Amended in Senate April 14, 2015

Senate BillNo. 161


Introduced by Senator Vidak

February 3, 2015


An act to amend Sections 3439, 3439.01, 3439.02, 3439.04, 3439.05, 3439.06, 3439.07, 3439.08, 3439.09, 3446, and 3447 of, to amend the heading of Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of, to amend the heading of Chapter 3 (commencing with Section 3445) of Title 2 of Part 2 of Division 4 of, to amend the heading of Title 2 (commencing with Section 3439) of Part 2 of Division 4 of, to amend and renumberbegin delete Sectionend deletebegin insert Sections 3439.11 andend insert 3439.12 of, and to amend, renumber, and addbegin delete Sectionsend deletebegin insert Sectionend insert 3439.10begin delete and 3439.11end delete of, the Civil Code, to amend Sections 5420, 7420, 15905.02, 15911.27, 17704.03, 17711.08, and 18640 of the Corporations Code, to amend Sections 283 and 9653 of the Probate Code, and to amend Section 2104 of the Public Utilities Code, relating to civil law.

LEGISLATIVE COUNSEL’S DIGEST

SB 161, as amended, Vidak. Uniform Fraudulent Transfer Act.

The Uniform Fraudulent Transfer Act, based in part on the model Uniform Fraudulent Transfer Act, generally establishes the conditions under which a transfer made or obligation incurred by a debtor is fraudulent as to a creditor, and sets forth the remedies of a creditor with respect to a fraudulent transfer or obligation, including, but not limited to, voiding the transfer. The act defines terms for its purposes.

This bill would rename the act the Uniform Voidable Transactions Act and would revise the act to adopt certain provisions proposed by the 2014 Uniform Voidable Transactions Act, which is based upon the Uniform Fraudulent Transfer Act, both of which were promulgated by the Uniform Law Commission. This bill would specify the burden of proof in making and defending a claim for relief and the basis for determining the governing law for a claim for relief under the act. This bill would modify definitions applicable to the act, would remove a definition of insolvency relating to a partnership debtor, and would add new definitions, including, but not limited to, definitions of “record” and “sign.” This bill would replace the term “fraudulent” with the term “voidable,” as specified.begin delete This bill would provide that each “protected series” of a “series organization,” as those terms are defined, is treated as a person for purposes of the act.end delete This bill would limit the applicability of the modifications to the act proposed by this bill to a right of action that accrued, transfer made, or obligation incurred on or after the effective date of this bill.

This bill would revise cross-references to the act and would make conforming changes to related provisions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

The heading of Title 2 (commencing with Section
23439) of Part 2 of Division 4 of the Civil Code is amended to read:

3 

4Title 2.  VOID AND VOIDABLE TRANSFERS AND
5UNDERTAKINGS

6

 

7

SEC. 2.  

The heading of Chapter 1 (commencing with Section
83439) of Title 2 of Part 2 of Division 4 of the Civil Code is
9amended to read:

10 

11Chapter  1. Uniform Voidable Transactions Act
12

 

13

SEC. 3.  

Section 3439 of the Civil Code is amended to read:

14

3439.  

This chapter may be cited as the Uniform Voidable
15Transactions Act.

16

SEC. 4.  

Section 3439.01 of the Civil Code is amended to read:

17

3439.01.  

As used in this chapter the following definitions are
18applicable:

19(a) “Asset” means property of a debtor, but the term does not
20include the following:

P3    1(1) Property to the extent it is encumbered by a valid lien.

2(2) Property to the extent it is generally exempt under
3nonbankruptcy law.

4(3) An interest in property held in tenancy by the entireties to
5the extent it is not subject to process by a creditor holding a claim
6against only one tenant.

7(b) “Claim,” except as used in “claim for relief,” means a right
8to payment, whether or not the right is reduced to judgment,
9liquidated, unliquidated, fixed, contingent, matured, unmatured,
10disputed, undisputed, legal, equitable, secured, or unsecured.

