BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 161 (Vidak)
Version: February 3, 2015
Hearing Date: April 14, 2015
Fiscal: No
Urgency: No
RD
SUBJECT
Uniform Fraudulent Transfer Act
DESCRIPTION
This bill would rename the existing Uniform Fraudulent Transfer
Act to the Uniform Voidable Transactions Act and adopt various
changes to the act based on updates made to the underlying model
act. Among other things, the bill would:
" substitute references to "fraudulent" with "voidable;"
" modify the test for insolvency and repeal the insolvency test for
partnerships;
" specify various burdens of proof in making or defending a claim
for relief;
" add a choice of law rule for claims of the nature governed by the
act;
add new and modernize existing definitions; and
revise cross-references and make other technical or
non-substantive changes.
This bill would also specify that the modifications made to this
Act apply only to a right of action that accrued, transfer made,
or obligation incurred, on or after the effective date of this
bill.
BACKGROUND
Generally, ownership implies that the owner can sell, give,
abandon, or pledge the owned property to secure a debt. That
being said, a creditor-debtor relationship can alter an owner's
power over the property owned. For example, when a property is
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mortgaged, the creditor has legally protected rights in the
property securing the debt, thereby restricting what the owner
can do with the mortgaged property. Under Article 9 of the
Uniform Commercial Code, secured creditors also obtain protected
rights in collateral that are protected. Unsecured
creditor-debtor relationships necessarily raise questions as to
a creditor's rights and remedies when the debtor manipulates
property to defeat the creditor's potential interest in that
property. For example, what rights or remedies does a creditor
have when the debtor foresees insolvency or never even intends
to satisfy the debt and attempts to conceal property that the
creditor might otherwise use to satisfy the debt owed? Can the
creditor ever reach the property after it has been transferred
or given to another person? (See ULC, Legislative Fact Sheet,
Fraudulent Transfer Act- now known as Voidable Transactions Act
Summary
[as of Apr. 5, 2015].)
In 1918, the National Conference of Commissioners on Uniform
State Laws (NCCUSL) (also known as the Uniform Law Commission
(ULC)) proposed a uniform Fraudulent Conveyance Act (adopted in
California in 1929) to help resolve such issues and to protect
creditors by allowing for recovery against property that is
fraudulently transferred by a debtor. In other words, the Act
provided a creditor with the means to reach assets a debtor has
otherwise transferred to another person to keep the assets from
being used to satisfy a debt. In 1984, pursuant to
recommendations made by NCCUSL, the Act was revised and renamed
the Uniform Fraudulent Transfer Act (UFTA), and the terminology
was changed from "conveyance" to "transfer" to indicate that the
law concerns transfers of all kinds of property and not just
transfers of real property. Notably, at the suggestion of the
State Bar of California, California deviated from certain
aspects of the uniform model law when it adopted the UFTA in
1986. (SB 2150 (Beverly, Ch. 383, Stats. 1986); see Sen.
Judiciary Com. analysis of SB 2150 (1985-1986 Reg. Session) pp.
4, 6; see also Civ. Code Sec. 3439 et seq. for text of UFTA.)
Last year, NCCUSL proposed new amendments to strengthen rights
and remedies under the act by addressing "a small number of
narrowly-defined issues." The updates include retitling the Act
to the Uniform Voidable Transactions Act, in part to reduce
misconceptions that the law requires proof of fraudulent intent.
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(ULC, Voidable Transactions Act Amendments (2014) - Formerly
Fraudulent Transfer Act
[as of Apr. 7, 2015].) This bill would adopt most of
the proposed changes to the model law into California's UFTA,
with some modifications that are largely in line with
recommendations of the Commercial Transactions Committee of the
Business Law Section of the State Bar of California.
CHANGES TO EXISTING LAW
1.Existing law , the Uniform Fraudulent Transfer Act (UFTA),
establishes the conditions under which a transfer made or
obligation incurred by a debtor is fraudulent as to a
creditor, and sets forth the remedies of a creditor with
respect to a fraudulent transfer or obligation, including, but
not limited to, voiding the transfer.
This bill would rename the above act to the Uniform Voidable
Transactions Act (UVTA), substitute references to the word
"fraudulent" with the term "voidable" instead or otherwise
strike obsolete references to the term "fraudulent."
