The defendants appeal from a final judgment rendered by a judge of the Superior Court (1) setting aside four
1. Background facts. We recite relevant facts that appear to be undisputed. In 1988, defendant George E. Robertson (George), the owner of a one-half interest in Hopedale Development, Inc. (Hopedale Development), a real estate development company, acquired the remaining one-half interest in the corporation from the plaintiff’s husband, Richard G. Innis. As the major portion of the consideration for the acquisition, George gave to Innis a promissory note in the principal amount of $900,000. In 1989, after her husband’s death, the plaintiff commenced an action against George in the Superior Court wherein she alleged both nonpayment of the promissory note and fraud in the manner in which George acquired her husband’s one-half interest in Hopedale Development.
It was during the pendency of that case that the real estate transfers that are the subject of the present proceeding took place. Between June and August, 1991, George and his wife, defendant Sandra M. Robertson (Sandra), conveyed four properties owned by them as tenants by the entirety; specifically, (1) apartment buildings containing twenty-four units on Dutcher Street in Hopedale (conveyed to Sandra as trustee of Robertson
In December, 1991, the plaintiff prevailed in the 1989 action. A jury determined both that George had failed to make payment on the promissory note, and that he had taken unfair advantage of the plaintiff’s husband in acquiring his one-half interest in Hopedale Development. Judgment in favor of the plaintiff entered against George in the amount of $5,072,911. On May 21, 1992, a judge of the Superior Court ordered that George’s stock in Hopedale Development (then in bankruptcy proceedings) be transferred to the plaintiff (in her capacity as representative of her husband’s estate) to be applied to the judgment debt.
The plaintiff, on or about December 13, 1993 (at which time she owned all of the stock of the bankrupt Hopedale Development), filed in the bankruptcy proceeding a proposed plan of reorganization of that corporation whereby a third party, the Richard G. Innis Trust, would purchase the corporation’s assets at their fair market value, with one hundred percent of the corporation’s stock being transferred to an affiliated entity, Innis Land Development, Inc. (in which the plaintiff’s children were interested parties). The plan was approved by a judge of the bankruptcy court on or about January 19, 1994. The Richard G. Innis Trust paid a total of $455,000 to Hopedale Development for all of its real estate assets, and those proceeds went entirely to creditors of that corporation. In 1998, most of this real estate was sold.
In 1997, the plaintiff commenced the present action to set aside the four real estate conveyances of 1991 so that, upon their return to ownership by George and Sandra, the real estate could be reached and applied to the outstanding judgment
2. The fraudulent conveyances. The defendants argue first that the real estate transfers that took place in 1991 cannot be deemed to be fraudulent conveyances because, by virtue of the characteristics of the tenancy by the entirety estate, the conveyances did not reduce George’s ability to satisfy his obligation to the plaintiff. They rely for the proposition on Richman v. Leiser,
That real property is owned by the entirety does not mean that the interest of a debtor spouse has no value to his or her creditors. At common law, “an individual creditor of the husband could levy and sell on execution his interest in the tenancy, and dispossess both the husband and wife.” Coraccio v. Lowell Five Cents Sav. Bank,
“[General Laws c. 209, § 1,] did not, however, alter the characteristics of the estate itself.” Ibid. While now “either spouse may convey or encumber his or her interest in property held as tenants by the entirety,” id. at 152, the right of survivor-ship of the nondebtor spouse is “indestructible.” Id. at 151. Acting on these principles in connection with the giving of a mortgage on real estate held by the entirety, the Supreme Judicial Court stated that “the bank, if it foreclosed, could acquire [the debtor spouse’s] interest in the property, namely a right wholly defeasible should the . . . nondebtor spouse[] survive [the debtor spouse].” Id. at 152. We see no reason why the same does not apply in the case of an encumbrance created by a judgment. Thus, where the property at issue is not the principal residence of the nondebtor spouse, the judgment creditor is free to seize the debtor spouse’s interest subject to dispossession should the nondebtor spouse survive the debtor. Where a principal residence is involved, G. L. c. 209, § 1, precludes such a seizure, but does not prevent a creditor from acquiring a right to the debtor spouse’s interest (which will ripen into ownership in the event the debtor spouse survives the nondebtor spouse).
It is for these reasons that the defendants’ argument that there cannot be a fraudulent conveyance by a tenant by the entirety fails. The interests of the debtor spouse, here George, have value. They can, in the cases of the Dutcher Street, Philip Road, and Cedar Street properties, be levied on by the plaintiff, albeit subject to defeasance should George predecease Sandra. Although George’s interest in the principal marital residence on Cutler Street is, by virtue of G. L. c. 209, § 1, not subject to immediate execution, it plainly has value by virtue of the fact that the plaintiff could acquire the entire property in the event that George survives Sandra. In these circumstances, it cannot be said that these transfers had no effect on the assets of the
The defendants’ remaining objections to the judge’s determination that the conveyances were fraudulent as to the plaintiff are likewise unavailing. The judge ruled correctly that the plaintiff was a “creditor” for purposes of the Uniform Fraudulent Conveyance Act (UFCA), formerly G. L. c. 109A (repeated in its entirety by St. 1996, c. 157).
Nor are we persuaded by the defendants’ contention that the judge’s findings that George was insolvent at the time of the challenged conveyances, or that he would thereby be rendered insolvent, were clearly erroneous. Pursuant to § 2 of the UFCA, one is insolvent “when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured.” It is unnecessary to reprise the meticulous findings of the judge regarding the value of George’s assets during
Finally, the judge permissibly found that the conveyances were not made for fair consideration. Consideration of less than one hundred dollars each for George’s interests in the four properties is inadequate on its face. The defendants’ contention that the conveyances compensated Sandra for contributions she had previously made to the business is permeated with ex post facto rationalization. The deeds recite no such consideration; no records were kept of Sandra’s work for the business; and no evidence of how her contributions were valued was presented.
3. Satisfaction of judgment. The defendants argue in the alternative that none of the above matters because the judgment obtained by the plaintiff in December, 1991, was satisfied fully by means of the transfer to the plaintiff of all of George’s stock in Hopedale Development pursuant to the court order dated May 21, 1992. They point to the fact that, pursuant to a plan of reorganization approved by a bankruptcy judge, the corporation’s assets (consisting of real estate holdings) were purchased by the Richard G. Innis Trust, and its stock was transferred to Innis Land Development, Inc., a company owned by the plaintiff’s children. Subsequently, the properties were sold for significant amounts, which the defendants contend should be applied to the judgment.
We agree with the analysis of the judge. The evidence supported the judge’s findings that, at the time of transfer of the Hopedale Development shares in 1992, the corporation had assets with a fair market value of $478,500 that consisted of parcels of raw, undeveloped land with no infrastructure or approval for the development of single family homes. Hopedale Development’s debts greatly exceeded its assets; it was unable
Judgment affirmed.
Notes
No value was placed on the stock at that time.
The judgment accommodates this difference by providing that the plaintiff may reach and apply “the interest of George Robertson in the aforesaid properties,” thus limiting the plaintiff to executing only on those interests of George that are presently available for seizure.
Because the transfers at issue occurred prior to the UFCA being repealed and replaced by the Uniform Fraudulent Transfer Act in 1996, the judge properly applied the version of the statute that was in effect at the time of those transfers. See First Fed. Sav. & Loan Assn. v. Napoleon,