The Third District Appellate Court of Illinois handed down a new case that is of interest to secured lenders.
The case of Pluciennik v. Vandenberg provided the first time that Illinois applied the Uniform Fraudulent Transfer Act (UFTA) and its definition of “asset” on an encumbered piece of real estate.
Plaintiffs filed a UFTA action seeking to avoid transfers of three parcels of real estate from companies owned and managed by Defendant to companies held in irrevocable trusts for the benefit of his minor daughters. Valid mortgages encumbered all the real estate transferred.
The Trial Court erred in determining, as a matter of law, that the real estate were not assets under the UFTA because they were fully encumbered because no evidence of the fair market value of the real estate was considered in granting a motion to dismiss the UFTA complaint.
“that the fair market value of encumbered property that exceeds the value of a valid lien qualifies as an asset under Illinois’s Uniform Fraudulent Transfer Act. “
“that the fair market value of encumbered property that exceeds the value of a valid lien qualifies as an asset under Illinois’s Uniform Fraudulent Transfer Act. “
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The trail court made a mistake by not taking evidence on the fair market value of the real estate transferred.
As a result, there continued to be a material issue of fact as to the reasonable value of the properties and whether, in light of the fair market value, the properties were fully encumbered.
Therefore, Illinois law recognizes the value of the asset over and above the encumbrance upon it to be subject to the UFTA.
Look at the both the fair market value, and the payoff of the debt before determining if there is a UFTA claim.
Picture of Collateral with low risk
Photograph by Lorem Ipsum via Stencil
The trail court made a mistake by not taking evidence on the fair market value of the real estate transferred.
As a result, there continued to be a material issue of fact as to the reasonable value of the properties and whether, in light of the fair market value, the properties were fully encumbered.
Therefore, Illinois law recognizes the value of the asset over and above the encumbrance upon it to be subject to the UFTA.
Look at the both the fair market value, and the payoff of the debt before determining if there is a UFTA claim.