Minnesota Court of Appeals Finds Marital Transfers to be Fraudulent, Upholds Summary Judgment for Bank to Collect Husband’s Judgment Debt – Los Angeles Asset Protection Planning and Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on August 9, 2013

While married, Mr. Brown defaulted on a guaranteed debt of more than $8.8 million, which included a principal debt to the bank of $227,040. The bank sued and obtained a judgment against Mr. Brown for $290 thousand. In the later divorce between the Browns, Mrs. Brown received property of more than $2 million. Mr. Brown was awarded property worth over $600 thousand. The district court also assigned to Mr. Brown the bank judgment and ordered Mr. Brown to hold harmless and indemnify Mrs. Brown against the judgment.

After the dissolution, the bank began a fraudulent-conveyance action against the Browns alleging that Mr. Brown fraudulently transferred “substantially all” of his assets to Mrs. Brown while retaining possession and control of the assets “shortly after the substantial debt owed to [the bank] became a judgment.” The bank sought to levy execution on the assets in question and moved for summary judgment. The district court ruled that the transfers of assets accomplished through the marital dissolution constituted actual fraud under Minn.Stat. § 513.44 (2012) and granted the summary judgment. The Browns appealed.

“When a creditor attempts to satisfy an existing debt, repayment of which has been circumvented by a transfer of assets from a debtor spouse to a non-debtor spouse, a presumption that the transfer is fraudulent arises and must be met by affirmative proof showing that the transfer was not fraudulent. The burden of proving that the transfer is not fraudulent is on the transferee.” Minneapolis Stock–Yards & Packing Co. v. Halonen. Neither Mr. nor Mrs. Brown presented clean and convincing evidence to rebut the presumption that the marital transfers were not fraudulent. That the transfer left Mrs. Brown with substantial assets and minimal debt, and Mr. Brown with all the debt making him essentially insolvent, also supported the holding that the transfers were fraudulent.

The Court of Appeals upheld the district court’s decision for summary judgment for the bank. Citizens State Bank Norwood Young America v. Brown.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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