Latest Florida Appeals Court Verdict Interprets Assignment for the Benefit of Creditors Statute

In Moffatt & Nichol, Inc. v. BEA International Corp., --- So.3d ---- (Fla. 3d DCA 2010), on which judgment was decided last week, Florida's Third District Court of Appeal asserted that Florida's Assignment for the Benefit of Creditors statute, Chapter 727, Florida Statutes, bars a creditor from filing an action not in fovor of a third party under the Uniform Fraudulent Transfer Act when an assignment has been recorded. The state of affairs underscores latest revisions to the assignment statute lining it up with Federal Bankruptcy law. There have been a small number of Florida litigation attorney reported cases of the assignment statute being discussed, so this case expounds a exceptional prospect for Florida litigation attorney practitioners to educate themselves on this apparently less utilized tool.

Chapter 727 lets a defaulter in payment to give its belongings to an assignee of his or her preference for the purposes of liquidating the belongings and meeting with the contentions of its creditors from the proceeds, parallel to Federal Bankruptcy law. An assignment in black and white is effected between the assignor and the assignee in the statutory form, making an inventory all accepted creditors and describing their assertions, and a proceeding is commenced (in State court), where Florida litigation attorney creditor contentions, with specified exclusions must be noted down or be forever orbidden. The proceeding acts as a deferment against levy, execution, attachment or the like in respect of any judgment against possessions of the estate in the possession, custody, or control of the assignee, similar to the Bankruptcy Code's automatic stay provision, with the exemption that distinct from the Bankruptcy Code, the assignment statute does not defer foreclosure proceedings based upon a consensual lien. The court before which the assignment is pending is provided with numerous authorities under Fla. Stat. § 727.109, together with the capacity to arbitrate claim priority in accordance with the statute and to hear actions brought by the assignee to demand third parties to turn over assets belonging to the assets and to steer clear of Florida litigation attorney fraudulent conveyances.

Which brings us to the instant case. A judgment creditor of the assignor wanted, in a case distinct from the assignment action, proceedings supplementary to execution to implead third parties claimed to have accepted fraudulent transfers from the assignor. Under Chapter 726, Florida Statutes, Florida's Uniform Fraudulent Transfer Act, a debtor may not translit assets to third parties with the definite objective to hamper, holdup, or defraud contemporary or known future creditors or without obtaining realistically comparable worth when the debtor knows it is broke or will soon become broke.

The creditor in this case contended that he or she must be allowed to proceed against third parties alleged to have got false transfers in spite of the presence of the assignment proceeding, because the possessions sought in the third party action were not belongings of the estate. The court differed. According to amendments to the assignment statute passed in 2007, "asset" as defined under Fla. Stat. § 727.103(1), includes "claims and causes of action, whether arising by contract or in tort, wherever located, and by whomever held at the date of the assignment." The court maintained founded upon this description that once an assignment proceeding is brought about in which all assets are assigned, only the assignee has standing to pursue fraudulent transfer assertions on behalf of the estate. To hold otherwise, reasoned the court, would allow one creditor to improperly 'cut in line', in breach of the spirit of the assignment statute. Correlation was drawn to Bankruptcy law, under which the trustee has absolute authority to prosecute Florida litigation attorney avoidance actions on behalf of the estate and its creditors.

Florida Litigation Attorney Gil Fendes writes exclusively on the Law, Legal issue having to do with the West Palm Beach Florida area