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Adkisson's Voidable Transactions - previously known as - Fraudulent Transfers Caution state law variances!

Introduction to the Uniform Voidable Transactions Act

(a/k/a the 2014 Revisions to the Uniform Fraudulent Transfers Act)

The fraudulent transfer laws are really old, as in truly ancient. According to later writings by the great Roman jurisconsultats [spelling correct], there were provisions for fraudulent transfers in the Twelve Tables, that first written Roman law completed circa. 450 B.C., but we'll never know what since no copies have been found. The point is that fraudulent transfer law has been around for nearly 2,500 years, and the most important provisions have survived into modern times.

 

As they became civilized, the Germanic tribes adopted the Roman Civil Law, and it was largely through the Franks that the English also liberally adopted that body of law, including fraudulent transfer law. English law on the subject was codified in the Fraudulent Conveyances Act of 1571, often referred to as the Statute of 13 Elizabeth. That Act reflects fraudulent transfer law at that time as being largely criminal, i.e., a fraudulent transfer was an action taken not just in derogation of the rights of creditors, but against the Crown itself. Thus, in perhaps the first landmark case in English fraudulent transfer jurisprudence, being Twyne's Case decided in 1601, the fraudulent transferee, Twyne, ends up being tried by the Star Chamber and subsequently imprisoned. Even today, in a number of states, such as California, the making, receipt, or assistance with a fraudulent transfer is still a statutory crime.

 

The core concepts of the Fraudulent Conveyances Act of 1571, and the English law opinions, including that in Twyne's case, ultimately served as the primary source of American law on the subject as adopted by the colonies and then by the states. This now brings us to 1914, when the Uniform Law Commission (ULC) began drafting a uniform act (indeed, one of the first uniform acts), which ultimately resulted in the Uniform Fraudulent Conveyances Act of 1918 (UFCA), which was widely adopted, and even persisted in New York through the date of this writing in 2014.

 

Over time, however, the UFCA was shown to have certain serious flaws, probably the most notorious being that it required that a creditor show that the transferee lacked "good faith" in making the transfer, which placed a very difficult evidentiary burden on creditors who were often not in a position to know all the facts. Another flaw was that "conveyance" is a term that is largely peculiar to the laws of real property, and so some courts from time to time would incorrectly deny relief to a creditor who was attempting to avoid a transfer of personal property.

 

The next significant change in fraudulent transfer law came not in the uniform acts, but in the Bankruptcy Code of 1978, with its bright, shiny, new §§ 548 and 550 which provided bankruptcy law with modern fraudulent transfer provisions. This lead to, just a few years later, to the Uniform Fraudulent Transfers Act of 1984 (UFTA), which made "good faith" an affirmative defense that the transferee would be required to prove up, and also booted the unfortunate word "conveyance".

 

But the UFTA did not mirror Bankruptcy Code §§ 548 and 550, nor should it. Bankruptcy law is primarily concerned with preferences, i.e., transfers by the debtor shortly before filing for bankruptcy, and the bankruptcy fraudulent transfer provisions are simply an optional extra. By contrast, the state fraudulent transfer laws are meant to cast a much wider net to protect the rights of creditors. Thus, §§ 548 and 550 are relatively limited in their scope, and § 548 has an impractically short two-year limitations period -- so short that Bankruptcy Trustees rarely use § 548, but instead commonly opt to use state fraudulent transfers with their longer four-year limitations periods to set aside transfers.

 

The ULC's adoption of the UFTA in 1984 was widely adopted by nearly all the states. In 2012, the ULC constituted a Drafting Committee to revise the UFTA, and that lead to the adoption of the 2014 Revisions to the UFTA, now called the Uniform Voidable Transactions Act (UVTA) in 2014. Despite the change of name, the UVTA is actually just a slight revision of the UFTA, much more rounding off the rough edges and filling in gaps than making anything like dramatic substantive changes, i.e., it is not really anything like a "new" Act, but much more like UFTA 2.0. Yet, the UVTA is definitely shows improvement over the 1984 legislation in new rules that govern burdens of proof and conflicts of law.

 

There are thus three bodies of fraudulent transfer law in the U.S., being:

  1. The UVTA a/k/a 2014 Revisions to the UFTA (and the UFCA in a couple of holdout states); and
  2. Bankruptcy Code §§ 548 and 550, which of course is available only in a bankruptcy proceeding; and
  3. Common-law fraudulent transfer, which has survived in many if not most states.

 

The purpose of this website is to explore and elucidate upon fraudulent transfer law. As a litigator who, at the time of this writing, has dealt with fraudulent transfer law for nearly 30 years, both on the creditor and debtor sides more-of-less evenly, I have written commentary and attempted to re-organize the treatment of this body of law in a way that is friendly to, well, litigators. When possibly, I have also tried to include material to explain why various provisions exist and what they were meant to do. Understanding the why will almost invariably lead to a much better understanding of how the law operates as it does.

