California Civil Jury Instructions (CACI) (2017)

4202. Constructive Fraudulent Transfer—No Reasonably Equivalent Value Received— Essential Factual Elements (Civ. Code, § 3439.04(a)(2))

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4202.Constructive Fraudulent Transfer—No Reasonably
Equivalent Value Received—Essential Factual Elements (Civ.
Code, § 3439.04(a)(2))
[Name of plaintiff] claims [he/she/it] was harmed because [name of
debtor] [transferred property/incurred an obligation] to [name of
defendant] and, as a result, was unable to pay [name of plaintiff] money
that was owed. [This is called “constructive 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] did not receive a reasonably equivalent
value in exchange for the [transfer/obligation];
4. [That [name of debtor] was in business or about to start a
business or enter a transaction when [his/her/its] remaining
assets were unreasonably small for the business or transaction;]
[or]
4. [That [name of debtor] intended to incur debts beyond [his/her/
its] ability to pay as they became due;] [or]
4. [That [name of debtor] believed or reasonably should have
believed that [he/she/it] would incur debts beyond [his/her/its]
ability to pay as they became due;]
5. That [name of plaintiff] was harmed; and
6. That [name of debtor]’s conduct was a substantial factor in
causing [name of plaintiff]’s harm.
If you decide that [name of plaintiff] has proved all of the above, [he/she/
it] does not have to prove that [name of debtor] intended to defraud any
creditors.
[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 2016
Directions for Use
Under the Uniform Voidable Transactions Act (formerly the Uniform Fraudulent
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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 without receiving a reasonably equivalent value in exchange for the
transfer or obligation, and the debtor either: (1) was engaged or was about to
engage in a business or a transaction for which the remaining assets of the debtor
were unreasonably small in relation to the business or transaction; or (2) intended
to incur, or believed or reasonably should have believed that the debtor would
incur, debts beyond the debtor’s ability to pay as they became due. (Civ. Code,
§ 3439.04(a)(2).)
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.
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.
Sources and Authority
• Transfer Without Reasonably Equivalent Value in Exchange. Civil Code section
3439.04(a)(2).
When Value Is Given. Civil Code section 3439.03.
• “There are two forms of constructive fraud under the UFTA. Civil Code section
3439.04 . . . provides that a transfer is fraudulent if the debtor did not receive
reasonably equivalent consideration and either ‘(1) Was engaged or about to
engage in a business or a transaction for which the remaining assets of the
debtor were unreasonably small in relation to the business or transaction; or (2)
Intended to incur, or believed or reasonably should have believed that he or she
would incur, debts beyond his or her ability to pay as they became due.’ Civil
Code section 3439.05 provides that a transfer is fraudulent as to an existing
creditor if the debtor does not receive reasonably equivalent value and ‘was
insolvent at that time or . . . became insolvent as a result of the transfer
. . . .’ ” (Mejia v. Reed (2003) 31 Cal.4th 657, 669–670 [3 Cal.Rptr.3d 390, 74
P.3d 166].)
• “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. It cannot be
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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.)
Secondary Sources
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)
17 California Forms of Pleading and Practice, Ch. 215, Duress, Menace, Fraud,
Undue Influence, and Mistake, §§ 215.70[5], 215.111[2][c] (Matthew Bender)
23 California Forms of Pleading and Practice, Ch. 270, Fraudulent Conveyances,
§§ 270.42, 270.193, 270.194 (Matthew Bender)
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