Bulletin: NJ000049

Dear Associates:

Firmani v. Firmani, 332 N.J. Super 118 (Appl. Div. 6/20/00)

Re: Fraudulent Transfers

Former wife brought an action against her former husband to set aside a conveyance by the former husband on the grounds that it was a fraudulent transfer designed to avoid enforcement of an obligation to her under their divorce settlement (in violation of N.J.S.A. 25:2-20 to 33, the Uniform Fraudulent Transfer Act). The former husband conveyed the property to his "family trust" for one dollar.

Comment:

Both the lower court on summary judgment and the Appellate court had no problem setting the conveyance aside.

This is yet another example of why insuring a deed where the consideration is "$1.00" is an extra hazardous risk and may not be done without expressed authority from the company.

The Thomas Group, Inc. v. Wharton Sr. Housing, 163 N.J. 507, (Supreme Court 5/4/00)

Re: Construction Lien Law

This case is the first time the New Jersey Supreme Court has been asked to decide a question under the "new" Construction Lien Law (enacted in 1994). The case involved a general contractor seeking to enforce a lien claim. Both the trial court and the Appellate Division, ruled that the contractor could not enforce his claim because he had not finished the work under his contract. They ruled the lien claim action was premature and dismissed the claim.

The Supreme Court reversed both the lower courts holding that the enforcement action should have merely been stayed until an arbitrator could determine the amount owed. The Supreme Court did not decide the lien priority of the claim now that it had "re-established" it. It left it to the trial court on remand to decide that issue.

Comment:

We are often asked to interpret this "new" and somewhat complex law. As this case points out, we do so at our peril. Here both lower courts believed the lien was no good, only to be reversed by the Supreme Court. This is always the problem with any new law, until the courts have reviewed it; it is always difficult to know what the statute really means. It will be interesting to see if the lower court gives the lien a priority as of the date of the original filing or some later date. If it is the earlier date, those who relied on the opinions of the courts below may see their liens impaired.