This bill would modify the existing definitions of "claim" (to
specify that the definition does not apply to "claims for
relief") and "person" (to include "instrumentalities,"
"business or nonprofit entities," but remove "organizations"
and other unspecified "commercial entities" from the
definition). This bill would also add new definitions for the
terms "electronic," "organization," "record," and "sign," as
specified and would update terminology throughout the Act
accordingly.
2.Existing law provides that a debtor is insolvent if, at fair
valuations, the sum of the debtor's debts is greater than all
of the debtor's assets. (Civ. Code Sec. 3439.02(a).) Existing
law also specifically provides that 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
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. (Civ. Code Sec. 3439.02(b).)
Existing law also provides that a debtor who is generally not
paying his or her debts as they become due is presumed to be
insolvent. (Civ. Code Sec. 3439.02(c).)
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This bill would repeal the special insolvency test, above, for
debtors that are partnerships.
This bill would revise the presumption above to specify
instead that 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. This bill
would provide that this presumption imposes on the party
against which the presumption is directed the burden of
proving the nonexistence of insolvency is more probable than
its existence.
3.Existing law provides that 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: (1) with actual intent to
hinder, delay or defraud any creditor of the debtor; and (2)
without receiving a reasonably equivalent value in exchange
for the transfer or obligation, as specified. (Civ. Code Sec.
3439.04(a).)
Existing law provides that 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 the time or became insolvent as a result of the
transfer or obligation. (Civ. Code Sec. 3439.05(a).)
This bill would specify that a creditor making a claim for
relief under either of the provisions above has the burden of
proving the elements of the claim for relief by a
preponderance of the evidence.
4.Existing law , subject to specified limitations, allows a
creditor to bring an action for relief against a transfer or
obligation under the UFTA, to obtain certain remedies with
respect to not only "the asset transferred" but also "its
proceeds." (Civ. Code Sec. 3439.07(a)(2), (3)(A), (3)(B),
(b).)
This bill would instead allow the creditor to obtain those
remedies with respect to the asset transferred or "other
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property of the transferee."
5.Existing law authorizes creditors to seek a remedy by way of
an attachment or other provisional remedy against the asset
transferred or its proceeds in accordance with certain
attachment procedures specified in the Code of Civil
Procedure. (Civ. Code Sec. 3439.07(a)(2).)
This bill would provide that a creditor may also obtain an
attachment or other provisional remedies that may otherwise be
available under applicable law.
6.Existing law provides that a transfer is voidable if it is
made with actual intent to hinder, delay, or defraud any
creditor of the debtor. (Civ. Code Sec. 3439.04(a).)
Existing law provides that a transfer or an obligation is not
voidable under that provision if against a person who took in
good faith and for a reasonably equivalent value against any
subsequent transferee or obligee. (Civ. Code Sec.
3439.08(a).)
This bill would specify that such a transfer or obligation is
not voidable against a person that took in good faith and for
a reasonably equivalent value given [to] the debtor.
7.Existing law provides that except as otherwise provided in
this section, to the extent a transfer is voidable in an
action by a creditor under the Act, as specified, the creditor
may recover judgment for the value of the asset transferred,
as adjusted as specified, or the amount necessary to satisfy
the creditor's claim, whichever is less. Existing law
provides that such a judgment may be entered against: (1) the
first transferee of the asset or the person for whose benefit
the transfer was made; or (2) any subsequent transferee other
than a good faith transferee who took for value or from any
subsequent transferee. (Civ. Code Sec. 3439.08(b).)
This bill would make structural revisions and would also
provide instead that the judgment may be entered against: (1)
(consistent with existing law) the first transferee of the
asset or the person for whose benefit the transfer was made;
or (2) an immediate or mediate transferee of the first
transferee other than (i) a good faith transferee that took
for value or (ii) an immediate or mediate good-faith
transferee of a person described in (i).
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This bill would add a provision that would similarly limit
recovery in claims brought pursuant to other specified
sections against such persons described above.
This bill would provide that in proving certain matters under
existing law, the following burdens of proof apply:
A party that seeks to invoke: (1) the defense available
to a good faith transferee that provided reasonably
equivalent value; (2) the right of a transferee who took in
good faith for value subject to a lien on the asset, to
enforce the obligation and reduce the amount of the
judgment; or (3) the defense of a transfer resulting from
termination of lease or enforcement of a security interest
under Article 9 of the Uniform Commercial Code, has the
burden of proving the applicability of those provisions.
