Nautilus, Inc. v. Yang

Nautilus, Inc. obtained a judgment against Stanley Kuo Hua Yang, and recorded an abstract of judgment against real property on which Stanley and his brother, Peter Chun Hua Yang, held title. Stanley and Peter transferred title on the property to their father, Chao Chen Yang, who obtained a reverse mortgage loan on the property from Security One Lending. In its title search, the title insurance company missed Nautilus’s abstract of judgment when the reverse mortgage loan funded. Stanley’s transfer of the property to Chao Chen was a fraudulent conveyance under the Uniform Fraudulent Transfer Act (UFTA). Nautilus sued Stanley, Peter, and Chao Chen. Nautilus also sued Urban Financial Group, Inc., which bought the mortgage from Security One, for damages resulting from the fraudulent conveyance from Stanley to Chao Chen. Following a bench trial, the court found that Security One and Urban Financial had acted in good faith, and could not be liable to Nautilus. Finding no reversible error in that judgment, the Court of Appeal affirmed: the trial court misapplied the burden of proof in connection with the good faith defense. "We publish our opinion because of our analysis of the requirements of the good faith defense. Some cases have held that a transferee cannot avail itself of the good faith defense if the transferee had fraudulent intent, colluded with a person who was engaged in a fraudulent conveyance, or actively participated in a fraudulent conveyance. . . . After analyzing those state and federal cases, we hold a transferee cannot benefit from the good faith defense if that transferee had fraudulent intent, colluded with a person who was engaged in the fraudulent conveyance, actively participated in the fraudulent conveyance, or had actual knowledge of facts showing knowledge of the transferor’s fraudulent intent." View "Nautilus, Inc. v. Yang" on Justia Law