California Superior Court Finds a Conspiracy with Fraudulent Transfers is Enough to Award Punitive Damages to Creditor – Los Angeles Income Tax Planning and Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on November 21, 2013

Elie sued and obtained a judgment against Ms. Smith’s winery to settle a $6 million debt Smith owed Elie. To avoid paying the judgment:

1. Smith and Mr. Cutuli signed a prenup transferring almost all of Smith’s assets, including the winery’s assets, to Cutuli at a future date for no consideration,
2. Cutuli then sued the winery to quiet title to its property which Smith did not defend,
3. Elie intervened in Cutuli’s lawsuit, and
4. Smith and Cutuli moved to Florida and filed bankruptcy.

When the Florida bankruptcy court did not extend Cutuli’s automatic stay against Elie’s judgment, the trial began. Cutuli refused to reappear in the lawsuit. However, based on the limited testimony Cutuli had given, the court determined that Cutuli had tried to avoid being liable for Smith’s debt by transferring assets and funds to/from his attorney. Evidence was also presented that Cutuli’s attorney had made frequent trips to the Cayman Islands, a tax haven.

The court held that
1. Cutuli was not credible,
2. The Prenup was not lawful or enforceable,
3. Cutuli and Smith had actively hid and destroyed evidence and assets, and
4. Businesses owned by Smith were actually her alter egos.

The court set aside Smith’s transfers to Cutuli, and awarded Elie almost $3 million in compensatory damages. The court also held because Smith and Cutuli’s conduct to defraud Elie was willful and despicable, $10 million in punitive damages was also warranted. Elie v. Smith, 2011 WL 9349985 (Cal.Super.Napa, Oct. 13, 2011).

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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