Discuss: in your opinion why did the Sarks feel they needed to fraudulently convey their home to their son? Discuss: what in your opinion should they have done instead?
Discuss: Sole Proprietorship-Fraudulent Conveyance
Discuss the following facts: Michael Sark Sr. operated a logging business as a sole proprietorship. To acquire equipment for the business, Sark (and his wife Paula) borrowed money from Quality Car & Truck Leasing, Inc. When the business encountered financial difficulties, Sark became unable to pay his creditors, including Quality. The Sarks sold their house (valued at $203,500) to their son Michael Jr. for $1 but continued to live in it. Three months later, Quality obtained a judgment against the Sarks for $150,481.85 and then filed a claim to set aside the transfer of the house to Michael Jr. as a fraudulent conveyance. The court issued a decision in Quality’s favor. The Sarks appealed, arguing that they were not actually Quality’s debtors. A state intermediate appellate court affirmed. The Sarks “are clearly judgment debtors to Quality Leasing and * * * the judgment has not been satisfied.” (see, Quality Car & Truck Leasing, Inc. v. Sark.).
- Discuss: in your opinion why did the Sarks feel they needed to fraudulently convey their home to their son?
- Discuss: what in your opinion should they have done instead?
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