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Adkisson's VOIDABLE TRANSACTIONS —— previously known as —— Fraudulent Transfers & Fraudulent Conveyances

Caution state law variances!

 

Voidable Transaction Statutes of The United States

 

California Uniform Voidable Transactions Act

California UVTA a/k/a CUVTA

California Civil Code §§ 3439 - 3439.14

 

{ Check Currency - Current Only As Of January 1, 2020 }

 

 

3439.

 

This chapter may be cited as the Uniform Voidable Transactions Act.

 

3439.01.

 

As used in this chapter the following definitions are applicable:

 

(a) “Asset” means property of a debtor, but the term does not include the following:

 

(1) Property to the extent it is encumbered by a valid lien.

 

(2) Property to the extent it is generally exempt under nonbankruptcy law.

 

(3) An interest in property held in tenancy by the entireties to the extent it is not subject to process by a creditor holding a claim against only one tenant.

 

(b) “Claim,” except as used in “claim for relief,” means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.

 

(c) “Creditor” means a person that has a claim, and includes an assignee of a general assignment for the benefit of creditors, as defined in Section 493.010 of the Code of Civil Procedure, of a debtor.

 

(d) “Debt” means liability on a claim.

 

(e) “Debtor” means a person that is liable on a claim.

 

(f) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

 

(g) “Lien” means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.

 

(h) “Organization” means a person other than an individual.

 

(i) “Person” means an individual, partnership, corporation, limited liability company, association, government or governmental subdivision, instrumentality or agency, business trust, estate, trust, business or nonprofit entity, or other legal entity.

 

(j) “Property” means anything that may be the subject of ownership.

 

(k) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

 

(l) “Sign” means, with present intent to authenticate or adopt a record, to either (1) execute or adopt a tangible symbol, or (2) attach to or logically associate with the record an electronic symbol, sound, or process.

 

(m) “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.

 

(n) “Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.

 

3439.02.

 

(a) A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater than the sum of the debtor’s assets.

 

(b) A debtor that is generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the party against which the presumption is directed the burden of proving that the nonexistence of insolvency is more probable than its existence.

 

(c) Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.

 

(d) Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

 

3439.03.

 

Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.

 

3439.04.

 

(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:

 

(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.

 

(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:

 

(A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.

 

(B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

 

(b) In determining actual intent under paragraph (1) of subdivision (a), consideration may be given, among other factors, to any or all of the following:

 

(1) Whether the transfer or obligation was to an insider.

 

(2) Whether the debtor retained possession or control of the property transferred after the transfer.

 

(3) Whether the transfer or obligation was disclosed or concealed.

 

(4) Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.

 

(5) Whether the transfer was of substantially all the debtor’s assets.

 

(6) Whether the debtor absconded.

 

(7) Whether the debtor removed or concealed assets.

 

(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.

 

(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.

 

(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred.

 

(11) Whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor.

 

(c) A creditor making a claim for relief under subdivision (a) has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

 

3439.05.

 

(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

 

(b) A creditor making a claim for relief under subdivision (a) has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

 

JayNote: California did not adopt the Insider Preference Test of UVTA § 5(b).

 

3439.06.

 

For the purposes of this chapter:

 

(a) A transfer is made:

 

(1) 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

 

(2) 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 chapter that is superior to the interest of the transferee.

 

(b) If applicable law permits the transfer to be perfected as provided in subdivision (a) and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed made immediately before the commencement of the action.

 

(c) If applicable law does not permit the transfer to be perfected as provided in subdivision (a), the transfer is made when it becomes effective between the debtor and the transferee.

 

(d) A transfer is not made until the debtor has acquired rights in the asset transferred.

 

(e) An obligation is incurred:

 

(1) If oral, when it becomes effective between the parties; or

 

(2) If evidenced by a record, when the record signed by the obligor is delivered to or for the benefit of the obligee.

 

3439.07.

 

(a) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in Section 3439.08, may obtain:

 

(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim.