The creditor has the burden of proving each applicable
element of the sections allowing (1) recovery against the
initial transferee or immediate or mediate transferees
(with exceptions), or (2) recovery of or from the asset
transferred or its proceeds, by levy or otherwise, as
specified, except that:
o the transferee has the burden of proving that the
transferee is a good faith transferee that took for good
value or is a good faith transferee of such a transferee;
and
o the party that seeks adjustment to the amount of the
judgment beyond the value of the asset transferred, as
specified, has the burden of proving the adjustment.
This bill would specify that the relevant standard of proof to
establish matters referred to above is preponderance of the
evidence.
This bill would renumber certain provisions of the Act and add
new sections that would:
Specify that the governing law for a claim "in the
nature of" a claim under this Act is the local law of the
jurisdiction in which the debtor is located, as specified,
when the transfer is made or the obligation is incurred. A
debtor's location would be based upon whether the debtor is
an individual (would be located at the individual's
principal residence); an organization with only one place
of business (would be located at its place of business); an
organization with more than once place of business (would
be located at its chief executive office).
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Provide various rules and definitions relating to
"series organizations" and protected series."
This bill would limit the applicability of the changes made to
this Act by this bill to a right of action that accrued,
transfer made, or obligation incurred, on or after the
effective date of this bill. This bill would update the
provision limiting the applicability of changes made to the
Act in 1986 to clarify that those 1986 changes apply only to
transfers or obligations incurred before the effective date of
this act and on or after January 1, 1987. This bill would
repeal a provision which requires that the provisions of this
Act, insofar as they are substantially the same as specified
provisions that were repealed by the 1986 act, be construed as
restatements and continuations and not as new enactments.
This bill would instead add a provision that would provide
that the provisions of this Act, insofar as they are
substantially the same as the provisions of this Act in effect
on the effective date of this bill, shall be construed as
restatements and continuations, not as new enactments.
This bill would specify that the date a transfer was made or
obligation incurred is to be determined in accordance with
existing provisions.
This bill would repeal codified legislative intent language.
This bill would make other technical, non-substantive changes.
COMMENT
1. Stated need for the bill
According to the author, "[t]his bill renames the Uniform
Fraudulent Transfer Act to the Uniform Voidable Transactions
Act. It would revise the act to adopt certain provisions
proposed by the 2014 Uniform Voidable Transactions Act, based
upon the Uniform Fraudulent Transfer Act and adopted by the
National Conference of Commissioners on Uniform State Laws."
2. This bill seeks to adopt changes to California's Uniform
Fraudulent Transfer Act based upon recommended changes to the
model law
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This bill largely seeks to implement various changes proposed by
the National Conference of Commissioners on Uniform State Laws
(NCCUSL) to the model Uniform Fraudulent Transfer Act. In
addition to various clarifying and technical changes, the
changes include: (1) renaming the act to the Uniform Voidable
Transactions Act (UVTA) and replacing reference to "fraudulent"
with "voidable;" (2) adding new and modernizing existing
definitions; (3) specifying various burdens of proof in making
and defending a claim for relief; (4) modifying the test for
insolvency and repealing the specific test for partnerships; (5)
adding a choice of law rule for claims of the nature governed by
the act; and (6) revising cross-references.
As detailed further below, the bill adopts some of the proposed
UVTA amendments, in whole, in order to modernize, clarify, and
maintain conformity with the model law. Some amendments are
adopted in part or with modifications that account for justified
differences in the existing California's uniform fraudulent
transfer laws. Still other amendments are omitted from the
bill, entirely. With one notable exception (discussed in
Comment 3(b), below), the modifications and omissions track
recommendations made by the Commercial Transactions Committee of
the Business Law Section of the State Bar of California.
a. Renaming of the Act and conforming changes to
terminology
This bill, in accordance with the recommended amendments to
the model act, would change the title of the act from "Uniform
Fraudulent Transfer Act" (UFTA) to the "Uniform Voidable
Transfer Act" (UVTA) and would make changes throughout the act
to either delete or replace the term "fraudulent" with the
term "voidable."
