American Express Travel Related Services Co., Inc. v. D & A Corp.
This is a very interesting fraudulent transfer and successor company liability case arising out of California.
American Express Travel Related Services Co., Inc. v. D & A Corp., 2007 WL 3217565 (E.D.Cal., Slip Copy, Oct. 29, 2007)
United States District Court, E.D. California.
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., Plaintiff,
v.
D & A CORPORATION dba Bakersfield Wholesale Foods, et al., Defendants.
No. CV-F-04-6737 OWW/TAG.
Oct. 29, 2007.
Mark S. Moore, PHV, Ira N. Glauber, Jaffe & Asher, LLP, New York, NY, Steven Koch, Edward Warren Gubler, Gubler & Koch LLP, Visalia, CA, for Plaintiff.
Heather S. Cohen, PHV, Marderosian Runyon Cercone Lehman and Armo, Seattle, WA, Michael G. Marderosian, Marderosian, Runyon, Cercone, Lehman & Armo, Russell Gene Vanrozeboom, Caswell Bell & Hillison LLP, Fresno, CA, Gary L. Huss, Wild Carter and Tipton, Fresno, CA, Curtis E. Floyd, Floyd & Horrigan, Bakersfield, CA, for Defendants.
MEMORANDUM DECISION GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (Doc. 362)
OLIVER W. WANGER, United States District Judge.
*1 American Express Travel Related Services Company, Inc. (hereinafter referred to as American Express) has sued Defendants D & A Corporation dba Bakersfield Wholesale Foods ("Bakersfield Wholesale"), Abdo Aezah ("Abdo"), Malaka M. Aezah, David Aezah ("David"), Bakersfield Grocery Wholesale ("Bakersfield Grocery"), David Aezah Investment, Inc. ("DAI"), and Does 1-100, inclusive, by the Third Amended Complaint (TAC) filed on February 23, 2007 (Doc. 158). David, Bakersfield Grocery and DAI are sometimes referred to collectively as the "David Defendants."
American Express moves for an order (1) granting summary judgment against David, Bakersfield Grocery, and DAI on its claims for fraudulent transfer, conspiracy to commit fraudulent transfer, alter ego and successor liability; (2) directing the payment of $1.4 million, representing the proceeds of David's sale of certain property in Mississippi maintained in escrow pending the outcome of this lawsuit; and (3) dismissing all the David Defendants' affirmative defenses alleged in their Answer as a matter of law.
A. GOVERNING STANDARDS.
Summary judgment is proper when it is shown that there exists "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. A fact is "material" if it is relevant to an element of a claim or a defense, the existence of which may affect the outcome of the suit. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). Materiality is determined by the substantive law governing a claim or a defense. Id. The evidence and all inferences drawn from it must be construed in the light most favorable to the nonmoving party. Id.
The initial burden in a motion for summary judgment is on the moving party. The moving party satisfies this initial burden by identifying the parts of the materials on file it believes demonstrate an "absence of evidence to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmoving party to defeat summary judgment. T.W. Elec., 809 F.2d at 630. The nonmoving party "may not rely on the mere allegations in the pleadings in order to preclude summary judgment," but must set forth by affidavit or other appropriate evidence "specific facts showing there is a genuine issue for trial." Id. The nonmoving party may not simply state that it will discredit the moving party's evidence at trial; it must produce at least some "significant probative evidence tending to support the complaint." Id. The question to be resolved is not whether the "evidence unmistakably favors one side or the other, but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." United States ex rel. Anderson v. N. Telecom, Inc., 52 F.3d 810, 815 (9th Cir.1995). This requires more than the "mere existence of a scintilla of evidence in support of the plaintiff's position"; there must be "evidence on which the jury could reasonably find for the plaintiff." Id. The more implausible the claim or defense asserted by the nonmoving party, the more persuasive its evidence must be to avoid summary judgment." Id. As explained in Nissan Fire & Marine Ins. Co. v. Fritz Companies, 210 F.3d 1099, 1102-1103 (9th Cir.2000):
*2 The vocabulary used for discussing summary judgments is somewhat abstract. Because either a plaintiff or a defendant can move for summary judgment, we customarily refer to the moving and nonmoving party rather than to plaintiff and defendant. Further, because either plaintiff or defendant can have the ultimate burden of persuasion at trial, we refer to the party with and without the ultimate burden of persuasion at trial rather than to plaintiff and defendant. Finally, we distinguish among the initial burden of production and two kinds of ultimate burdens of persuasion: The initial burden of production refers to the burden of producing evidence, or showing the absence of evidence, on the motion for summary judgment; the ultimate burden of persuasion can refer either to the burden of persuasion on the motion or to the burden of persuasion at trial.
A moving party without the ultimate burden of persuasion at trial-usually, but not always, a defendant-has both the initial burden of production and the ultimate burden of persuasion on a motion for summary judgment ... In order to carry its burden of production, the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial ... In order to carry its ultimate burden of persuasion on the motion, the moving party must persuade the court that there is no genuine issue of material fact ....
If a moving party fails to carry its initial burden of production, the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial ... In such a case, the nonmoving party may defeat the motion for summary judgment without producing anything ... If, however, a moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense ... If the nonmoving party fails to produce enough evidence to create a genuine issue of material fact, the moving party wins the motion for summary judgment ... But if the nonmoving party produces enough evidence to create a genuine issue of material fact, the nonmoving party defeats the motion.
B. FACTUAL BACKGROUND.
1. American Express's Statement of Undisputed Facts.
In moving for summary judgment, American Express proffered the following facts as undisputed. The David Defendants accept these facts as undisputed except where noted and discussed in this Memorandum Decision.
AE UMF 1: American Express Travel Related Services, Inc. is a corporation organized and existing under the laws of the State of New York, having its principal place of business at American Express Tower, World Financial Center, New York, New York 10285.FN1
FN1. The David Defendants contend that the evidence supporting this fact is inadmissible hearsay but, without waiving the objection, assert that the fact is undisputed. There are a number of undisputed facts with respect to which the David Defendants make the same objection: UMF Nos. 3, 5, 6, 7, 8, 13, 15, 17, 19, 21, 22, 23, 27, 28, 30, 31, 33, 34, 35, 36, 38, 39, 40, 42, 43, 44, 45, 47, 48, 49, 50, 51, 52, 53, 56, 57, 58, and 59. Because these facts are otherwise undisputed, the evidentiary objections do not suffice to raise a genuine issue of material fact.
This fact is undisputed.
AE UMF 2: Defendant David Aezah is a natural person who lives at 9008 Limoges Way, Bakersfield, California 93311.
*3 This fact is undisputed.
AE UMF 3: Defendant Abdo Aezah is a natural person who lives at 2516 El Portal Drive, Bakersfield, California 93309.
This fact is undisputed.
AE UMF 4: David and Abdo are brothers.
This fact is undisputed.
AE UMF 5: Defendant D & A Corporation dba Bakersfield Wholesale was a corporation organized and existing under the laws of the State of California with its principal place of business located at 402 California Avenue, Bakersfield, California 93304. Bakersfield Wholesale was operated as a wholesale grocery company that sold candy, soda, cigarettes, and other products to mini marts and other retail grocery outlets.
This fact is undisputed.
AE UMF 6: Bakersfield Wholesale began operations on or about January 3, 2005.
The David Defendants object to the supporting evidence as inadmissible hearsay and assert: "Without waiving said objections, DISPUTED. See Decl. of Marderosian, Ex. A."
