Voidable Transactions

 - previously known as -

Fraudulent Transfers

Caution state law variances!

Supplementary Provisions

UVTA § 12. SUPPLEMENTARY PROVISIONS.

 

Unless displaced by the provisions of this [Act], 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.

Reporter's Comment: This section is derived from § 11 of the Uniform Fraudulent Conveyance Act and Uniform Commercial Code § 1-103 (1984) (later § 1-103(b) (2014)). The section adds a reference to “laches” in recognition of the particular appropriateness of the application of this equitable doctrine to an untimely action to avoid a transfer under this Act. See Louis Dreyfus Corp. v. Butler, 496 F.2d 806, 808 (6th Cir. 1974) (action to avoid transfers to debtor’s wife when debtor was engaged in speculative business held to be barred by laches or applicable statutes of limitations); Cooch v. Grier, 30 Del.Ch. 255, 265-66, 59 A.2d 282, 287-88 (1948) (action under the Uniform Fraudulent Conveyance Act held barred by laches when the creditor was chargeable with inexcusable delay and the defendant was prejudiced by the delay).

 

Reporter's Comment [Comments to Section 4]: 9. This Act is not an exclusive law on the subject of voidable transfers and obligations. See § 1, Comment 2. For example, the Uniform Commercial Code supplements or modifies the operation of this Act in numerous ways. Instances include the following:

 

(a) U.C.C. § 2-402(2) (2014) recognizes the generally prevailing rule that retention of possession of goods by a seller may be voidable, but limits the application of the rule by negating any imputation of voidability from “retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification.” (Indeed, independently of § 2-402(2), retention of possession of goods in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification should not in itself be considered to “hinder, delay, or defraud” any creditor of the merchant-seller under § 4(a)(1).)

 

(b) Section 2A-308(1) provides a rule analogous to § 2-402(2) for situations in which a lessor retains possession of goods that are subject to a lease contract. Section 2A-308(3) provides that retention of possession of goods by the seller-lessee in a sale-leaseback transaction does not render the transaction voidable by a creditor of the seller-lessee if the buyer bought for value and in good faith.

 

(c) This Act does not preempt statutes governing bulk transfers, including Article 6 of the Uniform Commercial Code in jurisdictions in which it remains in force.

 

(d) Section 9-205 precludes treating a security interest in personal property as voidable on account of various enumerated features it may have. Among other things, § 9-205 immunizes a security interest in tangible property from being avoided on account of the secured party not being in possession of the property, notwithstanding the historical skepticism of nonpossessory property interests.

 

This Act operates independently of rules in an organic statute applicable to a business organization that limit distributions by the organization to its equity owners. Compliance with those rules does not insulate such a distribution from being voidable under this Act. It is conceivable that such an organic statute might contain a provision preempting the application of this Act to such distributions. Cf. Model Business Corporation Act § 152 (optional provision added in 1979 preempting the application of “any other statutes of this state with respect to the legality of distributions”; deleted 1984). Such a preemptive statute of course must be respected if applicable, but choice of law considerations may well render it inapplicable. See, e.g., Faulkner v. Kornman (In re The Heritage Organization, L.L.C.), 413 B.R. 438, 462-63 (Bankr. N.D. Tex. 2009) (action under the Texas enactment of this Act challenging a distribution by a Delaware limited liability company to its members; held, a provision of the Delaware LLC statute imposing a three-year statute of repose on an action under “any applicable law” to recover a distribution by a Delaware LLC did not apply, because choice of law rules directed application of the voidable transfer law of Texas).

 

Reporter's Comment [Comment to § 15]: 2. The Act, like the earlier Uniform Fraudulent Conveyance Act, has never purported to be an exclusive law on the subject of voidable transfers and obligations. See Prefatory Note (1984), ¶5; § 1, Comment 2, ¶6; § 4, Comment 9, ¶1; § 10, Comment 5. It remains the case that the Act is not the exclusive law on the subject of voidable transfers and obligations.

 

5. The Act does not address the extent to which a person who facilitates the making of a transfer or the incurrence of an obligation that is voidable under the Act may be subject to liability for that reason, whether under a theory of aiding and abetting, civil conspiracy, or otherwise. The Act leaves that subject to supplementary principles of law. See § 12. Cf. § 8(b)(1)(i) (imposing liability upon, inter alia, “the person for whose benefit the transfer was made”). Other law also governs such matters as (i) the circumstances in which a lawyer who assists a debtor in making a transfer or incurring an obligation that is voidable under the Act violates rules of professional conduct applicable to lawyers, (ii) the circumstances in which communications between the debtor and the lawyer in respect of such a transfer or obligation are excepted from attorney-client privilege, and (iii) the extent to which criminal sanctions apply to a debtor, transferee, obligee, or person who facilitates the making of a transfer or the incurrence of an obligation that is voidable under the Act. Neither the retitling of the Act, nor the consistent use of “voidable” in its text per Comment 4, effects any change in the meaning of the Act, and those amendments should not be construed to affect any of the foregoing matters.

 

JayNote: Very simply, all other law supplements the UVTA as necessary. This provision also operates to protect so-called "common law fraudulent conveyance" actions in the states that permit them, although such actions are usually redundant with the UVTA action.

 

 

UVTA - Logical Organization (Designed For Litigators)

Click here to go to the Voidable Transactions Decision Chart

 

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

3 - Value

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

(a)(1) {Intent Test} -- (a)(2) {Capitalization Test} -- (b) {Badges of Fraud}

5 - Transfer or Obligation Voidable As To Present Creditor

(a) {Insolvency Test} -- (b) {Insider Test}

6 - When Transfer Is Made Or Obligation Is Incurred

7 - Remedies Of Creditor

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

{Main Provisions} -- (b) and (c) {Money Judgment}

9 - Extinguishment Of Claim For Relief

10 - Governing Law

11 - Application To Series Organization

12 - Supplementary Provisions

13 - Uniformity Of Application And Construction

14 - Relation To Electronic Signatures In Global And National Commerce

15 - Short Title

16 - Repeals; Conforming Amendment

 

 

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© 2017 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 http://www.voidabletransactions.com