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Tuesday, March 12, 2013


Under fraudulent conveyance law, a creditor of a debtor can reach property of the debtor that the debtor transferred to third parties if the transfer is a fraudulent conveyance. However, Fla.Stats. §726.110(1) provides that an action to reach such transferred property must be commenced within 4 years of the transfer, or if later, within 1 year after the transfer was or could reasonably have been discovered. Thus, if the transfer occurred more than 4 years ago, a creditor cannot sue if the property owner can show that the transfer “was or could reasonably have been discovered” within the preceding 1 year period. If the transfer was not discovered and could not reasonably have been discovered, then the statute of limitations does not expire – hiding the transfer will not yield a reward to the transferor or the transferee. 

In a Florida case, the subject property was Florida real estate. A transfer was made by the debtor, and a deed was recorded in the public records. The current owner of the real estate claimed that the recording of the deed put the creditor on notice and since both the 4 year period and the 1 year period had expired since recording, a fraudulent conveyance claim against the current owner was time barred. More particularly, the issue was whether the recording of a deed constitutes such notice that a creditor “could reasonably have discovered” the transfer for purposes of the above rules. 

The trial court dismissed the fraudulent claim as time-barred. However, the 1st District Court of Appeals reversed and held that the mere recordation of the deed was not enough notice to start the 1 year rule of the statute as being a transfer that is reasonably discoverable. The DCA noted that recording statutes are there to put third persons who have a reason to examine the records on notice of a transfer – such as subsequent purchasers or would-be lienors. Authorities in other jurisdictions typically (but not unanimously) distinguish between subsequent purchasers and creditors alleging fraudulent transfers int his context. 

The DCA ultimately determined that: 
It is not reasonable to require a defrauded creditor to monitor the land records in all 67 couties or, indeed, outside the state, as well, as a routine practice.
Desak v. Vanlandingham, 37 Fla.L.Weekly D2354 (1st DCA)

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