How Trust Creation Barred a Fraudulent Transfer Claim

A recent decision involving a lending bank and a defaulting borrower shows the importance of lenders taking prompt action when signs of the borrower transferring assets and possible fraudelent transfers arise. TrustCo Bank loaned StoreSmart the funds for a construction project in 2006, and Susan Mathews personally guaranteed the loan. Mathews began transferring assets to trusts in 2007, StoreSmart defaulted on the loan in 2011, and TrustCo sued Mathews in 2013 for fraudulent transfers. The case involved  complicated choice of law issues and argument over which state’s statute of limitations should be used in the case to help direct whether the claim was barred by laches.

In TrustCo Bank v. Mathews, the Delaware Court of Chancery found that the banks’ claims were barred by laches because the transfers to the trust began in 2007, which was more than six years prior to the filing of the suit and the longest statute of limitations being argued in the case was New York’s six years limitations period.

See Jay Adkisson, Lenders Beware! Notice of the Borrower’s Trust Planning Can Start A Statute of Limitations Running, Forbes, Jan. 28, 2015.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.