The evidentiary support for this fact is the Admitted Facts section of the Scheduling Conference Order filed on March 7, 2007 (Doc. 243). The Admitted Facts section of this Order states that the facts set forth "are deemed proven without further proceedings." Exhibit A to Mr. Marderosian's declaration are copies of corporate documents indicating that Bakersfield Wholesale was incorporated and may have been doing business in late 2003.
The David Defendants retained new counsel after the Scheduling Conference Order was filed. The David Defendants have not moved under Rule 16, Federal Rules of Civil Procedure, to be relieved from the Admitted Facts set forth in the Scheduling Conference Order. Therefore, this fact is admitted.
AE UMF 7: Defendant Dave Aezah Investment, Inc. (DAS) is a corporation organized and existing under the laws of the State of California with its principal place of business located at 402 California Avenue, Bakersfield, California 93304. DAI is owned and controlled by David.
This fact is undisputed.
AE UMF 8: Bakersfield Grocery Wholesale is an unincorporated business entity which is owned and operated by David and began operations on or about January 3, 2005.
This fact is undisputed.
AE UMF 9: Bakersfield Wholesale's original owner was Abdo.
The David Defendants dispute this fact to the extent that Abdo is described as the "original owner", referring to Paragraphs 2-3 of David's declaration in opposition to the motion for summary judgment:
2. When Abdo and I executed the Declaration in regard to my forgiveness of the loan, the term ‘business' did not refer to Bakersfield Wholesale Foods. It was an expression we use that was meant to mean Abdo should no longer be concerned about the property and that it was now my business, not his. I have never owned any interest in Bakersfield Wholesale Foods. I did not become an owner of Bakersfield Wholesale Foods at any point. That business belonged exclusively to Abdo. I did help out on occasion when Abdo needed it but was neither an owner, officer, or employee.
*4 3. I was added as a signatory on one of Bakersfield Wholesale bank accounts; however, this was done for convenience purposes only. Abdo wanted me to be able to help him if he was busy or out of town. For some unknown reason, after I was added as a signatory, the bank would occasionally send me the bank statements. This was a mistake on their part and was not done at my request. I did not tell the bank that I was the owner of Bakersfield Wholesale and I was not the primary signatory on the account. Abdo told the bank that he was the owner of Bakersfield Wholesale Foods so I don't know why the bank would send me the bank statements. Nevertheless, when I did receive them, I gave them to Abdo as they pertained to his business, not mine.
The David Defendants also refer to Abdo's deposition transcript but do not provide page and line references.FN2 David's deposition transcript of September 13, 2006 at pages 21-22 and 26 is also referenced but the testimony does not provide evidentiary support for the disputed fact.
FN2. In Carmen v. San Francisco Unified School District, 237 F.3d 1026, 1031 (9th Cir.2001), the Ninth Circuit held:
[T]he district court may determine whether there is a genuine issue of material fact, on summary judgment, based on the papers submitted on the motion and such other papers as may be on file and specifically referred to and facts therein set forth in the motion papers. Though the court has discretion in appropriate circumstances to consider other materials, it need not do so. The district court need not examine the entire file for evidence establishing a genuine issue of material fact, where the evidence is not set forth in the opposing papers with adequate references to that it could conveniently be found.
AE UMF 10: Bakersfield Wholesale purchased approximately $3.6 million worth of Costco Cigarettes in November and December, 2004.
The David Defendants object that the evidentiary support for this fact is inadmissible hearsay.
The evidentiary support is the Admitted Fact section of the Scheduling Conference Order:
8. Bakersfield Wholesale purchased approximately $3.6 million worth of Costco Cigarettes in November and December, 2004, using American Express corporate accounts. Abdo has admitted to making all such purchases on behalf of Bakersfield Wholesale.
The hearsay objection is without merit.
The David Defendants dispute UMF 10 "to the extent that the credit card debt was incurred by Bakersfield Wholesale and Abdo Aezah, Malaka Aezah, and Fahd Aezah." The David Defendants refer to Exhibit B to Mr. Marderosian's declaration. Exhibit B is described as "true and correct copies of the credit applications, the Guarantee of Payment Agreement for Individual Accounts and the American Express credit card statements which show that Abdo Aezah, Malaka Aezah, D & A Corporation, and Fahd Aezah incurred the credit card debt at issue in this matter."
It is not reasonably disputed whether Bakersfield Wholesale made the credit card purchases of the Costco Cigarettes. The Scheduling Conference Order admits this fact from which the David Defendants have not sought relief. The credit cards were issued to Bakersfield Wholesale (actually D & A Corporation dba Bakersfield Wholesale). Based on Exhibit B, Abdo, Malaka and Fahd made charges on the Bakersfield Wholesale credit cards.
AE UMF 11, 12 and 13:
Abdo regularly collects rent from apartment buildings owned by David, then deposits monies into Abdo's own account, with David's approval.
Tenants owing monies to David made checks payable directly to Abdo.
Abdo pays taxes and other expenses for David's buildings out of his own personal checking account.
*5 The David Defendants object that the supporting evidence, which are references to David's deposition and deposition exhibits, are inadmissible hearsay.
Defendants dispute Facts 11, 12 and 13, referring to Paragraph 9(a) of David's declaration:
... Abdo ... has collected rent on my behalf when I was unavailable to do so. As a result, many of the tenants know Abdo. Sometimes, they will make their rent checks out to Abdo. When Abdo collects the rent, if the tenant makes the check payable to Abdo, Abdo may deposit the money in his account and give me the cash. This only happens occasionally. However, may [sic] times, even if the check is made out to Abdo, the check is deposited into my account because it is rental income to me alone. I am the only owner of these rental properties. Abdo and I do not have any rental properties together. Sometimes I ask Abdo to make repairs or pay various bills from the rent that he collects on my behalf. The money for the repairs or the other bills still comes directly from money that is owed to me exclusively.
David's testimony, under oath, is unambiguous. Defendants also refer to various parts of David's deposition transcript in disputing these facts.
AE UMFS 11, 12 and 13 are disputed.
AE UMF 14: Bakersfield Grocery Wholesale operates from the same address and operates exactly the same business as Bakersfield Wholesale.
The David Defendants object that the supporting evidence is inadmissible hearsay. The supporting evidence is David's response to Interrogatory No. 6 and Paragraphs 66 and 68 of the David Defendants' Answer filed on August 7, 2007 (Doc. 351). The David Defendants hearsay objections are without merit.
This evidence establishes that Bakersfield Grocery Wholesale operates from the same address as Bakersfield Wholesale but does not establish that the two businesses are exactly the same.
The David Defendants dispute this fact, referring to Paragraph 9(b) of David's declaration:
... I do not have knowledge of who all of Bakersfield Wholesale's customers and suppliers were. Based on some of the documentation I have seen in this case, it would appear that some of my customers and suppliers also were customers or suppliers of Bakersfield Wholesale. However, I believe that there are many customers and suppliers of Bakersfield Grocery Wholesale that there not mentioned in relation to Bakersfield Wholesale. I am attaching a list of some of my customers and suppliers as Exhibit ‘A.’ The majority of these customers and suppliers have never been mentioned or confirmed as customers or suppliers of Bakersfield Wholesale during my deposition. I do not know if they were also customers and suppliers of Bakersfield Wholesale. Many people on the list were people that I came across in my long career n[sic] this industry. Bakersfield is a small town and many convenience store operators know one another.
Defendants also refer to portions of David's deposition in disputing Fact 14.
*6 AE UMF 14 is disputed.
AE UMF 15: On August 27, 2004, Abdo delivered a grant deed to David, transferring title to the Warehouse to David. The transfer was recorded with the Clerk of Kern County, California on September 14, 2004.
