United States District Court, D. Colorado.
THE SOCIETY OF LLOYDS, Plaintiff(s),
Slip Copy, 2007 WL 2126381 (D.Colo.)
Civil Action No. 06-cv-01508-WYD-BNB.
DATE: July 23, 2007
COUNSEL: Peter C. Forbes, Horowitz/Forbes, LLP, Gregory Robert Stross, Gregory R. Stross, Attorney at Law, Denver, CO, for Plaintiffs.
WILEY Y. DANIEL, U.S. District Judge.
I. INTRODUCTION AND BACKGROUND
[*1] THIS MATTER is before the Court on Defendants Motion to Dismiss Pursuant to F.R.C.P. 12(b)(6) and 12(b)(1), filed December 5, 2006 (docket # 14). This is a fraudulent transfer action concerning the transfer of title and ownership of certain real and personal property from Defendant Raymond C. Lee to Defendant Katherine T. Lee. Plaintiff, The Society of Lloyds (Lloyds), brings claims for violation of the Colorado Uniform Fraudulent Transfers Act, C.R.S. § 38-8-101, et seq. (2006) (CUFTA), and for Civil Conspiracy.
According to the Complaint, Lloyds is a regulator of an English insurance market. Mr. Lee was a member of one or more of Lloyds syndicates, traditionally called Names and, as such, was personally liable for loses suffered by those syndicates. Complaint at ¶¶ 7-8. In the early 1980s, several syndicates began to suffer heavy losses, and Equitas Reinsurance Ltd. (Equitas) was established to act as reinsurer for the syndicates. Equitas then issued premium assessments to the Names. Complaint at ¶¶ 9-10. Various Names, including Mr. Lee, challenged the assessments, but on October 6, 2000, the High Court of Justice, Queens Bench Division Commercial Court in London, England, entered a money judgment in favor of Lloyds against Mr. Lee for the premium assessments made by Equitas (the English Judgment). Complaint at ¶¶ 10-12. Lloyds sought to domesticate the English Judgment in this Court in 2002, and on August 11, 2005, Judgement entered in favor of Lloyds and against Mr. Lee in the amount of £85,130.11, as well as post-judgment interest in the amount of 8% per annum, compounded annually. Complaint at ¶¶ 13-14. As of June 23, 2006, the total amount of the judgment against Mr. Lee was approximately $175,335.57. Complaint at ¶ 15.
In the Complaint, Lloyds asserts that in June and August of 1991, Mr. Lee executed quit-claim deeds of his ownership interest in real property located at 6914 Briarwood Dr., Englewood, Colorado (the Briarwood property) and 5164 Princeton Avenue, Englewood Colorado (the Princeton property) to his wife, Defendant Katherine T. Lee. Complaint at ¶¶ 91, 21. Lloyds further asserts that in 2004, Mr. Lee transferred funds of approximately $41,071.00 to Mrs. Lee. Complaint at ¶ 22. Lloyds seeks to void transfer of the Princeton property, and requests an Order declaring that transfer of the Briarwood property and transfer of the $41,071 in funds were conducted with actual intent to hinder, delay, or defraud a creditor and that Katherine T. Lee is liable to Lloyds for the value of the improper transfer, which would be used to satisfy the outstanding judgments against Mr. Lee. Complaint at ¶¶ at 1-3, Prayer for Relief. Lloyds commenced the instant action on August 2, 2006.
In the motion to dismiss, Defendants assert that Lloyds claims for fraudulent transfer of the real property have been extinguished pursuant to C.R.S. § 38-8-110 of the CUFTA, and must be dismissed. Defendants further assert that Lloyds remaining claim for fraudulent transfer of the $41,071 in funds is below the jurisdictional minimum for diversity jurisdiction and, if the claims for fraudulent transfer of real estate are dismissed, then the remaining claim concerning transfer of funds must also be dismissed pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction.
