BILL ANALYSIS                                                                                                                                                                                                    Ó





                             SENATE JUDICIARY COMMITTEE
                         Senator Hannah-Beth Jackson, Chair
                            2015 - 2016  Regular  Session


          SB 161 (Vidak)
          Version: April 14, 2015
          Hearing Date:  April 21, 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 and add a new  
            section to the Act to 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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             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  

          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  







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          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.  The adopted changes 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  
               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." . . .   







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               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  
            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  







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            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  
            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  







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            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  
            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  







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            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  
            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  







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            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," this particular 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  
          recommended against adoption of certain UVTA model law  
          amendments proposed by NCCUSL and, as recently amended, this  
          bill reflects those recommendations.  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.  








          SB 161 (Vidak)
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          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.  

          Also worth noting, the bill, as amended April 14, 2015, omits  
          NCCUSL's proposal to add a section to the UVTA specific to  
          "series organizations."  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.)  Not only are these organizations unable  
          to be formed in this state as a matter of existing law, but:  

            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.)   

           
          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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