Friday, October 7, 2005

Case Law Development: What Happens to Ownership of Fraudulently Transferred Assets?

Sometimes cases that have nothing to do with family law are nonetheless telling tales about how people behave in divorce.  I can’t resist sharing this one:  Once upon a time, an attorney, anticipating a divorce from his wife, sells a coin collection to his best friend for $30,000 (the collection is likely worth at least twice that).  He executes a bill of sale and other documentation to evidence the sale. 

Fast forward twenty years.  Best friend has died.  Elderly widow gets a call from a private investigator that attorney wants his coin collection back.  When Wife says he can’t have the coins, he sues in replevin and conversion.  The sale, he says, was a sham designed to hide the coins from his wife in the divorce.  He testifies that Husband had never actually paid the $30,000.  He also notes that he never actually carried out the sham because the divorce decree actually considered the value of his coin collection.   Trial court grants replevin on the basis that title to the coins was never effectively transferred.

The Supreme Court of Illinois reverses, based on the trial court’s error in admitting testimony in violation of the Dead Man’s Act.  The court also notes that, while replevin is a legal proceeding, equitable considerations (such as the scheming unethical tactics of Lawyer in his divorce) should be weighed.  The court suggests that Lawyer’s testimony that he never actually carried out the sham is not supported merely by his indication that the divorce decree considered the value of his coin collection, as he still had a large collection after the “sale” and there was no evidence that the trial court actually knew about the sale.  The court’s best guess, however, is that Lawyer wasn’t really trying to hid hide the coins so much as skew the valuation issue of the entire collection by producing current market value evidence through the bill of sale. 

One must hope the trial court on remand agrees with the Supreme Court’s suggestions regarding its view of the evidence.  Otherwise, the court will have removed one arrow from the quivers of family law attorneys trying to counsel their clients against hidinig assets during divorce.


Gunn v. Sobucki
, 2005 Ill. LEXIS 979 (October 6, 2005)

Opinion on the web at http://www.state.il.us/court/Opinions/SupremeCourt/2005/October/Opinions/Html/99607.htm (last visited October 7, 2005 bgf)

http://lawprofessors.typepad.com/family_law/2005/10/case_law_develo_7.html

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