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Surgeon loses appeal based on proven trick to evade taxes and creditors

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Metropolitan-Business News

Friday 3 December 2021

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Surgeon loses appeal based on proven trick to evade taxes and creditors

Opinion says collateral estoppel prevents efforts to evade 2016 judgment, plaintiff now says it was the product of collusion between him and his ex-wife

By a MetNews editor

The District Court of Appeal for that district rejected a surgeon’s claim that he should acquire title to three plots of land because they belonged to his ex-wife in a collusion action to deceive the tax authorities and evade his creditors, insisting that the parties had secretly agreed that the properties belonged to him.

Div. Five, in an unpublished opinion from presiding judge Laurence D. Rubin, filed Wednesday, upheld a judgment dismissing an action brought by doctor Ihsan Shamaan against the estate of Khulood Cotta, who had been a family doctor. They were husband and wife from 1972 to 1998.

Under the divorce decree, Cotta was allotted real estate in Huntington Beach, as well as two plots in Bell where they operated an outpatient facility, St. Jude Health Care Medical Center.

Cotta died on July 11, 2018. Shamaan brought an action against her estate on December 27, 2018 to revoke title to the three plots.

Detail drawing

In his initial complaint (with variations on the facts appearing in two amended pleadings), Shamaan said:

“In 1997, without consulting a lawyer, the plaintiff transferred legal title to the properties in question to the deceased, believing that having legal title to his name might offer better protection against future lawsuits and other potential future creditors ( although no specific creditor was considered at that time). The plaintiff retained equitable title to the properties in question, and it was then and always the intention of the plaintiff and the deceased that the plaintiff remain the “true” and fair owner of the properties in question. “

The oral argument continues (with words and brackets missing in the original):

“… In the case of the deceased who filed for divorce which resulted in a dissolution judgment in 1998, the plaintiff and the deceased were divorced. As part of their divorce, the applicant and the deceased entered into a [division of property agreement] for the purpose of legally finalizing their divorce, again without the involvement of a lawyer. However, this written agreement did not constitute their entire actual agreement and their personal and professional affairs remained closely related after that date, including their continued joint operation of the Medical Center.

It is argued that “[i]n November 2010, the Plaintiff and the Deceased attempted to more completely separate their assets in order to more fully effect their agreement upon their divorce, ”Cotta waived claiming the Bell and Huntington Beach properties in Shamaan. They then realized that this triggered an unmanageable property tax increase.

PA

The Bell outpatient medical facility, pictured above, sits on real estate claimed to be owned by a surgeon who claims he and his now deceased ex-wife agreed he was in fact his, despite a 2016 judicial decree that he was his own, arguing that the judgment was obtained by means of a collusive lawsuit aimed at deceiving one of his judicial creditors and avoiding the tax consequences. The district court of appeal confirmed a decision against the doctor on Wednesday.

Lawyer advice

The lawsuit says Shamaan consulted with a lawyer who advised that the properties be transferred to Cotta, but warned that a simple transfer would not work because a judgment creditor to whom Shamaan owed around $ 1 million would claim he was This was a fraudulent transfer, so the way to go would be for Cotta to sue her ex-husband to get the title back.

“Indeed, with the consent of Shamaan and Cotta, the attorney filed the said action … in Los Angeles County Superior Court on May 29, 2015,” the complaint states, adding, “Although the attorney initially had Consulted exclusively with Shamaan, with Shamaan’s consent, the lawyer represented Cotta in this case. The attorney is identified in the Los Angeles Superior Court action register as Thomas A. Vogele, whose office is in Costa Mesa.

The pleadings read:

“On August 3, 2016, the Court rendered a judgment in favor of Cotta and against Shamaan, which was the desired outcome by both parties. Legal title was returned to Cotta. However, in accordance with the agreement between Shamaan and Cotta, fair title remained with Shamaan, as was always the intention of the parties. “

Los Angeles Superior Court Judge David Sotelo was presiding over the case, which also ruled that Shamaan owed his ex-wife $ 1.37 million in outstanding loans.

Rosales decision

Los Angeles Superior Court judge Olivia Rosales, in supporting a challenge without leave to amend Shamaan’s second amended lawsuit against the estate, said the plaintiff “admits that the 2015 underlying action involved the same properties involved in this litigation “, concluding that” this action is prescribed by res judicata and collateral estoppel “.