This fact is undisputed.
AE UMF 16: On August 13, 2004, David was made a signatory on the accounts of Bakersfield Wholesale.
Defendants object that the supporting evidence is inadmissible hearsay. The supporting evidence is David's deposition testimony and deposition exhibit 28.
Defendants dispute Fact 16, referring to Paragraph 9(c) of David's declaration:
... It is my understanding from the documents that have been produced that Bakersfield Wholesale had more than one bank account with Wells Fargo. I was only added as a signatory on one of them.
The evidence is undisputed as to one Bakersfield Wholesale bank account with Wells Fargo, but disputed as to other accounts Bakersfield Wholesale may have had with Well Fargo.
AE UMF 17: As of August or September 2004, account statements were sent to David's mailing address, rather than to Abdo's mailing address.
This fact is undisputed.
AE UMF 18: In August or September 2004, David began placing orders for Bakersfield Wholesale and signing checks on its behalf.
Defendants object that the supporting evidence is inadmissible hearsay. The supporting evidence is David's deposition testimony and copies of checks signed by David attached to Mr. Glauber's affidavit filed previously in this action.
Defendants dispute Fact 18 to the extent that David "was not the only individual that placed orders or signed checks."
The David Defendants do not dispute that David began placing orders for Bakersfield Wholesale and signing checks, among others who signed, on behalf of Bakersfield Wholesale in August and September 2004.
AE UMF 19: David and Abdo executed a written "Declaration" dated September 19, 2004, which stated (1) that in exchange for the satisfaction of an alleged $150,000 loan from David to Abdo, Abdo was transferring the Warehouse building located at 402 California Avenue to David, and (2) that "[t]he borrower [Abdo] no longer has an interest of any king [kind] in this property or any business within it."
AE UMF 20: In November and December 2004, David wrote checks drawn on the Bakersfield Wholesale account in order to make mortgage payments on the Warehouse (which he admits owning as of those dates).
Defendants object that the supporting evidence, which are copies of checks signed by David attached to Mr. Glauber's affidavit filed previously in this action, David's deposition testimony, and Paragraph 50 of the Answer, are inadmissible hearsay and "vague and ambiguous." Fact 20 is disputed "to the extent that David only admits to owning the Warehouse and vehemently denies ever owning Bakersfield Wholesale."
It is undisputed that David wrote checks drawn on the Bakersfield Wholesale account to make mortgage payments on the Warehouse and it is disputed whether David owned Bakersfield Wholesale.
*7 AE UMF 21: On December 4, 2004, Bakersfield Wholesale made three payments to American Express which were returned for lack of funds.
This fact is undisputed.
AE UMF 22: American Express terminated Bakersfield Wholesale's American Express accounts and demanded payment in full of the total outstanding balance that was owed thereon.
This fact is undisputed.
AE UMF 23: Despite due demand, no payments on the account were made.
This fact is undisputed.
AE UMF 24: Abdo borrowed $150,000 from David, which Abdo has never repaid.
Defendants object that the supporting evidence, the Answer and David's interrogatory responses, are inadmissible hearsay.
Defendants dispute Fact 24 "to the extent that the note for $150,000 was forgiven in exchange for the conveyance of the Warehouse and assumption of the mortgage on the Warehouse."
AE UMF 24 is disputed.
AE UMF 25: Bakersfield Grocery Wholesale services the same customers that Bakersfield Wholesale did and makes purchases from the same suppliers.
This fact is disputed.
AE UMF 26: David runs Bakersfield Grocery Wholesale with the substantial assistance of his brother Abdo.
Defendants object that the supporting evidence, David's deposition testimony, is inadmissible hearsay.
Defendants dispute Fact 26 on the ground that the term "substantial is vague and ambiguous", referring to other portions of David's deposition testimony.
This fact is disputed.
AE UMF 27: In early 2005, David deposited checks from Bakersfield Wholesale's customers into Bakersfield Grocery Wholesale's account.
This fact is undisputed.
AE UMF 28: On January 15, 2005, David canceled a proposed bulk sale because of the TRO obtained by American Express in this lawsuit on January 4, 2005, which forbade transfers of assets from Bakersfield Wholesale to third parties.
This fact is undisputed.
AE UMF 29: David did not cancel the proposed bulk sale of the inventory until January 15, 2005.
Defendants dispute this fact "to the extent that the sale may have been cancelled prior to January 15, 2005 but notification was not provided until that day." Defendants cite no evidentiary support for this assertion.
AE UMF 29 is undisputed.
AE UMF 30: On December 6, 2004, David rented a large unit at a storage facility in Bakersfield, California, called Fortress Self-Storage.
This fact is undisputed.
AE UMF 31: David filled out a ‘Customer Identification" form required by Fortress Self-Storage, writing in "Bakersfield Wholesale" as his place of employment.
Defendants do not dispute that the Customer Identification Form lists Bakersfield Wholesale as David's place of employment. Defendants dispute that David was employed by Bakersfield Wholesale. In so disputing, David refers to his deposition testimony on July 9, 2007 at page 544:
Q. You list as your place of employment Bakersfield Wholesale. Why did you list Bakersfield Wholesale there?
*8 A. They were asking for employment so I just list that. It doesn't mean I was working there.
AE UMF 31 is undisputed.
AE UMF 32: Abdo moved at least $3 million in Costco Cigarettes from Bakersfield Wholesale to Fortress Self-Storage.
The evidentiary basis for this fact is the Admitted Facts in the Scheduling Conference Order:
16. A fire broke out on July 4, 2005, at the Fortress Self-Storage which damaged several units, including David's rental unit. As part of an insurance claim, David Aezah submitted receipts showing the cost of the cigarettes. The receipts submitted include November-December 2004 receipts for the purchase of cigarettes by Bakersfield Wholesale at Costco, using the American Express credit card. Based on these receipts, the insurance carrier (Travelers) issued a check to David, in his individual capacity, in the amount of $341,197.28. On or about January 11, 2006, David deposited the check into Bakersfield Grocery Wholesale's account at Citibank.
Defendants dispute AE UMF 32 claiming the cited evidentiary support does not prove these facts. Defendants assert that "[i]t is unknown by responding defendant as to how many cigarettes were transferred by Abdo to Fortress." Defendants refer to David's deposition testimony of July 9, 2007 at page 555 where David testified that he never learned that Abdo was storing cigarettes at Fortress Self-Storage. Defendants also refer to Abdo's deposition testimony of January 15, 2007 at pages 257-260.
Although David may not have known the number of cigarettes, he knew that he had cigarettes stored at Fortress and that the quantity there was in excess of David's cigarettes.
AE UMF 33: The records at Fortress show that the unit that David was renting had been accessed at least fifteen times between December 6, 2004, and July 4, 2005, the date of a fire at Fortress Self-Storage.
This fact is undisputed.
AE UMF 34: A fire at Fortress Self-Storage on or about July 4, 2005, damaged several storage units, including the unit rented by David. The renter deemed responsible for the fire was insured by Travelers, which engaged an insurance adjuster, Cunningham Lindsey U .S., Inc., to handle the claims. The representative of Cunningham Lindsey was Robert Bycott, an experienced adjuster who had investigated hundreds of fires, and at least ninety fires in commercial buildings.
This fact is undisputed.
AE UMF 35: After the fire, David arranged to have the remaining cigarettes removed to a container unit near the Warehouse at 402 California Avenue.
This fact is undisputed.
