I'm sending this today, Wednesday, because I'll be on the road most of tomorrow, Thursday. I posted the DD for Thursday a few hours ago.

Daily Development for Friday, October 4, 2002

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

FRAUDULENT CONVEYANCES; FOREIGN JUDGMENTS: Court has authority to hear fraudulent conveyance action of judgment creditor even if foreign judgment had expired where underlying debt was not extinguished.

Parker v. Livingston, 817 So.2d 554 (Miss. 2002).

Plaintiffs obtained judgments against Defendant in Florida in 1990. They later discovered the possibility that Defendant had engaged in fraudulent transfers of certain mineral interests in Mississippi, and enrolled their judgments in the appropriate Mississippi county in 1991, anticipating that they would set aside these transfers. There ensued an incredible comedy of errors giving full employment to a number of lawyers for some time as they unraveled all of the problems created. Ultimately, however, all was forgiven by the Mississippi Supreme Court, and Plaintiffs succeeded with their judgments. Here's the story:

Mississippi law requires sending notice of filing of foreign judgments to the named defendants. The clerks of the circuit courts in which Plaintiffs enrolled their judgments did not send such notices. Consequently, these judgments were not properly enrolled.

In 1992, Plaintiffs filed suit to set aside the challenged conveyances as fraudulent. But Defendant then filed for bankruptcy and everything got stayed for two years. After the discharge and ultimate relief from the automatic stay (apparently Plaintiffs' judgments were not discharged), Plaintiffs recommenced their action regarding the alleged fraudulent conveyances. In 1997, in this action, the flaw in the original Mississippi enrollments was discovered, and the Chancellor gave Plaintiffs 30 days to re-enroll the Florida judgments in Mississippi, this time with the proper notices.

Plaintiffs complied with this order, but were concerned that their Florida judgments were getting long in the tooth by this point, since judgments in Florida last only seven years, although they may be timely renewed. Consequently, with only one day before the renewal period ran, Plaintiffs attempted to renew their judgments in Florida.

Unfortunately, once again there was a failure to comply with notice requirements, this time through an apparent error by Plaintiffs' counsel, and the Florida judgment filings expired.

At the same time, Defendants counsel were able to get set aside the order granting 30 days to re-enroll the earlier judgment, since Plaintiffs' counsel had failed to provide Defendant's counsel with advance copies of the motion. It was looking good for Defendant at this point - but wait!!

At a subsequent trial, the trial court granted the relief requested by Plaintiffs and set aside the challenged conveyances as fraudulent.

The first question on appeal, of course, was how in the world the trial court could enforce Florida judgments that had expired as a matter of Florida law. The Mississippi court, interpreting Florida statutory law, noted that there was a 20 year statute of limitations for collection of judgments in Florida. It reconciled this statute with the seven year statutory requirement for refiling judgments by concluding that if a judgment was not properly refiled, it lost its priority as against other judgments in Florida, but still could be collected. Since the judgments in question were not competing with other claims (we're not told how the bankruptcy figured into all of this), the Plaintiffs could still collect on them against Defendant's assets, restored to him through the fraudulent conveyance ruling.

The Defendant's counsel then proceeded to the next most obvious problem - the validity (or lack thereof) of the Mississippi enrollments. Defendant argued that the 1991 enrollments were invalid because the clerks had not sent notice. The trial court apparently had ruled that there had been technical defects, not attributable to Plaintiffs, but that they had substantially complied with the statutes, Defendant apparently had notice anyway, albeit not official, and manifest injustice would result if the judgments were not held properly enrolled. The appeals court agreed.

"In would be a miscarriage of justice if this court were to condone dismissals of plaintiffs' action, simply because a court clerk fails to before his/her ministerial duties. One might argue that the Plaintiffs' counsel should have followed up on the matter by contacting the respective clerks to ensure that notices were mailed. However, imposing such a duty on litigants would be unduly burdensome. . ."

But wait, there's even more!! Defendant next argued that Plaintiffs had not brought an action on the judgments for seven years after they had been filed in Mississippi, and Mississippi law states that failure to bring an action within seven years renders the judgments void in Mississippi. Defendant argued, citing some relevant authority, that an action to set aside a fraudulent conveyance is not an "action on a judgment." The court refused to follow this reasoning, and held, albeit somewhat less than resoundingly, that the action to set aside a fraudulent conveyance in aid of a judgment is an "action"

on the judgment. In any event, the court noted, the seven year period was tolled during Defendant's bankruptcy.

Finally, finally, the court got to the issues concerning the review of the fraudulent conveyance allegations themselves, and upheld the trial court's ruling for Plaintiffs' all the way, even going so far as to reinstate on remand a motion for sanctions against the Defendant even though the trial court had not clearly ruled on such motion, thus technically voiding it. Further, the court ruled that the trial court had erred in failing to grant an immediate writ of execution against the interests in question, and remanded so that this could occur.

Comment: DIRT rarely discusses procedural cases , because most DIRTers are transactions lawyers precisely because they hate procedural wrangling. But some DIRTers in fact do venture into courts collecting debts and otherwise seeking judicial relief for their client's interests, and this item is designed to demonstrate that we love those DIRTers too, benighted as they are in their tolerance of this such fluff.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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