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  1. #1
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    Mar 2018
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    Default What is a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    My question involves real estate located in the State of: WA

    - I have a judgment lien on an undeveloped property owned by Person A (as well, there are multiple other liens attached to the same property including a lien by the local County)
    -Person B owns the undeveloped property adjacent to Person A's property
    -Person A and B are friends and Person A is the builder/contractor for Person B's property development (early on, it is a known fact they are partners in the development of both properties)
    -Person A borrows $30k from Lender X (a small amount relative to the property's value)....a few months pass and Person A doesn't pay back Lender X...
    -Lender X forecloses on their $30k loan and takes ownership of Person A's property
    -then Lender X appears to have sold Person A's property to Person B?! (though there's nothing recorded with the local recorder's office)
    -Person B had signed a Deed of Trust on Person A's property though it seems no money changed hands
    -Person B now seems to own Person A's property and is developing both properties (which to me seemed to be the plan from the start)

    To me, this seems like a manipulation by an insider (ie. Person B) to fraudulently convey the property to Person B and to extinguish my judgment lien as well as other liens from Person A's real property.

    -You may ask why would Person A and B go through this elaborate fraud to develop the two properties...both properties have significant defects and Person A needed to violate many County regulations to get both properties to the point they could be developed by Person B (ie. Bad Cop (Person A), Good Cop (Person B)

    Thoughts?

  2. #2
    Join Date
    Jul 2018
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    Your post fails to provide any information about when things happened relative to each other, and that is of critical importance. Please provide the following information:

    1. Is your judgment lien specific to the piece of property in question or is it simply a standard judgment lien that attaches to any/all real property owned by the judgment debtor? How much is your judgment for?
    2. When was your judgment lien created/filed/recorded?
    3. When was the deed of trust that secured Lender X's loan recorded?
    4. When did the foreclosure proceedings start?
    5. When did Lender X "take[] ownership of Person A's property"?
    6. What does "Lender X appears to have sold Person A's property to Person B" mean given that "there's nothing recorded with the local recorder's office"?
    7. What other encumbrances existed against the property at the time of the foreclosure sale, and were any of those encumbrances senior to Lender X's deed of trust? Did any of all of the holders of such encumbrances receive payment from the foreclosure sale?


    Quote Quoting J Jackson
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    To me, this seems like a manipulation by an insider (ie. Person B) to fraudulently convey the property to Person B and to extinguish my judgment lien as well as other liens from Person A's real property.
    The term "insider" has no legal meaning in this context, and, in any event, I don't think this interpretation is supported by any facts you posted.


    Quote Quoting J Jackson
    View Post
    Thoughts?
    The only thing of concern to you is whether your judgment lien was treated appropriately in connection with the foreclosure. If you answer the questions I asked, I can offer an opinion about that.

  3. #3
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    Mar 2013
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    Quote Quoting J Jackson
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    I have a judgment lien
    My guess is, given the circumstances described, you'll never see a nickel of your money. You can spend thousands on litigation to enforce your lien with no guarantee and little likelihood of recovery.

    Consult an attorney.

  4. #4
    Join Date
    Mar 2018
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    Thanks for your response..trying to respond to your questions below:

    Quote Quoting pg1067
    View Post
    Your post fails to provide any information about when things happened relative to each other, and that is of critical importance. Please provide the following information:

    1. Is your judgment lien specific to the piece of property in question or is it simply a standard judgment lien that attaches to any/all real property owned by the judgment debtor? How much is your judgment for?
    I believe it's a standard lien that attaches to all property owned by judgment debtor...it arose from dismissal of a "frivolous lien" filed by Person A while they owned the property I've mentioned as well as suit for damages they caused to my property ..judgment amount is approx. $40k

    2. When was your judgment lien created/filed/recorded?
    my judgment lien recorded March 2018.... lien originally filed against me Jan 2017

    3. When was the deed of trust that secured Lender X's loan recorded?
    March 2017 (*shortly after Person A's now-declared frivolous lien was filed on my property)

    4. When did the foreclosure proceedings start?
    Notice of trustee sale April 2018...it should be noted the amount Lender X foreclosed the property for is roughly the same or less than my judgment lien

    4a. Person B signed a Deed of Trust on the property July 2018 (This is the one that seems extremely fishy since no money changed hands)

    5. When did Lender X "take[] ownership of Person A's property"?
    Trustee Deed March 2019

    6. What does "Lender X appears to have sold Person A's property to Person B" mean given that "there's nothing recorded with the local recorder's office"?
    sorry, that was a mistake...there is a warranty deed now recorded, dated April 2019

    7. What other encumbrances existed against the property at the time of the foreclosure sale, and were any of those encumbrances senior to Lender X's deed of trust? Did any of all of the holders of such encumbrances receive payment from the foreclosure sale?
    Other encumbrances...spousal child support, govt code violation lien, contractor liens...I believe child support and govt would be senior to Lender X right?...I don't know if they received payment but I can find out




    The term "insider" has no legal meaning in this context, and, in any event, I don't think this interpretation is supported by any facts you posted.