As reflected in the official comments to the UVTA amendments
and the Commercial Transaction Committee's statement of
position on the UVTA, while the term "fraudulent" was
sanctioned by historical usage, the term was a misleading
description of the act as originally written:
Fraud is not, and has never been, a necessary element of a
claim under the Act. The misleading intimation to the
contrary in the original title of the Act led to confusion
in the court. . . . The misleading insistence on "fraud" in
the original title also contributed to the evolution of
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widely-used shorthand terminology that further tends to
distort understanding of the provisions of the Act. Thus,
several theories of recovery under the Act that have
nothing whatever to do with fraud (or with intent of any
sort) came to be widely known by the oxymoronic and
confusing shorthand tag "constructive fraud." . . .
Likewise, the primordial theory of recovery under the Act .
. . came to be widely known by the shorthand tag "actual
fraud." That shorthand is misleading, because that
provision does not in fact require proof of fraudulent
intent. . . . (NCCUSL, UVTA, Official Comment 1 (June 5,
2014), p. 49 [internal citations omitted]
[as of Apr. 7, 2015].)
By renaming the act to the UVTA and removing references to the
term "fraudulent," the bill would arguably relieve such
misconceptions of the act. The bill would also make various
other updates to terminology in uniformity with the model act.
These include the addition of terms such as "organization,"
"record," and "sign," as well as updated definition of
"transfer."
b. Test for insolvency
The UFTA currently provides that a debtor is insolvent if, at
fair valuations, the sum of the debtor's debts is greater than
all of the debtor's assets. (Civ. Code Sec. 3439.02(a).) The
UFTA also specifically provides a test for insolvency that is
specific to partnerships.
As proposed by the NCCUSL and recommended by the Commercial
Transactions Committee, this bill would repeal the special
insolvency test for debtors that are partnerships and would
otherwise revise the existing presumption that a debtor who is
generally not paying his or her debts as they become due is
insolvent. (See Civ. Code Sec. 3439.02(c).) Effectively, the
bill would create an exception to the presumption of
insolvency where the nonpayment of debts is the result of a
bona fide dispute. Additionally, the bill would provide that
the party against which the presumption is directed has the
burden of proving that the nonexistence of insolvency is more
probable than its existence. In making these changes, the
California UVTA would maintain uniformity in its insolvency
provisions with the other states that adopt the UVTA
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amendments proposed by NCCUSL.
c. Burden of proof for creditor claims
The UFTA provides that 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 with actual intent to
hinder, delay, or defraud any creditor of the debtor, and
without receiving a reasonably equivalent value in exchange
for the transfer or obligation, as specified. (Civ. Code Sec.
3439.04(a).) Separately, the UFTA also provides that 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. (Civ. Code Sec. 3439.05(a).)
This bill would add that a creditor making a claim for relief
under either of these provisions has the burden of proving the
elements of the claim for relief by a preponderance of the
evidence. The Commercial Transactions Committee recommended
adoption of these amendments because the committee felt it
would be consistent with existing California case law
interpreting California's UFTA. Staff notes that this burden
of proof and the standard of preponderance of the evidence
indeed appear consistent with case law. In Whitehouse v. Six
Corp. (1995) 40 Cal.App.4th 527, 530 the court of appeal held
that when a creditor resists a claim by asserting the property
has been fraudulently transferred to the third party, the
creditor must prove this allegation by a preponderance of the
evidence. Further, the court held, a creditor has the burden
of proof to establish a fraudulent transfer. With respect to
the preponderance of the evidence standard, specifically, the
court relied on a 1977 California Supreme Court case, Liodas
v. Sahadi (1977) 19 Cal.3d 278, 292-293 wherein "our Supreme
Court disapproved the dictum [in a prior case] that said fraud
must be proved by clear and convincing evidence. The Liodas
court stated the well-established rule that fraud must be
proved by a preponderance of the evidence." (Id. at 533-534;
see also Annod Corp. v. Hamilton & Samuels (2002) 100
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Cal.App.4th 1286, 1293, recognizing the preponderance of the
evidence standard as the relevant standard.)
d. Defenses and liabilities of a transferee or obligee
clarified
Under the UFTA, a transfer is generally voidable if it is made
with actual intent to hinder, delay, or defraud any creditor
of the debtor, as specified. However, the act provides that a
transfer or obligation is not avoidable in those circumstances
against a person who took in good faith and for a reasonably
equivalent value or against any subsequent transferee or
obligee. (See Civ. Code Secs. 3439.04(a) and 3439.08(a).)
