J 23 Flashcards
David and Suzy married in 2015.
They resided in Suffolk, Virginia.
The home in Suffolk was a gift to David from his grandfather in 2014, before meeting Suzy.
David and Suzy purchased a lakefront vacation home near Roanoke, Virginia, in 2019.
The vacation home was held in both of their names as tenants by the entireties.
In July 2021, David’s business failed due to the COVID-19 outbreak.
David had no liquidity and became unable to pay his debts.
He stopped making payments on personal loans from Lender Servicing Co. (Lender), which were based on personal guarantees David made before his marriage to Suzy.
To protect the Suffolk home from creditors, David transferred the property to Suzy’s name alone in September 2021.
The deed stated the transfer was made out of David’s natural love and affection for Suzy.
The deed was recorded in the Suffolk Circuit Court.
Lender filed a Complaint against David for nonpayment of loans in the Circuit Court of the City of Suffolk.
David was served with the Complaint on November 1, 2021.
In December 2021, David inherited a farm in the City of Chesapeake, Virginia, from his father.
On February 2, 2022, David conveyed the farm to John Smith in exchange for a $50,000 debt he owed Smith.
The deed was recorded promptly after the closing.
Lender obtained a $200,000 judgment against David on January 10, 2022.
The judgment was docketed in the Clerk’s office of the Circuit Court of the City of Suffolk.
In March 2022, Lender’s lawyer recorded authenticated abstracts of the judgment against David in the Clerk’s offices of the Circuit Court of the City of Chesapeake and the Circuit Court of the City of Roanoke.
Does Lender have a right to enforce its judgment against the home in Norfolk. Explain fully.
Transfers made with the intent to defraud creditors are considered fraudulent under Virginia law. Transfers between spouses are presumed fraudulent and can be voided by creditors.
This presumption can be rebutted if the spouse gives consideration for the transfer or it is a bona fide gift.
Badges of fraud:
David was insolvent and facing legal action.
The transfer was to a family member (Suzy).
David retained an interest in the property by continuing to live in the house.
If the Lender can prove fraudulent intent, the transfer can be voided and the Lender can enforce the judgment.
Does Lender have a right to enforce its judgment against The vacation home in Roanoke? Explain fully.
A transfer can be voided if made with fraudulent intent, unless the recipient is a bona fide purchaser.
Key consideration: Was Smith a bona fide purchaser who paid fair value for the farm and had no knowledge of David’s fraudulent intent?
David inherited the farm in December 2021 and conveyed it to Smith in February 2022, before the Lender’s judgment was recorded in March 2022.
If Smith was unaware of David’s insolvency or fraudulent intent, the conveyance may stand, and the Lender cannot void the transfer.
Does Lender have a right to enforce its judgment against The vacation home in Roanoke? Explain fully.
Under Virginia law, property held as tenancy by the entireties can only be used to satisfy joint debts of the spouses.
Since David’s debt to the Lender is solely his, the Lender cannot enforce its judgment against the vacation home.
Property held as tenancy by the entireties is protected from creditors pursuing individual debts of either spouse.
