CACI No. 4200. Actual Intent to Hinder, Delay, or Defraud a Creditor - Essential Factual Elements (Civ. Code, § 3439.04(a)(1))

Judicial Council of California Civil Jury Instructions (2020 edition)

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4200.Actual Intent to Hinder, Delay, or Defraud a
Creditor - Essential Factual Elements (Civ. Code, § 3439.04(a)(1))
[Name of plaintiff] claims [he/she/nonbinary pronoun/it] was harmed
because [name of debtor] [transferred property/incurred an obligation] to
[name of defendant] in order to avoid paying a debt to [name of plaintiff].
[This is called “actual fraud.”] To establish this claim against [name of
defendant], [name of plaintiff] must prove all of the following:
1. That [name of plaintiff] has a right to payment from [name of
debtor] for [insert amount of claim];
2. That [name of debtor] [transferred property/incurred an
obligation] to [name of defendant];
3. That [name of debtor] [transferred the property/incurred the
obligation] with the intent to hinder, delay, or defraud one or
more of [his/her/nonbinary pronoun/its] creditors;
4. That [name of plaintiff] was harmed; and
5. That [name of debtor]’s conduct was a substantial factor in
causing [name of plaintiff]’s harm.
To prove intent to hinder, delay, or defraud creditors, it is not necessary
to show that [name of debtor] had a desire to harm [his/her/nonbinary
pronoun/its] creditors. [Name of plaintiff] need only show that [name of
debtor] intended to remove or conceal assets to make it more difficult for
[his/her/nonbinary pronoun/its] creditors to collect payment.
[It does not matter whether [name of plaintiff]’s right to payment arose
before or after [name of debtor] [transferred property/incurred an
obligation].]
New June 2006; Revised June 2013, June 2016
Directions for Use
Under the Uniform Voidable Transactions Act (formerly the Uniform Fraudulent
Transfer Act), 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 with actual intent to hinder, delay, or defraud a creditor. (Civ. Code,
§ 3439.04(a)(1).)
This instruction assumes the defendant is a transferee of the original debtor. Read
the bracketed second sentence if the plaintiff is asserting claims for both actual and
constructive fraud. Read the last bracketed sentence if the plaintiff’s alleged claim
arose after the defendant’s property was transferred or the obligation was incurred.
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Note that in element 3, only the debtor-transferor’s intent is required. (See Civ.
Code, § 3439.04(a)(1).) The intent of the transferee is irrelevant. However, a
transferee who receives the property both in good faith and for a reasonably
equivalent value has an affirmative defense. (See Civ. Code, § 3439.08(a); CACI
No. 4207, Affırmative Defense - Good Faith.)
If the case concerns an incurred obligation, users may wish to insert a brief
description of the obligation in this instruction, e.g., “a lien on the property.”
Courts have held that there is a right to a jury trial whenever the remedy sought is
monetary relief, including even the return of a “determinate sum of money.”
(Wisden v. Superior Court (2004) 124 Cal.App.4th 750, 757 [21 Cal.Rptr.3d 523].)
If the only remedy sought is the return of a particular nonmonetary asset, the action
is an equitable action. However, even if a specific nonmonetary asset is involved, a
conspiracy claim or an action against any party other than the transferee who
possesses the asset (e.g., “the person for whose benefit the transfer was made”) (Civ.
Code, § 3439.08(b)(1)(A)) necessarily would seek monetary relief and give rise to a
right to a jury trial.
Note that there may be a split of authority regarding the appropriate standard of
proof of intent. The Sixth District Court of Appeal has stated: “Actual intent to
defraud must be shown by clear and convincing evidence. (Hansford v. Lassar
(1975) 53 Cal.App.3d 364, 377 [125 Cal.Rptr. 804].)” (Reddy v. Gonzalez (1992) 8
Cal.App.4th 118, 123 [10 Cal.Rptr.2d 58].) Note that the case relied on by the
Hansford court (Aggregates Assoc., Inc. v. Packwood (1962) 58 Cal.2d 580 [25
Cal.Rptr. 545, 375 P.2d 425]) was disapproved by the Supreme Court in Liodas v.
Sahadi (1977) 19 Cal.3d 278, 291-292 [137 Cal.Rptr. 635, 562 P.2d 316]. The
Fourth District Court of Appeal, Division Two, disagreed with Reddy: “In
determining whether transfers occurred with fraudulent intent, we apply the
preponderance of the evidence test, even though we recognize that some courts
believe that the test requires clear and convincing evidence.” (Gagan v. Gouyd
(1999) 73 Cal.App.4th 835, 839 [86 Cal.Rptr.2d 733], internal citations omitted,
disapproved on other grounds in Mejia v. Reed (2003) 31 Cal.4th 657, 669, fn. 2 [3
Cal.Rptr.3d 390, 74 P.3d 166].)
Sources and Authority
• Uniform Voidable Transactions Act. Civil Code section 3439 et seq.
• “Claim” Defined for UVTA. Civil Code section 3439.01(b).
• Creditor Remedies Under UVTA. Civil Code section 3439.07.
• “The UFTA permits defrauded creditors to reach property in the hands of a
transferee.” (Mejia,supra, 31 Cal.4th at p. 663.)
• “The UVTA, formerly known as the Uniform Fraudulent Transfer Act, ‘permits
defrauded creditors to reach property in the hands of a transferee.’ ‘A fraudulent
conveyance is a transfer by the debtor of property to a third person undertaken
with the intent to prevent a creditor from reaching that interest to satisfy its
claim.’ . . . The purpose of the voidable transactions statute is ‘ “to prevent
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debtors from placing property which legitimately should be available for the
satisfaction of demands of creditors beyond their reach . . . .” ’ ” (Lo v. Lee
(2018) 24 Cal.App.5th 1065, 1071 [234 Cal.Rptr.3d 824], internal citations
omitted.)
