Summary
The Appellate Division, Fourth Department, affirmed an order denying the petitioner’s motion for summary judgment in a proceeding seeking to sell real property to satisfy a judgment lien. The court held that a self-settled trust established for the benefit of the judgment debtor was subject to creditor claims without proof of fraudulent conveyance, but found a triable issue concerning the applicability of the homestead exemption.
Topics
Practice areas
Questions Presented
- Whether a judgment creditor seeking to reach assets held in a self-settled trust must establish that the trust was a fraudulent conveyance.
- Whether respondent's opposition raised a triable issue of fact regarding applicability of the homestead exemption to the proposed sale of the real property.
Holdings
- A creditor need not allege or prove that a self-settled trust was a fraudulent conveyance before seeking to reach the full amount of the settlor's retained beneficial interest.
- Although petitioner met her initial burden, respondent's opposing affidavit raised a triable issue of fact as to whether the homestead exemption applied to the proposed sale, precluding summary judgment.
Key quotations
“"A disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator"” (*1)
“"The statutory language is abundantly clear and unequivocal that self-settled trusts are void as against creditors"” (*1)
“"settlor's creditors need not allege or prove [that a self-settled] trust is a fraudulent conveyance before they are permitted to reach the full amount of the beneficial interest retained by the settlor"” (*1)
Factual background
George Carlo was the grantor and lifetime beneficiary of the Carlo Family Trust, which was funded with assets transferred by Carlo or by persons acting under his authority. The Trust was established to receive and manage assets for Carlo's benefit, required payment of income and requested principal to or for his benefit, and was revocable by him at any time. Petitioner held a judgment lien against Carlo and sought to sell real property owned by Carlo and the Trust to satisfy that lien.
Procedural history
Petitioner commenced a special proceeding in Supreme Court, Chautauqua County, seeking enforcement of a judgment lien against real property owned by George Carlo and the Carlo Family Trust. Supreme Court denied petitioner's motion for summary judgment, and petitioner appealed. The Appellate Division unanimously affirmed without costs.