AE UMF 36: In order to establish the value of the cigarettes destroyed at Fortress, David submitted the November-December 2004 receipts for the purchase of cigarettes by Bakersfield Wholesale, at Costco, using the American Express credit card, which showed the cost of the cigarettes.
This fact is undisputed.
AE UMF 37: Following the fire at Fortress Self-Storage, David transferred insurance proceeds belonging to Bakersfield Wholesale to Bakersfield Grocery Wholesale.
*9 The evidentiary basis for this is Admitted Facts, Paragraph 16, of the Scheduling Conference Order.
Defendants dispute this fact, referring to Paragraph 9(f) of David's declaration in opposition to this motion:
As to plaintiff's undisputed material fact no. 37: Travelers Insurance Company issued a check to me for $341,197.28. I deposited the check in my account. I then gave the money to Abdo because the insurance money was to compensate him for the lost cigarettes.
Defendants also refer to David's July 9, 2007 deposition testimony at pages 612, 619-620, and 623-625.
This fact is undisputed.
AE UMF 38: David executed a release of Travelers in the United States and personally delivered it to Bycott on December 27, 2006. Travelers issued a check to David personally in the amount of $341,197.28.
This fact is undisputed.
AE UMF 39: On or about January 11, 2006, David deposited the check into Bakersfield Grocery Wholesale's account at Citibank.
This fact is undisputed.
AE UMF 40: David subsequently transferred such insurance proceeds from Bakersfield Grocery Wholesale to Abdo.
This fact is undisputed.
AE UMF 41: On January 4, 2005, this Court signed a temporary restraining order preventing the defendants (which at that time did not include David) from transferring any real property that might be available to satisfy the debt.
Defendants do not dispute this fact. However, referring to Paragraph 9(j) of David's declaration, Defendants assert: "in that David was not a defendant in the matter, he was not aware of the temporary restraining order." However, there is no paragraph 9(j) in David's declaration.
This fact is undisputed.
AE UMF 42: In early January 2005, following the filing of the California Action, Abdo deeded title to his residence to David for no consideration.
This fact is undisputed.
AE UMF 43: After American Express moved to hold Abdo in contempt for this fraudulent conveyance, the house was deeded back to Abdo by David.
This fact is undisputed.
AE UMF 44: In January 2005, David took checks which had been made payable to "Bakersfield Wholesale Foods," for goods purchased in 2004-many of which were issued in 2004, before Bakersfield Grocery Wholesale was formed or licensed-and deposited them directly into the bank account of the new entity, Bakersfield Grocery Wholesale.
Defendants do not dispute this fact. However, they assert: "[T]he monies for each and every check were given back to Bakersfield Wholesale." Defendant cite Paragraph 9(k) of David's Declaration as support. However, there is no Paragraph 9(k).
This fact is undisputed.
AE UMF 45: David wrote approximately $350,000.00 in checks on his personal account and on the account of Bakersfield Grocery Wholesale in the fall of 2005 through the spring of 2006 to various individuals who cashed checks in Yemen.
This fact is undisputed.
AE UMF 46: In or about April 2006, the Aezahs began negotiations for the purchase of the "Carver Village Apartments," a large apartment complex located at 1912 Live Oak Street, Pascagoula, Mississippi (the "Mississippi Property").
*10 Defendants dispute Fact 46, relying on Paragraph 9(g) of David's Declaration:
In April 2006, I began negotiations to purchase Carver Village Apartments for my acquisition of these apartments. Any participation by Abdo was at my request and did not result in or reflect any ownership interest for Abdo.
AE UMF 46 is disputed.
AE UMF 47: In 2006, the property was listed for sale through the real estate firm of Cumbest Realty, Inc. ("Cumbest Realty"). Although the investment was made in David's name, Abdo was personally involved in negotiations for the transaction (including price negotiations) and Abdo traveled to Mississippi in order to inspect the property before David purchased it.
This fact is undisputed.
AE UMF 48: In order to pay for the property, on May 9, 2006, Abdo and an employee of Bakersfield Grocery took 6,000 $100 bills, for a total of $600,000, from a safe at 402 California and deposited the cash into the bank account of Bakersfield Grocery Wholesale at Citibank. Citibank's records confirm the deposit of 6,000 $100 bills on May 9, 2006. On May 10, 2006, Abdo and the employee deposited another $707,500 in $100 bills into the bank account.
This fact is undisputed.
AE UMF 49: Citibank records show the deposit of more than 13,000 $100 bills by defendants, for a total of more than $1.3 million.
This fact is undisputed.
AE UMF 50: Citibank records show checks written by David Aezah with this money to the real estate firm in Mississippi to purchase the Mississippi Property.
This fact is undisputed.
AE UMF 51: On or about May 17, 2006, David closed on the purchase of the Mississippi Property, using the cash Abdo had deposited into the Bakersfield Grocery Wholesale account.
This fact is undisputed.
AE UMF 52: In August 2006, David learned that it would be difficult to develop the Mississippi Property because the buildings in question had been condemned or were in the process of being condemned for violations of building codes.
This fact is undisputed.
AE UMF 53: Abdo and a handyman then traveled to Mississippi for seven to eight days and consulted with local contractors to determine whether the apartments could be brought into compliance with building codes.
This fact is undisputed.
AE UMF 54: David and Abdo decided not to develop the property, and began investigating the possibility of reselling it.
Defendants dispute this fact, relying on Paragraph 9(h) of David's Declaration:
I made all decisions about the property in Mississippi as I was the sole owner of the property. Abdo did as I instructed. He was helping me out as I was busy and/or otherwise unavailable. He did not contribute financially to the acquisition of the property. I was the sole owner of the property.
AE UMF 54 is disputed.
AE UMF 55: Abdo began to make arrangements to list the property for sale through Cumbest Realty.
Defendants dispute Fact 55, relying on Paragraph 9(h) of David's Declaration quoted above re Fact 54.
*11 AE UMF 55 is disputed.
AE UMF 56: Ultimately, however, David began negotiations to sell the Mississippi Property to the Low Income Family Enrichment Foundation (the "Life Foundation") which had previously been interested in the property. The parties negotiated a sale price of $1,450,000 and entered into a contract of sale dated July 17, 2006.
This fact is undisputed.
AE UMF 57: On September 19, 2006, American Express, having learned about the proposed transaction from bank records produced by Citibank, brought an action in the United States District Court for the Southern District of Mississippi (the "Mississippi Action") in order to enjoin its sale and prevent the loss of proceeds of the proposed sale.
This fact is undisputed.
AE UMF 58: On November 13, 2006, American Express agreed to lift a lis pendens it had obtained and permit the sale of the Mississippi Property to proceed, subject to execution by David, American Express, and the Life Foundation of an Agreement and Escrow Instructions dated November 13, 2006, which was executed by all parties.
This fact is undisputed.
AE UMF 59: On February 21, 2007, American Express dismissed the Mississippi Action without prejudice, pursuant to a stipulation signed by counsel for David and American Express, and so ordered by the Court in this action, which provides that the disposition of the proceeds of the sale of the Carver Village Apartments may be determined by this Court.
This fact is undisputed.
2. David Defendants' Supplemental Statement of Undisputed and Disputed Facts.
The David Defendants set forth the following as undisputed material facts:
DD UMF 1: In or about May 2004, Abdo Aezah applied for and was granted a corporate credit card on behalf of Bakersfield Wholesale.
This fact is undisputed.
DD UMF 2: In or about September 2004, Abdo Aezah applied for and was granted a corporate credit card on behalf of D & A Corporation.
This fact is undisputed.