She also ruled that the judicial estoppel precludes Shamaan from taking a position in his low-key title action against the estate which is contradicted by his position in Cotta’s silent title action in 2015 against him, commenting:

“… The plaintiff even admits that he accepted the 2015 civil action filing to avoid property taxes and fraudulent transfer issues. Thus, judicial estoppel is appropriate in these circumstances to prevent the plaintiff from playing “quickly and freely” with the courts. “

Rubin’s review

In his opinion upholding Rosales’ judgment, Rubin agreed that as Shamaan seeks redress based on alleged agreements with Cotta prior to the 2016 judgment, “this is prohibited by the exclusion of the matter,” explaining :

“This judgment expressly ruled that the wife was ‘owner in fee simple’ of the property and that no other person, including the husband, had any” right, interest in title or claim on or on the real property. ” . This constitutes (1) a final decision; of (2) the identical question of whether the husband had an interest in the properties; (3) which was in fact challenged by the wife’s motion for summary arbitration; (4) against the husband, a party to the wife’s quiet title action.

Shamaan argued that following the 2016 judgment, Cotta once again agreed orally that he had fair title to the properties. Rubin replied:

“Claims based on this theory are prohibited by the fraud statute. Article 15206 of the Succession Code explains that a real estate trust is only valid if it is proven in writing or by operation of law.

Constructive trust

The surgeon further argued that the properties were subject to a constructive trust. The presiding judge cited Civil Code §2224 in these terms:

“He who gains a thing by fraud, accident, error, undue influence, breach of a trust or other wrongful act is, unless there is another and better right, an involuntary trustee of the thing acquired,” for the benefit of the person who would otherwise have had it.

Rubin wrote:

“To establish a constructive trust, applicants must prove: the existence of a res (property or some interest in the property); applicants are entitled to this resolution; and the defendant’s acquisition of the res by a wrongful act… The husband’s argument for a constructive trust necessarily fails on the third element. He can’t establish the woman won ownership by wrongful act, as she acquired the property by judgment of 2016. Husband tries to rely on a new post-judgment agreement giving him an interest in the property wwhich already belonged to his wife. “

Fair theory

Producing a new theory, Shamaan argued that it should be relieved of the effect of the 2016 judgment on grounds of fairness.

“The husband admits he was guilty in his collusive pursuit of covert action for his wife’s title, but suggests he should win nonetheless because the two he and his wife were at fault, requiring a balancing of actions, ”explained Rubin. “The husband is wrong. “

He elaborated:

“The husband here seeks to obtain fair compensation for a judgment which he fraudulently agreed to obtain. He is now alleging mutual error, seeking to overturn the judgment, on the grounds that his planned fraud scheme did not work. These are not the type of extraordinary circumstances that warrant fair relief.

Global call

Div. Five consolidated Shamaan’s appeal against Rosales’ judgment with his appeal of an October 27, 2020 order of Sotelo dismissing a motion to quash the writ of execution by which the estate sought to recover the $ 1.37 million. attributed to Cotta. The ex-husband claimed that Cotta had verbally agreed not to attempt to enforce the judgment.

Shamaan admitted that he and his ex-wife had “unclean hands” by engaging in a tax evasion scheme, but speculated that his hands were cleaned by paying the taxes owed, adding that the his had not been, asserting that the equitable doctrine of “unclean hands” prevented the estate from seeking to enforce the judgment.

Sotelo found that if Shamaan’s presentation of the facts is true, “then Cotta and Shamaan are both to blame because they jointly committed fraud” but Shamaan “was the most blameworthy part because the scheme to reversing his property tax would only have benefited him. “

He added that if there was an agreement between the parties as claimed by Shamaan, this agreement “was executed to commit tax evasion and is not enforceable”.

Sotelo confirmed

There was no evidence of Cotta’s agreement not to enforce the judgment, Rubin pointed out in his opinion affirming Sotelo’s order.

Shamaan asserted that the estate is equitably prevented by delays in seeking enforcement given that Cotta, who has not sought enforcement, is deceased and cannot testify on his behalf as to their consent. Without being convinced, Rubin said:

“Yet it is the wife who suffers from the fact that her husband does not seek recognition of satisfaction during his wife’s life. If the husband believed that the money judgment was really satisfied by agreement, he had nearly two years during which he could have asked his wife to file a judgment satisfaction and, if she refused, make a petition under. article 724.050 of the Code of Civil Procedure in order to compel it to do so.

He continued:

“If the husband had made such a request, the court would have heard from both husband and wife on whether the judgment was satisfied. Instead, the husband failed to make this claim in a timely manner, let the $ 1.37 million judgment remain unsatisfied in court records, and only asserted his satisfaction after the death of the woman and was no longer able to testify against him. The husband failed to establish any loopholes on the part of the estate; if anything, he established that his own claim was blocked by failures. “

The case is Shaman vs. Cotta, B305682.

Benjamin I. Bastomski and James A. Frieden of the law firms of James A. Frieden partnered with Jeffery J. Czech of Czech & Howell to represent Shamaan in the appeal. Vogele and Timothy M. Kowal and Teddy T. Davis from his office argued for Cotta’s succession.

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