Mere Recording Of Deed Does Not Commence Four Year Statute Of Limitations On Fraudulent Conveyance [Florida]


Under fraudulent conveyance law, a creditor of a debtor can reach property of the debtor that the debtor transferred to third parties if the transfer is a fraudulent conveyance. However, Fla.Stats. §726.110(1) provides that an action to reach such transferred property must be commenced within 4 years of the transfer, or if later, within 1 year after the transfer was or could reasonably have been discovered. Thus, if the transfer occurred more than 4 years ago, a creditor cannot sue if the property owner can show that the transfer “was or could reasonably have been discovered” within the preceding 1 year period. If the transfer was not discovered and could not reasonably have been discovered, then the statute of limitations does not expire – hiding the transfer will not yield a reward to the transferor or the transferee. 
In a Florida case, the subject property was Florida real estate. A transfer was made by the debtor, and a deed was recorded in the public records. The current owner of the real estate claimed that the recording of the deed put the creditor on notice and since both the 4 year period and the 1 year period had expired since recording, a fraudulent conveyance claim against the current owner was time barred. More particularly, the issue was whether the recording of a deed constitutes such notice that a creditor “could reasonably have discovered” the transfer for purposes of the above rules. 
The trial court dismissed the fraudulent claim as time-barred. However, the 1st District Court of Appeals reversed and held that the mere recordation of the deed was not enough notice to start the 1 year rule of the statute as being a transfer that is reasonably discoverable. The DCA noted that recording statutes are there to put third persons who have a reason to examine the records on notice of a transfer – such as subsequent purchasers or would-be lienors. Authorities in other jurisdictions typically (but not unanimously) distinguish between subsequent purchasers and creditors alleging fraudulent transfers int his context. 
The DCA ultimately determined that: 
It is not reasonable to require a defrauded creditor to monitor the land records in all 67 couties or, indeed, outside the state, as well, as a routine practice.
Desak v. Vanlandingham, 37 Fla.L.Weekly D2354 (1st DCA)

Topics:  Creditors, Debtors, Deeds, Fraudulent Conveyance, Recording Requirements, Statute of Limitations

Published In: Business Torts Updates, Civil Procedure Updates, General Business Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles (Chuck) Rubin, Gutter Chaves Josepher Rubin Forman Fleisher P.A. | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »