Can assignment of redemption rights constitute fraudulent transfer under Utah law? Brockbank v. Brockbank Explained

The Utah Court of Appeals addressed a complex question involving the intersection of redemption rights and fraudulent transfer law in Brockbank v. Brockbank, providing important clarity for practitioners handling foreclosure and collection matters.

Background and Facts

In this divorce case, Penny Brockbank obtained a $43,000 judgment against James Brockbank and a lien on his real property. Following a sheriff’s sale where Penny was the sole bidder at $15,000 for property valued at $45,000, James lacked funds to exercise his right of redemption under Rule 69. He assigned this right to Cheryl Rachelle for $100, who then redeemed the property for $16,653. Penny accepted the redemption payment, credited it against James’s debt, but then sued to void the assignment as a fraudulent transfer under the Utah Uniform Fraudulent Transfer Act.

Key Legal Issues

The court confronted two primary questions: whether assignment of redemption rights could constitute a fraudulent transfer, and whether accepting redemption proceeds constitutes waiver of objections to the assignment. The trial court had granted summary judgment for Penny, allowing her to retain both the redemption money and void the assignment.

Court’s Analysis and Holding

The Court of Appeals reversed, holding that the Uniform Fraudulent Transfer Act does not apply to assignments of redemption rights because such rights are not assets reachable by the foreclosing creditor. The court emphasized that allowing creditors to control redemption rights would undermine the purpose of redemption—providing a check on below-market bids. Additionally, Penny’s acceptance and retention of the redemption proceeds constituted waiver of any objections to the transfer under established Utah law.

Practice Implications

This decision provides crucial guidance for foreclosure practice. Creditors cannot challenge assignments of redemption rights as fraudulent transfers, as these rights exist beyond their reach. However, creditors who accept redemption proceeds risk waiving objections to the underlying assignment. The ruling reinforces that redemption rights serve as important protections against inadequate bidding at foreclosure sales, and courts will preserve these protections even against sophisticated creditor challenges.