CACI No. 4205. “Insolvency” Explained

Judicial Council of California Civil Jury Instructions (2017 edition)

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4205.“Insolvency” Explained
[[Name of debtor] was insolvent [at the time/as a result] of the
transaction if, at fair valuation, the total amount of [his/her/its] debts
was greater than the total amount of [his/her/its] assets.]
In determining [name of debtor]’s assets, do not include property that
has been [transferred, concealed, or removed with intent to hinder,
delay, or defraud creditors/ [or] transferred [specify grounds for voidable
transfer based on constructive fraud]]. [In determining [name of debtor]’s
debts, do not include a debt to the extent it is secured by a valid lien on
[his/her/its] property that is not included as an asset.]
New June 2006; Revised June 2016
Directions for Use
Give this instruction with CACI No. 4203, Constructive Fraudulent
Transfer—Insolvency—Essential Factual Elements. Give also CACI No. 4206,
Presumption of Insolvency.
Property the transfer of which is potentially voidable under the Uniform Voidable
Transactions Act (formerly the Uniform Fraudulent Transfer Act) is to be excluded
from the computation of the debtor’s assets for purposes of determining insolvency.
(Civ. Code, § 3439.02(c).) In the first sentence of the second paragraph select the
first option if there is property transferred and alleged to be voidable for actual
fraud (see Civ. Code, § 3439.04(a)(1).), and specify the grounds in the second
option if there is property transferred and alleged to be voidable for constructive
fraud. (See Civ. Code, §§ 3439.04(a)(2), 3904.05.) Read the bracketed last sentence
if appropriate to the facts. (See Civ. Code, § 3439.02(d).)
Sources and Authority
• When Debtor Is Insolvent. Civil Code section 3439.02.
“Asset” Defined. Civil Code section 3439.01(a).
• “To determine solvency, the value of a debtor’s assets and debts are compared.
By statutory definition, a debtor’s assets exclude property that is exempt from
judgment enforcement. Retirement accounts are generally exempt.” (Mejia v.
Reed (2003) 31 Cal.4th 657, 670 [3 Cal.Rptr.3d 390, 74 P.3d 166], internal
citations omitted.)
• “We conclude . . . that future child support payments should not be viewed as
a debt under the UFTA.” (Mejia, supra, 31 Cal.4th at p. 671.)
Secondary Sources
Ahart, California Practice Guide: Enforcing Judgments & Debts, Ch. 3-C,
Prejudgment Collection—Prelawsuit Considerations, ¶ 3:327 et seq. (The Rutter
23 California Forms of Pleading and Practice, Ch. 270, Fraudulent Conveyances,
§§ 270.42[3], 270.192 (Matthew Bender)
26 California Forms of Pleading and Practice, Ch. 307, Insolvency, § 307.32
(Matthew Bender)

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