Legal Memorandum: "Fraudulent Transfer" in MN

Issue: What is the definition of a fraudulent transfer in Minnesota?

Area of Law: Bankruptcy & Creditors Rights
Keywords: Fraudulent transfer; Debtor; Reasonable cause to believe
Jurisdiction: Minnesota
Cited Cases: None
Cited Statutes: Minn. Stat. § 513.45(b)
Date: 04/01/2013

The relevant statute provides:

A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.


Minn. Stat. § 513.45(b) (2012) (emphasis added).  It is apparent from the plain language of this statute that, in order for liability to attach, the debtor must have been insolvent at the time of the transfer, but the insider’s reasonable cause to believe that the debtor was insolvent is not subject to the same “at that time” qualifying language. 

In United States v. Mabie, 663 F.3d 322 (8th Cir. 2011), cert. denied, 133 S. Ct. 107 (2012), the court considered a similar question of statutory interpretation based on a plain reading of the statute.  The court concluded in Mabie that, where the word "knowingly" appeared in the statute earlier in the text, and the phrase in which it appeared was followed by a comma, setting it off from the subsequent text, there was nothing in the language of the statute to suggest that the subsequent phrase was modified by the word “knowingly.”  Id. at 334. 


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