How can I prevent a defendant from hiding their assets in an LLC?

Asked about 2 years ago - Sacramento, CA

I'm going to be filing a small claims suit against somebody for $10K. She violated civ 51 civ 1942.5 and negligently inflicted emotional distress. I am afraid though that if I win and get a judgement in my favor that the defendant will use her LLC as a shelter. So I am considering if I should name the LLC as a defendant as well or if I should wait to file against it separately with an added fraud cause of action in a higher jurisdiction court. I'm awaiting an UD complaint to be filed against me just so I can have my motion to quash heard which will concretely prove that I've been paying rent to a fraudster.

Additional information

A Demand Letter with a pay by date (same day I expect UD to be filed) was next week was sent to defendant earlier this week certified mail with return receipt.

Attorney answers (4)

  1. Frank Wei-Hong Chen

    Contributor Level 20

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    Answered . Well, you can't prevent the defendant from hiding assets. And you should not name the LLC is the LLC has no legal liability for violating your civil rights or violating Civil Code section 1942.5.

    Rather, once you obtain a judgment against the defendant, if the defendant transfers assets to the LLC, you can at that time sue the LLC and the defendant for fraudulent conveyance/fraudulent transfer.

    http://www.avvo.com/legal-guides/ugc/fraudulent...

    http://www.avvo.com/legal-guides/ugc/fraudulent...

    California's Fraudulent Transfer Act, is enacted at Civil Code sections 3439 to 3439.12.

    Under Section 3439.04, a transfer is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:

    1) With actual intent to hinder, delay, or defraud any creditor of the debtor.

    2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:

    A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.

    B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.

    Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is... more
  2. Eric D Ridley

    Pro

    Contributor Level 14

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    Answered . While you can't stop someone from hiding assets, you can break the llc once
    the judgement is rendered

    ..
    >

    Eric Ridley can be reached by phone: (805) 244-5291, by email: ridley.eric@gmail.com, or at http://www.... more
  3. William Bronchick

    Contributor Level 7

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    Answered . You can't name the LLC unless the LLC is at fault or she was working on behalf of the LLC when she committed the wrongdoing.

    There's a law called "fraudulent conveyances" that allows you set aside any transfers that were made to the LLC to avoid paying creditors.

  4. Charles R Smith

    Contributor Level 16

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    Answered . As already said, you cannot prevent your landlord from transferring assets. Be sure to sue the legal owner of the property, which may very well be an LLC. You may also have a claim against the individual person as well. You would be well advised to consult with a tenant's rights attorney regarding your specific situation before you or your landlord files a court action.

    The above "answer" is for discussion purposes only and is neither intended as legal advice nor to create an... more

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