CACI 4200 Actual Intent to Hinder, Delay, or Defraud a Creditor—Essential Factual Elements (Civ. Code, § 3439.04(a)(1))

California Civil Jury Instructions CACI

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].]

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.

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, Affirmative 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.” (Mejiasupra, 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 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 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, Prelawsuit Considerations, ¶ 3:291 et seq. (The Rutter Group)
Gaab & Reese, California Practice Guide: Civil Procedure Before Trial—Claims & Defenses, Ch. 5(III)-B, 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