California Civil Jury Instructions (CACI) (2017)

4203. Constructive Fraudulent Transfer—Insolvency—Essential Factual Elements (Civ. Code, § 3439.05)

Download PDF
4203.Constructive Fraudulent Transfer—Insolvency—Essential
Factual Elements (Civ. Code, § 3439.05)
[Name of plaintiff] claims [he/she/it] was harmed because [name of
debtor] [transferred property/incurred an obligation] to [name of
defendant] and 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 plaintiff]’s right to payment from [name of debtor]
arose before [name of debtor] [transferred property/incurred an
obligation];
5. That [name of debtor] was insolvent at that time or became
insolvent as a result of the transfer or obligation;
6. That [name of plaintiff] was harmed; and
7. 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
creditors.
New June 2006; Revised 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 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, § 3439.05.)
This instruction assumes the defendant is a transferee of the debtor. This instruction
may be used along with CACI No. 4202, Constructive Fraudulent Transfer—No
965
0011
Reasonably Equivalent Value ReceivedEssential Factual Elements, if it is alleged
that the plaintiff became a creditor before the transfer was made or the obligation
was incurred. Read the bracketed second sentence if the plaintiff is asserting causes
of action for both actual and constructive fraud. Also give CACI No. 4205,
“Insolvency” Explained, and CACI No. 4206, Presumption of Insolvency.
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
• Voidable Transaction Involving Insolvency. Civil Code section 3439.05.
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
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
Wiseman & Reese, California Practice Guide: Civil Procedure Before Trial Claims
&Defenses, Ch. 5(III)-B, Fraud—Fraudulent Transfers—Elements of Claim,
¶ 5:545 et seq. (The Rutter Group)
17 California Forms of Pleading and Practice, Ch. 215, Duress, Menace, Fraud,
CACI No. 4203 UNIFORM FRAUDULENT TRANSACTIONS ACT
966
0012
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, 270.191, 270.192 (Matthew Bender)
UNIFORM FRAUDULENT TRANSACTIONS ACT CACI No. 4203
967
0013