DD UMF 3: Abdo requested three additional American Express credit cards in the name of Abdo Aezah/Bakersfield Wholesale, Malaka Aezah/Bakersfield Wholesale, Fahd Aezah/Bakersfield Wholesale.
This fact is undisputed.
DD UMF 4: American Express issued another credit card to D & A Corporation.
This fact is undisputed.
DD UMF 5: None of the American Express cards issued were issued to David Aezah, Bakersfield Grocery Wholesale, or Dave Aezah Investment, Inc.
This fact is undisputed.
DD UMF 6: David did not use any of the American Express cards that were issued.
This fact is undisputed.
DD UMF 7: By designating Abdo Aezah, Malaka Aezah and Fahd Aezah to receive American Express cards, Bakersfield Wholesale agreed to be bound by the terms and conditions of the Agreement between Corporate Account and American Express and Corporate Cardmember and American Express.
This fact is undisputed.
DD UMF 8: By accepting the corporate card, Abdo Aezah, Malaka Aezah, and Fahd Aezah agreed to be individually responsible for the debt incurred. David Aezah was not a party to any of these agreements in that a card was not issued to him.
*12 This fact is undisputed.
DD UMF 9: The American Express Agreement with its card holders provides that the individual whose name appears on the card is responsible for all charges.
This fact is undisputed.
DD UMF 10: American Express dismissed all claims against Fahd Aezah despite a corporate card being issued to him.
This fact is undisputed.
DD UMF 11: David Aezah has over 22 years of experience operating or owning mini marts, liquor stores, and gas stations.
This fact is undisputed.
DD UMF 12: Prior to issuing Bakersfield Wholesale the additional credit cards in September 2004, American Express determined that Bakersfield Wholesale and/or Abdo Aezah were credit risks. The account was initially coded extreme.
This fact is undisputed.
DD UMF 13: The collective limit on the credit cards issued by American Express to Bakersfield Wholesale was supposed to be $110,000.
This fact is undisputed.
DD UMF 14: An investigative report was prepared by American Express' Director of Security for the Western Region. David Aezah's name is not included in the report. No investigative report was ever prepared by American Express which identified David Aezah as a participant in any alleged fraud.
This fact is undisputed.
DD UMF 15: The promissory note that was executed by David and Abdo Aezah to secure a loan from David to Abdo in the amount of $150,000 identifies the warehouse located at 402 California Avenue in Bakersfield, California as the only security for the loan.
This fact is undisputed.
DD UMF 16: There was a mortgage on the warehouse located at 402 California Avenue in Bakersfield, California in the amount of $280,000 at the time the promissory note was executed.
This fact is undisputed.
DD UMF 17: Abdo Aezah/Bakersfield Wholesale agreed to pay David Aezah rent to continue to occupy the warehouse after David Aezah became the owner of the warehouse.
This fact is undisputed.
DD UMF 18: Abdo Aezah is the only owner of Bakersfield Wholesale Foods identified on the papers to make David Aezah a signatory on the Bakersfield Wholesale Foods checking account.
This fact is undisputed.
DD UMF 19: Abdo told Robert Bycott to make the insurance settlement check out to David Aezah and Bakersfield Grocery Wholesale.
This fact is undisputed.
DD UMF 20: The customer and supplier list of Bakersfield Grocery Wholesale is not identical to the customer and suppliers of Bakersfield Wholesale Foods.
This fact is undisputed.
DD UMF 21: American Express has not identified any individual or business to testify that they acquired cigarettes from David Aezah that were previously acquired at Costco by Abdo Aezah.
This fact is undisputed.
DD UMF 22: David was not a party to this action at the time the temporary restraining order as to Abdo's property was issued.
This fact is undisputed.
In addition, the David Defendants submit that the following are disputed material facts:
*13 1. David Aezah has never been an owner of Bakersfield Wholesale Foods.
This fact is disputed.
2. The David Defendants did not participate in the sale of any Costco Cigarettes.
This fact is disputed.
3. The Mississippi Property was purchased by David Aezah only.
This fact is disputed.
4. David had adequate funds to purchase the Mississippi Property and did not receive any money from Abdo Aezah to acquire the property.
This fact is disputed.
5. The money that was spent in Yemen came from David's various business endeavors and David's wife. Abdo did not give David any money that was used or cashed in Yemen.
This fact is disputed.
6. Bakersfield Wholesale Food's inventory was auctioned off or otherwise disposed of. Bakersfield Grocery Wholesale did not acquire or receive any inventory from Bakersfield Wholesale Foods.
This fact is disputed.
7. David did not have any real knowledge of what was happening between American Express and Abdo Aezah until he became a defendant in this matter.
This fact is disputed.
C. CLAIMS FOR FRAUDULENT TRANSFER.
1. Intentional Fraudulent Transfer.
American Express seeks summary judgment on its claims against the David Defendants for fraudulent transfer pursuant to California Civil Code § 3439.04.
Section 3439.04 provides in pertinent part:
(a) A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation incurred, if the debtor made the transfer or incurred the obligation as follows:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.
(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:
(A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
(B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.
(b) 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.
(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.
*14 (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 lienholder who transferred the assets to an insider of the debtor.
(c) The amendment to this section made during the 2004 portion of the 2003-04 Regular Session of the Legislature, set forth in subdivision (b), does not constitute a change in, but is declaratory of, existing law, and is not intended to affect any judicial decisions that have interpreted this chapter.
American Express argues that there is evidence in this action establishing all of the "badges of fraud" set forth in Section 3439.04(a).
In re Beverly, 374 B.R. 221 (9th Cir.BAP 2007), the Ninth Circuit BAP held in pertinent part:
Actually fraudulent transfers are avoidable under UFTA by present and future creditors. A transfer is said to be ‘actually fraudulent’ as to a creditor if the debtor made the transfer ‘with the actual intent to hinder, delay, or defraud any creditor of the debtor.’ Cal.Civ.Code § 3439.04(a)(1).
The focus is on the intent of the transferor. While intent to defraud is the usual rubric, the intended effect of the transfer need only be hindrance of a creditor or delay of a creditor. Any of the three-intent to hinder, intent to delay, or intent to defraud-qualifies a transfer for UFTA avoidance, even if adequate consideration is paid by someone other than a good faith transferee for reasonably equivalent value ....
Whether there is actual intent to hinder, delay, or defraud under UFTA is a question of fact to be determined by a preponderance of the evidence ....
Since direct evidence of intent to hinder, delay or defraud is uncommon, the determination typically is made inferentially from circumstances consistent with the requisite intent ... Thus, UFTA lists eleven nonexclusive factors that historically (since the Statute of Elizabeth in 1572) have been regarded as circumstantial ‘badges of fraud’ that are probative of intent. Cal.Civ.Code § 3439 .04(b).
The UFTA list of ‘badges of fraud’ provides neither a counting rule, nor a mathematical formula. No minimum number of factors tips the scales toward actual intent. A trier of fact is entitled to find actual intent based on the evidence in the case, even if no ‘badges of fraud’ are present. Conversely, specific evidence may negate an inference of fraud notwithstanding the presence of a number of ‘badges of fraud.’ ....
First, American Express contends, brothers are "indisputably insiders." American Express cites BFP v. Resolution Trust Corporation, 511 U.S. 531, 533 n. 5, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (Souter, J., dissenting): FN3
FN3. American Express is advised that citations to cases should include the specific page in the case to which reference is made, especially when the quotation is from a footnote in the dissenting opinion. The Court's limited time for preparation of motions is not well-used when the Court is required to hunt for references in citations.
