Case Caption: Redemption Holdings, Inc. v. Government of the Virgin Islands et al.Case Number: S. Ct. Civ. No. 2015-0029Date: 07/18/2016Author: Hodge, Rhys S. Citation: Summary:

Multiple indicia of fraud arise in this case from a debtor's conduct in assigning his right of redemption for certain foreclosed real property to a closely-held corporation of which he was the only shareholder, hiding his interest in the corporation, redeeming the property through that entity and then ultimately conveying his shares in the corporation to another person, indicating his intent to put the property out of reach of the creditor involved in this quiet title action, and other creditors. This amounts to a fraudulent conveyance: The debtor acted with actual intent to defraud the creditor and caused the creditor harm. Under the former Virgin Islands Uniform Fraudulent Conveyances Act, 28 V.I.C. § 207, in effect at the time of these transactions, every conveyance made and every obligation incurred with actual intent to hinder, delay, or defraud either present or future creditors, is fraudulent and a creditor may have the conveyance set aside to the extent necessary to satisfy his claim, or may disregard the conveyance and attach or levy execution upon the property conveyed, as provided in former 28 V.I.C. § 209(1)(a) and (b). In this case the Superior Court correctly determined that there was sufficient evidence that the debtor conveyed his right of redemption to the close corporation he controlled with actual intent to defraud the creditor. In addition, the true ownership of the property was concealed from creditors, because, during the time the debtor was the sole shareholder of the corporation there was no notice that he still effectively had possession and ownership over the property. While a defendant's default only admits to the facts as laid out in the complaint, here the debtor's disappearance for a period of years, coupled with the default judgment in the action to collect upon the debts, supports a finding that he had intent to avoid repaying the creditor. Absence of even a single valid payment on any of the three loans to the creditor is further evidence tending to show actual intent to defraud. In order for a creditor to be successful in a claim against a debtor for fraudulent transfer, the creditor must also show that he was prejudiced by the transfer, and that the transfer put some property beyond the creditor's reach which otherwise would have served to fulfill the debt. The evidence supports that finding here, and this transfer prejudiced creditors. Thus the debtor's conveyance of the right of redemption to the closely-held corporation he controlled was fraudulent and may be set aside. The Superior Court's February 27, 2015 judgment setting aside the debtor's conveyance of his right of redemption to the closely-held corporation, and permitting the creditor to execute upon the property to the extent necessary to satisfy the judgment obtained in Super. Ct. Civ. No. 534/2007, is affirmed.

Attachment: Open Document or Opinion