That being said, both the California UFTA and the model UFTA
are silent as to whether the defense can be invoked if the
"reasonably equivalent value" is given to someone other than
the debtor. Consistent with the NCCUSL proposed UVTA
amendments, this bill would add language to the existing
provision above to specify that the value must be given to the
debtor, specifically.
Additionally, the UFTA currently provides that except as
otherwise provided in this section, to the extent a transfer
is voidable in an action by a creditor under the Act, as
specified, the creditor may recover judgment for the value of
the asset transferred, as adjusted as specified, or the amount
necessary to satisfy the creditor's claim, whichever is less.
It only allows for such a judgment to be entered against
either: (1) the first transferee of the asset or the person
for whose benefit the transfer was made; or (2) any subsequent
transferee other than a good faith transferee who took for
value or from any subsequent transferee. (Civ. Code Sec.
3439.08(b).)
This bill would instead limit such recovery to judgments
against either: (1) (the same as existing law) the first
transferee of the asset or the person for whose benefit the
transfer was made; or (2) an immediate or mediate transferee
of the first transferee. However, the bill would provide that
an immediate or mediate transferee of the first transferee has
a defense against such a judgment if the transferee in
question is either a good faith transferee that took for
value, or an immediate or mediate good-faith transferee of a
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good faith transferee that took for value. In other words, an
"immediate or mediate transferee" (i.e. a subsequent
transferee) would only be shielded from liability if the
immediate or mediate transferee takes in good faith. As a
result, such changes would arguably prevent a "bad faith"
transferee from using an innocent "intermediate transferee" to
shield a transfer from voidability.
The bill would also extend the above limits to recovery from
certain transferees and obligees in other actions for relief
where the creditor seeks recovery of or from the asset
transferred or its proceeds, by levy or otherwise, as
specified.
e. Applicable burdens of proof relating to defenses and
liabilities of a transferee
This bill would add certain rules that would determine the
burden of proving matters covered by the section detailing the
liabilities and defenses of a transferee or obligee. Under
these provisions, a party seeking to invoke either: (1) the
defense available to a good faith transferee that provided
reasonably equivalent value; (2) the right of a transferee who
took in good faith for value subject to a lien on the asset,
to enforce the obligation and reduce the amount of the
judgment; or (3) the defense of a transfer resulting from
termination of lease or enforcement of a security interest
under Article 9 of the Uniform Commercial Code, has the burden
of proving the applicability of those provisions.
Additionally, the bill would generally place upon the creditor
the burden of proving each applicable element of the
provisions that allow: (1) for recovery against the initial
transferee or immediate or mediate transferees (with
exceptions); or (2) for recovery of or from the asset
transferred or its proceeds, by levy or otherwise, as
specified. There are two exceptions to this burden: (1) the
transferee would have the burden of proving that the
transferee is a good faith transferee that took for good value
or is a good faith transferee of such a transferee; and (2)
the party that seeks adjustment to the amount of the judgment
beyond the value of the asset transferred, as specified, has
the burden of proving the adjustment.
The relevant standard of proof for these purposes would be a
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preponderance of the evidence (again, a more likely than not
standard).
As noted by the Commercial Transactions Committee, while
California does not have a corresponding section specifying
burdens of proof in relation to proving these matters above,
these additions would arguably be consistent with California
Evidence Code provisions that generally provide a party has
the burden of proof as to each fact the existence or
nonexistence of which is essential to the claim for relief or
defense that he is asserting. (Commercial Transactions
Committee, Statement of Position on the UVTA (Sept. 30, 2014)
p. 23; see also Evid. Code Sec. 500.)
f. Obsolete language
This bill proposes to repeal a UFTA provision that codifies
legislative intent regarding a 2004 amendment made to the UFTA
section setting forth relevant factors for determining actual
intent. (See Civ. Code Sec. 3439.04(b), (c).) That language
set forth that the change made to that section by the 2004 act
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. While the
deletion of such codified intent could inadvertently suggest
that this Legislature no longer intends the 2004 amendment to
be read as declaratory of (then) existing law and thereby
affect judicial decision, the Commercial Transactions
Committee believes that, "due to the passage of time and other
facts," that legislative intent language "no longer serves any
purpose and may be deleted from the [California UFTA]."
