Tassone v. Tovar

Opinion

EPSTEIN, J.

Gonzalo and Felicitas Tovar and their son Nefi Tovar appeal from a judgment entered in favor of Agostino and Catherine Tassone for

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fraudulent transfer. Appellants argue that there cannot be a fraudulent transfer, as to a creditor, of property subject to a declaration of homestead because such property is exempt from creditors up to the value of the homestead. We agree and reverse the judgment in its entirety.

Factual and Procedural Summary

In 1980, respondents sued appellants Gonzalo and Felicitas Tovar alleging fraud in the sale of real property. In October 1980, after suit was filed, appellants Gonzalo and Felicitas Tovar executed and recorded a declaration of homestead on their house. By grant deed, dated and delivered February 11, 1986, Gonzalo and Felicitas Tovar conveyed the house as a gift to their son, appellant Nefi Tovar, and his wife, Sylvia Tovar. Shortly after that, on May 1, 1986, Nefi Tovar and his wife sold and deeded the house to a third party for $90,000. Both deeds were recorded on May 5, 1986.

At the time of the sale, the applicable homestead exemption was $55,000.

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The net proceeds on the sale were $36,675.05, paid to Nefi Tovar and his wife. Nefi Tovar and his wife used the proceeds towards payment of some of their parents’ debts and expenses, the purchase of a car for the parents and a house for themselves, and for cash gifts to other siblings. None of the proceeds were used to buy a new home for the parents.

On April 8, 1986, a default judgment was entered in favor of respondents in the 1980 lawsuit. Notice of the entry of judgment was sent to appellants in May 1986, after the Tovars had deeded the house to their son and his wife. In February 1990, respondents sued appellants and Sylvia Tovar. They sought “annulment” of the sale of the house and damages for fraudulent transfer by conspiracy, fraudulent transfer-insolvency, and conversion of the house. The trial court decided in favor of appellants on the first cause of action for annulment of the sale of the house and the fourth cause of action for conversion. Respondents prevailed on the other causes of action.