BILL ANALYSIS
AB 248
Page 1
Date of Hearing: April 12, 2005
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
AB 248 (Tran) - As Introduced: February 8, 2005
PROPOSED CONSENT
SUBJECT : FRAUDULENT TRANSFERS: TECHNICAL CLEAN-UP
KEY ISSUE : SHOULD TECHNICAL CORRECTIONS BE MADE TO THE
CALIFORNIA UNIFORM FRAUDULENT TRANSFER ACT TO CORRECT ERRONEOUS
CROSS-REFERENCES RESULTING FROM LAST YEAR'S ENACTMENT OF SB 1408
WHICH, IF NOT CORRECTED, COULD RESULT IN PERFECTLY LEGITIMATE
TRANSFERS BEING VOIDED?
SYNOPSIS
This non-controversial bill, sponsored by the Business Law
Section of the California State Bar, seeks to make technical
corrections to the California Uniform Fraudulent Transfers Act
(CUFTA) resulting from last year's enactment of SB 1408. The
author states that this bill corrects two sections of the code
whose reference to the amended code were inadvertently
overlooked last year. The author states that without the
technical clean-up sought in this bill, legitimate transfers
could be made invalid. There is no known opposition to this
bill.
SUMMARY : Makes technical changes to correct erroneous
cross-references to the California Uniform Fraudulent Transfers
Act. Specifically, this bill amends Civil Code Sections 3439.08
and 3439.09 to reflect the renumbering of provisions of Civil
Code Section 3439.04 made by SB 1408 which was passed by the
Legislature and subsequently chaptered last year.
EXISTING LAW:
1)Generally provides that a creditor may enforce his rights
against property that is fraudulently transferred by a debtor.
(Uniform Fraudulent Transfers Act, Civil Code Section 3439 et
seq. All further references are to this code unless otherwise
noted.)
2)Defines a fraudulent transfer as a transfer by a debtor with
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actual intent to hinder, delay, or defraud a creditor, where
the debtor does not receive reasonably equivalent value in
exchange for the transfer. (Section 3439.4.)
3)Provides that in determining whether a debtor has actual
intent to defraud a creditor, a court may consider a variety
of factors known as "badges of fraud." (Section 3439.04.)
4)Makes erroneous references to Civil Code Section 3439.04.
(Sections 3439.08 and 3439.09.)
FISCAL EFFECT : As currently in print, this bill is keyed
non-fiscal.
COMMENTS : This bill, sponsored by the Business Law Section of
the California State Bar, seeks to make technical corrections to
the California Uniform Fraudulent Transfers Act (CUFTA). The
needed change arises from last year's amendments to CUFTA which
incorporated into the body of the statutes, a non-exclusive list
of factors (known as "badges of fraud") used to determine
intent. In support of the bill, the author states:
Last year, SB 1408 (Poochigian, Chapter 50, Statutes 2004)
amended one provision of the California Uniform Fraudulent
Transfers Act, Civil Code Section 3439 by moving the
nonexclusive list of "badges of fraud" indicating the
existence of a fraudulent transfer from the comment section
to the body of the statute itself. The purpose of this
change was to ensure [that] the courts give the "badges of
fraud" proper consideration. SB 1408 passed through both
houses of the Legislature on Consent. ?Unfortunately, SB
1408 did not include essential changes to other provisions
of the CUFTA to make them consistent with the changes made
to Civil Code Section 3439.04. Both Sections 3439.08 and
3439.09 refer to provisions of the prior law which have
been either renumbered or repealed. If not corrected,
these non-incorrect cross-references could result in
perfectly legitimate transfers being voided.
The sponsor notes that the failure to correct references to
Civil Code Section 3439.04 in Sections 3439.80 and 3439.09 last
year was an inadvertent oversight. Importantly, and as the
sponsor suggests, the existing incorrect references to the prior
law can lead to serious unintended consequences. The
discrepancy in the current law paradoxically renders perfectly
AB 248
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legal transfers void. Correcting the now-incorrect
cross-references will ensure that legitimate transfers remain
valid. The bill is proposed as an urgency measure so that the
problem may quickly be corrected.
REGISTERED SUPPORT / OPPOSITION :
Support
Business Law Section of the California State Bar (sponsor)
Opposition
None on file.
Analysis Prepared by : Cynthia Alvillar / JUD. / (916) 319-2334