Legal Memorandum: Motion to Levy Execution in MN

Issue: Whether a motion to levy execution should be denied if a bank failed to join a transferee of the property.

The Bank may base a Motion to levy execution on a person’s assets on Minn. Stat. § 513.47(b), a provision that is part of the Minnesota version of the Uniform Fraudulent Transfer Act (“UFTA”).  See Minn. Stat. § 513.47 (Historical and Statutory Notes, stating that, “[t]his statute is identical with § 7 of the Uniform Fraudulent Transfer Act.”).  At least forty-four states have adopted the UFTA.  See id. § 513.41 (Supp. 2011 (listing jurisdictions).  In these states, it has long been settled law that

[t]he grantee of the debtor is generally held to be a necessary party defendant in an action to set aside a conveyance as fraudulent, the courts recognizing that he has an interest in the subject matter of the suit, which should not be affected by a decree unless he has been given the right to be heard.

Annotation, Necessary Parties Defendant to Action to Set Aside Conveyance in Fraud of Creditors, 24 A.L.R.2d 395, 422 (1952 & Supp. 2010).  Minnesota follows this general rule.  Chrysler Credit Corp. v. Peterson, 342 N.W.2d 170, 172 (Minn. Ct. App. 1984).

The reasons for the rule are obvious, compelled by the fact that the proceeding will affect—and potentially terminate–the transferee’s interest in the property at issue.  Among other things, the constitutional mandate of due process requires the transferee’s joinder:  “Fundamental principles of due process require that transferees who claim an interest in real property or its proceeds have a full and fair opportunity […]