 

(2) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedures described in Title 6.5 (commencing with Section 481.010) of Part 2 of the Code of Civil Procedure, or as may otherwise be available under applicable law.

 

(3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure, the following:

 

(A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or other property of the transferee.

 

(B) Appointment of a receiver to take charge of the asset transferred or other property of the transferee.

 

(C) Any other relief the circumstances may require.

 

(b) If a creditor has commenced an action on a claim against the debtor, the creditor may attach the asset transferred or other property of the transferee if the remedy of attachment is available in the action under applicable law and the property is subject to attachment in the hands of the transferee under applicable law.

 

(c) If a creditor has obtained a judgment on a claim against the debtor, the creditor may levy execution on the asset transferred or its proceeds.

 

(d) A creditor who is an assignee of a general assignment for the benefit of creditors, as defined in Section 493.010 of the Code of Civil Procedure, may exercise any and all of the rights and remedies specified in this section if they are available to any one or more creditors of the assignor who are beneficiaries of the assignment, and, in that event (1) only to the extent the rights or remedies are so available and (2) only for the benefit of those creditors whose rights are asserted by the assignee.

 

3439.08.

 

(a) A transfer or obligation is not voidable under paragraph (1) of subdivision (a) of Section 3439.04, against a person that took in good faith and for a reasonably equivalent value given the debtor or against any subsequent transferee or obligee.

 

(b) To the extent a transfer is avoidable in an action by a creditor under paragraph (1) of subdivision (a) of Section 3439.07, the following rules apply:

 

(1) Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subdivision (c), or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against the following:

 

(A) The first transferee of the asset or the person for whose benefit the transfer was made.

 

(B) An immediate or mediate transferee of the first transferee, other than either of the following:

 

(i) A good faith transferee that took for value.

 

(ii) An immediate or mediate good faith transferee of a person described in clause (i).

 

(2) Recovery pursuant to paragraph (1) of subdivision (a), or subdivision (b), or subdivision (c) of Section 3439.07 of or from the asset transferred or its proceeds, or other property of the transferee, as applicable, by levy or otherwise, is available only against a person described in subparagraph (A) or (B) of paragraph (1).

 

(c) If the judgment under subdivision (b) is based upon the value of the asset transferred, the judgment shall be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.

 

(d) Notwithstanding voidability of a transfer or an obligation under this chapter, a good faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to the following:

 

(1) A lien on or a right to retain an interest in the asset transferred.

 

(2) Enforcement of an obligation incurred.

 

(3) A reduction in the amount of the liability on the judgment.

 

(e) A transfer is not voidable under paragraph (2) of subdivision (a) of Section 3439.04 or Section 3439.05 if the transfer results from either of the following:

 

(1) Termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law.

 

(2) Enforcement of a lien in a noncollusive manner and in compliance with applicable law, including Division 9 (commencing with Section 9101) of the Commercial Code, other than a retention of collateral under Sections 9620 and 9621 of the Commercial Code and other than a voluntary transfer of the collateral by the debtor to the lienor in satisfaction of all or part of the secured obligation.

 

(f) The following rules determine the burden of proving matters referred to in this section:

 

(1) A party that seeks to invoke subdivision (a), (d), or (e) has the burden of proving the applicability of that subdivision.

 

(2) Except as otherwise provided in paragraph (3) or (4), the creditor has the burden of proving each applicable element of subdivision (b) or (c).

 

(3) The transferee has the burden of proving the applicability to the transferee of subparagraph (B) of paragraph (1) of subdivision (b).

 

(4) A party that seeks adjustment under subdivision (c) has the burden of proving the adjustment.

 

(g) The standard of proof required to establish matters referred to in this section is preponderance of the evidence.

 

3439.09.

 

A cause of action with respect to a transfer or obligation under this chapter is extinguished unless action is brought pursuant to subdivision (a) of Section 3439.07 or levy made as provided in subdivision (b) or (c) of Section 3439.07:

 

(a) Under paragraph (1) of subdivision (a) of Section 3439.04, not later than four years after the transfer was made or the obligation was incurred or, if later, not later than one year after the transfer or obligation was or could reasonably have been discovered by the claimant.

