CACI 4206 Presumption of Insolvency
California Civil Jury Instructions CACI
4206 Presumption of Insolvency
A debtor who is generally not paying [his/her/nonbinary pronoun/its] debts as they become due, other than because of a legitimate dispute, is presumed to be insolvent.
In determining whether [name of debtor] was generally not paying [his/her/nonbinary pronoun/its] debts as they became due, you may consider all of the following:
(a)The number of [name of debtor]’s debts;
(b)The percentage of debts that were not being paid;
(c)How long those debts remained unpaid;
(d)Whether special circumstances explain any failure to pay the debts; and
(e)[Name of debtor]’s payment practices before the period of alleged nonpayment [and the payment practices of [name of debtor]’s [trade/industry]].
If [name of plaintiff] proves that [name of debtor] was generally not paying debts as they became due, then you must find that [name of debtor] was insolvent unless [name of defendant] proves that [name of debtor] was solvent.
New June 2006; Revised June 2016
Directions for Use
This instruction should be read in conjunction with CACI No. 4203, Constructive Fraudulent Transfer—Insolvency—Essential Factual Elements, and CACI No. 4205, Insolvency Explained.
Sources and Authority
•Presumption of Insolvency. Civil Code section 3439.02(b).
•“Subdivision (c) [now subdivision (b)] establishes a rebuttable presumption of insolvency from the fact of general nonpayment of debts as they become due. … The presumption imposes on the party against whom the presumption is directed the burden of proving that the nonexistence of insolvency as defined in subdivision (a) is more probable than its existence.” (Legislative Committee Comment to Civil Code section 3439.02.)
•“In determining whether a debtor is paying its debts generally as they become due, the court should look at more than the amount and due dates of the indebtedness. The court should also take into account such factors as the number of the debtor’s debts, the proportion of those debts not being paid, the duration of the nonpayment, and the existence of bona fide disputes or other special circumstances alleged to constitute an explanation for the stoppage of payments. The court’s determination may be affected by a consideration of the debtor’s payment practices prior to the period of alleged nonpayment and the payment practices of the trade or industry in which the debtor is engaged.” (Legislative Committee Comment to Civil Code section 3439.02.)