REGINA CANTY, ADMINISTRATRIX OF THE ESTATE OF

SHAMAIA L. SMITH v. KATHLEEN J. OTTO, SC 18610

Judicial District of Hartford

 

Fraudulent Conveyances; Whether a Creditor has Standing to Bring a Fraudulent Transfer Claim to Void Transfer of Property Made Pursuant to a Divorce Judgment. In April, 2007, the defendant's husband, Kenneth Otto (Otto), was implicated in the murder of Shamaia Smith. Soon thereafter, Otto transferred a number of his assets to the defendant, and the defendant commenced a dissolution of marriage action. On June 3, 2008, the court dissolved the Ottos' marriage, and ordered Otto to transfer the majority of his assets to the defendant. Subsequently, on December 9, 2008, Otto was convicted of Smith's murder. In March, 2009, the administratrix of Smith's estate, pursuant to the Uniform Fraudulent Transfer Act (UFTA), General Statutes 52-552a et seq., brought the present action, alleging that the defendant had participated in the fraudulent transfer of Otto's assets, including assets that were transferred pursuant to the divorce judgment. She also filed an application for a prejudgment remedy. The defendant filed a motion to dismiss the action, including the prejudgment remedy application, for lack of subject matter jurisdiction, arguing, inter alia, that the plaintiff lacked statutory standing to bring her UFTA claim because the distribution of marital property that takes place as the result of a divorce judgment does not constitute a "transfer" of assets under General Statutes 52-552b (12). The trial court disagreed, ruling that, although the text of the statute does not explicitly reference a divorce judgment, the expansive nature of its text confirms it to be broad enough to encompass the transfer of assets made pursuant to a divorce judgment. Next, the defendant argued that the plaintiff lacked standing to assert her UFTA claim because a collateral attack on the divorce judgment is outside the zone of interests protected by the UFTA. The court observed that, under our jurisprudence, an exception to the rule against collateral attacks on judgments exists in favor of parties who are "strangers" to a judgment because they did not have an opportunity to litigate their claim in the previous action. Noting that the plaintiff was not allowed to intervene in the Ottos' dissolution action to litigate her UFTA claim, the court rejected the defendant's argument, stating that the plaintiff was a "stranger" to the divorce action, and fundamental fairness strongly counseled in favor of giving the plaintiff her day in court. The defendant next claimed that the divorce judgment could not be collaterally attacked because our case law forbids a court from setting aside only a portion of a divorce judgment due to the unique equitable considerations that come into play in such decisions. The court rejected this claim as well, noting that a party bringing a UFTA claim is not seeking to invalidate the divorce judgment itself, but, rather, is only seeking to void the transfer of specific property that was fraudulently transferred. Subsequently, the court granted the plaintiff's application for a prejudgment remedy in the amount of $552,000, finding that probable cause existed to believe that the transfers of assets that took place prior to the divorce and those effectuated by the divorce judgment itself were made with the actual intent to defraud the plaintiff. In this appeal, the Supreme Court will review the trial court's decision.