    The only thing of concern to you is whether your judgment lien was treated appropriately in connection with the foreclosure. If you answer the questions I asked, I can offer an opinion about that.



    I was hoping I have some recourse in this matter related to UFTA as far as establishing fraudulent intent by Person A and B....I was wondering if the term "insider" may apply as outlined here (I feel several of these conditions apply here):

    Establishing actual fraudulent intent
    The Act lists eleven non-exclusive factors, similar to common law “badges of fraud”, for determining whether the debtor had actual intent to hinder, delay, or defraud creditors (Clayton v. Wilson, 168 Wash.2d 57, 70, 227 P.3d 278, 284 (2010; RCW 19.40.041). All the factors tend to establish actual fraudulent intent except numbers eight and three:

    1.The transfer or obligation was to an insider;

    2. The debtor retained possession or control of the property transferred after the transfer;

    3. The transfer or obligation was disclosed or concealed;

    4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;

    5. The transfer was of substantially all the debtor’s assets;

    6. The debtor absconded;

    7. The debtor removed or concealed assets;

    8. The value of the consideration received by the debtor was not reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

    9. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

    10. The transfer occurred shortly before or shortly after a substantial debt was incurred; and

    11. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

  5. #5
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    The fact that Lender X's deed of trust was recorded over a year before your judgment lien is hugely important and is evidence that there was nothing "fraudulent" about what happened.

    When the senior lien (Lender X's deed of trust) was foreclosed, your lien was wiped out, and you were not entitled to anything unless the foreclosure sale generated enough money to pay the indebtedness to Lender X, the indebtedness to any lienholders senior to Lender X, and the cost of the foreclosure. If there was money left after all those things were paid, then junior lienholders, such as yourself, would be next in line. Given that the Lender X apparently took title, it seems likely that the minimum required bid was not met. If that's right, then your lien was wiped out and you got nothing. It's unfortunate, but that's how it works. That Lender X happened to sell to Person B is neither here nor there. Person B may have taken advantage of the situation, but that's not illegal.

    By all means have a local attorney look at this, but I don't see any chance of you prevailing.

  6. #6
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    Mar 2018
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    that's really lousy....as part of the foreclosure, shouldn't the public have had an opportunity to buy/bid on the property? I would likely have just bought the property myself..

    It was scheduled for auction then cancelled...then Person B signed the deed of trust July 2018...doesn't that action on July 2018 seem odd?

    -also, new information from recorder's office shows the government lien on the property was not released

    -I am currently working with an attorney on this but not thrilled with their performance...they stated the July 2018 deed of trust is definitely fraud but didn't feel it to be a fraud ON ME....I feel differently since the result contributed to wiping out my judgment lien on the property

  7. #7
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    Sep 2010
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    The power of sale foreclosure does allow the public to bid. Those on the deed are required to be notified as well as the sale being posted on the property and in the newspaper. What doesn't happen in such sales is a notification of other lienholders. It's incumbent on you to keep an eye on things. Almost always the lender bids as much as whatever their interest is in the property and that is typically the only bid received. It then ends up in the REO inventory and the lender sells it at their own discretion. As pointed out, the foreclosure wiped out the junior liens ont he property.

    You're free to pursue other property of the judgment debtor (if any).

  8. #8
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    Mar 2018
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    27

    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    I see....as mentioned, I was prepared to go to the auction and it was cancelled for some reason...I don't believe the sale was posted on the property either
    ...at this point is there anything I can do to void the transfer of property or call into question the way they conducted the foreclosure?

    Why would the government lien have not been paid off as part of the foreclosure?

  9. #9
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    Quote Quoting J Jackson
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    that's really lousy....as part of the foreclosure, shouldn't the public have had an opportunity to buy/bid on the property?
    Foreclosure notices are typically "published" in a way that those who care about them can find out about them but which is, in reality, only a very limited public notice. However, you, as a junior lienholder, should have been specifically notified.

  10. #10
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    Default Re: a Fraudulent Conveyance and How Does It Impact a Judgment Lien

    Quote Quoting pg1067
    View Post
    Foreclosure notices are typically "published" in a way that those who care about them can find out about them but which is, in reality, only a very limited public notice. However, you, as a junior lienholder, should have been specifically notified.
    No such requirement for power of sale foreclosures in Washington State.

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