 

(b) Under paragraph (2) of subdivision (a) of Section 3439.04 or Section 3439.05, not later than four years after the transfer was made or the obligation was incurred.

 

(c) Notwithstanding any other provision of law, a cause of action under this chapter with respect to a transfer or obligation is extinguished if no action is brought or levy made within seven years after the transfer was made or the obligation was incurred.

 

3439.10.

 

(a) In this section, the following rules determine a debtor’s location:

 

(1) A debtor who is an individual is located at the individual’s principal residence.

 

(2) A debtor that is an organization and has only one place of business is located at its place of business.

 

(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.

 

(b) A claim in the nature of a claim under this chapter is governed by the local law of the jurisdiction in which the debtor is located when the transfer is made or the obligation is incurred.

 

JayNote: California did not adopt the Protected Series provisions of UVTA § 11.

 

3439.12.

 

Unless displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement its provisions.

 

3439.13.

 

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

 

3439.14.

 

(a) The changes to this chapter made by the act adding this subdivision apply only to a right of action that accrued, transfer made, or obligation incurred, on or after the effective date of that act.

 

(b) This chapter, and the other changes in the law made by Chapter 383 of the Statutes of 1986, apply only to transfers made or obligations incurred before the effective date of the act that added subdivision (a) and on or after January 1, 1987. As to transfers made or obligations incurred prior to January 1, 1987, the law in effect at the time the transfer was made or the obligation was incurred shall apply.

 

(c) Section 3439.06 shall determine the date that a transfer was made or obligation incurred.

 

(d) The provisions of this chapter, insofar as they are substantially the same as the provisions of this chapter in effect on December 31, 2015, shall be construed as restatements and continuations, and not as new enactments.

 

 

RECENT ARTICLES

 

2020.05.21 ... Utah Supreme Court Rejects Mixed Motive Test For Intentional Fraudulent Transfers In Jones Case

2020.01.06 ... Twyne’s Case And The Most Infamous Flock Of Sheep In Anglo-American Law

2019.12.07 ... New York Finally Modernizes Its Fraudulent Transfer Laws By Adopting The Uniform Voidable Transactions Act

2019.10.29 ... Repeal Of Kentucky’s Fraudulent Transfer Law In Favor Of UVTA Causes Headaches In Orchard

2019.10.19 ... Texas Homestead Gets Constitutional Protection From Fraudulent Transfer Claim In Lapides

 

 

Many more articles on voidable transactions law found here

 

UVTA - LOGICAL ORGANIZATION

(Designed For Litigators)

 

Click here to go to the Voidable Transactions Decision Chart

 

Overview of UVTA -- The process and result

 

Learn The Vocabulary Of The Act (Main Page)

 

Has A Voidable Transaction Occurred? (Main Page)

 

Does The Transferee Have A Defense? (Main Page)

 

What Remedies Are Available? (Main Page)

 

Other Helpful Provisions (Main Page)

 

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 - How insolvency is calculated

3 - Value - Issues relating to calculating value

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

(a)(1) {Intent Test} - To hinder, delay or defraud any creditor

(a)(2)(i) {Overextending Insolvency Test} - The debtor engages in a transaction for which it does not have the financial strength

(a)(2)(ii) {Sinking Insolvency Test} - The debtor is not technically insolvent but headed for insolvency

(b) {Badges of Fraud} - Circumstances available to prove the debtor's intent

5 - Transfer or Obligation Voidable As To Present Creditor

(a) {Insolvency Test} - The test preferred by creditors

(b) {Insider Preference Test} - Not really a fraudulent transfer test at all

6 - When Transfer Is Made Or Obligation Is Incurred - Determines the time of the transfer

7 - Remedies Of Creditor

      {Non-Money Judgment Remedies} - Avoidance, attachment, etc.

