Full question:
We have a judgment against a contractor (corporation) following an arbitration. Appeal of the judgment just expired. Right after the arbitration award was issued in our favor, the owner moved assets from the subject corporation to another of his businesses which we believe is a fraudulent conveyance. The owner is allowing an automatic termination of the corporation by not filing an annual report with the state corporation commission. Our judgment will survive the termination under Va. Code Section 13.1-755, but the corporation can no longer be sued (it appears). Can we still move to have the fraudulent conveyance reversed or would that be considered suing the corporation after it no longer exists? Or, could it be considered part of collecting the judgment? For example, could we claim that the cause of action arose prior to the termination since the fraudulent conveyance occurred right after we obtained the award in arbitration? See 413 S.E.2d 605 (Va. 1992) for construction of this section of the Code. We would prefer to have an attorney handle these matters, but we are out of funds and must pursue the judgment ourselves.
- Category: Corporations
- Subcategory: Corporate Dissolution
- Date:
- State: Virginia
Answer:
In some cases, it is possible to pursue the owner of the corporation individually under an alter ego theory, where the court may hold the individual liable if there is no clear separation between them and the corporation. The application of this theory will depend on the specific facts of your case.
In Holston International v. Coulthard, the court determined that a fraudulent conveyance could be addressed in a garnishment proceeding to collect a judgment. This suggests that you might be able to raise the issue of the fraudulent conveyance during the process of collecting your judgment, rather than needing to initiate a separate lawsuit against the now-terminated corporation.
While the corporation can no longer be sued directly, you may still have options to challenge the fraudulent conveyance. If the fraudulent transfer occurred after the arbitration award was issued, you could argue that your cause of action arose before the corporation's termination, which may allow you to seek to reverse the conveyance as part of your judgment collection efforts.
It is important to note that the courts have differing opinions on these matters, so consulting with a legal professional for tailored advice is recommended, even if you are currently unable to afford one.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.