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Sunday, August 02, 2015

No Four Year Statute of Limitations for Fraudulent Conveyance

Florida Statutes Section 726.110 generally provides for a four year statute of limitations in regard to fraudulent conveyances (or if longer, 1 year after the transfer was or could have reasonably been discovered by the claimant). Fraudulent conveyance law generally allows a creditor to pursue a third party that received assets from a debtor if the transfer was a fraudulent conveyance.

In a recent Florida case, a judgment holder sought to collect a judgment against a transferee on assets transferred by the debtor. This was done under proceedings supplementary under Florida Statutes Section 56.29, which is a procedural mechanism for collecting on a money judgement. The property of the transferee was at risk since Florida Statutes Section 56.29 provides “[w]hen any gift, transfer, assignment or other conveyance of personal property has been made or contrived by the judgment debtor to delay, hinder, or defraud creditors, the court shall order the gift, transfer, assignment or other conveyance to be void and direct the sheriff to take the property to satisfy the execution.”

The language of this statute is similar in language and concept to the general fraudulent conveyance statutes. Based on such similarity, the transferee argued that the statute of limitations under those statutes should apply to protect the transferee – since that period had run it was too late to collect against the transferee.

No such luck, said the first District Court of Appeal. The statute for collections under proceedings supplementary on a judgment are not tied to the fraudulent conveyance statutes of limitations. Instead, the judgment holder instead can proceed against the transferee (if the transfer was made to delay, hinder or defraud creditors) for the 20 year entire term of the judgment. Transferees thinking they are protected under a 4 year fraudulent conveyance statute in all events may have to adjust their assumptions.

While not applicable in the subject case, however, if a bankruptcy is involved then this extended period may not be applicable. In re: C.D. Jones & Company, Inc., 2015 WL 2260707 at footnote 18 (United States Bankruptcy Court, N.D. Florida 2015).

Biel Reo, LLC v. Barefoot Cottages Development Co., LLC, 156 So.3d 506 (1st DCA 2014)

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