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Remedies ~ Non-Money
Non-Money Remedies Mainuvta07a
NON-MONEY REMEDIES
- (Avoidance, Attachment, Injunction, Levy, Receiver, Other)
SECTION 7
[[(a) In an action for relief against a transfer or obligation under this [Act], a creditor, subject to the limitations in Section 8, may obtain:
(1) avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim;
(2) an attachment or other provisional remedy against the asset transferred or other property of the transferee if available under applicable law; and
(3) subject to applicable principles of equity and in accordance with applicable rules of civil procedure:
(i) an injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
(ii) appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or
(b) If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.
NON-MONEY REMEDIES § 7
(a) In an action for relief against a transfer or obligation under this [Act], a creditor, subject to the limitations in Section 8, may obtain:
Reporter's Comment to § 7(a) cmt. 4.
As under the Uniform Fraudulent Conveyance Act, a creditor is not required to obtain a judgment against the debtor-transferor or to have a matured claim in order to proceed under subsection (a). See §§ 1(3) and 1(4); American Surety Co. v. Conner, 251 N.Y. 1, 166 N.E. 783, 65 A.L.R. 244 (1929); 1 G. Glenn, Fraudulent Conveyances and Preferences 129 (Rev. ed. 1940).
Reporter's Comment to § 7(a) cmt. 7 ¶ 1.
If a transfer or obligation is voidable under § 4 or § 5, the basic remedy provided by this Act is its avoidance under subsection (a)(1). “Avoidance” is a term of art in this Act, for it does not mean that the transfer or obligation is simply rendered void.
It has long been established that a transfer avoided by a creditor under this Act or its predecessors is nevertheless valid as between the debtor and the transferee.
For example, in the case of a transfer of property worth $100 by Debtor to Transferee, held voidable in a suit by Creditor-1 who is owed $80 by Debtor, “avoidance” of the transfer leaves the $20 surplus with Transferee.
Debtor is not entitled to recover the surplus.
Nor is Debtor’s Creditor-2 entitled to pursue the surplus by reason of Creditor 1’s action (though Creditor-2 may be entitled to bring its own avoidance action to pursue the surplus).
The foregoing principle is embedded in the language of subsection (a)(1), which prescribes “avoidance” only “to the extent necessary to satisfy the creditor’s claim.”
Section 9(a) of the Uniform Fraudulent Conveyance Act was similarly limited. See, e.g., Becker v. Becker, 416 A.2d 156, 162 (Vt. 1980); De Martini v. De Martini, 52 N.E.2d 138, 141 (Ill. 1943); Markward v. Murrah, 156 S.W.2d 971, 974 (Tex. 1941); Society Milion Athena, Inc. v. National Bank of Greece, 22 N.E.2d 374, 377 (N.Y. 1939); National Radiator Corp. v. Parad, 8 N.E.2d 794, 796-97 (Mass. 1937); 1 G. Glenn, Fraudulent Conveyances and Preferences § 114, at 225 (Rev. ed. 1940).
The transferee’s mental state is irrelevant to the foregoing, but a good-faith transferee may also be afforded protection by § 8.
Reporter's Comment to § 7(a) cmt. 7 ¶ 2.
It follows that “avoidance” of an obligation under subsection (a)(1) likewise should not mean its cancellation, but rather a remedy that recognizes the existence of the obligation and the superiority of the plaintiff creditor’s interest over the obligee’s interest.
Ordinarily that should mean subordination of the obligation to the plaintiff creditor’s claim against the debtor.
That would entail disgorgement by the obligee of any payments received or receivable on the obligation, to the extent necessary to satisfy the plaintiff creditor’s claim, with the obligee being subrogated to the plaintiff creditor when the latter’s claim is paid.
Of course, if the obligation is unenforceable for reasons other than contravention of this Act, contravention of this Act does not render the obligation enforceable.
Reporter's Comment to § 7(a) cmt. 7 ¶ 3.
This Comment relates to the meaning of subsection (a)(1).
If this Act is invoked in a bankruptcy proceeding, the remedial entitlements provided by the Bankruptcy Code may differ from those provided by this Act.
JayNote
Section 7 and Section 8(b) and (c) provide for the Creditor's remedies. The remedy of a money judgment is considered at § 8(b) and (c)
That the money judgment remedy is not found in this § 7 but instead in § 8 (Defenses) is further indicia of the chronic misorganization of the UFTA as carried over to the UVTA.