The Court notes correctly that fraudulent conveyance laws were directed first against insolvent debtors' passing assets to friends or relatives, in order to keep them beyond their creditors' reach (the proverbial ‘Elizabethan deadbeat who sells his sheep to his brother for a pittance,’ see Baird & Jackson, Fraudulent Conveyance Law and Its Proper Domain, 38 Vand.L.Rev. 829, 852 (1985)) ....
*15 American Express refers to evidence that the transfers of the assets of Bakersfield Wholesale to its successor, Bakersfield Grocery, were actively concealed and occurred in direct violation of the Court's January 4, 2005 TRO prohibiting such a transaction; that the transfer of the Costco Cigarettes was, and continues to be, concealed from American Express, which has never received a satisfactory explanation of the location of the Costco Cigarettes or of the proceeds of their sale; that the transfer of Bakersfield Wholesale's assets occurred immediately after it had incurred $3.6 million in debt and continued after Abdo received notice of this lawsuit; that the transfer of the Costco Cigarettes represented substantially all of Bakersfield Wholesale's assets; that Abdo and David repeatedly perjured themselves and that Abdo inconsistently asserted the Fifth Amendment privilege against self-incrimination in an effort to conceal the location of the Costco Cigarettes and the proceeds from the sale of those cigarettes; that Bakersfield Wholesale received less than reasonably equivalent value for the transfer of the Costco Cigarettes and other assets of Bakersfield Wholesale to David and Bakersfield Grocery; that Bakersfield Wholesale received nothing when David used the assets of Bakersfield Wholesale to purchase the Mississippi Property; and that the transfers to David and Bakersfield Grocery have rendered Abdo and Bakersfield Wholesale insolvent.
This evidence, American Express contends, establishes that it is entitled to summary judgment on its claims of intentional fraudulent transfers under California law.
The David Defendants oppose this aspect of the motion for summary judgment, contending that there have been no fraudulent transfers between Abdo and David. Defendants refer to evidence that Abdo admitted he sold the Costco Cigarettes in their entirety, that David denies selling any of the Costco Cigarettes or accessing the storage unit containing the Costco Cigarettes; that Abdo was the only person having a key to the Fortress Self Storage unit; that, when Abdo lost the key, David had to have the lock cut; that, while Robert Bycott's evidence that David stated that he, David, would access the storage units for the cigarettes for his own purposes, Bycott's evidence is mistaken and contradicts the testimony and declarations of Abdo and David; that American Express has not identified a witness who purchased cigarettes from Bakersfield Grocery that came from Costco or Bakersfield Wholesale, saw David sell any cigarettes that belong to Bakersfield Wholesale, Costco or American Express, or that David sold the same type of cigarettes through Bakersfield Grocery that were acquired by Abdo from Costco; that there was never a transfer of inventory belonging to Bakersfield Wholesale to any of the David Defendants; that David intended to purchase the remaining inventory of Bakersfield Wholesale but cancelled the prospective sale when he learned of the Court's TRO; and that Abdo admits auctioning off the remaining inventory. The David Defendants contend that American Express has no evidence of the amount of inventory Abdo had in December 2004 and that American Express's evidence that David must have acquired the Bakersfield Wholesale inventory because he was ready to begin conducting business once he obtained a business license is speculation. The David Defendants admit that Abdo conveyed his home to David, but assert that David reconveyed the home to Abdo when David learned of the Court's preliminary injunction, further contending that David was not a party to this action at that time and would have no way of knowing about the preliminary injunction. With regard to the Mississippi Property, the David Defendants refer to evidence that it was purchased with David's own funds; that neither Abdo or Bakersfield Wholesale contributed any monies toward that acquisition; and that defense expert Dick Nordstrom opines that David had adequate funds to acquire the Mississippi property. The David Defendants refer to evidence that the money spent in Yemen came from David's various business ventures and from his wife; that the money did not come from Abdo or Bakersfield Wholesale; and that defense expert Dick Nordstrom opines that David had adequate funds, exclusive of the Costco Cigarettes proceeds, to spend the amount spent in Yemen. With regard to Bakersfield Grocery's receipt of insurance proceeds from the damage at the storage facility, the David Defendants refer to evidence that Abdo asked that the check be made out to David because David was the lessor of the storage facility; that David was not entitled to the proceeds and turned the money over to Abdo; and that Abdo spent the entire amount of the insurance proceeds on the acquisition of a new ice cream business.
*16 American Express replies that, although David has made a general denial of his intent to fraudulently convey assets, where the "badges of fraud" are present, a general denial of culpability is unavailing to avoid summary judgment. American Express cites In re Beverly, supra, 374 B.R. 221, 2007 WL 2200590. In In re Beverly, the Ninth Circuit BAP ruled that "[t]he summary judgment evidence in this appeal contains an extraordinary amount of direct evidence of the requisite intent, as well as circumstantial evidence of ‘badges of fraud.’ " The Ninth Circuit BAP referred to direct evidence in the debtor's own words to his spouse's counsel and concluded:
The evidence demonstrates that the Outland litigation was the main reason Beverly structured the MSA [marital settlement agreement] so as to transfer his entire interest in the $1 million nonexempt fund. If there had been a simple equal division of community assets (as presumed by California law when a court makes the division), he would have had about $500,000 of nonexempt funds ($50,000 eligible to be rolled over into a new homestead) that he knew would be vulnerable to collection of the $424,000 Outland judgment.
In addition, there was circumstantial evidence supporting five "badges of fraud". The Ninth Circuit further ruled that Beverly's summary judgment evidence in opposition, which consisted of his contention that a bankruptcy lawyer advised him that his MSA transfers could not be avoided as fraudulent and his contention that the MSA negotiations were not collusive because the divorce was hostile and was resolved through mediation, did not suffice to raise a genuine issue of material fact. The issue of avoidance is a matter of California law, not bankruptcy law even cursory research would have turned up the California Supreme Court's decision which exposes MSA transfers to UFTA avoidance. As to the MSA negotiations, both spouses had an incentive to thwart collection of the Outland judgment and there was no evidence regarding the extent to which the mediator was apprised of the UFTA issues that would be triggered by the MSA. The Ninth Circuit ruled that Mrs. Beverly, as the proponent of good faith transferee status, did not demonstrate genuine issues of material fact that would support such a finding, because she was copied on the direct evidence letters from Beverly to his spouse's attorney and Mrs. Beverly's attorney recognized the fraudulent aspect of the MSA. There is nothing in In re Beverly, however, that substantiates American Express's contention that a general denial of culpability is unavailing to avoid summary judgment.
In its reply brief, American Express also argues that the undisputed evidence shows that David acted with the intent to hinder, delay or defraud American Express.
American Express contends that the evidence establishes that David knew what was at the Fortress Self-Storage unit and why it was there. In his deposition taken on July 9, 2007, David testified in pertinent part:
*17 Q. Have you ever learn [sic] that your brother was storing cigarettes at Fortress?
A. No.
Q. Did you ever learn that anybody was storing cigarettes at Fortress?
A. No.
(David Depo, July 9, 2007, 555:16-21).
Abdo testified at his deposition taken on January 13, 2007 in pertinent part as follows:
Q. Okay. Now, did David work with you to help you move these cigarettes to Fortress?
A. No.
Q. Did David have anything at all to do with Fortress?
A. David, the only thing I asked him, I asked him-I tell him, you know, can you give me a favor, now I-my credit-American Express messed up my credit, if I rent it-if I need to rent the place out, you know, they may be going to do a credit check, they not rent it to me. But can you rent me a place, I have left over. I tell him, I got a little bit left over, I want to keep them until I settle with American Express and I pay them, and you know, then I change it to my name, and if you ever want to use it, I let you use it. If I remember, that's right, because it's been awhile, I'm just guessing. The-the-you know, I'm not a hundred percent sure.