II. STANDARD OF REVIEW
A. Rule 12(b)(6)
[*2] In ruling on a motion to dismiss filed pursuant to Fed.R.Civ.P. 12(b)(6), the court must accept all the well-pleaded allegations of the complaint as true and construe them in the light most favorable to the plaintiff. David v. City and County of Denver, 101 F.3d 1344, 1352 (10th Cir.1996), cert. denied, 522 S.Ct. 858 (1997) (quoting Gagan v. Norton, 35 F.3d 1473, 1474 n. 1 (10th Cir.1994)). A complaint may be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) only if the plaintiff can prove no set of facts to support a claim for relief. Id. (quoting Jojola v. Chavez, 54 F.3d 488, 490 (10th Cir.1995)).
If, accepting all well-pleaded allegations as true and drawing all reasonable references in favor of plaintiffs, it appears beyond doubt that no set of facts entitle plaintiffs to relief, then the court should grant a motion to dismiss. See Tri-Crown, Inc. v. American Fed. Sav. & Loan Assn, 908 F.2d 578, 582 (10th Cir.1990).
B. Rule 12(b)(1)
Where a party moves to dismiss for lack of subject matter jurisdiction pursuant to FED. R. CIV. P. 12(b)(1), the attack can be either a facial attack to the allegations of the complaint or a factual attack. Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990). Where there is a facial attack, the Court must look to the factual allegations of the Complaint. Groundhog v. Keller, 442 F.2d 674, 677 (10th Cir.1971). In a factual attack, the court may consider matters outside the pleadings, and the motion is not converted to a motion for summary judgment. Id.; Cizek v. United States, 953 F.2d 1232, 1233 (10th Cir.1992). The trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56. Osborn v. United States, 918 F.2d 724, 730 (quoting Mortenson v. First Fed. Sav. & Loan Assn, 549 F.2d 884, 891 (3rd Cir.1977). Because at issue in a factual 12(b)(1) motion is the trial courts jurisdiction—its very power to hear the casethere is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. Id.
Defendants first assert that Lloyds claims for fraudulent transfer of real property have been extinguished pursuant to C.R.S. § 38-8-110(1)(a), which provides:
(1) A cause of action with respect to a fraudulent transfer or obligation under this article is extinguished unless action is brought:
(a) under section 38-8-105(1)(a), within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.
(Emphasis added). As the transfers at issue took place in 1991, clearly, Lloyds claims are clearly outside the four-year provision. However, Lloyds alleged in its Complaint that [t]his action was filed within the one year time period applicable under § 110(1)(a). Complaint at ¶ 29. As discussed above, Lloyds commenced the instant case on August 2, 2006. Defendants note that the 1991 transfers of real estate were made by quitclaim deed, and Lloyds does not allege that such deeds were unrecorded or otherwise hidden. According to Defendants, Lloyds should have discovered the transfers in October, 2000, when it obtained its English Judgment, or at the latest by 2002, when it sought to domesticate the English Judgment in federal district court in Colorado.
[*3] In Response, Lloyds contends that, [f]or purposes of applying the statute of limitations applicable to fraudulent conveyance actions Colorado has always drawn a distinction between general creditors and judgment creditors. Rsp. at 4-5. According to Lloyds, until a foreign judgment has been recognized, the holder of the judgment is considered a general creditor, and general creditors are not charged with constructive notice of potentially fraudulent transfers. Lloyds reasons that it is not charged with knowledge of the real property transfers at issue until August 11, 2005, when Judge Blackburn entered his final order recognizing the validity of the English Judgment. According to Lloyds, it had until August 11, 2006, to bring its claims under the CUFTA.
