QUESTION: I know receivers often bring actions to set aside fraudulent transfers and recover the property transferred, but can a receiver be appointed in a fraudulent transfer lawsuit to take possession of and safeguard transferred property pending trial?
ANSWER: Yes, a receiver can be appointed in a fraudulent transfer lawsuit to take charge of the asset transferred or its proceeds, or an injunction can be obtained to prevent further transfers of the asset or its proceeds. These remedies are especially useful when the property involved is income producing. California’s, as well as other states’, fraudulent transfer laws specifically provide creditors such remedies. See California Civil Code § 3439.07(a)(3)(A) & (B). You don’t see it happen too often, however, and there are just a few reported cases. Even before the adoption of the Uniform Fraudulent Transfer Act, California cases approved the appointment of receivers in fraudulent transfer cases. F. M. Heffernan v. Bennett & Armour, et. al., 110 Cal.App.2d 564 (1952); Burrows v. Jorgensen, 158 Cal.App.2d 644 (1958). These cases recognize that a receiver can be appointed to preserve property pending trial not only under the fraudulent transfer statute, but also under the general grant of authority to courts to appoint receivers under California Code of Civil Procedure § 564(a)(9): “In all other cases where necessary to preserve the property or the rights of any party.”
Injunctive relief is also available to creditors to prevent the further transfer of assets or their proceeds. California Civil Code § 3439.07(a)(3)(A) provides that in a fraudulent transfer action the court can enjoin “disposition by the debtor or a transferee, or both, of the asset transferred or its proceeds.” The Legislative Committee Comment (3) endorses “the court, in an action on a fraudulent transfer or obligation to restrain the defendant from disposing of his property, to appoint a receiver to take charge of his property, or to make any order the circumstances may require.” See Oiye v. Fox, 211 Cal.App.4th 1036, 1055-1060 (2012) (affirming a trial court’s injunction prohibiting, under the California Fraudulent Transfer Act, the defendant from concealing, transferring, encumbering or disposing of his assets); see also SRB Investment Services, LLP et al v. Branch Banking and Trust Company et. al., 289 Ga. 14 (2011) (Georgia Supreme Court, in interpreting Georgia’s Uniform Fraudulent Transfer Act, identical to California’s, stated: “Fraudulent transfer cases are especially amenable to interlocutory injunctive relief.”).
In SRB Investment Services, the defendant argued that the injunction should not issue because the plaintiff, who could sue for money damages, had an adequate remedy at law. The Georgia Supreme Court rejected that argument noting: “We recently explained that the ultimate availability of a judgment for money damages has never precluded an interlocutory injunction when fraudulent transfers are at issue. While ‘[c]reditors without liens may not, as a general rule, enjoin their debtors from disposing of property nor obtain injunctions or other extraordinary relief in equity’ long before the enactment of the Georgia UFTA in 2002, Georgia law provided, as an exception to this rule, that ‘[e]quity may enjoin the defendant as to transactions involving fraud.’ When a money judgment is likely to be uncollectible because a debtor has fraudulently moved its assets in an attempt to dissipate or conceal them from a creditor, Georgia law, both before and under the Georgia UFTA, gives the creditor the right to seek interlocutory relief by freezing the assets where they are.” Id. at 5-6 (citations omitted).
- Senior Partner
Peter A. Davidson is a Senior Partner in the Bankruptcy, Receivership, and Creditors’ Rights Department.
Since 1977 Peter has represented receivers, plaintiffs and defendants in receivership actions in state and federal court ...
Subscribe
Recent Posts
- Landlord: Look Out and Take Notice | By: Geoffrey M. Gold
- New Cal/OSHA Indoor Heat Standards Require New Prevention Measures and Written Prevention Plan | By: Joanne Warriner
- California Bans All Plastic Bags at Grocery Stores | By: Pooja S. Nair
- FTC’s Nationwide Ban on Non-Compete Agreements Stopped by Federal Court Ruling | By: Cate A. Veeneman
- Can the IRS Obtain a Receiver to Help Collect Taxes Owed? | By: Peter Davidson
- Severing Unconscionable Terms in Employment Arbitration Agreements | By: Jared W. Slater
- Can You Collaterally Attack a Receiver’s Appointment?
- Changes to PAGA Create Opportunities for Employers to Minimize Penalties | By: Tanner Hosfield
- Overbroad Employment Arbitration Agreements Will Not Be Enforced in California | By: Jared W. Slater
- LA Al Fresco Deadline Extended | By: Pooja S. Nair
Blogs
Contributors
Archives
- October 2024
- September 2024
- August 2024
- July 2024
- June 2024
- May 2024
- April 2024
- March 2024
- February 2024
- January 2024
- December 2023
- November 2023
- October 2023
- September 2023
- August 2023
- July 2023
- June 2023
- May 2023
- April 2023
- March 2023
- February 2023
- January 2023
- December 2022
- November 2022
- October 2022
- September 2022
- August 2022
- July 2022
- June 2022
- May 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- October 2021
- September 2021
- August 2021
- July 2021
- June 2021
- May 2021
- April 2021
- March 2021
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- March 2019
- February 2019
- January 2019
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014