Opinion ID: 200889
Heading Depth: 2
Heading Rank: 2

Heading: Fleet's Cause of Action

Text: 23 Fleet claims that its state judgment and execution created a lien on the equitable interest that Valente retained in the Middletown property. We agree. As we noted in the previous section, the Rhode Island Supreme Court, in Mitchell v. Campbell, 48 R.I. 120, 136 A. 249 (1927), explicitly allowed a creditor to acquire a lien on fraudulently-transferred assets: 24 When a conveyance for the purpose of defrauding creditors is made of the legal title to real estate without any intention of passing the beneficial interest therein, it is well settled that the equitable estate of the grantor may be attached in a suit at law as well as in equity. 25 Id. at 250. This unconditional holding authorizes Rhode Island courts to enforce liens on equitable interests to remedy transfers of title such as the one in this case. See also Brierly v. Brierly, 431 A.2d 410, 416 (R.I.1981) (upholding the trial judge's attachment of a husband's equitable interest in the family home); R.I. Gen. Laws § 9-26-14 (outlining the procedures for [w]henever execution is to be levied upon real estate or any interest therein ) (emphasis added); id. § 10-5-9 (concerning any writ to attach real estate, or the right, title, and interest of any defendant in real estate); Restatement (Second) of Trusts § 407(3) (Creditors of the beneficiary of a resulting trust can by appropriate proceedings reach his interest and thereby subject it to the satisfaction of their claims against him.). Since Fleet acquired a lien on real estate of [Valente] including any and all real estate located within the Town of Middletown, we conclude that it had a valid lien on Valente's equitable interest in the Middletown property. 26 Resisting this conclusion, Valente claims that the relief offered by Mitchell and similar cases is not applicable to the Middletown property because the property was fully encumbered by a mortgage and other liens at the time that he conveyed this property to his son. He cites Mehrtash v. Mehrtash, 93 Cal.App.4th 75, 112 Cal.Rptr.2d 802, 805 (2001) for the principle that [i]t cannot be said that a creditor has been injured unless the transfer puts beyond [its] reach property [it] otherwise would be able to subject to the payment of [its] debt. The debtor in Mehrtash deeded his residence to his step-sons for no consideration when he was insolvent. When a creditor attempted to reverse that transfer, the court held that she was not harmed by the transaction since the residence was only worth between $540,000 and $551,000 and was encumbered by $610,000 in mortgages and liens. Id. at 805-06. 27 We disagree with Valente's claim that Mehrtash supports his position. Like the bankruptcy court here, the Mehrtash court only considered whether the creditor could seek relief under the UFTA and did not evaluate whether the debtor retained an interest in the property after the fraudulent transfer. Therefore, its conclusion that the UFTA does not provide relief when the transferred property was fully encumbered does not address the availability of common law remedies. 28 It is true that the Mehrtash court supplemented its UFTA analysis by observing that recovering the property from the transferee would not actually help the creditor since the debtor could not have satisfied his debts with that property. It buttressed that observation by citing the fundamental maxim of jurisprudence that `[t]he law neither does nor requires idle acts.' Id. at 805 (quoting Bennett v. Paulson, 7 Cal.App.2d 120, 45 P.2d 369, 370 (1935)). See also A/S Kreditt-Finans v. Cia Venetico De Navegacion S.A. of Panama, 560 F.Supp. 705, 711 (E.D.Pa.), aff'd, 729 F.2d 1446 (3d Cir.1984) ([N]umerous courts in other jurisdictions in which the issue has arisen have stated as though it were axiomatic the requirement that a creditor be injured by the conveyance it seeks to invalidate.). However, as Valente's sale of the property revealed, that reasoning does not apply here. The Middletown property had appreciated in value prior to the turnover proceeding in the bankruptcy court, and Fleet could have satisfied its judgment from Valente's equitable asset but for his fraudulent conduct. Since the bankruptcy court could have awarded the proceeds that Valente received from the sale to Fleet, it was not being asked to undertake an idle act. 29