The Recovery of Treble Damages in a Fraudulent Transfer Case with Intentional Fraud Elements

The Recovery of Treble Damages in a Fraudulent Transfer Case with Intentional Fraud Elements

On Behalf of | May 13, 2015 | Business

Things gained through unjust fraud are never secure.


You are owed money damages. You hire a collection attorney, whose hard work results in the case settling at a rather volatile mediation. The defendant enters into a repayment plan over the course of a  few years, secured by a stipulation for entry of judgment in the event of a default. A couple of years into the settlement, the Defendant defaults under the settlement agreement and judgment is eventually entered.

An experienced collections attorney would promptly get an abstract of judgment issued and sent out for recording.

What happens when the attorney uncovers that sometime after the default under the settlement, but before the money judgment was entered, the Defendant quitclaimed his beautiful upscale house to his 80 year old father for no consideration? The abstract of judgment does not attach to the real property, the major asset you had planned to collect against.

There is only one thing to do: file a fraudulent transfer action against the Defendant and his 80 year old father, a costly endeavor. In California each party bears their own attorneys fees unless a contract, statute or other law (or case law) authorizes a fee award.  In this instance, except for the limited case law exception that attorneys’ fees are recoverable if you are forced to sue for the tort of another (generally not applicable to fraudulent transfer cases), you are out of luck.

In cases like these, the defendant rarely settles. During this process, a person can literally eat up the vast majority of an estimated judgment recovery just trying to get back to the place where the lien attaches or the asset can be levied upon.

This is where treble damages come in. Thanks to a recent case (Bell v. Feibush (2013) 212 Cal.App.4th 1041), it may be possible for your collections attorney to craft a treble damage recovery that could help you recoup some or all of the attorneys’ fees incurred in a fraudulent transfer case with intentional fraud elements. In Bell, a somewhat obscure statute allowed a plaintiff to recover attorney’s fees and treble damages in any ordinary fraud case. The Court of Appeals found that a criminal conviction under California Penal Code § 496(a) – which includes theft by false pretense – is not a prerequisite to treble damages under Penal Code § 496(c) in a civil action.

In Bell, the Plaintiff filed an action against the Defendant after the Defendant fraudulently induced the Plaintiff to loan him $202,000. The Defendant failed to repay the Plaintiff, and defaulted on the judgment against him. The trial court awarded the Plaintiff treble damages based upon California Penal Code § 496. Subdivision (a) of section 496 specifies the criminal penalties for receiving, concealing or withholding property obtained in “any manner constituting theft,” and subdivision (c) permits treble damages and an award of attorney’s fees in a civil action brought by any party injured by such a violation of subdivision (a).

In affirming the default judgment for treble damages, the Court of Appeal noted that California Penal Code § 496 does not indicate that a criminal conviction is required for a private plaintiff to recover treble damages. The legislature believed that the deterrent effect of criminal punishment was insufficient to reduce thefts; treble damages recovery by any person injured by the purchase or withholding of stolen property would assist in drying up the market for stolen goods. Moreover, the Court stated that California Penal Code § 484 defines “theft” to include theft by false pretense.

The civil counterpart of false pretense is fraudulent misrepresentation. Fraud cases are typically a cluster of causes of action and a smart collection attorney would look into the possibility of including a misrepresentation claim with its intentional fraudulent transfer cause of action (if the facts support such) and include a prayer for relief seeking treble damages under California Penal Code § 496.

If you are in a position where you are having difficulty collecting a judgment owed to you, contact Los Angeles commercial collections attorney Ron Slates today.