Legal Memorandum: Transfers Pending a Divorce in ND

Issue: Whether transfers between closely held corporations controlled by one spouse would be considered fraudulent as to the other spouse when the transfers occurred during the pendency of a divorce in North Dakota.

When the debtor is an individual, an “insider” includes “a corporation of which the debtor is a director, officer, or person in control, or a limited liability company of which the debtor is a governor, manager or person in control.”  N.D. Cent. Code § 13-02.1-01(7)(a).*FN1  Several cases decided in other jurisdictions have held that transfers between closely held corporations controlled by one spouse can be fraudulent as to the other spouse when the transfers occurred during the pendency of a divorce, or while divorce was being contemplated. 

Haubenschild v. Haubenshild, No. A08-0097 (Minn. Ct. App. Jan. 13, 2009) (husband transferred stock in family farm in contemplation of divorce, ostensibly pursuant to other owners’ rights of redemption; court concluded that “redemption” did not occur under divorce clause, and thus did not deprive wife of possible remedy; court analyzes the Uniform Fraudulent Transfer Act (UFTA) in detail, including its provisions regarding remedies)

Stephenson v. Stephenson, 278 A.2d 351 (N.H. 1971) (husband transferred corporate marital asset to his attorney for $1000; wife was entitled to her share of actual asset, not worthless corporate stock)

Boyo v. Boyo, 196 S.W.3d 409 (Tex. App.–Beaumont 2006) (wife contended that husband conspired with alter-ego corporations to deplete marital estate; court noted that spouse who controls marital property owes fiduciary duty to other spouse and disposing of it without notice to or consent of other spouse raises presumption of fraud)

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