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

{Main Provisions} -The transferee's good faith for-value defense

(b) and (c) {Money Judgment Remedy} - Alternative remedy for creditors when avoidance is not good enough

9 - Extinguishment Of Claim For Relief - Similar to Statutes of Limitation

10 - Governing Law - Conflicts of Laws provisions

11 - Application To Series Organization - Applies to intra-series transfers

12 - Supplementary Provisions - Allows application of other law to issues unresolved by the UVTA

13 - Uniformity Of Application And Construction - Court opinions from other states may be looked to for guidance

14 - Relation To Electronic Signatures In Global And National Commerce - Waste of statutory space

15 - Short Title - From fraudulent transfers to voidable transactions

16 - Repeals; Conforming Amendment - Information for enacting legislatures

 

OTHER SOURCES OF

FRAUDULENT TRANSFER LAW

 

Fraudulent Transfers In Bankruptcy - Main Page

 

28 U.S.C. § 3301, et seq. - Where United States is the creditor

 

Common Law Fraudulent Transfer - Still exists in most states

 

Fraudulent Conveyances Act of 1571 a/k/a Statute of 13 Elizabeth - The medieval statute to which the modern American UVTA traces some of its roots.

 

Statutes Of The U.S. Jurisdictions -- State and Territorial Voidable Transaction and Fraudulent Transfer Laws

 

TOPICAL COURT OPINIONS

 

DEFINITIONS

     Creditor Definition - Court opinions on the definition of creditor

     Debtor Insider Affiliate Relative Organization Person Definitions   - Court opinions on the definitions of debtor, insider, etc.

     Claim And Debt Definitions  - Court opinions on the definitions of claim and debt

     Asset And Property Definitions  - Court opinions on the definitions of assets and property

     Lien And Valid Lien Definitions  - Court opinions on the definitions of lien and valid lien

     Transfer Definition  - Court opinions on the definition of transfer

     Value And Reasonably Equivalent Value (REV) Definition  - Court opinions on the definitions of value and reasonably equivalent value

     Insolvency Definition  - Court opinions on the definition of insolvency

TESTS

     Insolvency Test  - Court opinions relating to the Insolvency Test

     Insider Preference Test  - Court opinions relating to the Insider Preference Test

     Overextending Insolvency Test  - Court opinions relating to the Overextending Insolvency Test

     Sinking Insolvency Test  - Court opinions relating to the Sinking Insolvency Test

     Intent Test  - Court opinions relating to the Intent Test

           Badges Of Fraud  - Court opinions relating to the Badges of Fraud

DEFENSES

     Extinguishment Periods a/k/a (incorrectly) Statute Of Limitations  - Court opinions relating to the extinguishment periods

     Transferee Good Faith  - Court opinions relating to the transferee good faith for-value defense

REMEDIES

     Non-Money Remedies  - Court opinions relating to avoidance and other non-money remedies

     Money Judgment Remedies  - Court opinions relating to money judgments

OTHER

     Burdens of Proof  - Court opinions relating to the burdens of proof

     Conflict Of Laws  - Court opinions relating to conflict of laws

     Uniformity  - Court opinions relating to uniformity with the laws of other jurisdictions

     Supplementary Law  - Court opinions relating to the interplay of the UVTA with other law

     Jurisdictional Issues - Court opinions relating to jurisdiction of UVTA actions.

BANKRUPTCY

     Section 548  - Court opinions relating to 11 USC 548

 

OTHER RESOURCES

 

 

OTHER INFORMATIONAL WEBSITES

by Jay Adkisson

 

  • Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances.

 

  • Captive Insurance - 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.

 

  • Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.

 

  • Creditor-Debtor - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies.

 

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

 

  • 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.

 

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

 

  • 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.

 

  • Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special section on California Anti-SLAPP.

 

 

Voidable Transactions:

Fraudulent Transfers In American Law

 

by Jay D. Adkisson (Available 2021)

 

Click here for more information

Contact Jay Adkisson:

 

Phone: 702-953-9617     Fax: 877-698-0678     jay [at] jayad.com

 

Unless a dire emergency, please send me an e-mail first in lieu of calling to set up a telephone appointment for a date and time certain.

 

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© 2020 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.