Michigan adopted the Uniform Enforcement of Fraudulent Transfers Act.( “UFTA”). In a nutshell, UFTA says that if your debtor, while owing you money, transfers his assets to someone else, you can sue that someone else to collect what is owed to you. But the Michigan Court of Appeals recently decided the case of Mather Investors v Maddock and Larson which may cause a new pitfall for collection attorneys.

Mather owns a nursing home in which Maddock was a resident. Maddock owed a large balance to the nursing home. Mather sued Maddock. However, Maddock died before she was served with the complaint. This case was dismissed. Mather, however, learned that Maddock had transfered a substantial amount of assets to her son Larson. Mather sued Larson. Larson successfully defended the lawsuit stating that the debt owed by his mom, Maddock, had not been established and that she should have been made a party to the lawsuit against Larson.
The Michigan Court of Appeals held that while UFTA does not require that a debtor necessarily be made a party to an action against a third party transferree, a court may otherwise require that the debtor be made a party. Under the Michigan Court Rules, a party is a necessary party if complete adudication of the case cannot be accomplished without the presence of that party. in the Mather case, the court held that neither Maddock nor her estate ever had a meaningful opportunity to challenge the debt alleged by Mather and thus, she and/or her estate were necessary parties. The Court of Appeals affirmed the dismissal of the action against Larson.
An Inequitable Result?
Maddock was able to stay rent free at the Mather’s retirement home to the tune of $50,000. She was able to transfer all of her assets to her son Larson who is now, undoubtedly enjoying the ownership of his mothers modest fortune. Meanwhile, we have a Plaintiff’s attorney who now has to explain to his client why Ms. Maddox, G-d rest her soul, got away with $50,000 in goods and services that Mather provided.
Practice Tips
1. When filing an UFTA action in the absence of a judgment against the original debtors, add the debtors as parties, even though the statute does not require such joinder. Why? You are no worse off for joining the debtor. Sometimes, it may be absolutely unnecessary to do so. I had a case last year, Chen v Yu, where I filed an UFTA action against the debtors’ wives for $850,000. I did not join the original debtors in the action since I already had a judgment against them and my UFTA action was post judgment. If the UFTA action is NOT post judgment, join the debtors in the original action.
2. Stay on top of your process server. If your process server has not effectuated service of process within 21 days, get his affidavit of attempt service. Then get an Order for Alternate Service. The Order for Alternate Service would have saved the Plaintiff’s attorney the aggravation of the appellate part of this case.
3. For Nursing Homes – get a personal guarantee from family members. In the context of the Mathers case, the Plaintiff would have had a cause of action for breach of contract against Larson. Again, this appeal could have been avoided.
4. Interestingly, this holding seems to make clear that an UFTA action may be filed pre-judgment. You file a lawsuit against the debtors and the transferees. However, as a practical aspect, it is rare that a Plaintiff’s attorney or the Plaintiff will learn of fraudulent transfers until after a lawsuit is filed against the debtors. But upon learning of such transfers, one may usually amend a complaint to include the Transferrees and thus speed up the process of seizing those assets for the satsifaction of the eventual judgment.