Henry et al v. Rizzolo et al

Filing 582

ORDER Denying 553 Motion for Summary Judgment. FURTHER ORDERED that the parties shall file a proposed joint pretrial order within 30 days of the date of this Order. Signed by Judge Philip M. Pro on 4/19/12. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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KIRK and AMY HENRY,

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Plaintiffs,

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vs.

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FREDRICK RIZZOLO aka
RICK RIZZOLO, an individual;
LISA RIZZOLO, an individual; and
THE RICK AND LISA RIZZOLO
FAMILY TRUST,

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Defendants.
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2:08-CV-00635-PMP-GWF
ORDER

Presently before the Court is Defendants Lisa Rizzolo, The Lisa M. Rizzolo

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Separate Property Trust, and The LMR Trust’s (collectively “Lisa Rizzolo”) Motion for

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Summary Judgment (Doc. #553), filed on November 7, 2011. Plaintiffs Kirk and Amy

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Henry filed an Opposition (Doc. #560) on December 1, 2011. Lisa Rizzolo filed a Reply

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(Doc. #564) on December 19, 2011.

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The parties are familiar with the facts of this case and the Court will not set forth

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the facts here except where necessary. Summary judgment is appropriate if the pleadings,

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the discovery and disclosure materials on file, and any affidavits show that “there is no

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genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

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law.” Fed. R. Civ. P. 56(a), (c). A fact is “material” if it might affect the outcome of a suit,

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as determined by the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S.

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242, 248 (1986). An issue is “genuine” if sufficient evidence exists such that a reasonable

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fact finder could find for the non-moving party. Villiarimo v. Aloha Island Air, Inc., 281

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F.3d 1054, 1061 (9th Cir. 2002). Initially, the moving party bears the burden of proving

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there is no genuine issue of material fact. Leisek v. Brightwood Corp., 278 F.3d 895, 898

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(9th Cir. 2002). After the moving party meets its burden, the burden shifts to the

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non-moving party to produce evidence that a genuine issue of material fact remains for trial.

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Id. The Court views all evidence in the light most favorable to the non-moving party. Id.
Defendant Lisa Rizzolo moves for summary judgment on two grounds. First,

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Lisa Rizzolo argues that community property is not an “asset” capable of being fraudulently

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transferred under Nevada’s Uniform Fraudulent Transfer Act (“NUFTA”). Second, she

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argues that the four-year statute of limitations under NUFTA bars any claim against The

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Rick and Lisa Rizzolo Family Trust because the trust was created more than four years prior

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to the filing of the Complaint.
Plaintiffs respond that this Court previously has rejected Lisa Rizzolo’s

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arguments. Plaintiffs contend a divorce decree is subject to NUFTA. Plaintiffs also argue

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that it does not matter for statute of limitations purposes whether the trust was created

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outside the limitations period, it matters only whether fraudulent transfers occurred within

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the limitations period. Plaintiffs contend the trust first received fraudulent transfers in May

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2005, when the Rizzolos divorced, and Plaintiffs’ Complaint brought in May 2008 therefore

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is timely.

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A. Community Property

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Under NUFTA, a “transfer” is fraudulent if the debtor made the transfer with

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“actual intent to hinder, delay or defraud any creditor of the debtor.” Nev. Rev. Stat.
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§ 112.180(1)(a). A “transfer” is “every mode, direct or indirect, absolute or conditional,

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voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset,

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and includes payment of money, release, lease and creation of a lien or other encumbrance.”

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Id. § 112.150(12). NUFTA defines an “asset” as “property of a debtor, but the term does

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not include . . . [a]n interest in property held in tenancy by the entireties or as community

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property to the extent it is not subject to process by a creditor holding a claim against only

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one tenant.” Id. § 112.150(2)(c).

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Nevada is a community property state. Mullikin v. Jones, 278 P.2d 876, 880

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(Nev. 1955). Under Nevada law, any property a spouse owns prior to marriage, and any

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property acquired by that spouse during marriage by gift, bequest, devise, descent, or as a

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personal injury award, is that spouse’s separate property. Nev. Rev. Stat. § 123.130.

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However, property acquired during a marriage presumptively is community property. See

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id. § 123.220; Fick v. Fick, 851 P.2d 445, 448 (Nev. 1993). Spouses have “present, existing

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and equal interests” in community property during the marriage. Nev. Rev. Stat.

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§ 123.225(1).

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Nevada treats debts in a similar fashion as ownership of assets. “[D]ebts incurred

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before marriage remain the separate debts of each spouse—they do not automatically

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transmute into community debts upon marriage” In re Field, 440 B.R. 191, 195 (Bankr. D.

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Nev. 2009). Thus, while a creditor can collect on a premarital debt from the debtor

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spouse’s separate property or the debtor spouse’s share of the community property, a

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creditor cannot collect on a premarital debt from the non-debtor spouse’s separate property

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or the non-debtor spouse’s share of the community property. Nev. Rev. Stat. § 123.050; In

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re Field, 440 B.R. at 195; Rodgers v. Rodgers, 887 P.2d 269, 272-73 (Nev. 1994); Slack v.

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Schwartz, 161 P.2d 345, 347 (Nev. 1945).

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In contrast, a debt incurred during marriage presumptively is a community debt
unless the lender intended to rely on the debtor spouse’s separate property to satisfy the
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debt. Norwest Fin. v. Lawver, 849 P.2d 324, 326 (Nev. 1993). A creditor owed a

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community debt thus can collect from the entirety of the community. United States v. ITT

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Consumer Fin. Corp., 816 F.2d 487, 491 n.12 (9th Cir. 1987) (interpreting Nev. Rev. Stat.