 

This website also focuses mostly on garden-variety fraudulent transfers. The net of the fraudulent transfer laws is cast broadly, and picks up transfers as diverse as the reorganization of a financially-distressed mega-conglomerate, as well as the creditor who is simply trying to get the debtor's former Bentley back from his wife's cousin who bought it for $1. It is the latter type of transactions that is the focus of this website; probably those who deal with the former type of transactions will feel that the treatment of this website is too pedestrian, but truthfully those litigators likely know this body of law as it relates to those special types of cases far better than your writer ever will, and so they will be left to their own study. This website is aimed at getting the Bentley back.

 

Notably, the law of fraudulent transfers changes not just with the Uniform Laws and the Bankruptcy Code, but with the numerous court opinions which come out daily on the subject, and so this website should be viewed as no more than the starting point in the analysis of a fraudulent transfer issue, and nothing like its conclusion. When possible, I try to keep up with the most important new opinions dealing with fraudulent transfer issues, and this commentary is included in the resources section of this website.

 

I hope that you find it useful. Comments and suggestions to me at jay [at] jayadkisson.com are always welcome.

 

 

 

 

C O M M O N      P A G E      F O O T E R

UVTA AUDIO PRESENTATION

 

Need to become fluent in the UVTA quickly? This four-hour audio program by Jay Adkisson and Dave Slenn, ABA Advisors to the UVTA Drafting Committee, explains key features of the UVTA, how they operate, and why. Hosted by Leimberg Information Services. Click here for more

RECENT ARTICLES ON FRAUDULENT TRANSFERS

 

2018.07.26 ... Ninth Circuit Rules For IRS In Shareholder Distribution Claw-Back Fraudulent Transfer Case In Slone

2018.04.22 ... State And Federal Fraudulent Transfer Law Diverge Over Exempt Property In Vorhes

2017.12.18 ... Revocation Of A Company's S-Election By Shareholders Not Deemed A Voidable Transaction In Arrowsmith

2017.12.07 ... 'I Only Gave It To My Spouse In Case I Got Sued' Defense Flops Once Again In Soley Case

2017.08.20 ... One Year Discovery Rule For Fraudulent Transfers Tested In PNC Bank Case

2017.05.30 ... The Good Faith Transferee Defined In Nautilus

Many more articles by Jay Adkisson found here

 

UVTA - LOGICAL ORGANIZATION (Designed For Litigators)

UVTA - NUMERICAL ORGANIZATION (Confusing & Difficult To Use)

 

The Uniform Law Commission's complete copy of the UVTA with comments in PDF format is available here. The webpage for the UVTA, showing states that have enacted and much other information regarding the Act is found here.

 

1 - Definitions

(1) Affiliate -- (2) Asset -- (3) Claim -- (4) Creditor -- (5) Debt -- (6) Debtor -- (7) Electronic -- (8) Insider -- (9) Lien -- (10) Organization -- (11) Person -- (12) Property -- (13) Record -- (14) Relative -- (15) Sign -- (16) Transfer -- (17) Valid Lien

2 - Insolvency

3 - Value

4 - Transfer Or Obligation Voidable As To Present Or Future Creditor

(a)(1) {Intent Test} -- (a)(2)(i) {Capitalization Test} -- (a)(2)(ii) {Equity-Sense Insolvency Test}

(b) {Badges of Fraud}

5 - Transfer or Obligation Voidable As To Present Creditor

(a) {Insolvency Test} -- (b) {Insider Preference Test}

6 - When Transfer Is Made Or Obligation Is Incurred

7 - Remedies Of Creditor

8 - Defenses, Liability, And Protection Of Transferee Or Obligee

{Main Provisions} -- (b) and (c) {Money Judgment}

9 - Extinguishment Of Claim For Relief

10 - Governing Law

11 - Application To Series Organization

12 - Supplementary Provisions

13 - Uniformity Of Application And Construction

14 - Relation To Electronic Signatures In Global And National Commerce

15 - Short Title

16 - Repeals; Conforming Amendment

 

FRAUDULENT TRANSFERS IN BANKRUPTCY

 

 

TOPICAL COURT OPINIONS

OTHER RESOURCES

OTHER INFORMATIONAL WEBSITES BY JAY ADKISSON

 

  • About Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances - https://jayadkisson.com/

 

  • Captive Insurance Companies - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business, by the author of the best-selling book on the topic: Adkisson's Captive Insurance Companies - https://captiveinsurancecompanies.com/

 

 

  • Collecting On A Judgment - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies - https://collectingonajudgment.com/

 

  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused - https://privateretirementplans.com/

 

  • Charging Orders - The confusing remedy against a debtor's interest in an LLC or partnership is explained in reference to the Uniform Partnership Act, the Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act - https://chargingorder.com/

 

  • Protected Series LLCs - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017 - https://protectedseriesact.com/

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues - https://calejl.com/

 

  • Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States - https://antislapplaws.com/

 

Available in 2019

 

Voidable Transactions: Fraudulent Transfers In Modern American Law, by Jay D. Adkisson

 

Click here for purchase information

© 2018 Jay D. Adkisson. All rights reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction.  This site https://voidabletransactions.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.