CACI 4203 Constructive Fraudulent Transfer—Insolvency—Essential Factual Elements (Civ. Code, § 3439.05)
California Civil Jury Instructions CACI
4203 Constructive Fraudulent Transfer—Insolvency—Essential Factual Elements (Civ. Code, § 3439.05)
[Name of plaintiff] claims [he/she/nonbinary pronoun/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/nonbinary pronoun/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 Reasonably Equivalent Value Received─Essential 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.’ ” (Mejia v. Reed (2003) 31 Cal.4th 657, 669–670 [3 Cal.Rptr.3d 390, 74 P.3d 166].)
•“Even without actual fraudulent intent, a transfer may be fraudulent as to present creditors if the debtor did not receive ‘a reasonably equivalent value in exchange for the transfer’ and ‘the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.’ ” (PGA West Residential Assn., Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 169 [221 Cal.Rptr.3d 353].)
•“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.)