On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County.
Approved for Publication April 23, 1996.
Before Judges Landau, Kleiner and Humphreys.
The opinion of the court was delivered by: Humphreys
Evans-Knott II ("E & K"), a general partnership, transferred real property while insolvent to Anders Engineering, Inc. ("Anders"). According to the deed, the consideration was "debt forgiveness." Thereafter, Anders conveyed the real property to its principal shareholder, George Chajkowsky for $55,000.00. Plaintiff, a creditor of E & K, obtained a summary judgment against Anders and Chajkowsky on the ground that both transfers. were fraudulent under the Uniform Fraudulent Transfer Act ("UFTA"), N.J.S.A. 25:2-20 to -34, adopted in New Jersey in 1988. This statute replaced the Uniform Fraudulent Conveyance Act ("UFCA"), N.J.S.A. 25:2-7 to -19. See Flood v. Caro Corp., 272 N.J. Super. 398, 403, 640 A.2d 306 (App. Div. 1994).
Anders and Chajkowsky appeal. They contend that: (1) a transfer by an insolvent partnership to a third party in order to satisfy a debt of the partners is not a fraudulent conveyance; (2) a genuine material issue of fact is present as to whether Chajkowsky is a good faith transferee who took for value; (3) plaintiff is barred by laches; and (4) a constructive trust should be imposed on the real property for the property taxes paid by them while holding title.
After a thorough examination of the record, we affirm the holdings that the transfer to Anders was a fraudulent transfer, and that plaintiff is not barred by laches. We reverse the holding that the transfer from Anders to Chajkowsky was fraudulent. We remand for an evidentiary hearing as to whether Chajkowsky was a good faith transferee for value, and whether a constructive trust should be imposed on the property for the real property taxes.
TRANSFER FROM E & K TO ANDERS
The transfer by E & K to Anders was constructively fraudulent under N.J.S.A. 25:2-27(a) of the UFTA. That subsection provides:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.
In consideration of the transfers, Anders forgave a debt of approximately $57,000.00 owed to it by other partnerships in which E & K's partners were also partners. The definition of "value" in the UFTA includes satisfaction of an antecedent debt. N.J.S.A. 25:2-24(a). However, the "value" given in exchange for the transfer "must be received by and for the benefit of the debtor-transferror and not some other person or entity." Flood v. Caro Corp., supra, 272 N.J. Super. at 406. A transfer made in satisfaction of the debt of another is not made for reasonably equivalent value. Id. at 407; Hollander v. Gautier, 114 N.J. Eq. 485, 489, 168 A. 860 (Ch. 1933). See also N.J.S.A. 25:2-27(a).
Thus, the transfer of the real property by E & K to Anders to satisfy debts of the partners of E & K was not a transfer for a "reasonably equivalent value" to E & K. Hence, the transfer from E & K to Anders, while E & K was insolvent, was constructively fraudulent as to the plaintiff. We also find no basis for barring plaintiff's claim on the ground of laches. See Lavin v. Bd. of Ed. of City of Hackensack, 90 N.J. 145, 151-153, 447 A.2d 516 (1982).
TRANSFER FROM ANDERS TO ...