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Bevensee v. The Presbyterian Home at Meadow Lakes, Inc.

A-2073-97T3 (N.J. Super. App. Div. 2000) (Unpublished)

FRAUDULENT TRANSFERS; REMEDIES—Creditors entitled to a remedy under the Fraudulent Transfer Act have a range of protective possibilities, including appointment of a receiver.

An elderly man sought to live in a continuing care retirement community. To do so, he needed to pay an initial entrance fee and make continuing monthly payments. At the time he applied for entry, his sole asset was a house he valued at $300,000. That value was overstated and had been arrived at by guessing. The community allowed the man to move in upon making a down payment toward the entrance fee, with a promise that the house be sold and the balance of the entrance fee then be paid. Instead of selling the house, the man and his daughter obtained an equity loan. In response to some pressure from the community, a portion of those loan proceeds were used to pay the balance of the entrance fee. After a period of time, the man fell behind in his monthly payments, and when he died, he owed a substantial amount of money to the community. The community sought to recover that money by forcing sale of the house. Unbeknownst to the community, however, the man had previously conveyed the house to himself and his grandson as joint tenants with the right of survivorship. The deed listed the consideration as “one dollar and other valuable consideration.” In a lawsuit that followed the man’s death, the community successfully obtained summary judgment in its favor, holding that the transfer of the home from the man to himself and his grandson was fraudulent, and the lower court appointed a receiver to oversee sale of the property. The Appellate Division upheld the lower court’s findings. In doing so, it looked at the Fraudulent Transfer Act and the case law under that act. The act lists eleven “badges of fraud” that New Jersey courts are to consider in determining “whether a debtor conveyed property with the actual intent of placing it beyond the reach of creditors.” Here, the transfer bore “at least five of the ‘badges of fraud’ enumerated in the statute.” The transfer was to an “insider,” i.e., the grandson. “Transfers made to close relatives are especially suspect.” Second was that the transfer was made wherein the decedent retained possession and control of the property after the transfer. Third, the transfer was concealed from the community, despite the fact that the community was to be notified of any such transfer under its contract with the decedent. Fourth, the home was the only real asset owned by the decedent. Lastly, the transfer was made for less than fair value. Consequently, according to the Court, “[t]he conveyance was riddled with badges of fraud, and a transfer to [the grandson] was patently fraudulent under the Uniform Fraudulent Transfer Act, ... with the intent to hinder or delay the realization of [the creditors’] interests in the property.” Also, creditors entitled to remedy under the Act have a range of protective possibilities. Appointment of a receiver was an appropriate remedy under the circumstances.

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