• “Under the UFTA, ‘a transfer of assets made by a debtor is fraudulent as to a
creditor, whether the creditor’s claim arose before or after the transfer, if the
debtor made the transfer (1) with an actual intent to hinder, delay or defraud any
creditor, or (2) without receiving reasonably equivalent value in return, and
either (a) was engaged in or about to engage in a business or transaction for
which the debtor’s assets were unreasonably small, or (b) intended to, or
reasonably believed, or reasonably should have believed, that he or she would
incur debts beyond his or her ability to pay as they became due.’ ” (Hasso v.
Hapke (2014) 227 Cal.App.4th 107, 121-122 [173 Cal.Rptr.3d 356], internal
citations omitted.)
• “[A] conveyance will not be considered fraudulent if the debtor merely transfers
property which is otherwise exempt from liability for debts. That is, because the
theory of the law is that it is fraudulent for a judgment debtor to divest himself
of assets against which the creditor could execute, if execution by the creditor
would be barred while the property is in the possession of the debtor, then the
debtor’s conveyance of that exempt property to a third person is not fraudulent.”
(Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 13 [33 Cal.Rptr.2d
283].)
• “A transfer is not voidable against a person ‘who took in good faith and for a
reasonably equivalent value or against any subsequent transferee.’ ” (Filip,
supra, 129 Cal.App.4th at p. 830, internal citations omitted.)
• “ ‘[T]he UFTA is not the exclusive remedy by which fraudulent conveyances and
transfers may be attacked’; they ‘may also be attacked by, as it were, a common
law action.’ ” (Wisden, supra, 124 Cal.App.4th at p. 758, internal citation
omitted.)
• “Case law has established the remedies specified in the UVTA are cumulative
and not the exclusive remedy for fraudulent conveyances. ‘They may also be
attached by, as it were, a common law action.’ By its terms the UVTA was
intended to supplement, not replace, common law principles relating to fraud.”
(Berger v. Varum (2019) 35 Cal.App.5th 1013, 1019 [248 Cal.Rptr.3d 51].)
• “[E]ven if the Legislature intended that all fraudulent conveyance claims be
brought under the UFTA, the Legislature could not thereby dispense with a right
to jury trial that existed at common law when the California Constitution was
adopted.” (Wisden, supra, 124 Cal.App.4th at p. 758, internal citation omitted.)
• “Whether a conveyance was made with fraudulent intent is a question of fact,
and proof often consists of inferences from the circumstances surrounding the
transfer.” (Filip, supra, 129 Cal.App.4th at p. 834, internal citations omitted.)
• “In order to constitute intent to defraud, it is not necessary that the transferor act
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maliciously with the desire of causing harm to one or more creditors.” (Economy
Refining & Service Co. v. Royal Nat’l Bank (1971) 20 Cal.App.3d 434, 441 [97
Cal.Rptr. 706].)
• “There is no minimum number of factors that must be present before the scales
tip in favor of finding of actual intent to defraud. This list of factors is meant to
provide guidance to the trial court, not compel a finding one way or the other.”
(Filip, supra, 129 Cal.App.4th at p. 834.)
• “ ‘A well-established principle of the law of fraudulent transfers is, “A transfer
in fraud of creditors may be attacked only by one who is injured thereby. Mere
intent to delay or defraud is not sufficient; injury to the creditor must be shown
affirmatively. In other words, prejudice to the plaintiff is essential.” ’ ” (Berger,
supra, 35 Cal.App.5th at p. 1020.)
• “It cannot be said that a creditor has been injured unless the transfer puts beyond
[her] reach property [she] otherwise would be able to subject to the payment of
[her] debt.” (Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75, 80 [112
Cal.Rptr.2d 802], internal citations omitted.)
• “[G]ranting [plaintiff judgment creditor] an additional judgment against
[defendant judgment debtor] under the UFTA for . . . ‘the amount transferred
here to avoid paying part of his underlying judgment, would in effect allow
[him] to recover more than the underlying judgment, which the [UFTA] does not
allow.’ (Italics added.) We thus conclude that because [plaintiff] obtained a
judgment in the prior action for the damages [defendant] caused him, the
principle against double recovery for the same harm bars him from obtaining a
second judgment against her under the UFTA for a portion of those same
damages.” (Renda v. Nevarez (2014) 223 Cal.App.4th 1231, 1238 [167
Cal.Rptr.3d 874], original italics.)
• “Certain cases, while not awarding consequential damages, have recognized the
availability of such damages.” (Berger, supra, 35 Cal.App.5th at p. 1021.)
Secondary Sources
8 Witkin, California Procedure (5th ed. 2008) Enforcement of Judgment, § 495 et
seq.
Ahart, California Practice Guide: Enforcing Judgments & Debts, Ch. 3-C,
Prejudgment Collection - Prelawsuit Considerations, ¶ 3:291 et seq. (The Rutter
Group)
Wiseman & Reese, California Practice Guide: Civil Procedure Before Trial Claims
& Defenses, Ch. 5(III)-B, Fraud - Fraudulent Transfers - Elements of Claim, ¶ 5:528
(The Rutter Group)
23 California Forms of Pleading and Practice, Ch. 270, Fraudulent Conveyances,
§ 270.40 (Matthew Bender)
1 Goldsmith et al., Matthew Bender Practice Guide: California Debt Collection and
Enforcement of Judgments, Ch. 4, Fraudulent Transfers, 4.05
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