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Creditors Must Timely Sue For Fraudulent Transfers – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Creditors Must Timely Sue For Fraudulent Transfers

In PGA West Residential Association, Inc. v. Hulven International, Inc., 2017 S.O.S. 4035, plaintiffs alleged that a property owner attempted to insulate the equity in his property from creditors by fraudulent means, specifically, naming a sham corporation as the beneficiary on a deed of trust. The lawsuit was filed more than seven years after the alleged fraudulent activity.

Defendants argued that a transfer to a sham entity constituted a “transfer” under the Uniform Fraudulent Transfer Act (UFTA) and that the UFTA and its seven-year limitations period governed the alleged unlawful activity. PGA West argued that there was no “transfer” because Hulven never really existed and, as a result, was incapable of acting as a transferee and, therefore, the UFTA and its limitations period did not apply.

The court found that the defendant’s alleged fraudulent attempt constituted a “transfer” for purposes of the UFTA and that the seven-year limitations period applied. Further, the court found that the seven-year limitations period for actions under UFTA is a substantive statute of repose that completely extinguishes a right or obligation and is not subject to forfeiture. Because the plaintiff filed its lawsuit after the UFTA‟s statute of repose seven-year limitations period had expired, its rights under UFTA were completely extinguished.

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