Legal Memorandum: Prima Facie Case of Fraudulent Transfer

Issue: What elements are needed for a bank to able to establish all elements of a prima facie case of fraudulent transfer to an insider under Minn. Stat. 513.45(b)?

Area of Law: Bankruptcy & Creditors Rights
Keywords: Prima facie case; Fraudulent transfer; Insider
Jurisdiction: Minnesota, Ohio
Cited Cases: 176 Minn. 529; 215 Minn. 1; 767 N.W.2d 691; 185 Minn. 370; 9 N.W.2d 1; 36 Minn. 439; 785 N.W.2d 753; 185 Minn. 374; 224 N.W. 149
Cited Statutes: Minn. Stat. 513.45(b); 38A C.J.S. Guaranty §§ 117, 122, 133 (2012); 38A C.J.S. Guaranty § 87; 10 C.J.S. Bills and Notes § 131; UFTA § 5
Date: 03/01/2012

Minnesota’s Fraudulent Transfer Act provides that 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/transferor was insolvent at that time, and the insider had reasonable cause to believe that the debtor/transferor was insolvent.  Minn. Stat. § 513.45(b) (2011).  To be a fraudulent transfer under this provision of the Act, the challenging creditor’s claim against the debtor/transferor must have arisen before the challenged transfer was made.  See, e.g., In re Structurlite Plastics Corp., 193 B.R. 451 (Bankr. S.D. Ohio 1995) (cited in annotations to UFTA, and stating that, to have a remedy under Ohio’s version of the UFTA on the theory that the challenged transfer rendered the debtor insolvent, the creditor must have had a claim against the debtor both at the time of the challenged transfer, and at the time the fraudulent conveyance action was brought), aff’d in part, rev’d in part and remanded, 224 B.R. 27 (6th Cir. 1998)*FN1; Larson v. Tweten, 185 Minn. 374, 241 N.W. 47 (1932) (noting that the judgment creditor’s proof in that case established that the claim upon which the judgment rested arose before the conveyance attacked as fraudulent); id., 185 Minn. 370, 241 N.W. 45 (also observing that the intervener’s proof in the same case established that the claim upon which the judgment rested arose before the […]

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