11(c) “Creditor” means a person that has a claim, and includes an
12assignee of a general assignment for the benefit of creditors, as
13defined in Section 493.010 of the Code of Civil Procedure, of a
14debtor.

15(d) “Debt” means liability on a claim.

16(e) “Debtor” means a person that is liable on a claim.

17(f) “Electronic” means relating to technology having electrical,
18digital, magnetic, wireless, optical, electromagnetic, or similar
19capabilities.

20(g) “Lien” means a charge against or an interest in property to
21secure payment of a debt or performance of an obligation, and
22includes a security interest created by agreement, a judicial lien
23obtained by legal or equitable process or proceedings, a
24common-law lien, or a statutory lien.

25(h) “Organization” means a person other than an individual.

26(i) “Person” means an individual, partnership, corporation,
27limited liability company, association, government or governmental
28subdivision, instrumentality or agency, business trust, estate, trust,
29business or nonprofit entity, or other legal entity.

30(j) “Property” means anything that may be the subject of
31 ownership.

32(k) “Record” means information that is inscribed on a tangible
33medium or that is stored in an electronic or other medium and is
34 retrievable in perceivable form.

35(l) “Sign” means, with present intent to authenticate or adopt a
36record, to either (1) execute or adopt a tangible symbol, or (2)
37attach to or logically associate with the record an electronic symbol,
38sound, or process.

39(m) “Transfer” means every mode, direct or indirect, absolute
40or conditional, voluntary or involuntary, of disposing of or parting
P4    1with an asset or an interest in an asset, and includes payment of
2money, release, lease, license, and creation of a lien or other
3encumbrance.

4(n) “Valid lien” means a lien that is effective against the holder
5of a judicial lien subsequently obtained by legal or equitable
6process or proceedings.

7

SEC. 5.  

Section 3439.02 of the Civil Code is amended to read:

8

3439.02.  

(a) A debtor is insolvent if, at a fair valuation, the
9sum of the debtor’s debts is greater than the sum of the debtor’s
10assets.

11(b) A debtor that is generally not paying the debtor’s debts as
12they become due other than as a result of a bona fide dispute is
13presumed to be insolvent. The presumption imposes on the party
14against which the presumption is directed the burden of proving
15that the nonexistence of insolvency is more probable than its
16existence.

17(c) Assets under this section do not include property that has
18been transferred, concealed, or removed with intent to hinder,
19delay, or defraud creditors or that has been transferred in a manner
20making the transfer voidable under this chapter.

21(d) Debts under this section do not include an obligation to the
22extent it is secured by a valid lien on property of the debtor not
23included as an asset.

24

SEC. 6.  

Section 3439.04 of the Civil Code is amended to read:

25

3439.04.  

(a) A transfer made or obligation incurred by a debtor
26is voidable as to a creditor, whether the creditor’s claim arose
27before or after the transfer was made or the obligation was incurred,
28if the debtor made the transfer or incurred the obligation as follows:

29(1) With actual intent to hinder, delay, or defraud any creditor
30of the debtor.

31(2) Without receiving a reasonably equivalent value in exchange
32for the transfer or obligation, and the debtor either:

33(A) Was engaged or was about to engage in a business or a
34transaction for which the remaining assets of the debtor were
35unreasonably small in relation to the business or transaction.

36(B) Intended to incur, or believed or reasonably should have
37believed that the debtor would incur, debts beyond the debtor’s
38ability to pay as they became due.

P5    1(b) In determining actual intent under paragraph (1) of
2subdivision (a), consideration may be given, among other factors,
3to any or all of the following:

4(1) Whether the transfer or obligation was to an insider.

5(2) Whether the debtor retained possession or control of the
6property transferred after the transfer.

7(3) Whether the transfer or obligation was disclosed or
8concealed.

9(4) Whether before the transfer was made or obligation was
10incurred, the debtor had been sued or threatened with suit.

11(5) Whether the transfer was of substantially all the debtor’s
12assets.

13(6) Whether the debtor absconded.

14(7) Whether the debtor removed or concealed assets.

