Defined ~ Transfer And When Made

Transfer Definition Mainuvta0116definitiontransfer

DEFINITION OF "TRANSFER" AND WHEN MADE


#definedtransfer


"TRANSFER" DEFINED

§ 1(16) "Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.

Reporter's Comment to § 1(16).
The definition of "transfer" is derived principally from Bankruptcy Code § 101(48) (1984).
The definition of "conveyance" in § 1 of the Uniform Fraudulent Conveyance Act was similarly comprehensive, and the references in this Act to "payment of money, release, lease, and the creation of a lien or encumbrance" are derived from the Uniform Fraudulent Conveyance Act.
While the definition in the Uniform Fraudulent Conveyance Act did not explicitly refer to an involuntary transfer, the decisions under that Act were generally consistent with an interpretation that covered such a transfer. See, e.g., Hearn 45 St. Corp. v. Jano, 283 N.Y. 139, 27 N.E.2d 814, 128 A.L.R. 1285 (1940) (execution and foreclosure sales); Lefkowitz v. Finkelstein Trading Corp., 14 F.Supp. 898, 899 (S.D.N.Y. 1936) (execution sale); Langan v. First Trust & Deposit Co., 277 App.Div. 1090, 101 N.Y.S.2d 36 (4th Dept. 1950), aff'd, 302 N.Y. 932, 100 N.E.2d 189 (1951) (mortgage foreclosure); Catabene v. Wallner, 16 N.J.Super. 597, 602, 85 A.2d 300, 302 (1951) (mortgage foreclosure).
The 2014 amendments add a reference to transfer by "license," which is derived from the definition of "proceeds" in Uniform Commercial Code § 9-102(a)(64)(A) (2014).
JayNote
The definition of "transfer" is very expansive, and can encompass virtually every way that a debtor can get property to a transferee.

#whentransfermade


!!!WHEN TRANSFER MADE

SECTION 6. WHEN TRANSFER IS MADE OR OBLIGATION IS INCURRED.

For the purposes of this [Act]:

(1) a transfer is made:
(i) with respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against which applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and
(ii) with respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this [Act] that is superior to the interest of the transferee;
(2) if applicable law permits the transfer to be perfected as provided in paragraph (1) and the transfer is not so perfected before the commencement of an action for relief under this [Act], the transfer is deemed made immediately before the commencement of the action;
(3) if applicable law does not permit the transfer to be perfected as provided in paragraph (1), the transfer is made when it becomes effective between the debtor and the transferee;
(4) a transfer is not made until the debtor has acquired rights in the asset transferred; and
(5) an obligation is incurred:
(i) if oral, when it becomes effective between the parties; or
(ii) if evidenced by a record, when the record signed by the obligor is delivered to or for the benefit of the obligee.
Prefatory Note (UFTA 1984).
The new Act includes a new section specifying when a transfer is made or an obligation is incurred.
The section specifying the time when a transfer occurs is adapted from § 548(d) of the Bankruptcy Code.
Its premise is that if the law prescribes a mode for making the transfer a matter of public record or notice, it is not deemed to be made for any purpose under the new Act until it has become such a matter of record or notice.
Reporter's Comment to § 6 cmt. 1.
One of the uncertainties in the law governing the avoidance of transfers and obligations of the nature governed by this Act is the time at which the cause of action arises. Section 6 clarifies that point in time.
JayNote
The term "transfer" plays a critical role in the Act. The "transfer" is said to have been made when the transferee receives defensible title from the debtor.

#transferperfection601


(1) a transfer is made:

(i) with respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against which applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and
(ii) with respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this [Act] that is superior to the interest of the transferee;
Reporter's Comment to § 6(1).
For transfers of real property other than a fixture, paragraph (1)(i) fixes the time as the date of perfection against a good-faith purchaser from the transferor.
For transfers of fixtures and assets constituting personalty, paragraph (1)(ii) fixes the time as the date of perfection against a judicial lien creditor not asserting rights under this Act.
Perfection under paragraph (1) typically is effected by notice-filing, recordation, or delivery of unequivocal possession. See U.C.C. §§ 9-310, 9 313 (2014) (security interest in personal property generally is perfected by notice-filing or delivery of possession to transferee); 4 American Law of Property §§ 17.10-17.12 (1952) (recordation of transfer or delivery of possession to grantee required for perfection against bona fide purchaser from grantor).
The provision for postponing the time a transfer is made until its perfection is an adaptation of Bankruptcy Code § 548(d)(1) (1984).

