SECTIONS 3439-3439.12 - California Statutes

CIVIL CODE

SECTION 3439-3439.12

3439. This chapter may be cited as the Uniform Fraudulent Transfer
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" 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 who 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 who is liable on a claim.
(f) "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.
(g) "Person" means an individual, partnership, corporation,
limited liability company, association, organization, government or
governmental subdivision or agency, business trust, estate, trust, or
any other legal or commercial entity.
(h) "Property" means anything that may be the subject of
ownership.
(i) "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, and creation of a lien or other encumbrance.
(j) "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 fair valuations, the sum
of the debtor's debts is greater than all of the debtor's assets.
(b) A debtor which is a partnership is insolvent if, at fair
valuations, the sum of the partnership's debts is greater than the
aggregate of all of the partnership's assets and the sum of the
excess of the value of each general partner's nonpartnership assets
over the partner's nonpartnership debts.
(c) A debtor who is generally not paying his or her debts as they
become due is presumed to be insolvent.
(d) 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.
(e) 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
fraudulent 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 he or she would incur, debts beyond his or her 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 lienholder who transferred the assets to an insider of
the debtor.
(c) The amendment to this section made during the 2004 portion of
the 2003-04 Regular Session of the Legislature, set forth in
subdivision (b), does not constitute a change in, but is declaratory
of, existing law, and is not intended to affect any judicial
decisions that have interpreted this chapter.

3439.05. A transfer made or obligation incurred by a debtor is
fraudulent 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.

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 whom 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 writing, when the writing executed 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 its proceeds in accordance with the procedures
described in Title 6.5 (commencing with Section 481.010) of Part 2 of
the Code of Civil Procedure.
(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 its proceeds.
(B) Appointment of a receiver to take charge of the asset
transferred or its proceeds.
(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 its proceeds
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 an obligation is not voidable under
paragraph (1) of subdivision (a) of Section 3439.04, against a person
who took in good faith and for a reasonably equivalent value or
against any subsequent transferee or obligee.
(b) Except as otherwise provided in this section, to the extent a
transfer is voidable in an action by a creditor under paragraph (1)
of subdivision (a) of Section 3439.07, 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:
(1) The first transferee of the asset or the person for whose
benefit the transfer was made.
(2) Any subsequent transferee other than a good faith transferee
who took for value or from any subsequent transferee.
(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 any interest in the asset
transferred.
(2) Enforcement of any 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 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.

3439.09. A cause of action with respect to a fraudulent 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,
within four years after the transfer was made or the obligation was
incurred or, if later, within 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, within four years after the transfer was made or the
obligation was incurred.
(c) Notwithstanding any other provision of law, a cause of action
with respect to a fraudulent 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. 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.

3439.11. 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.

3439.12. 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 on or after January 1, 1987; and, as to
transfers made or obligations incurred prior to that date, the law in
effect at the time the transfer was made or the obligation was
incurred shall apply. The provisions of this chapter, insofar as they
are substantially the same as the provisions of Chapter 1
(commencing with Section 3439) of Title 2 of Part 2 of Division 4,
which was repealed by Chapter 383 of the Statutes of 1986, shall be
construed as restatements and continuations, and not as new
enactments.