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Sale to Parents:
>
>Message: 1
> Date: Wed, 31 Mar 2004 04:07:02 -0000
>Subject: digest 17 - sale to parents
>
>There is a line of cases which were argued in the 80's, I believe
>one of the cases had a name like Duret...., anyway, the line of
>cases concerned suing mortgage companies for forclosing on
>properties when the properties had a lot of equity, calling it a
>fraudulent conveyance (Madrid was another of the cases).
>
>The first few Circuit level cases held selling for 70% of value was
>never a fraudulent conveyance, but selling for less was a fraudulent
>conveyance. Later, courts came around to the view the sale at a
>foreclosure set the market value and could not be attacked at all
>(absent bidding fraud, etc.). These 70% cases are still good law
>for percent of value blocking a fraudulent conveyance attack.
>
>Take a look at them. Your facts seem to fit. The idea is when a
>person is in trouble, the person may have to sell for less than full
>fair market value. This being the case, courts cannot set aside all
>sales below highest and best price as fraud.
Dennis, thanks for the tip on the fraudulent conveyance part of this
case. Since the parents paid the fair market value for the condo, it seems
to me that this could never be a fraudulent conveyance.
The problematic part of this case is the preference action. When the son
took the proceeds of the sale (about $30K) and paid them to his parents in
consideration of an earlier obligation (i.e., not the money the parents
paid to purchase the condo), this was certainly a transfer of an interest
in property by the debtor. The argument I am trying to make is that at
that time (within 30 days of the filing of the petition), the sales
proceeds were exempt property in the hands of the debtor. Since the debtor
could have exempted the property and thus kept the trustee from touching it
(debtor's right to exempt property is measured as of the filing date of the
petition), I am trying to argue "no harm, no foul," i.e., that the estate
that was available for distribution to creditors was not diminished so that
the purpose of the preference statute does not apply here.
Does this argument sound half-way sensible to anyone but me?
Thanks for your thoughts,
Silvio Nardoni
The post was migrated from Yahoo.