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McCarthy v. Revocable Trust Agreement of McCarthy

Court of Appeals of Minnesota

August 19, 2013

Irene McCarthy, Appellant,
Revocable Trust Agreement of Thomas J. McCarthy, et al., Respondents.


Ross, Judge Morrison County District Court File No. 49-CV-12-1037

George L. May, Law Office of George L. May, Woodbury, Minnesota (for appellant)

Francis J. Rondoni, Jeffrey D. Bores, Gary K. Luloff, Chestnut Cambronne, PA, Minneapolis, Minnesota (for respondents)

Considered and decided by Bjorkman, Presiding Judge; Ross, Judge; and Willis, Judge [*]

ROSS, Judge

In this fraudulent-transfer dispute, Irene McCarthy challenges the district court's dismissal of her claims against the trustees and beneficiaries of a trust created by her deceased ex-husband, Thomas McCarthy, allegedly to avoid his written promises to pay her $500, 000. Irene asserts that her fraudulent-transfer claim should survive the trustees and beneficiaries' motion to dismiss for failure to state a claim because she alleged sufficient facts to demonstrate a fraudulent transfer, because Thomas and his estate are not necessary parties to this action, and because fraudulent-transfer actions should be treated as tort claims excluded from the probate code's statute of limitations. Because Irene was not a creditor and had no claim to the $500, 000 at the time she filed her claim, we affirm.


Irene and Thomas McCarthy were married in 1956 and divorced in 1973. See McCarthy v. McCarthy, 301 Minn. 270, 271, 222 N.W.2d 331, 332 (1974). Irene filed a civil suit alleging that she contracted with Thomas in March 1973 in contemplation of their divorce trial. Under the alleged contract, Irene agreed not to call certain witnesses that would describe his conduct during a business trip to Las Vegas and whose testimony might cost him his job. Irene alleges that, in exchange, Thomas agreed to bequeath $500, 000 to her, or, if she predeceased him, to their two children. The money would be due sooner than Thomas's death if Thomas lost his monetary interest in Cahill Land Company.

Irene alleges that she and Thomas entered into a second contract soon after their divorce. She alleges that Thomas reiterated his previous commitment to pay the $500, 000 on the same terms as before but that Irene additionally agreed not to maintain a lawsuit against Thomas for assaulting her. This contract again provided for an earlier payment obligation once Thomas no longer had a monetary interest in Cahill Land Company. And Irene alleges that she orally agreed not to disclose certain illegal tax activities that she asserts Thomas engaged in, and that she upheld her end of all the agreements.

Twenty-seven years after the divorce, in November 2001, Thomas created a revocable trust in which he named himself as the trustor and trustee. He designated his beneficiaries to be his extant wife Linda McCarthy, his brother Keith McCarthy, and Linda McCarthy's three children and two grandchildren. Without alleging what property specifically was transferred into the trust, Irene alleges that Thomas transferred "all, or most of his assets into the [t]rust." Around the same time, Thomas executed a will that did not include Irene or his children.

Thomas died on May 24, 2006. Irene does not allege that the estate knew about the alleged agreements, and the estate did not pay the $500, 000 that Thomas allegedly promised to Irene. Irene never requested any of this money from the estate. Instead, nearly six years after Thomas died, she filed the current civil action on May 14, 2012, against Linda McCarthy and the beneficiaries of Thomas's revocable trust. She claimed that Thomas's transfer of his assets into the revocable trust in 2001 was a fraudulent transfer and that she is entitled to $50, 000 or more and a constructive trust to be reimbursed by the respondents with any distributions they received from the trust.

The respondents moved to dismiss under rule 12.02(e) of the Rules of Civil Procedure. The district court granted the motion. The district court reasoned that the first contract between Thomas and Irene was void on public policy grounds because it was a contract under an agreement to protect an alleged guilty person from criminal prosecution or to conceal a crime. It deemed the second contract similarly void to the extent it depended on the consideration of Irene's promise not to disclose Thomas's allegedly illegal tax activities.

The district court did find the second written promise enforceable to the extent it settled Irene's civil claims arising from the alleged assault. But the district court held that Irene was not entitled to relief because she did not establish herself as a creditor under Minnesota's Fraudulent Transfer Act. See Minn. Stat. ยง 513.41(4) (2010) (defining creditor). And because the statute of limitations under Minnesota Statutes section 524.3-803 ...

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