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LEBOVITZ v. MUDD6/22/1987
Heard May 5, 1987.
Decided June 22, 1987.
This appeal involves two consolidated cases. The circuit court, pursuant to Rule 12(b)(6), SCRCP, dismissed appellants' causes of action alleging fraudulent conveyances. The court further ordered that notices of lis pendens be stricken. We reverse and remand.
FACTS
Appellants brought these actions against respondents and the other defendants for fraud and unfair trade practices in
Appellants' complaints also include causes of action alleging respondents had made fraudulent conveyances proscribed by the Statute of Elizabeth, S.C. Code Ann. § 27-23-10 (1976). They allege the individual respondents recorded 18 backdated deeds which transferred all of the real property of their South Carolina partnership, L.U.C.A. B., first to themselves individually and then to their newly created Illinois partnership, DASOCA. Appellants further allege these transfers were made for no consideration, thereby rendering L.U.C.A. B. insolvent, and were made with knowledge of appellants' fraud and unfair trade practices claims and with the actual intent to defraud them.
To give notice of their claims to set aside the alleged fraudulent conveyances, appellants filed and served notices of lis pendens covering ten parcels of property. Of these, only one is connected with the fraud and unfair trade practices causes of action.
The circuit court dismissed the fraudulent conveyances causes of action on two grounds:
(1) "[Appellants] nowhere assert [they] possess the status
of a creditor or other entitled to bring an action
within the meaning of the fraudulent conveyance statute,
S.C. Code Ann. § 27-23-10 [(1976)].
(2) "As a general rule [one must] reduce the debt to
judgment and have execution issued and returned nulla
bona by the sheriff to attack a conveyance as fraudulent."
The court also ordered the notices of lis pendens stricken, reasoning that appellants' appropriate remedy was under the prejudgment attachment statutes, S.C. Code Ann. § 15-19-10 et seq. (1976).
While the appeal was pending respondents petitioned this court for extraordinary relief, requesting that the notices of lis pendens be cancelled. We granted the relief. However, the effect of our order was pendente lite only and we address here the merits of the lis pendens issue.
ISSUES
I. Did the trial court err in dismissing the causes of action for fraudulent conveyances?
II. Did the trial court err in ordering that the notices of lis pendens be stricken?
I. FRAUDULENT CONVEYANCES
The two grounds upon which the circuit court dismissed the fraudulent conveyances causes of action will be addressed in turn.
A. Pleadings
Appellants contend their complaints properly allege the status of one entitled to the protection of the fraudulent conveyances statutes. We agree. Section 27-23-10 provides:
Every ... conveyance of lands ... which may be had or
made to or for any intent or purpose to delay, hinder or
defraud creditors or others of their just and lawful
actions . . . shall be . . . clearly and utterly void. [Emphasis
supplied.]
As the emphasized language clearly shows, the statute does not limit its application to judgment creditors. Rather, its protection extends to other types of parties defrauded in connection with the conveyance of property.
In Dennis v. McKnight, 161 S.C. 209, 159 S.E. 555 (1931) the complaint alleged the defendant had conveyed all of his property to his wife with the intention of placing it
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