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Intili v. Di Giorgio

300 N.J. Super. 652, 693 A.2d 573 (Ch. Div. 1997)

DEBTOR-CREDITOR; FRAUDULENT TRANSFERS— Overriding a literal reading of the Uniform Fraudulent Transfer Act, a creditor’s claim is time barred by the Court because she had actual and constructive notice of her debtor’s transfer of property within the 4-year limitation period, but failed to file a cause of action until after that period had passed.

On May 14, 1990, a creditor filed a complaint against two debtors for money due on a note. Two months later, judgment by default was entered. In November, 1991, one of the debtors conveyed his one-half interest in real property to a third party for no consideration. The deed was recorded later that month. In January, 1993, the Law Division vacated the 1990 default judgment and the matter went to trial. In October, 1993, the creditor obtained a final judgment against the debtors, jointly and severally, and shortly thereafter learned of the 1991 transfer without consideration. In May, 1996, the creditor brought an action seeking to void the transfer. Debtors claim the cause of action is time barred since creditor had knowledge of the transfer but failed to assert a claim within the 4-year limitation period prescribed under the Uniform Fraudulent Transfer Act (“UFTA”). This time period begins on the date of the alleged fraudulent transfer. The creditor contended that her action was timely filed because the legislature intended the relevant statute to be a statute of limitations that can be tolled in certain circumstances, and since the Law Division vacated the default judgment in January, 1993, her creditor status and debtors’s debtor status were removed, giving her no right to pursue a UFTA claim until the final verdict was rendered in October, 1993. The Chancery Division was left to determine the legislative purpose behind the limitations period.

The Court stated that legislative intent overrides a literal reading of the statute and that the UFTA delineates the rights and remedies of creditors in cases of transfers of assets made by debtors to prevent or impede satisfaction of claims. The statute of limitations adopted by the UFTA bars the right, rather than the remedy, upon expiration of the statutory time periods. The UFTA defines a “creditor” as one who has a right to payment, whether or not the right has been reduced to a judgment and whether or not a claim has matured or remains disputed, either legally or equitably. Furthermore, a defendant need not be a debtor before a plaintiff asserts a UFTA claim. Therefore, the Court found that the UFTA expressly limits a creditor’s right to set aside a transfer to the time period in the statute, regardless of when a party obtains final judgment in a court of law. Although there is also a statutory time period of one year after the transfer was or could reasonably have been discovered, the Court held that this time limit was created for situations in which a creditor does not learn of the alleged fraudulent transfer until after the 4-year statute of limitations runs out. The Court then stated that the creditor had record notice of the transfer when the deed was recorded and actual notice in late 1993. Despite creditor’s successful vacatur in January, 1993, the right to assert a UFTA claim never tolled. Accordingly, creditor’s claim is time barred because she had actual and constructive notice of debtors’ transfer of property within the 4-year limitations period of the UFTA but failed to file a cause of action until that period had expired.


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