J 09 Flashcards
- Tony, a self-employed building contractor, owned three parcels of real property in Bristol, Virginia.
- Each parcel was appraised at $125,000 by an independent appraiser but assessed for taxation at $90,000.
- Title to Parcel 1 was held by Tony and his wife, Paula, as tenants by the entireties.
- The other two parcels were owned by Tony in fee simple and were unencumbered.
- Tony’s contracting business had slowed, and he had no assets other than some building equipment.
- Tony relied on Paula’s salary as a librarian for living expenses.
- Tony owed creditors $300,000, including $200,000 to the Bank of Commerce.
- On April 15, Bank’s attorney demanded Tony make a “substantial payment” or provide deeds of trust on the three parcels as security for the debt.
- On April 30, Tony and Paula executed and recorded a deed transferring Parcel 1 to Paula for $500.
- On May 1, Bank learned of the transfer and sued Tony for the full $200,000 debt.
- On May 5, Tony executed a deed of trust on Parcel 2 to his father for a $45,000 loan.
- On May 5, Tony conveyed Parcel 3 to his friend, Alfred, for a $100,000 promissory note due in five years, with the right to repurchase the parcel for the same amount within that period.
- Bank amended its complaint to seek an order setting aside the deed to Paula on Parcel 1, the deed of trust to Tony’s father on Parcel 2, and the deed to Alfred on Parcel 3.
- Tony denied that Bank had the right to set aside these conveyances.
What arguments should Bank make in support of its prayer to set aside each of the conveyances, what arguments should Tony make in opposition, and how should the court rule on each? Explain fully.
Arguments the Bank should make are:
[i] The conveyances of Parcel 1 to Paula, the conveyance of a deed of trust on Parcel 2 in favor of his Dad, without
any additional consideration and the conveyance of Parcel 3 to his friend were all made with the intent to hinder and defraud his creditors and under Va. Code 55-80, the Bank is entitled to the court’s setting aside the conveyance and making the property subject to the Bank’s claims.
[ii] Tony would argue that as a debtor, under Virginia law, he’s entitled to prefer one creditor over another. He should also argue, as to Parcel 1, that since it was held with Paula as Tenants by the Entirety, it was immune from the reach of a creditor of just him and that the court should not set aside the transfer of Parcel 1.
