THIRD-PARTY LIABILITY FOR FRAUDULENT CONVEYANCE
Elliott v. Glushon, 390 F. 2d 514 (9th Cir. 1967)
A bankruptcy trustee sued attorney Eugene Glushon for his role in structuring transfers of bankruptcy estate property which were found to be fraudulent transfers under the Bankruptcy Act. The trustee sought to recover the property from Glushon or other co-defendants. In an affidavit submitted in evidence Glushon was quoted as saying, "You know we did it, and we know we did it. But just try to prove it." The court found that Glushon was not liable for damages because of his role in the alleged fraudulent conveyance. The court found that the purpose of the Bankruptcy Act is to preserve assets of the estate and not to render civilly liable all persons who may have contributed in some way to the dissipation of estate assets. A trustee may bring suit against those persons who received transferred property and may recover from the transferees the value of that property if they have subsequently converted the property. The court held that the term "fraudulent transfer" as used in the Bankruptcy Act includes a great many transactions which do not constitute "actual fraud."
Mack v. Newton, 737 F. 2d 1343 (5th Cir. 1984)
A corporate debtor sold 188 cows subject to a mortgage and applied the proceeds not to reduce the cow mortgage but to reduce another debt. Defendant Newton was one of the principals of the bankrupt corporation and also a principal of another entity who received the benefit of the proceeds from the sale of the cows. The trustee filed an action against Newton, in part, on the basis of civil conspiracy to make a fraudulent conveyance. The court held that under the Bankruptcy Act, a third party is not liable for the value of the property fraudulent conveyed, even though he may have participated or conspired in the fraudulent conveyance, provided he did not receive any of the property transferred.
Coggin v. Coggin, 30 F. 3d 1143 (11th Cir. 1994)
A bankruptcy debtor transferred $13,000 to his son. The transfer was found to be an avoidable conveyance under §548 of the Bankruptcy Act and grounds for denial of discharge. A partial recovery was made through settlement with the transferee's son, and the trustee sought to recover the additional amount of money from the transferor/debtor. The Eleventh Circuit denied recovery against the debtor for the value of the fraudulent conveyance not otherwise recoverable from the transferee, and did not permit an award of damages against the transferor debtor. Although not citing Elliott or Glushon, this case is consistent with these precedents because if the trustee cannot recover damages for a fraudulent conveyance from the debtor, then logically there is no grounds for same damages from the debtor's attorney or other agents.
Yusem v. South Florida Water Management District, 770 So. 2d 746 (4th DCA 2000)
During a lawsuit but prior to a judgment being entered against him, defendant Henry Yusim came into possession of approximately $210,000 and immediately thereafter transferred the same amount into an offshore trust. The money temporarily moved through the joint account of Henry Yusim and his wife, Judith Yusim. The court held that Judith Yusim was not liable because she was not the transferee of the money. The court further held that Florida's fraudulent conveyance statutes are nothing more than a creditor's equitable remedy that sets aside transfers leaving the creditor free to pursue the subject assets in the hands of the debtor or to maintain an action against the transferee who has received the asset. The fraudulent conveyance statutes do not provide for judgments for additional money against the debtor.