In Nautalis vs. Yang, the Fourth District discusses the good faith defense to set aside of a fraudulent transfer. It said that
(w)e publish our opinion because of our analysis of the requirements of the good faith defense. Some cases have held that a transferee cannot avail itself of the good faith defense if the transferee had fraudulent intent, colluded with a person who was engaged in a fraudulent conveyance, or actively participated in a fraudulent conveyance. A line of federal cases interpreting California law concludes the good faith defense may also fail if the transferee had actual knowledge of facts suggesting to a reasonable person that the transfer was fraudulent. Some of those cases may be read to improperly establish an inquiry notice standard, and others frame the test in a way that is inconsistent with the legislative comment to section 3439.08. After analyzing those state and federal cases, we hold a transferee cannot benefit from the good faith defense if that transferee had fraudulent intent, colluded with a person who was engaged in the fraudulent conveyance, actively participated in the fraudulent conveyance, or had actual knowledge of facts showing knowledge of the transferor’s fraudulent intent.
This case is a good reminder that Family court is a court of equity and a party who was part of a fraudulent transfer cannot raise a good faith defense (I completed the transfer in good faith) if the transferee is operating with fraudulent intent as establish by the facts.