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Elahie v. Norman

January 16, 2009


On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Morris County, Docket No. DC-007903-07.

Per curiam.


Submitted October 21, 2008

Before Judges Collester and Graves.

In his Special Civil Part complaint, plaintiff Brendan Elahie alleged that defendant Omar Norman had unlawfully assisted his mother, Sherry Norman, in violating the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2-20 to -34. Defendant appeals from a judgment entered on December 19, 2007, in the amount of $3650, following a bench trial. After reviewing the record and the applicable law in light of the contentions advanced on appeal, we affirm in part, reverse in part, and remand for further proceedings.

In a separate case involving plaintiff and defendant's mother, Sherry Norman, plaintiff was awarded a judgment for $1340 plus counsel fees of $2310, for a total judgment of $3650. On the day of trial----August 1, 2006----Sherry Norman recorded a deed that transferred her one-family home to her son, Omar Norman, the defendant in the present matter. According to the deed signed by Sherry Norman, defendant paid the sum of one dollar for the transfer of title. Nevertheless, defendant concedes the property was worth approximately $180,000 to $190,000 when his mother transferred it to him. According to defendant, his mother transferred the property to him because she got "fed up with landlording and she said that's it, I quit, I don't want it anymore, you take it subject to the existing mortgage."

After plaintiff obtained a judgment against Sherry Norman, he learned of the deed from Sherry Norman to her son, and plaintiff's attorney notified defendant that he had unlawfully participated in a fraudulent conveyance in violation of the UFTA. When defendant failed to respond to the letter he received from plaintiff's attorney, plaintiff filed the present action alleging that defendant assisted his mother in her efforts "to conceal assets from Plaintiff's judgment."

Plaintiff's complaint was filed in August 2007, and the case was tried on December 19, 2007. However, defendant signed and recorded a quit-claim deed on December 5, 2007, transferring the property back to his mother. Plaintiff was notified of the transfer in a letter dated December 11, 2007. Consequently, during the trial on December 19, 2007, defendant argued that plaintiff had not "been harmed in any way" because defendant had transferred the property back to his mother. In reply to this argument, plaintiff's attorney noted that defendant did not transfer the property back to his mother until after plaintiff filed a complaint and incurred litigation expenses.

The trial court found that "the last second transfer" of the property by Sherry Norman to her son on August 1, 2006, was "an illegal transfer to avoid a judgment creditor," and that defendant's explanation for the transfer was not credible. Accordingly, the court concluded that plaintiff's proofs were sufficient to establish that defendant had assisted his mother in violating the UFTA. With regard to damages the court stated, "the appropriate damage amount is as exhibited in the [prior court order dated August 14, 2006], $1,340 in damages together with attorney fees in the amount of $2,310.00."

Our Court has recognized that a creditor in this state "may bring a claim against one who assists another in executing a fraudulent transfer." Banco Popular N. Am. v. Gandi, 184 N.J. 161, 178 (2005). Moreover, if a creditor satisfies "the agreement and knowledge aspects of civil conspiracy and all of the underlying components of a UFTA claim," then "[c]ivil conspirators are jointly liable for the underlying wrong and resulting damages." Ibid. In this case, based on the testimony and the documentary proofs, the court found that plaintiff had clearly satisfied his burden and that factual determination is binding on appeal because it is "supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).

After concluding that defendant assisted his mother in violating the UFTA, the court awarded plaintiff the sum of $3650----the exact amount of the prior judgment against defendant's mother. As the Court has noted, the UFTA provides alternative remedies:

The remedies available to a successful claimant under the UFTA are broad. Obviously, avoidance of the transfer is primary. N.J.S.A. 25:2-29(a)(1). Other remedies include attachment against the asset transferred or other property of the transferee, N.J.S.A. 25:2-29(a)(2); a money judgment against the transferee where the transfer cannot be undone, N.J.S.A. 25:2-30(a), (b); and injunctive relief. N.J.S.A. 25:2-29(a)(3)(a). The statute also contains a catch-all provision, affording a creditor "[a]ny other relief the circumstances may require." N.J.S.A. 25:2-29(a)(3)(c). [Banco Popular N. Am., supra, 184 N.J. at 176-77.]

Nonetheless, a transferee is not personally liable for the debts of another unless the property is placed beyond the creditor's reach, and the transfer cannot be undone. In this case, we agree with defendant that the transfer from Sherry Norman to defendant was "undone" on December 5, 2007, when defendant recorded a quit-claim deed transferring the property back to his mother. Under these circumstances, plaintiff's compensatory damages cannot exceed the reasonable litigation expenses he incurred in the present action. See Hagen v. Gallerano, 66 N.J. Super. 319, 333 (App. Div. 1961) ("[T]he reasonable expense of the litigation to establish the invalidity of the [fraudulently procured] release is an item that is recoverable in the fraud case.").

In view of the foregoing, we affirm the trial court's ruling that defendant unlawfully participated in a transfer of property in violation of the UFTA, but we vacate the award of damages and remand that ...

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