(Commercial Transactions Committee, Statement of Position on
the UVTA (Sept. 30, 2014) p. 16.) Staff notes that any
statute of limitations has arguably passed for any potential
cause of action under this act with respect to a transfer or
obligation incurred prior to or in 2004. (See Civ. Code Sec.
3439.09(c).)
3. Changes to the model act not recommended for adoption in
California
As noted above, the Commercial Transactions Committee's
Statement of Position on the UVTA did not recommend the adoption
of the changes proposed by NCCUSL, wholesale. In fact, the
committee recommended against adoption of certain provisions,
and the bill reflects those recommendations, with one exception
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as discussed in Comment 3b, below.
a. Provisions not adopted
In accordance with the recommendations made by the Commercial
Transactions Committee, this bill omits several of the UVTA
model law amendments proposed by NCCUSL. One of the more
notable omissions would be provisions that allow individual
creditors to sue insiders who receive preferential transfers,
or otherwise relate only to those preferential transfers.
Examples include relatives, controlling shareholders,
directors, and partners when the debtor is a partnership. The
"insider preference" provisions make a transfer by a debtor to
an insider voidable as to a creditor whose claim arose before
the transfer if certain conditions are met.
In recommending against adoption of these "insider preference"
provisions, Commercial Transaction Committee noted that the
provisions are carried over from the UFTA without significant
change and that the California Legislature rejected adoption
of those provisions in their UFTA form back in 1986. The
committee noted it is unaware of any change of circumstance
that would justify abandoning the public policy choice that
has been retained for the last 30 years.
b. Series organizations
As discussed in the comments above, this bill largely adheres
to the State Bar's Commercial Transactions Committee
recommendations, including the committee's recommendations
against adoption of certain provisions. Staff notes that this
is true but in one respect: the bill would add a new section
to the UVTA relating to series organizations. As background,
a series organization is a master organization whose
organizing document provides for separate sub-units, or
series, each of which operates as a separate and independent
person. The NCCUSL proposed provision regarding series
organizations provides that each of these organizations and
each "protected series" of the organization is a separate
person for purposes of the UVTA, even if for other purposes a
protected series is not a person separate from the
organization or other protected series of the organization.
The proposed language appears to be intended to avoid any
doubt that the law of avoidable transfers will apply to a
transfer, for example, by one protected series to another of
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the same series organization, regardless of whether the
separateness of the transferor and transferee is respected
outside of the organization's jurisdiction of organization.
Notably, the Commercial Transactions Committee recommended
against the adoption of this section because "such adoption is
premature and unnecessary." (Commercial Transactions
Committee, Statement of Position on the UVTA (Sept. 30, 2014)
pp. 3, 24.) Specifically, the Commercial Transactions
Committee explained the unnecessariness of including such a
provision in California's UVTA, given that such organizations
cannot be formed in this state as a matter of existing law:
Series organizations represent a relatively recently
developed form of non-California business entity and are
not yet in widespread use. Should a voidable transfer case
involving such an entity arise before a court applying
California law, the court would be able to apply the UVTA
even in the absence of [that section concerning series
organizations]. (Id. at 4.)
Moreover, the committee noted that not only are series
organizations a "relatively recent development," but also,
"foreign series organizations transacting business in
California do not appear to be commonplace." As such, "the
risk of avoidable transfers being made between protected
series of series organizations does not appear to be
particularly widespread or vexing, nor does the need for
immediate legislation appear to be particularly urgent."
In support of including the provision, the sponsor of this
bill, the California Commission on Uniform State Laws, argues
that while it "understands that inclusion of provisions
related to series organizations might be considered premature,
we have included the language from the uniform draft for a
couple of reasons. First, foreign protected series do exist
in California now. Secondly, the IRS [Internal Revenue
Service], FTB [Franchise Tax Board] and California Secretary
of State recognize these series organizations."
4. Technical amendments
The following technical amendments are suggested to correct
drafting errors:
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Author's technical amendments:
On page 8, strike lines 32-35 and insert "(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)."
On page 12, line 11, after "on" strike "the effective date as
the act adding subdivision (a)" and insert "December 31, 2015"
Support : None Known
Opposition : None Known
HISTORY
Source : California Commission on Uniform State Laws
Related Pending Legislation : None Known
Prior Legislation : SB 2150 (Beverly, Ch. 383, Stats. 1986) see
Background.
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