At the time
SFWMD's final judgment was entered, Henry Yusem
had [*2] a pending legal malpractice action.
In April of 1998, Henry Yusem's attorneys, Allison
and Robertson, P.A., settled the legal malpractice
action, receiving $ 244,701.11. On April 9,
1998, Henry Yusem directed Allison and Robertson,
P.A. to wire transfer the $ 244,701.11 into
the joint bank account of Henry and Judith Yusem.
Henry Yusem and Judith Yusem held the joint
account as tenants by the entireties. On the
same day that the $ 244,701.11 was wire transferred
into the joint account, Henry Yusem transferred
$ 210,000 to an offshore trust account which
he held in his name only. Henry Yusem testified
that the entirety of these monies was lost in
a bad investment in foreign currency.
SFWMD filed this suit against
Henry Yusem and Judith Yusem alleging that Henry
Yusem engaged in a fraudulent asset conversion
in violation of section 222.30, Florida Statutes
(1997), and Chapter 726, Florida Statutes (1997).
A non-jury trial was held in which Henry and
Judith Yusem were the only witnesses to testify.
After concluding that the funds wire transferred
into the joint account were subject to execution
pursuant to SFWMD's final judgment, the trial
court concluded as follows:
14) Once again, [*3] these
assets were not identified as the wages of HENRY
YUSEM. These proceeds were wired directly into
the YUSEMS' account on April 9, 1998. On the
same day, HENRY YUSEM transferred the bulk of
the funds, or $ 210,000.00, to HHY trust. At
trial, HENRY YUSEM claimed the money was lost.
After allegedly losing approximately $ 210,000
in a "poor investment" in foreign
currency, YUSEM was unwilling or unable to recall
any specific details regarding the investment
or subsequent loss. The Huntsman test n1 is
satisfied as to this transfer of $ 210,000.
Specifically, the court finds the following
badges of fraud exist:
a) The transfer of settlement
funds was to an insider, first to the parties
joint account and then to the Defendants' offshore
trust.
b) The debtor retained control
of the funds after the transfer and apparently
chose to invest them.
c) The funds were transferred
at a time when the judgment was outstanding.
d) The transfer was made almost
immediately, removing the funds in a manner
that suggests concealment.
These badges of fraud support
a finding of fraudulent intent. The transfer
allowed the debtor to retain possession while
concealing the funds.
The [*4] trial court ordered that:
Based upon the transfer of
settlement funds to the Defendant's joint account,
the Plaintiff is entitled to a judgment against
the Defendants, HENRY YUSEM and JUDITH YUSEM
jointly and severally in the amount of $ 210,000.
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- Footnotes - - - - - - - - - - - - - - -
n1 Huntsman Packaging Corp.
v. Kerry Packaging Corp., 992 F. Supp. 1439,
1446 (M.D. Fla. 1998).
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Footnotes- - - - - - - - - - - - - -
Judith Yusem argues that the
record is devoid of any evidence that she had
any knowledge of the existence of the malpractice
action, the fact that it had settled, that the
proceeds were transferred into their joint account
or that her husband immediately transferred
the funds into his offshore trust account. Therefore,
she cannot be held to be a transferee under
the fraudulent conveyance statute. We agree.
Section 726.105, Florida Statutes
(1997), provides in pertinent part:
(1) A transfer made or obligation
incurred by a debtor is fraudulent as to a creditor,
[*5] whether the creditor's claim arose before
or after the transfer was made or the obligation
was incurred, if the debtor made the transfer
or incurred the obligation:
(a) With actual intent to
hinder, delay, or defraud any creditor of the
debtor; or
. . .
(2) In determining actual
intent under paragraph (1)(a), consideration
may be given, among other factors, to whether:
(a) The transfer or obligation
was to an insider.
(b) The debtor retained possession
or control of the property transferred after
the transfer.
(c) The transfer or obligation
was disclosed or concealed.
(d) Before the transfer was
made or obligation was incurred, the debtor
had been sued or threatened with suit.
(e) The transfer was of substantially
all the debtor's assets.
(f) The debtor absconded.
(g) The debtor removed or
concealed assets.
(h) The value of the consideration
received by the debtor was reasonably equivalent
to the value of the asset transferred or the
amount of the obligation incurred.
(i) The debtor was insolvent
or became insolvent shortly after the transfer
was made or the obligation was incurred.
(j) The transfer occurred
shortly before or shortly after a substantial
debt was incurred. [*6]
(k) The debtor transferred
the essential assets of the business to a lienor
who transferred the assets to an insider of
the debtor.
The debtor in this case is
Henry Yusem. The transferee is Henry Yusem's
offshore trust account. Judith Yusem was not
a debtor, because SFWMD had a judgment against
Henry Yusem only; nor was she a transferee,
because the money was only momentarily transferred
into the joint account without her knowledge
and there was no evidence that she benefitted
from the transfer. Additionally, there is a
total absence of evidence that she conspired
with Henry Yusem to defraud SFWMD. Therefore,
there is no basis to hold Judith Yusem liable.
Section 726.108(1), Florida
Statutes (1997), n2 provides for the remedies
of creditors. There is nothing in section 726.108
which provides that a creditor such as SFWMD,
that has a judgment against a debtor such as
Henry Yusem, can obtain an additional judgment
against the same debtor, because the debtor
fraudulently transferred funds to avoid his
creditors. The judgment of $ 224,695.42 obtained
by SFWMD in 1996 continues [*7] to grow at the
rate of 10% per year. Had Henry Yusem taken
$ 210,000, of the $ 244,701.11 legal malpractice
settlement and gambled it away in Las Vegas,
instead of using it to pay on the outstanding
final judgment, would SFWMD be entitled to an
additional judgment of $ 210,00.00? We think
not.
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- Footnotes - - - - - - - - - - - - - - -
n2 (1) In an action for relief
against a transfer or obligation under ss. 726.101-726.112,
a creditor, subject to the limitations in s.
726.109 may obtain:
(a) Avoidance of the transfer
or obligation to the extent necessary to satisfy
the creditor's claim;
(b) An attachment or other
provisional remedy against the asset transferred
or other property of the transferee in accordance
with applicable law;
(c) Subject to applicable
principles of equity and in accordance with
applicable rules of civil procedure:
1. An injunction against further
disposition by the debtor or a transferee, or
both, of the asset transferred or of other property;
2. Appointment of a receiver
to take charge of the asset transferred or of
other property of the transferee; or
3. Any other relief the circumstances may require.
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Footnotes- - - - - - - - - - - - - - [*8]
The trial court misapprehended
the purpose and scope of a fraudulent conveyance
action. A fraudulent conveyance action is simply
another creditors' remedy. It is either an action
by a creditor against a transferee directed
against a particular transaction, which, if
declared fraudulent, is set aside thus leaving
the creditor free to pursue the asset, or it
is an action against a transferee who has received
an asset by means of a fraudulent conveyance
and should be required to either return the
asset or pay for the asset (by way of a judgment
and execution). A fraudulent conveyance action,
under section 726.108, is not an action against
a debtor for failure to pay an amount owing
from a prior judgment.
For the above stated reasons,
we reverse the final judgment entered in favor
of SFWMD and against both Henry Yusem and Judith
Yusem.
WARNER, C.J., and DELL, J., concur.
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