
`forced the issue. (See Code Civ. Proc., § 720.510 et seq.)
`
`
`
`The underlying judgment debtors in Wyzard, supra, 23
`
`Cal.App.4th 1183 did not have sufficient assets to satisfy the
`
`judgment and also pay their attorney. Moreover, the individual
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`judgment debtor had given his former wife a lien on the same
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`property. (Id. at pp. 1186, 1187.)
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`Here, it initially appeared Strenger had sufficient assets to
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`pay the Sheppard Mullin fees and at least a portion of plaintiffs’
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`judgment. It also appeared the property to which Sheppard
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`Mullin’s lien attached was, on paper, worth far more than the
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`lien itself. In fact, plaintiffs’ counsel agreed Strenger could use
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`the art and furnishings not only to pay attorney fees, but also to
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`pay Ampton’s ongoing expenses. Nothing in the record indicates
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`if, or how much of, Strenger’s assets were consumed running
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`Ampton.
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`As in Wyzard, supra, 23 Cal.App.4th at page 1191,
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`plaintiffs here also disputed the amount of attorney fees the law
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`13
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`FILED: NEW YORK COUNTY CLERK 06/23/2017 12:50 PM
`NYSCEF DOC. NO. 155
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`INDEX NO. 151885/2015
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`RECEIVED NYSCEF: 06/23/2017
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`firm charged. To the extent there was a factual issue as to the
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`amount of Sheppard Mullin’s fees, it did not rise to the level of an
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`issue of material fact sufficient to defeat summary judgment.
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`The declaration of plaintiffs’ counsel was not so much fact-based
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`as it was argument. The trial court presided over the lawsuit
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`before, during, and after trial and considered the evidence
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`concerning the amount of the legal fees. The “‘experienced trial
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`judge is the best judge of the value of professional services
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`rendered in his court.’” (Serrano v. Priest (1977) 20 Cal.3d 25,
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`49.) In this case, the experienced trial judge was not making a
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`judgment call concerning a precise amount for attorney fees; he
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`was acknowledging the client was obligated to pay for the legal
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`services Sheppard Mullin provided.
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`
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`Plaintiffs further argue that Wyzard, supra, 23 Cal.App.4th
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`1183 did not involve concealment of the lien from the debtor, as
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`allegedly occurred here. Citing to the transcript of the hearing on
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`the Ampton defendants’ request for a temporary stay of
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`execution, plaintiffs contend the Ampton defendants, through
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`Sheppard Mullin, intentionally concealed the existence of the lien
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`from them at the hearing, conduct they insist raised an inference
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`of fraudulent intent.
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`
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`A fair reading of the transcript of the temporary stay
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`proceedings, however, supports the inference that the Ampton
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`defendants adequately informed the trial court and counsel of
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`their intent to use the art collection to pay attorney fees as well
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`as the costs of operating Ampton. They also mentioned using the
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`asset to pay for an appellate bond, but that did not occur.
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`Plaintiffs’ counsel understood and agreed to the use of the art
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`collection for that specific purpose because he drafted and
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`submitted a proposed order that expressly allowed the Ampton
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`14
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`FILED: NEW YORK COUNTY CLERK 06/23/2017 12:50 PM
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`RECEIVED NYSCEF: 06/23/2017
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`defendants to encumber the art collection to pay attorney fees.
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`Given those facts, the purported concealment did not give rise to
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`a material factual dispute concerning the Ampton defendants’
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`intent to defraud.
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`Nor was there a triable issue of fact as to the constructive
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`fraud claim. The viability of that cause of action turned on
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`whether the debtor received a “reasonably equivalent value in
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`exchange” (Civ. Code, § 3439.04, subd. (a)(2)), not on any actual
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`intent to hinder, delay or defraud. Strenger’s art collection was
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`valued by Sotheby’s at between $6 and $14 million; the debt to
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`Sheppard Mullin was at most $837,702. From these facts,
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`plaintiffs conclude there was no reasonable equivalence between
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`the value of the property pledged to secure the debt and the debt
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`itself.
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`Under California law, the Sheppard Mullin lien was
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`coextensive with the debt, not the security. (See, e.g., 8 Witkin,
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`Cal. Procedure (5th Ed. 2008) Enforcement of Judgments, § 488,
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`p. 527 [“‘The premise of the [Uniform Fraudulent Transfers] Act
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`is that the value of the interest transferred for security is
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`measured by and thus corresponds exactly to the debt secured’”];
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`Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 439 [“A security
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`interest cannot exist without an underlying obligation, and
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`therefore a [lien] is generally extinguished by either payment [of
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`the amount of the debt] or sale of the property in an amount
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`which satisfies the lien”].) Although Sheppard Mullin had a
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`potentially larger pool of resources from which to satisfy the lien,
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`once the value of the items executed upon reached $837,702, the
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`debt would be satisfied and the lien extinguished. This is not a
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`situation where the preferred creditor created a lien in excess of
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`the money it claimed was due.
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`15
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`FILED: NEW YORK COUNTY CLERK 06/23/2017 12:50 PM
`NYSCEF DOC. NO. 155
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`INDEX NO. 151885/2015
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`RECEIVED NYSCEF: 06/23/2017
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`
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`Plaintiffs also maintain the Ampton defendants’ conduct
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`following the entry of judgment in the underlying action,
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`including efforts to stay enforcement of the judgment without
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`posting an appellate bond and the initial and subsequent
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`contempt citations in New York, the first of which led to our
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`dismissal of the appeal from the underlying judgment, suggests
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`an intent to defraud. That conduct, however, like the badges of
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`fraud plaintiffs cite, was insufficient to raise a triable issue of fact
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`in light of the holding in Wyzard, supra, 23 Cal.App.4th 1183.
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`
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`Finally, the holding in Wyzard, supra, 23 Cal.App.4th 1183
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`supports sound public policy. Without the “Wyzard rule,”
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`attorneys will have less incentive to represent clients who cannot
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`pay adverse judgments, particularly if entering into a security
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`transaction like the one here exposes them to lawsuits seeking to
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`void the preference.
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`
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`A debtor may treat one legitimate creditor preferentially
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`over another. (Civ. Code, § 3432.) Without a doubt, the
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`preferential treatment may hinder or delay the other creditor’s
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`efforts to satisfy the debt. But as a matter of law, that does not
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`permit the disadvantaged creditor to collaterally attack and void
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`the preferential transfer. The preferential treatment of a
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`legitimate creditor is not a fraudulent transfer. Summary
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`judgment was properly granted.
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`16
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`FILED: NEW YORK COUNTY CLERK 06/23/2017 12:50 PM
`NYSCEF DOC. NO. 155
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`INDEX NO. 151885/2015
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`RECEIVED NYSCEF: 06/23/2017
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`DISPOSITION
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`The judgment is affirmed. Sheppard Mullin is awarded
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`costs on appeal.
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`NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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`DUNNING, J.*
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`We concur:
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`KRIEGLER, Acting P. J.
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`BAKER, J.
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` *
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`Judge of the Orange Superior Court appointed by the Chief
`Justice pursuant to article IV, section 6, of the California
`Constitution.
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`17
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