Lloyds is correct that, prior to adoption of the CUFTA in 1991 [FN1], Colorado courts held that the general three-year statute of limitations applicable to an action for fraudulent conveyance brought pursuant to C.R.S. § 38-10-117, does not accrue until the date the creditor has obtained a judgment on the underlying obligation. Hill v. Walden (In re Walden), 207 B.R. 1, 4 (D.Colo.1997). In such cases, the Colorado Supreme Court has found that a creditor is chargeable with constructive notice of an allegedly fraudulent conveyance when the creditor becomes a judgment creditor and that the statute of limitations begins to run from this date. Munoz v. Munoz, 111 B.R. 928, 932 (D.Colo.1990) (citing Greco v. Pullara, 166 Colo. 465, 444 P.2d 383, 384 (1968)). However, Lloyds reliance on this case law is misplaced. Lloyds has asserted claims under the CUFTA, not C.R.S. § 38-10- 117, and none of the cases cited by Lloyds discuss the specific limitation provisions set forth in § 38-8-110(1)(a).
FN1. C.R.S. § 38-10-117(2) states that [t]his section shall not apply to any transfer made or obligation incurred on or after July 1, 1991 .
In order to determine if Lloyds claims are timely under the CUFTA, I must decide whether the claims were brought within one year after the transfer or obligation was or could reasonably have been discovered by the claimant, as set forth in section 110(1)(a). While Colorado courts have yet to construe this portion of the CUFTA, I note that several courts in other UFTA jurisdictions have found that the phrase could reasonably have been discovered refers to the time when an objectively reasonable claimant could have discovered the transfer. SASCO v. Zudkewich, 767 A.2d 469, 474 (N.J.2001); see also Gulf Ins. Co. v. Clark, 20 P.3d 780, 784, 788 (Mont.2001).
In SASCO, a case involving a transfer of real property, the New Jersey Supreme Court applied the objectively reasonable standard and found that a reasonable creditor would have performed an asset search and discovered the real property transfer when the debtor defaulted on its obligation. The court rejected an argument that a reasonable commercial creditor would not perform an asset until it obtained a judgment against the debtor. SASCO, 767 A.2d at 475-76; see also First Southwestern Financial Services v. Pulliam, 912 P.2d 828, 831 (N.M.App.1996) (a reasonable creditor would have inquired into real estate records of debtor when the right to payment arose). The court reasoned that adopting a contrary rule would allow creditors to defer their UFTA claims until after a judgment had been obtained and would undermine[ ] the core purposes of a statute of limitations, eliminating stale claims and creating repose. Id. at 476.
[*4] I agree with the courts reasoning in SASCO and Pulliam and conclude that a reasonable creditor should be charged with knowledge of a recorded real property transfer when the right to payment arose. Under the facts of this case, an reasonable creditor in Lloyds position could have discovered the 1991 transfers when it obtained its English Judgment on October 6, 2000, and was certain that the Names were liable for the premium assessments issued by Equitas. A reasonable creditor in Lloyds position would have commenced an asset search at the very latest by 2002, prior to initiating suit to domesticate its foreign Judgment in federal district court in Colorado. I reject Lloyds argument that it was reasonable for them to wait six-years after Mr. Lees liability for the Equitas assessments arose before performing an asset search that would have uncovered the 1991 real property transfers.
In conclusion, I find that Lloyds claims for fraudulent transfer of the Briarwood property and the Princeton property have been extinguished pursuant to C.R.S. § 38-8-110 of the CUFTA, and must be dismissed pursuant to Fed.R.Civ.P. 12(b)(6).I further find that Lloyds remaining state law claim for fraudulent transfer of funds of approximately $41,071.00 to Defendant Katherine Lee must be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, as the amount in controversy no longer exceeds $75,000. See 28 U.S.C. § 1332(a).
For the reasons set forth herein, it is hereby
ORDERED that Defendants Motion to Dismiss Pursuant to F.R.C.P. 12(b)(6) and 12(b)(1), filed December 5, 2006 (docket # 14) is GRANTED. It is
FURTHER ORDERED that Plaintiffs claims based on the alleged 1991 fraudulent transfers of real property are DISMISSED WITH PREJUDICE . It is
FURTHER ORDERED that Plaintiffs claims based on the alleged fraudulent transfer of approximately $41,071.00 in funds is DISMISSED WITHOUT PREJUDICE for lack of subject matter jurisdiction.