Sanwa Bank v. Chang

In Sanwa Bank v. Chang (2001) 87 Cal.App.4th 1314, husband obtained an unsecured line of credit from a bank. Subsequently, he quitclaimed to wife his interest in the family home and defaulted on the loan. The bank sued husband and wife for fraudulent conveyance. Thereafter, husband filed a Chapter 7 bankruptcy petition. The family home was not listed as an asset of the bankruptcy estate. After husband's discharge from bankruptcy, the bank's action proceeded to trial against wife. The bank prevailed. (Id. at pp. 1316-1317.) On appeal, wife argued that the fraudulent conveyance claim should have been adjudicated in husband's bankruptcy action and, upon husband's discharge from bankruptcy, the bank did not have a valid cause of action against her under California's Uniform Fraudulent Transfer Act. (Id. at pp. 1317-1318.) The Court of Appeal disagreed, concluding: "The injunction created by husband's discharge from bankruptcy does not protect the residence from the present fraudulent conveyance action because it was pre-bankruptcy property, not after-acquired property, and it was never made a part of the bankruptcy estate. Husband is discharged from personal liability on the debt to Sanwa Bank; Wife, however, remains personally liable for the community debt-particularly here where she admittedly is the transferee of a fraudulent conveyance-and the residence, as prebankruptcy community property, may be looked to for payment." (Id. at p. 1319.)