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Surgeon Loses Appeal That Was Founded on His Admitted Ruse to Evade Taxes, Creditors
Opinion Says Collateral Estoppel Precludes Effort to Squirm Out of 2016 Judgment Plaintiff Now Says Was the Product of Collusion Between Him and His Ex-Wife
By a MetNews Staff Writer
The Court of Appeal for this district has rejected the contention by a surgeon that he should gain title to three parcels of land because they were adjudicated to be the property of his ex-wife through a collusive lawsuit that was aimed at cheating taxing authorities and evading his creditors, insisting the parties had secretly agreed that the properties were his.
Div. Five, in an unpublished opinion by Presiding Justice Laurence D. Rubin, filed Wednesday, affirmed a judgment of dismissal of an action brought by physician Ihsan Shamaan against the estate of Khulood Cotta, who had been a family-medicine doctor. They were husband and wife from 1972-98.
Under the divorce decree, Cotta was awarded real property in Huntington Beach, as well as two parcels 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 Dec. 27, 2018 to quiet title to the three parcels.
Details Scheme
In his initial complaint (with variations on the facts appearing in two amended pleadings), Shamaan averred:
“In 1997, without consulting counsel, Plaintiff transferred legal title of the Subject Properties to the Decedent, believing that having legal title in her name might provide better protection against future lawsuits and other potential future creditors (although no specific creditor was contemplated at that time). Plaintiff retained equitable title to the Subject Properties, and it was then and always the intention of Plaintiff and Decedent that Plaintiff would remain the ‘true’ and equitable owner of the Subject Properties.”
The pleading continues (with missing words and brackets in the original):
“…In the Decedent filed for divorce which resulted in a judgment of dissolution in 1998, Plaintiff and the Decedent divorced. In connection with their divorce, Plaintiff and the Decedent entered into a [division of property agreement] for purposes of legally finalizing their divorce, again without the participation of counsel. However, this written agreement did not constitute the totality of their actual agreement and their personal and professional affairs remained closely intertwined after that date, including their continued joint operation of the Medical Center.”
It is contended that “[i]n November 2010, Plaintiff and Decedent attempted to more fully separate their property in order to more fully effectuate their agreement at the time of their divorce,” with Cotta quitclaiming the Bell and Huntington Beach properties to Shamaan. They then realized that this triggered an unmanageable property tax increase.
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—AP Depicted above is the outpatient medical facility in Bell that is on real property the ownership of which is claimed by a surgeon who maintains that he and his ex-wife, now deceased, had agreed was actually his, despite a 2016 judicial decree that it was hers, contending that the judgment was obtained through a collusive suit to cheat a judgment creditor of his and avoid tax consequences. The Court of Appeal for this district on Wednesday affirmed a decision against the doctor.
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Attorney’s Advice
The complaint says that Shamaan consulted an attorney who advised that the properties be shifted back to Cotta, but cautioned that a simple transfer would not work because a judgment creditor who was owed about $1 million by Shamaan would claim it was a fraudulent transfer, so the way to proceed would for Cotta to sue her ex-husband to regain title.
“Indeed, with Shamaan’s and Cotta’s consent, the attorney filed said action… in Los Angeles County Superior Court on May 29, 2015,” the complaint says, adding: “Although the attorney had initially consulted exclusively with Shamaan, with Shamaan’s consent, the attorney represented Cotta in this matter.” The attorney is identified on the Los Angeles Superior Court register of actions as Thomas A. Vogele, whose office is in Costa Mesa.
The pleading recites:
“On August 3, 2016, the Court entered a Judgment in favor of Cotta and against Shamaan, which was the outcome desired by both parties. Legal title was restored to Cotta. However, pursuant to the agreement between Shamaan and Cotta, equitable title remained held by Shamaan, as was always the intention of the parties.”
Presiding over the matter was Los Angeles Superior Court Judge David Sotelo, who also determined that Shamaan owed his ex-wife $1.37 million in loans that had not been repaid.
Rosales’s Ruling
Los Angeles Superior Court Judge Olivia Rosales, in sustaining a demurrer without leave to amend to Shamaan’s second amended complaint against the estate, said that the plaintiff “admits that the underlying 2015 action involved the same subject properties that are at issue in this litigation,” finding that “the present action is barred by res judicata and collateral estoppel.”
She also held that judicial estoppel bars Shamaan from taking a position in his quiet title action against the estate that is contradicted by his stance in Cotta’s 2015 quiet title action against him, commenting:
“…Plaintiff even admits that he agreed to the filing of the 2015 civil action to avoid property taxes and fraudulent transfer issues. Thus, judicial estoppel is proper under these circumstances to preclude Plaintiff from playing ‘fast and loose’ with the courts.”
