First Southwestern Financial Services v. Pulliam

• Citation: 121 N.M. 436,1996 NMCA 32,912 P.2d 828
• Decision Date: 22 January 1996
• Docket Number: No. 16453,16453
• Parties: FIRST SOUTHWESTERN FINANCIAL SERVICES, Plaintiff-Appellant, v. Harvey PULLIAM a/k/a Eugene Harvey Pulliam a/k/a E. Harvey Pulliam and Katherine M. Pulliam a/k/a Katherine M. Vidaurri a/k/a Katherine M. De Shon, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

Page 828

912 P.2d 828

121 N.M. 436

FIRST SOUTHWESTERN FINANCIAL SERVICES, Plaintiff-Appellant, v. Harvey PULLIAM a/k/a Eugene Harvey Pulliam a/k/a E. Harvey

Pulliam and Katherine M. Pulliam a/k/a Katherine

M. Vidaurri a/k/a Katherine M. De Shon,

Defendants-Appellees.

No. 16453.

Court of Appeals of New Mexico.

Jan. 22, 1996.

[121 N.M. 437] Appeal from the District Court of Bernalillo County; Burt Cosgrove, District Judge.

Alfred M. Sanchez, Albuquerque, for Plaintiff-Appellant.

Paul F. Becht, Albuquerque, for Defendants-Appellees.

OPINION

BUSTAMANTE, Judge.

1. First Southwestern Financial Services (Plaintiff) appeals from an order dismissing its complaint against Harvey and Katherine Pulliam under the Uniform Fraudulent Transfer Act, NMSA 1978, §§ 56-10-14 to -25 (Cum.Supp.1995) (UFTA), to set aside an allegedly fraudulent transfer of property. The trial court found that the limitations statute, Section 56-10-23(A), had fully run before Plaintiff filed its complaint. We affirm.

2. On January 8, 1990, Harvey sold a house to Katherine, who at that time was a single woman. Katherine recorded the deed with the Bernalillo County clerk on January 16, 1990. Harvey and Katherine married in June of 1990.

3. The Federal Deposit Insurance Corporation (FDIC) obtained a judgment against Harvey on October 9, 1991, based on Harvey's 1988 default under the terms of a promissory note with a now-failed New Mexico bank. We take judicial notice that, after taking over banks, the FDIC sometimes sells its "uncollectible judgments" to other entities at discounted prices. In their brief, the Pulliams claim, and Plaintiff does not deny, that the judgment against Harvey was one of those "uncollectible judgments." The judgment was assigned to Plaintiff by an instrument dated and signed on May 4, 1993.

4. Plaintiff filed this action on July 18, 1994 to set aside the transfer of the house from Harvey to Katherine as a fraudulent conveyance. The Pulliams moved to dismiss the suit, alleging it had been filed after the claim extinguishment provision of the UFTA had run. Because Plaintiff filed affidavits in support of its response to the Pulliams' motion to dismiss, we treat the court's action as a summary judgment. When facts relevant to a statute of limitations issue are not in dispute, the standard of review is whether the district court correctly applied the law to the undisputed facts. Investment Co. v. Reese, 117 N.M. 655, 657, 875 P.2d 1086, 1088 (1994).

5. Section 56-10-23(A) provides in pertinent part:

A cause of action with respect to a fraudulent transfer or obligation ... is extinguished unless action is brought ... within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.

6. Plaintiff pursues two separate theories under the statute. First, Plaintiff asserts that its action is timely because the four-year limitation period should be calculated from the date of entry of the judgment in favor of the FDIC, October 9, 1991. Second, Plaintiff argues that the one-year period should be calculated from the date the FDIC's assignment of its judgment to Plaintiff was recorded, August 31, 1993. Using either method, Plaintiff's complaint filed July 18, 1994 would be timely. However, the plain language of the statute precludes adoption of Plaintiff's position.

7. The first clause of Section 56-10-23(A) extinguishes causes of action asserting a fraudulent transfer after the passage of four years from the date of the challenged transfer. Here, the four-year period elapsed on January 16, 1994 at the latest because the deed from Harvey to Katherine was recorded on January 16, 1990. Plaintiff attempts to escape this conclusion by arguing that the words "or the obligation was incurred" in Section 56-10-23(A) allows the extinguishment period to begin running on the date of transfer or on the date judgment is entered against the party that has transferred property, whichever is later. Plaintiff thus seeks to equate entry of the judgment on October 9, 1991 with incurring an obligation within the meaning of the statute, citing Eskridge v. Nalls, 852 P.2d 818, 820-21 (Okla.Ct.App.1993).

8. Plaintiff misinterprets the statute. A debtor may effectively impair the ability of creditors to collect against him by incurring fraudulent obligations as well as by transferring properties. The UFTA recognizes this possibility by allowing creditors to set aside fraudulent obligations as well as transfers. In the statute, the word "fraudulent" modifies both "transfer" and "obligation." Thus, "obligation" throughout the statute refers to a "fraudulent obligation" that the debtor intentionally enters into with another. See §§ 56-10-18 to -23(C). The judgment obtained by the FDIC obviously was not a "fraudulent obligation" and the limitations period cannot be calculated from its entry.

9. The UFTA expressly limits the right to set aside a transfer to the time period in the statute, notwithstanding the date a party's cause of action might formally accrue. In this regard the UFTA operates in the same manner as other statutes of repose that extinguish a cause of action as of a certain date rather than simply blocking the remedy. Cf. NMSA 1978, §§ 37-1-27 & -28 (Repl.Pamp.1990); Garcia v. La Farge, 119 N.M. 532, 537, 893 P.2d 428, 433 (1995) (distinguishing between statutes of limitation and statutes of repose). For example, in this case, if the FDIC had obtained its judgment after January 16, 1994, the four-year period would have expired before the FDIC, or Plaintiff as its assignee, could assert a claim because under the UFTA a creditor's right to set aside an allegedly fraudulent transfer or obligation generally does not arise until it obtains a judgment against the debtor. Cf. Garcia, (stating that st...