New Jersey Appellate Division Holds That Statute of Limitations for Alleged Fraudulent Transfer of Real Property Begins Running at Recordation of Deed

New Jersey’s Appellate Division recently held that a creditor’s complaint, in which it sought to nullify a debtor’s transfer of property, was made within the statute of limitations for a fraudulent transfer, because the four-year limitations period did not begin running until the deed at issue was recorded.  See Nationwide Registry & Sec., Ltd. v. Melhem, 2016 WL 921670 (N.J. Super. Ct. App. Div. Mar. 11, 2016).  In the case, the plaintiff was assigned a Nevada judgment against the debtor, which it had registered in New Jersey in 2014.  The plaintiff then learned that the debtor owned real property but had sold it to his sister for one dollar in 2009.  The deed, however, was not recorded until 2011.  The plaintiff filed a lawsuit against the debtor and his sister in 2014, arguing that the transfer was null and void as fraudulent under the Uniform Fraudulent Transfer Act (“UFTA”).  See N.J.S.A. 25:2-20.  The defendants then moved for summary judgment based on the four-year statute of limitations for a fraudulent transfer, arguing that the transfer occurred in 2009 and the complaint was not filed until 2014.  See N.J.S.A. 25:2-31.  The trial court granted the defendants’ motion, citing to a New Jersey statute stating that a deed transfers property interest upon delivery.  N.J.S.A. 46:3-13.  On appeal, however, the court reversed the decision.  It held that the UFTA expressly states that a transfer of real property is made when “the transfer is so far perfected that a good-faith purchaser . . . cannot acquire an interest in the asset that is superior to the interest of the transferee . . .”  N.J.S.A. 25:2-28.  Therefore, the trial court judge had erred in looking outside the UFTA to determine when the allegedly fraudulent transfer was made.  As the deed was not recorded until 2011 and the complaint was filed in 2014, the complaint was timely.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.