California Uniform Voidable Transactions

California has a number of formal acts in statute. Civil Code Division 4, Part 2, Title 2, Chapter 1 provides the Uniform Voidable Transaction Act, which is contained in Sections 3439 to 3439.14. Chapter 1 was added in 2015 by Chapter 44. Section 3439 names the Act.

Section 3439.01 provides definitions for the following terms: “asset”; “claim”; “creditor”; “debt”; “debtor”; “electronic”; “lien”; “organization”; “person”; “property”; “record”; “sign”; “transfer”; and, “valid lien.”

Section 3439.02 provides that 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. 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.

In addition, 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. 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.

Section 3439.03 specifies that 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.

Section 3439.04 provides that 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 in a specified manner.

In determining actual intent, consideration may be given, among other factors, to any or all of the eleven specified provisions. A creditor making a claim for relief has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

Section 3439.05 specifies that 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.

Section 3439.06 provides when a transfer is made and an obligation is incurred. Section 3439.07 specifies that, in an action for relief against a transfer or obligation under this chapter, a creditor, subject to certain limitations, may obtain avoidance of the transfer or obligation, or an attachment or other provisional remedy against the asset transferred.

In addition, 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.

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.

Section 3439.08 provides that a transfer or obligation is not voidable, against a person that took in good faith and for a reasonably equivalent value given the debtor or against any subsequent transferee or obligee. To the extent a transfer is avoidable in an action by a creditor, specified rules apply.

Section 3439.09 provides that a cause of action with respect to a transfer or obligation under this chapter is extinguished unless action is brought pursuant to current law.

Section 3439.10 specifies rules that determine a debtor’s location. 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.

Section 3439.12 provides that, 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.

Section 3439.13 states that this chapter is to 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. Section 3439.14 provides that 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.