In an issue of first impression, the Michigan Court of Appeals considered whether a party may dispose of all of his assets to avoid payment of damages in a pending wrongful death case by transferring 100% of the marital assets to his spouse by means of an uncontested divorce judgment.
The Court of Appeals held that such a transfer could be set aside in a supplementary action as a fraudulent transfer under the Uniform Fraudulent Transfer Act (UFTA) as to a creditor of the transferring spouse. Estes v. Titus, Docket No. 261968, decided on December 21, 2006. (For Publication)
Plaintiff’s husband was shot and killed by Mr. Estes. Estes was found guilty of first degree murder at a trial in 2002, and was sentenced to life in prison. Plaintiff filed a wrongful death action against Estes. Shortly thereafter, Julie Estes (“Julie”) divorced Estes. The consent judgment awarded all marital property to Julie, supposedly in lieu of child support. (Their minor child was 17 at the time and the amount in question was hundreds of thousands of dollars.)
Titus first sought to intervene in the family court to set aside the judgment, but this case was dismissed because the rights of third parties may not be litigated in a divorce action. Titus later obtained a $550,000 judgment against Estes and sought to enforce it through supplementary proceedings in the circuit court. She sought to set aside the transfer to Julie of 100% of the marital assets.
Titus’ argument was that Estes’ assignment of all interest in the marital property in the uncontested divorce judgment was a fraudulent transfer under the UFTA. The Court of Appeals stated that under the circumstances, Estes could use the transfer to Julie of substantially all of his interests in the marital property to support Titus’ claim the divorce judgment was a fraudulent transfer.
The Court of Appeals concluded plaintiff raised valid claims and presented sufficient evidence under the UFTA, requiring the trial court to add defendant’s ex-wife as a party to Titus’ supplementary proceedings, and to determine plaintiff’s and the Julie’s interests in the disputed property that Julie received from Estes as part of the property settlement incorporated into the divorce judgment. Reversed and remanded.
To read the entire decision in Estes v. Titus click here.
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