Opinion ID: 1855429
Heading Depth: 1
Heading Rank: 6

Heading: fraudulent transfer

Text: The Hanigans argue that even if we decline to uphold the constructive trust, we should affirm the district court's judgment because the transfer of title from Terry to Mary Jane was in fraud of Terry's creditors. The Hanigans claim that even if tracing is required for the imposition of a constructive trust, tracing is not required for fraud where the fraud is a transfer to place property out of the reach of creditors. The Hanigans assert that one need only identify the fraudulently transferred property. Alternatively, the Hanigans argue that they are entitled to a decree voiding the transfers as fraudulent to the extent necessary to satisfy their claims. Obviously, had Terry not conveyed the property in joint tenancy, the Hanigans would have been able to reach it pursuant to the judgment entered in the action at law on the eight promissory notes. However, a fraudulent transfer on its own will not support the imposition of a constructive trust on the transferred property. As to fraudulent transfers, the court does not impose a constructive trust on the transferred property precisely because the lack of tracing will not justify the exclusive ownership rights that a constructive trust entails. The court instead sets aside the fraudulent transfer and does so only as to such creditors as attack it. See United States Nat. Bank of Omaha v. Rupe, 207 Neb. 131, 296 N.W.2d 474 (1980). The Hanigans argue that Terry's act of placing title to the property in joint tenancy gratuitously transferred an interest to Mary Jane when he knew or believed that he had or would be incurring debts from the acquisition of the lot and construction of the residence which were or would be beyond his ability to pay. The Hanigans claim that the first fraudulent conveyance was the undivided one-half interest in the lot, which cost $60,000, and that each subsequent increase in the value of the house through payment to the builder constituted a fraudulent transfer to the extent of one-half of each progress payment. They argue that Terry's suicide, by effectuating Mary Jane's right of survivorship, constituted a fraudulent transfer of his remaining one-half interest in the house. We find that Terry's act of placing the title in joint tenancy was a fraudulent transfer as to the Hanigans. The joint tenancy deed was recorded in October 1988. The Nebraska Uniform Fraudulent Conveyance Act, Neb.Rev.Stat. §§ 36-601 to 36-613 (Reissue 1988), which was in effect at the time of this conveyance, is therefore controlling. Section 36-606 stated: Every conveyance made and every obligation incurred without fair consideration when the person making the conveyance or entering into the obligation intends or believes that he or she will incur debts beyond his or her ability to pay as they mature, is fraudulent as to both present and future creditors. The undisputed testimony establishes that the conveyance to Mary Jane was made without fair consideration. At all times during the years immediately before and after the conveyance, Terry was insolvent in that his assets at fair market value were less than his liabilities. A person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay the probable liability on his existing debts as they become absolute and matured. § 36-602. The record establishes that at the time of the conveyance, Terry intended to incur debts beyond his ability to pay as they matured. Section 36-609 provided that [w]here a conveyance ... is fraudulent ... such creditor... may ... (a) [h]ave the conveyance set aside ... to the extent necessary to satisfy his or her claim.... Thus, the Hanigans are entitled to have the original conveyance of the property set aside. Since this conveyance is set aside, we need not consider subsequent additions to the value of the property or whether Terry's suicide effected a transfer of his interest in the property. We next address the extent to which the Hanigans may levy execution upon the property. The Uniform Fraudulent Conveyance Act defined an asset which may be fraudulently conveyed as property not exempt from liability for his or her debts. See § 36-601. Without deciding these issues, we point out that Mary Jane may be entitled to claim a homestead allowance pursuant to Neb.Rev. Stat. § 30-2322 (Reissue 1995) or Neb.Rev. Stat. § 40-101 (Reissue 1993) and an exempt property allowance pursuant to Neb.Rev. Stat. § 30-2323 (Reissue 1995). Mary Jane's children may be entitled to a reasonable allowance for support pursuant to Neb.Rev. Stat. § 30-2324 (Reissue 1995). These issues have not been addressed by the district court, nor were they considered by the court when it found a constructive trust in all of the property. Thus, the property is still subject to Mary Jane's possible right to assert such exemptions involving the property. The Hanigans may levy against the property only to the extent that it is nonexempt. Therefore, the district court must consider what exemptions and other allowances have priority over the Hanigans' claims.