(Abdo Depo. p. 32:2-19). David testified at the July 25, 2007 hearing in this Court in pertinent part as follows:
Q. Can you remember one way or the other that, when you were opening the Fortress facility, whether your brother had told you that he wanted to put something in there until he settled with American Express?
A. Yes.
Q. And is that what you remember his telling you?
A. I remember, yes, I think I remember that.
Q. And isn't it true that the reason he told you he wanted to put that product away until he settled is that he was afraid American Express would take it before a settlement?
A. I do not remember if we talked about this or not.
Q. Isn't it true that you understood, at the time, that the reason he wanted to put the product in storage until he settled with American Express was to keep it away from American Express?
A. I do not remember that. It was three years ago. I'm not exactly quite sure.
(July 25, 2007 Transcript, 100:23-101:14). However, in his Declaration dated June 21, 2007 and filed with the Court on June 21, 2007, David averred in Paragraph 13 in pertinent part:
... I rented a storage locker and Abdo asked if he could put some of his cigarettes in the storage locker. I did not at that point know what was really going on with American Express and Abdo. The storage locker was in my name and so the check for the property that was damaged in the fire was issued in my name. However, I gave all of the money to Abdo since it was his property that had been destroyed. I did not keep or use any of that money in any way.
American Express argues that David should not be permitted to create an issue of fact by contradicting the averment in the June 21, 2007 affidavit.
In Foster v. Arenta Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir.1985) and Radobenko v. Automated Equipment Corp., 520 F.2d 540, 544 (9th Cir.1973), the Ninth Circuit held that a party should not be able to substitute an affidavit alleging helpful facts for earlier deposition testimony harmful to its case in order to avoid summary judgment. This rule applies to conflicts between affidavits and interrogatory responses as well. School Dist. No. IJ, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1264 (9th Cir., 1993). However, in Kennedy v. Allied Mut. Ins. Co. 952 F.2d 262, 266-267 (9th Cir.1991), the Ninth Circuit held:
*18 We conclude that the Foster-Radobenko rule does not automatically dispose of every case in which a contradictory affidavit is introduced to explain portions of earlier deposition testimony. Rather, the Radobenko court was concerned with ‘sham’ testimony that flatly contradicts earlier testimony in an attempt to ‘create’ an issue of fact and avoid summary judgment. Therefore, before applying the Radobenko sanction, the district court must make a factual determination that the contradiction was actually a ‘sham.’
Examples of contradictory testimony that does not amount to a "sham" include clarification where the deponent was confused at the deposition and the affidavit explains those aspects of the deposition testimony, lack of access to material facts at the time of the deposition and the affidavit sets forth the newly-discovered evidence. See Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th Cir.1991).
David's Declaration dated September 10, 2007 and filed in opposition to the motion for summary judgment avers in Paragraph 1:
1.... I am originally from Yemen. I do speak English but I don't speak it that well. I do understand some English but I also get confused and do not always understand it that well especially when I am not given a chance to explain what I mean. I am able to read some English but I do not read it that well.
David unequivocally admitted that Abdo transferred cigarettes to the Fortress storage and is bound by this testimony. He disclaims full knowledge of American Express's proceedings at the time of the transfer. From the record, it does not appear David's testimony that he was not aware of the extent of the legal proceedings against Abdo at the time of the transfer is a sham intended to create an issue of fact to avoid summary judgment.
American Express contends in its reply brief that David kept the inventory at the Fortress Self-Storage unit even after David learned the details of this lawsuit. Although David now claims that he did not know all of the details of the legal dispute between American Express and Abdo when the Fortress storage unit was rented on December 6, 2004, American Express contends that David was fully on notice of American Express' claims against Abdo by January 15, 2005. American Express refers to David's deposition testimony on September 13, 2007 concerning the grant deed dated January 6, 2005:
MR. GLAUBER: Q. And this I'll represent to you was the transfer of Abdo's house to yourself. What were the circumstances leading up to your brother Abdo transferring title to his house to you?
A. Well, one day Abdo, he come to me and he say, ‘I want to transfer my house to your name’ and I said, ‘That's fine.’ And then he told me why, you know, the situation between American Express and all that and I said, ‘Fine.’ And then also after that I find out that I be in trouble doing that. [¶] One week later, two weeks later, I can't remember exactly, I called Jan Shine and make appointment with her, and I took Abdo, and I re-transfer it back to him.
*19 ...
Q. Right. Do you remember American Express had brought in an application to hold your brother in contempt of court and isn't that why the title to the house was transferred back to him?
A. Exactly, that way I won't be in trouble. But I don't remember exactly how long. But all I know is I did transfer it back to him after I heard that he's-with American Express.
Q. Let's go back to January 6, 2005 ... Your brother transferred title to his house on El Portal Road to you, did you pay any money for that transfer?
A. No, no.
Q. Well, why was it that your brother wanted to transfer title to his home to you?
A. Well, I don't know what he was going through-with American Express. Maybe he think that American Express would take it away from him. We never run into this before, I mean, this kind of idea, this kind of situation like this one before. [¶] But all I know is about myself, that I find out that it's not going to be good for me, not going to benefit for me, it's bad for me, so I transfer it back to him. I insist to him, I said, ‘Hey, take your house back, I don't want to get into trouble with nobody.’
(David Depo., September 13, 2006 73:15-75:10). American Express also refers to the statement in David's opposition brief, referring to David's deposition testimony on September 13, 2006 at pages 65-71, that he cancelled the proposed bulk sale of Bakersfield Wholesale's assets to him in early January 2005 "because he learned that American Express has [sic] a temporary restraining order in effect preventing any such disposition of assets." FN4 Even though David knew in early January 2005 of the existence of the Court's order preventing Bakersfield Wholesale and Abdo from disposing of assets, at no time did David surrender the inventory at Fortress to the Court or to American Express, and, according to his most recent version of events, gave Abdo continued access to the Bakersfield Wholesale inventory, even after David was named as a party to this lawsuit on or about March 23, 2005.
FN4. Although referred to by the parties as a "temporary restraining order", what was actually filed on January 4, 2006 (Doc. 6) is an "Order to Show Cause" why a writ of attachment should not issue. The Order to Show Cause further ordered in pertinent part:
ORDERED that pending the hearing and determination of this motion, defendants, all persons owing any debt to defendants, and all other persons and garnishees, be and hereby are restrained and prohibited from transferring or paying any assets of the defendants or any real or personal property in which the defendants have an interest, or any debt owed to defendants to the following extent: i) as to defendant Bakersfield Wholesale, to the extent of $3,683,320,97; ii) as to defendant Abdo Aezah, to the extent of $351,384.38 ....
American Express further contends that David has admitted that he used the inventory stored at the Fortress Self-Storage unit in Bakersfield Grocery. American Express refers to David's deposition testimony on October 9, 2006:
MR. MOORE: Q. And, Mr. Aezah, this is a check drawn to you personally in the amount of $341,000 and change from Travelers Indemnity. Why did you receive this check from them?
A. This from when I used to have a storage, has product in it. So it burn up because of next door neighbor, he caused the problems, and these people, they reimburse me for it.
Q. All right. So are you saying you owned a storage facility?
A. I didn't own it. I rent it.
Q. You rented a storage facility?
A. Yes.
Q. And where was that storage facility located, what's the address?
A. In Bakersfield.
Q. And at what street address?
A. I don't know.
Q. You had $300,000 worth of property at a place you don't know where it is?
*20 A. No, I can't remember. It's not like that I know it by heart.
