J 08

Question 1

• Dan has fallen on hard times since the opening of MegaBooks in the nearby shopping mall.
• For the past six months, Dan has been legally insolvent, unable to pay his debts as they become due.
• Acme Publishing Co. obtained a $5,000 judgment against Dan in the Norfolk Circuit Court.
• Acme has made a “final demand” for an additional $75,000 that Dan owes, but it has not yet been reduced to judgment.
• Recently, Acme learned of the following actions taken by Dan within the past month:
  
  • He removed a valuable collection of rare books from the bookstore and gave them to his son for his birthday.
  • He paid $50,000 in past due rent to the limited liability company that owns the building where Dan’s Corner Bookstore is located. Dan is the sole member of the LLC.
  • He has been negotiating with a collector in Philadelphia to sell a valuable antique Revolutionary War printing press.

Question 2

On what basis, if any, can Acme challenge the gift of the rare books to Dan’s son and what can Acme do to perfect the challenge? Explain fully.

Answer 2

Acme can challenge the gift of the rare books based on fraudulent transfers or voluntary conveyances made while the debtor is insolvent.

Under §55-80, fraudulent transfers made with the intent to hinder or defraud creditors can be set aside, and the property can be reached by the creditor.
Under §55-81, voluntary conveyances made while the debtor is insolvent or that render the debtor insolvent are void as to creditors at the time of the conveyance.

Acme should file suit, alleging one or both of these theories and request the court to set aside the gift.
Acme can then seek a writ of execution on the $5,000 judgment and ask the sheriff to levy on the rare books.

Question 3

(b) May Acme file an effective lis pendens on the building owned by the LLC or otherwise secure payment from the proceeds of any sale of the building? Explain fully.

Answer 3

Acme cannot file a lis pendens yet.
Under §8.01-268, a lis pendens may only be filed if the action seeks to establish an interest in the real property described in the memorandum.

A lis pendens is proper only when an action is pending that could affect title to the real estate.

Acme may need to take other legal actions to secure payment from the proceeds of the building sale.

Question 4

(c) What steps, if any, can Acme take to prevent the sale of the antique printing press and eventually have its value applied toward the amounts Dan owes Acme? Explain fully.

Answer 4

Acme can file an attachment proceeding against Dan and the antique printing press.

The attachment proceeding should argue that the property is about to be disposed of in a way that would hinder Acme from collecting the $75,000 owed.

Acme should file suit for a money judgment of $75,000 against Dan.
Acme may also file for a temporary injunction to prevent Dan from selling the printing press, preserving it to satisfy the judgment for $75,000.