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§ 123.050). Additionally, a creditor can collect on a community debt from the debtor

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spouse’s separate property, but the creditor cannot collect from the non-debtor spouse’s

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separate property unless the non-debtor spouse obligated himself or herself to repay the

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debt. Id.

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Likewise, a spouse is not personally liable for his or her spouse’s intentional torts
committed during marriage merely by virtue of being married. Jewett v. Patt, 591 P.2d

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1151, 1152 (Nev. 1979). Consequently, the non-tortfeasor spouse’s separate property is not

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subject to a judgment against the tortfeasor spouse. See id. However, a tort committed

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during the marriage by one spouse is considered a community debt, and the entirety of the

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community property is subject to a judgment against the tortfeasor spouse, even if the other

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spouse was not a named party to the suit. Randono v. Turk, 466 P.2d 218, 223-24 (Nev.

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1970); see also F.T.C. v. Neiswonger, 580 F.3d 769, 776 (8th Cir. 2009) (analyzing Nevada

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law).

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Here, Kirk Henry was injured in September 2001, Plaintiffs filed suit against

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Rick Rizzolo in October 2001, and the Rizzolos divorced in June 2005. Because the

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conduct giving rise to Plaintiffs’ claim against Rick Rizzolo occurred during the marriage,

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Plaintiffs’ claim against Rick Rizzolo is a community debt. Lisa Rizzolo’s separate

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property is not subject to the judgment, but the entire community is subject to a judgment,

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even though Lisa Rizzolo was not a named party to the lawsuit Plaintiffs filed against Rick

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Rizzolo. Accordingly, Lisa Rizzolo’s share of the community property is “subject to

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process by a creditor holding a claim against only one tenant” as set forth in NUFTA

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§ 112.150(2)(c), and therefore falls within the definition of an “asset” that can be

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fraudulently transferred.1 Moreover, to the extent the divorce settlement inequitably

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divided the community assets and Rick Rizzolo fraudulently transferred a portion of his

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share of the community property to Lisa Rizzolo through the divorce, Rick Rizzolo’s share

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of the community property that was fraudulently transferred to Lisa Rizzolo is also subject

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to the judgment.

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This is so even though Rick Rizzolo settled the claim and breached the settlement

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agreement after the divorce. Married couples may not avoid community debts by (1)

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making fraudulent transfers through a divorce, (2) settling the community claim against the

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spouse who fraudulently transferred community assets, and (3) breaching the settlement

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agreement, leaving the spouse who fraudulently transferred community assets without

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sufficient means to satisfy the liability owed to the third party creditor. Where a reasonable

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jury could find the spouses engaged in such conduct, a fraudulent transfer claim against the

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community property will lie. See, e.g., In re Beverly, 374 B.R. 221, 233-34 (9th Cir. BAP

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2007); Mejia v. Reed, 74 P.3d 166, 173 (Cal. 2003). As this Court already has determined a

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reasonable jury could find the Rizzolos’ divorce constituted a fraudulent transfer, the Court

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will deny Lisa Rizzolo’s Motion on this basis. (See Order (Doc. #536) at 8-9.)

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Moreover, Lisa Rizzolo’s community property argument relates only to the

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property transfer that occurred in the context of the Rizzolos’ divorce decree. Following

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their divorce, any transfers between the Rizzolos would not constitute a transfer of

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community property. Consequently, even if Plaintiffs could attach only Rick Rizzolo’s

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separate property and his half of the community property, the Court still would partially

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deny Lisa Rizzolo’s Motion for Summary Judgment with respect to any post-divorce

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transfers from Rick Rizzolo to Lisa Rizzolo. (Id. at 9-10 (holding a reasonable jury could

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See, e.g., Wikes v. Smith, 465 F.2d 1142, 1147 (9th Cir. 1972) (applying California law);
Stewart Title Co. v. Huddleston, 608 S.W.2d 611, 612 (Tex. 1980); Spokane Merchants’ Ass’n v.
Olmstead, 327 P.2d 385, 387-88 (Idaho 1958); Vest v. Superior Ct. In & For City & Cnty. of S.F., 294
P.2d 988, 991 (Cal. Dist. Ct. App. 1956).
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find post-divorce transfers were fraudulent).)

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B. Statute of Limitations

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A fraudulent transfer claim under § 112.180(1) is barred unless the plaintiff

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brings the claim within four years after the transfer was made or within one year after the

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plaintiff discovered or reasonably could have discovered the transfer, whichever is later.

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Nev. Rev. Stat. § 112.230(1). As an initial matter, Lisa Rizzolo does not represent The

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Rick and Lisa Rizzolo Family Trust. Even if the Court considered her argument on this

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point, the limitations period does not run from when the trust was created but from when

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any transfers were made. Plaintiffs have presented evidence from which a reasonable jury

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could find fraudulent transfers starting with the Rizzolos’ divorce in June 2005. (Order

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(Doc. #536) at 8-9.) Plaintiffs filed their Complaint in this action in May 2008, within the

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limitations period. The Court therefore will deny Lisa Rizzolo’s Motion on this basis.

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III. CONCLUSION

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IT IS THEREFORE ORDERED that Defendants Lisa Rizzolo, The Lisa M.

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Rizzolo Separate Property Trust, and The LMR Trust’s Motion for Summary Judgment

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(Doc. #553) is hereby DENIED.

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IT IS FURTHER ORDERED that the parties shall file a proposed joint pretrial
order within thirty (30) days of the date of this Order.

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DATED: April 19, 2012

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PHILIP M. PRO
United States District Judge

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