Litigation

When a party to a matrimonial action attempts to transfer real property to a third party having actual knowledge of the divorce proceedings, the transfer is effective only to the extent that it does not conflict with the equitable distribution order. In re the Marriage of Whiteside v. Whiteside and Equity Holdings, LLC, No. 33514, Supreme Court of Appeals of West Virginia, May 28, 2008.

The husband and wife were married on Feb. 14, 1994. On April 8, 1996, they acquired 19 acres of land in West Virginia (the “Wildwood lots”). They owned the Wildwood lots as joint tenants with the right of survivorship. In 2000, the couple filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. On Jan. 31, 2001, the wife filed a petition for divorce, seeking, inter alia, an equitable division of the marital property, which included the Wildwood lots. Meanwhile, the husband, unbeknownst to the family court and the wife, conveyed his one-half undivided interest in the Wildwood lots to Equity Holdings by deed dated July 23, 2004. After the wife learned of the conveyance, she filed a motion with the family court seeking to void the deed. The family court denied the wife's motion and she appealed to the circuit court, where the appeal was also denied. The wife appealed to the Supreme Court of Appeals, which reversed the courts below. It held that the family court erred when it concluded that Equity Holdings was a bona fide purchaser of the husband's share of the Wildwood lots. It held that because Equity Holdings had actual notice of the divorce proceedings and the wife's intent to make claims against the husband's share of the property, Equity Holdings could not be a bona fide purchaser. It further held that the husband's actions established an intent to avoid application of the equitable distribution law. The court concluded that when a party to a matrimonial action, prior to entry of a final judgment of equitable distribution, attempts to transfer real property to a third party having actual knowledge of the divorce proceedings, the transfer is effective only to the extent it does not conflict with the equitable distribution order, unless the other party to the divorce joins or consents to the transfer.