A “fraudulent conveyance” occurs when a debtor tries to avoid paying an unsecured debt by transferring property to another entity or person if the property is at risk of being seized by a creditor. In a Georgia appellate decision, a defendant LLLP appealed the lower court’s granting of an LLC’s motion asking to be substituted for the plaintiff in the lawsuit, as well as its motion for summary judgment denial. The defendant LLLP argued that the lower court had made a mistake in finding that the LLC had standing to recover under the Uniform Fraudulent Transfer Act (“UFTA”) claim.
The case arose in a trial of a different lawsuit. In that case, the court ordered the estate should specifically perform to buy the LLC’s stock from shareholders. A few months later the shareholders sued the estate, the LLLP and others asserting UFTA claims and asking for damages for fraudulent conveyances.
The plaintiffs claimed that a couple had created the LLLP in 2010 in order to transfer $5 million to the company with the goal of defrauding creditors. The couple asked for damages, including satisfaction of the $1.2 million judgment they’d been awarded. The plaintiffs argued that the UFTA allowed voiding of those transfers since they were made in order to defraud, delay or hinder the estate’s creditors (such as the plaintiff).