Q. What part of town is it in?
...
A. I think southwest.
Q. And when was the fire?
A. I don't remember when the fire was.
Q. Well, was it 2003, was it 2004?
A. In 2005, I think it is.
Q. And is this property that you owned individually?
A. Yes.
Q. And did you own it through Bakersfield Grocery or just directly.
A. I didn't get it.
Q. Was this somehow connected with the inventory for Bakersfield Grocery? What did you have stored there?
A. Yeah, in case I have product, extra product, somebody just put them in there.
(David Depo., October 9, 2006, 312:18-314:7). In his Declaration dated September 10, 2007 and filed in opposition to the motion for summary judgment, David avers in Paragraphs 9(e) and (f) in pertinent part as follows:
e.... I do not have any first hand knowledge as to the value of the cigarettes that were stored in Fortress Storage or where they came from. I secured the storage facility because Abdo asked me to. He had not provided me much information about what was really going on with American Express. I rented the storage unit and gave him the key. As a result of this lawsuit, I have learned that a significant amount of cigarettes were sold to A N J Mini Mart. I do not know how many cigarettes were sold by Abdo prior to December 6, 2006. I do not know the exact value of the cigarettes that were stored or what Abdo did with all of the cigarettes.
f.... Travelers Insurance Company issued a check to me for $341,197.28. I deposited the check in my account. I then gave the money to Abdo because the insurance money was to compensate him for the lost cigarettes.
This testimony is highly significant, because American Express had not yet learned of David's involvement with Fortress, and was examining him concerning the insurance check alone. David contended unequivocally that the insurance payment was for "extra" cigarette inventory that he had been storing for use by Bakersfield Grocery Wholesale, his successor business. David Tr. 312-14.
American Express again argues that David should not be permitted to manufacture an issue of fact by contradicting his previous testimony. The issue presented is whether David's most recent declaration is a sham intended to create an issue of fact to withstand summary judgment. There is no contention made by David that his English language skills caused him to be confused with this testimony or that he discovered additional evidence-his later testimony is diametrically opposed to his early description that he accepted transfer of Abdo's and Bakersfield Wholesale's cigarettes. Although the issue is close, it is concluded that David's testimony is not a sham intended to create an issue of fact to avoid summary judgment. Ultimately the right to jury trial on the issue of credibility should endure.
American Express contends that David admitted using the inventory during his discussions with the insurance adjustor, Robert Bycott. American Express refers to Bycott's deposition testimony of January 16, 2007:
*21 Q. All right. And what did he say to you and what did you say to him, as best you can recall?
A. On the initial visit?
Q. Yes. And after you exhaust your recollection, I'll let you look at your notes. And I realize this is not a memory test, but I'm just trying to see what you can remember.
A. As far-as far as I recall, and what-what would seem reasonable, based on a first-first meeting, is he discussed the damage to his-his cigarettes at the storage facility due to the fire, and-and I recall that it was-he said it was causing him some hardship, because he lost quite a bit of product, and-and he wanted to try to be-remedy it as soon as possible in order not to lose income, I guess, or-
Q. Did he explain to you why it was causing hardship?
A. I-from what I recall, I think, you know, he'd have clients-from what I recall, is he would rotate stock from the storage facility to his business on California on an as-needed basis. He didn't have an inventory to draw from there, so his clients coming in to acquire or purchase the cigarettes, he wasn't able to-or he was having difficulty in providing their-what they needed.
(Bycott Depo., January 16, 2007, 33:13-34:16).
In his Declaration dated September 10, 2007 filed in opposition to the motion for summary judgment, David avers:
4. I did not participate in the sale or disposition of any of the cigarettes acquired by Abdo from Costco with American Express credit cards. I know that Robert Bycott indicated that I told him that I would access the storage facility so that I could sell the cigarettes, however, that was a mistake. It seems to me that the actions described by Mr. Bycott in his file are referencing Abdo. I did not say or do the things he identified as they pertained to accessing the storage facility or selling the cigarettes contained therein that came from Costco.
David refers to Bycott's January 16, 2007 deposition testimony:
Q. Okay. All right. When David was in Yemen, and your notes don't indicate the first date he went there, but I'll represent that you actually skipped over the date, I don't know if you saw that or not, but you have one entry in your work log that you knew that he was out of the country on October 12th.
A. Okay.
Q. And I believe he got back near the end of December, correct?
A. I believe so.
Q. During that time period, did you attempt to contact David in Yemen? Did you pass a message along?
A. No, I-I-I never tried to call him in Yemen.
Q. And did you pass a message to Abdo saying, hey, I need to talk to David, could you have him call me?
A. I recall meeting with David before he left, he indicated he was going to be going to Yemen and asked that I direct any calls while he was out to his-to Abdul [sic],-
Q. Okay.
A.-which I did. I don't recall ever trying to call him, or I just ran everything through Abdul [sic] to relay to David.
...
Q. Turning to Exhibit 99. Do you recognize this document? I believe you've already testified to it.
*22 A. Yes.
...
Q. This letter is actually addressed to both David and Abdul [sic]. Do you remember informing them, or writing that David must execute the Release despite Abdul [sic] having the Power of Attorney?
A. Yes.
Q. Okay. After you executed that letter, informing them that David needed to sign it and that Abdul [sic] could not act on his behalf, did you attempt to contact David after that point?
A. No, I believe the purpose of that letter was to put it in writing, because David was out of the country.
Q. Okay. Did you request that Abdul [sic] have David contact you after you informed him that he could not use this Power of Attorney?
A. Not that I recall.
Q. Okay.
A. That's why I'm requesting that David sign it.
Q. Turning to Exhibit 89, page two ... Do you remember if the receipts that were provided by Costco referred to the exact cigarettes that were lost?
A. No, I believe that they were presented by David to show his acquisition price that he pays for them.
Q. Okay. So, the cigarettes lost did not necessarily reflect the cigarettes in the receipts?
A. Right. As far as I recall.
Q. Okay. Did anyone, at any time, either David or Abdul [sic], say that they were co-owners of Bakersfield Grocery Wholesale?
A. I don't recall ever being told that.
...
Q. Okay. Did David Aezah ever tell you specifically to put the name Bakersfield Grocery Wholesale on the check?
A. I don't recall.
Q. Okay. On the 29th [of November]-did we-I think we already covered that Abdul was the one who said it.
...
A. Yes.
Q. Okay. And you did not speak to David on that date?
A. No.
(Bycott Depo., January 16, 2007, 102:20-108:13).
David argues that Bycott's testimony should be disregarded in resolving this motion because his testimony relied on his written notes.
However, as American Express notes, Bycott's deposition testimony was made without refreshing his recollection by reviewing his notes.
American Express argues that Bycott's testimony concerning the statements made to him by David concerning David's ownership and use of the product stored at the Fortress cannot be undermined by the speculation that Bycott had confused David with Abdo during this initial meeting over the insurance claim. Bycott had no contact with Abdo until several months into the negotiations, in October 2005, when David was out of the country. Bycott testified at his January 16, 2007 deposition:
Q. Okay. Did David Aezah ever mention his brother, Abdo or Abdul Aezah?
A. Yes.
Q. Did he ever say that he was in business with his brother?
A. I don't recall that.
Q. What did he say about his brother?
A. The only thing I recall is that he-David, at one point during the claim, it seemed to me that towards the end of the claim, had gone to Yemen, and there was a document we needed him to sign, a Proof of Loss, to get it finalized