U.S. Small Business Administration v. Bensal

Case Type:
Business
Case Status:
Affirmed
Citation:
No. 14-17404 (9th Circuit, Apr 04,2017) Published
Tag(s):
Ruling:
9th Circuit affirmed ruling of district court (N.D. Cal.) in favor of US Small Business Administration. SBA sought to avoid fraudulent transfer under Federal Debt Collection Procedures Act by debtor to children with actual intent to hinder and delay after debtor "disclaimed" inheritance under California law, effecting transfer of inheritance to children. Panel held that FDCPA displaced California disclaimer law of inheritance, including statutory provision that disclaimer was not voidable. Probate law did not bar recovery under FDCPA. SBA's default judgment qualified as "debt" under FDCPA.
Procedural context:
SBA sued debtor and transferees to avoid fraudulent transfer, and district court entered summary judgment in favor of SBA. Defendant debtor appealed to 9th Circuit.
Facts:
BCI obtained two loans from private bank; US Small Business Association (SBA) guaranteed percentage of one of them. Bensal personally guaranteed both loans. After BCI and Bensal defaulted, bank sued both and obtained default judgment. SBA paid private bank approximately $55k on second loan, and bank assigned entirety of default judgment (approx. $300k), of which approximately $140k represented debt on second loan. Several years later, Bensal inherited a share in his deceased father's trust worth approximately $155k. Bensal did not accept the inheritance. Instead, he signed a disclaimer, which legally passed his trust share to his two children and prevented creditors from accessing his trust share under California law. SBA sued Bensal, trust, and children to avoid transfer as fraudulent under the Federal Debt Collection Procedures Act (FDCPA), and to execute upon the trust share.
Judge(s):
Hawkins, Berzon, Murguia

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