#transferlitigation602


(2) if applicable law permits the transfer to be perfected as provided in paragraph (1) and the transfer is not so perfected before the commencement of an action for relief under this [Act], the transfer is deemed made immediately before the commencement of the action;

Reporter's Comment to § 6(2).
When no steps are taken to perfect a transfer that applicable law permits to be perfected, the transfer is deemed by paragraph (2) to be perfected immediately before the filing of an action to avoid it; without such a provision to cover that eventuality, an unperfected transfer arguably would be immune to attack.
Some transfers may not be amenable to perfection as against a bona fide purchaser or judicial lien creditor.
JayNote
If the transfer could have been perfected by the transferee, but for whatever reason was not, then it is deemed to have been perfected in the split-second prior to the filing of the voidable transaction action. This has two important ramifications: (1) even if the transfer was not perfected, it is deemed perfected if the transferee could have perfected it, and thus a transfer as been said to have occurred for purposes of bringing the action; (2) the applicable extinguishment period runs from the date of the transfer -- and if the transferee could have perfected title, but never does, this has the practical effect of tolling the extinguishment period until the split-second before the voidable transaction action is filed. This rule prevents the transferee from playing games by attempting to avoid the fraudulent transfer claim by not perfecting title.

#transfereffective603


(3) if applicable law does not permit the transfer to be perfected as provided in paragraph (1), the transfer is made when it becomes effective between the debtor and the transferee;

Reporter's Comment to § 6(3).
In the event that a transfer may not be perfected as provided in paragraph (1), paragraph (3) provides that the transfer occurs for the purpose of this Act when the transferor effectively parts with an interest in the asset.

#transferdebtorrights604


(4) a transfer is not made until the debtor has acquired rights in the asset transferred; and

Reporter's Comment to §6(4) cmt. 2.
Paragraph (4) requires the transferor to have rights in the asset transferred before the transfer is made for the purpose of this section.
This provision makes clear that the purpose of this section may not be circumvented by notice-filing or recordation of a document evidencing an interest in an asset to be acquired in the future. Cf. Bankruptcy Code § 547(e) (1984); U.C.C. § 9-203(b)(2) (2014).

#transferrecord605


(5) an obligation is incurred:

(i) if oral, when it becomes effective between the parties; or
(ii) if evidenced by a record, when the record signed by the obligor is delivered to or for the benefit of the obligee.
Reporter's Comment to § 6(5) cmt. 3 ¶ 1.
Paragraph (5) had no analogue in the Uniform Fraudulent Conveyance Act.
It is intended to resolve uncertainty arising from Rubin v. Manufacturers Hanover Trust Co., 661 F.2d 979, 989-91, 997 (2d Cir. 1981), insofar as that case holds that an obligation of guaranty may be deemed to be incurred when advances covered by the guaranty are made rather than when the guaranty first became effective between the parties. Compare Rosenberg, Intercorporate Guaranties and the Law of Fraudulent Conveyances: Lender Beware, 125 U.Pa.L.Rev. 235, 256-57 (1976).
Reporter's Comment to § 6(5) cmt. 3 ¶ 2.
An obligation may be avoided under this Act if it is incurred under the circumstances specified in § 4(a) or § 5(a). The debtor may receive reasonably equivalent value in exchange for an obligation incurred even though the benefit to the debtor is indirect. See Rubin v. Manufacturers Hanover Trust Co., 661 F.2d at 991-92; Williams v. Twin City Co., 251 F.2d 678, 681 (9th Cir. 1958); Rosenberg, supra, at 243-46.
Reporter's Comment to § 6(5) cmt. 3 ¶ 3.
Under paragraph (5), an oral obligation is incurred when it becomes effective between the parties, and later confirmation of the oral obligation by a record does not reset the time of incurrence to that later time. U.S. Bankruptcy Code § 548(d)(1)
For the purposes of this section, a transfer is made when such transfer is so perfected that a bona fide purchaser from the debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest in the property transferred that is superior to the interest in such property of the transferee, but if such transfer is not so perfected before the commencement of the case, such transfer is made immediately before the date of the filing of the petition.

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TRANSFER OPINIONS


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