This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
C.V. Consultants, a foreign corporation, transferred a parcel of real property to a third party, Cowell, after becoming insolvent and facing a default judgment from Ellen Equipment for unpaid equipment rental bills. Ellen Equipment alleged that the transfer was fraudulent under the New Mexico Uniform Fraudulent Transfer Act (UFTA), claiming it was made to hinder, delay, or defraud creditors or without receiving reasonably equivalent value in exchange (paras 2-6).
Procedural History
- County Court of El Paso County, Texas, April 3, 2002: Ellen Equipment obtained a default judgment against C.V. Consultants for unpaid equipment rental bills (para 5).
- District Court of Doña Ana County, August 9, 2006: The trial court voided the transfer of property from C.V. Consultants to Cowell, reformed the mortgage, and ordered the property sold to satisfy creditors, including Ellen Equipment. Cowell and Ellen Equipment cross-appealed (paras 6-7).
Parties' Submissions
- Plaintiff (Ellen Equipment): Argued that the property transfer was fraudulent under the UFTA, asserting that C.V. Consultants acted with intent to hinder, delay, or defraud creditors and did not receive reasonably equivalent value in exchange. Ellen Equipment also claimed Cowell was an insider and not a good faith transferee (paras 8-10, 14, 21-22).
- Defendant (Cowell): Contended that the transfer was made in good faith, that he provided reasonably equivalent value by assuming liability for the promissory note, and that Ellen Equipment failed to meet its burden of proof. Cowell also argued that the statute of frauds did not apply to the agreements between him and C.V. Consultants (paras 13-20).
Legal Issues
- Was the transfer of property from C.V. Consultants to Cowell made with actual intent to hinder, delay, or defraud creditors under the UFTA?
- Did C.V. Consultants receive reasonably equivalent value in exchange for the property transfer?
- Was Cowell an insider to C.V. Consultants under the UFTA?
- Was the trial court correct in granting Cowell a lien on the property?
Disposition
- The Court of Appeals affirmed the trial court’s finding that the transfer was not made with actual intent to hinder, delay, or defraud creditors.
- The Court of Appeals reversed the trial court’s determination that the transfer was voidable under the UFTA due to a lack of reasonably equivalent value.
- The Court of Appeals remanded the case to vacate the trial court’s judgment setting aside the deed, ordering the sale of the property, and granting Cowell a lien (paras 23-24).
Reasons
Per Castillo J. (Wechsler and Robinson JJ. concurring):
Actual Intent to Defraud: The court found substantial evidence supporting the trial court’s conclusion that the transfer was not made with actual intent to hinder, delay, or defraud creditors. While some “badges of fraud” were present, such as the transfer occurring after a lawsuit threat and involving substantially all of C.V. Consultants’ assets, other factors, like retention of control or concealment of assets, were absent. The trial court’s findings were supported by the evidence (paras 8-12).
Reasonably Equivalent Value: The court held that Ellen Equipment failed to meet its burden of proving that C.V. Consultants did not receive reasonably equivalent value for the property. The trial court’s conclusion that the transfer “may not” have involved equivalent value improperly shifted the burden of proof to Cowell. The evidence showed that Cowell assumed liability for the promissory note, which constituted value (paras 13-20).
Insider Status: The court upheld the trial court’s finding that Cowell was not an insider, as Ellen Equipment failed to specifically challenge this finding on appeal (para 21).
Cowell’s Lien: Since the transfer was deemed valid, the court vacated the trial court’s grant of a lien to Cowell and the order for the property’s sale (para 22).