Rubin’s Opinion
In his opinion affirming Rosales’s judgment, Rubin agreed that to the extent Shamaan is seeking relief based on purported agreements with Cotta prior to the 2016 judgment, “it is barred by issue preclusion,” explaining:
“That judgment expressly held that wife was ‘the owner in fee simple’ of the properties and that no other person, including husband, had any ‘right, title interest or claim in or to the real properties.’ This constitutes (1) a final adjudication; of (2) the identical issue of whether husband had an interest in the properties; (3) which was actually litigated by wife’s summary adjudication motion; (4) against husband, a party to wife’s quiet title action.”
Shamaan maintained that following the 2016 judgment, Cotta orally agreed, again, that he held equitable title to the properties. Rubin responded:
“Claims based on this theory are barred by the statute of frauds. Probate Code section 15206 explains that a trust in real property is not valid unless evidenced in writing or by operation of law.”
Constructive Trust
The surgeon further contended that the properties were subject to a constructive trust. The presiding justice quoted Civil Code §2224 as saying:
“One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he or she has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it.”
Rubin wrote:
“To establish a constructive trust, plaintiffs must prove: the existence of a res (property or some interest in the property); the plaintiffs right to that res; and the defendant’s acquisition of the res by some wrongful act….Husband’s argument of a constructive trust necessarily fails on the third element. He cannot establish wife gained the property by a wrongful act, because she gained the property by the 2016 judgment. Husband is attempting to rely on a new postjudgment agreement giving him an interest in the property which was already owned by wife.”
Equitable Theory
Producing a new theory, Shamaan argued that he should be relieved of the effect of the 2016 judgment on equitable grounds.
“Husband recognizes that he was culpable in his collusive pursuit of wife’s quiet title action, but suggests he should nonetheless prevail because both he and wife were at fault, requiring a balancing of the equities,” Rubin related. “Husband is mistaken.”
He elaborated:
“Husband is here seeking equitable relief from a judgment that by his admission he fraudulently colluded to obtain. He now claims mutual mistake, seeking to undo the judgment, on the basis that his planned fraudulent scheme failed to work. This is not the type of extraordinary circumstance which justifies equitable relief.”
Consolidated Appeal
Div. Five consolidated Shamaan’s appeal from Rosales’s judgment with his appeal from an Oct. 27, 2020 order by Sotelo denying a motion to quash the writ of execution by which the estate sought to recover the $1.37 million awarded to Cotta. The ex-husband asserted that Cotta had orally agreed not to attempt to enforce the judgment.
Shamaan acknowledged that both he and his ex-wife had “unclean hands” in entering into a tax-avoidance scheme but put forth the proposition that his hands had been cleansed by paying the taxes that were owed, adding that hers had not been, positing that the equitable doctrine of “unclean hands” barred the estate from seeking to execute on the judgment.
Sotelo found that if Shamaan’s rendition of the facts is truthful, “then both Cotta and Shamaan are blameworthy because they jointly committed fraud” but that Shamaan “was the more blameworthy party because the scheme to reverse his property tax liability would have solely benefited him.”
He added that if there was an agreement between the parties as claimed by Shamaan, that agreement “was executed to perpetrate tax fraud and is not enforceable.”
Sotelo Affirmed
There was no evidence as to the existence of an agreement by Cotta not to levy execution on the judgment, Rubin pointed out in his opinion affirming Sotelo’s order.
Shamaan asserted that the estate is equitably barred by laches in seeking enforcement given that Cotta, who did not seek to levy execution, is deceased and cannot testify on his behalf as to their agreement. Unpersuaded, Rubin said:
“Yet it is wife who is prejudiced by husband’s failure to pursue an acknowledgement of satisfaction during wife’s lifetime. If husband believed the money judgment was truly satisfied by agreement, he had nearly two years in which he could have asked wife to file a satisfaction of judgment and, if she declined, bring a motion under Code of Civil Procedure section 724.050 in order to compel her to do so.”
He continued:
“Had husband brought such a motion, the court would have heard both husband and wife on the issue of whether the judgment was satisfied. Instead, husband failed to timely make the assertion, allowed the $1.37 million judgment to remain unsatisfied in the court’s records, and only asserted satisfaction after wife had died and was no longer able to testify against him. Husband failed to establish laches on the part of the estate; if anything, he established that his own claim was barred by laches.”
The case is Shamaan v. Cotta, B305682.
Benjamin I. Bastomski and James A. Frieden of the Law Offices of James A. Frieden teamed with Jeffery J. Czech of Czech & Howell in representing Shamaan in the appeal. Vogele and Timothy M. Kowal and Teddy T. Davis of his office argued for Cotta’s estate.
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