15(8) Whether the value of the consideration received by the debtor
16was reasonably equivalent to the value of the asset transferred or
17the amount of the obligation incurred.

18(9) Whether the debtor was insolvent or became insolvent
19shortly after the transfer was made or the obligation was incurred.

20(10) Whether the transfer occurred shortly before or shortly
21after a substantial debt was incurred.

22(11) Whether the debtor transferred the essential assets of the
23business to a lienor that transferred the assets to an insider of the
24debtor.

25(c) A creditor making a claim for relief under subdivision (a)
26has the burden of proving the elements of the claim for relief by
27a preponderance of the evidence.

28

SEC. 7.  

Section 3439.05 of the Civil Code is amended to read:

29

3439.05.  

(a) A transfer made or obligation incurred by a debtor
30is voidable as to a creditor whose claim arose before the transfer
31was made or the obligation was incurred if the debtor made the
32transfer or incurred the obligation without receiving a reasonably
33equivalent value in exchange for the transfer or obligation and the
34debtor was insolvent at that time or the debtor became insolvent
35as a result of the transfer or obligation.

36(b) A creditor making a claim for relief under subdivision (a)
37has the burden of proving the elements of the claim for relief by
38a preponderance of the evidence.

39

SEC. 8.  

Section 3439.06 of the Civil Code is amended to read:

40

3439.06.  

For the purposes of this chapter:

P6    1(a) A transfer is made:

2(1) With respect to an asset that is real property other than a
3fixture, but including the interest of a seller or purchaser under a
4contract for the sale of the asset, when the transfer is so far
5perfected that a good faith purchaser of the asset from the debtor
6against which applicable law permits the transfer to be perfected
7cannot acquire an interest in the asset that is superior to the interest
8of the transferee; and

9(2) With respect to an asset that is not real property or that is a
10fixture, when the transfer is so far perfected that a creditor on a
11 simple contract cannot acquire a judicial lien otherwise than under
12this chapter that is superior to the interest of the transferee.

13(b) If applicable law permits the transfer to be perfected as
14provided in subdivision (a) and the transfer is not so perfected
15before the commencement of an action for relief under this chapter,
16the transfer is deemed made immediately before the
17commencement of the action.

18(c) If applicable law does not permit the transfer to be perfected
19as provided in subdivision (a), the transfer is made when it becomes
20effective between the debtor and the transferee.

21(d) A transfer is not made until the debtor has acquired rights
22in the asset transferred.

23(e) An obligation is incurred:

24(1) If oral, when it becomes effective between the parties; or

25(2) If evidenced by a record, when the record signed by the
26obligor is delivered to or for the benefit of the obligee.

27

SEC. 9.  

Section 3439.07 of the Civil Code is amended to read:

28

3439.07.  

(a) In an action for relief against a transfer or
29obligation under this chapter, a creditor, subject to the limitations
30in Section 3439.08, may obtain:

31(1) Avoidance of the transfer or obligation to the extent
32necessary to satisfy the creditor’s claim.

33(2) An attachment or other provisional remedy against the asset
34transferred or other property of the transferee in accordance with
35the procedures described in Title 6.5 (commencing with Section
36481.010) of Part 2 of the Code of Civil Procedure, or as may
37otherwise be available under applicable law.

38(3) Subject to applicable principles of equity and in accordance
39with applicable rules of civil procedure, the following:

P7    1(A) An injunction against further disposition by the debtor or
2a transferee, or both, of the asset transferred or other property of
3the transferee.

4(B) Appointment of a receiver to take charge of the asset
5transferred or other property of the transferee.

6(C) Any other relief the circumstances may require.

7(b) If a creditor has commenced an action on a claim against
8the debtor, the creditor may attach the asset transferred or other
9property of the transferee if the remedy of attachment is available
10in the action under applicable law and the property is subject to
11attachment in the hands of the transferee under applicable law.

12(c) If a creditor has obtained a judgment on a claim against the
13debtor, the creditor may levy execution on the asset transferred or
14its proceeds.

15(d) A creditor who is an assignee of a general assignment for
16the benefit of creditors, as defined in Section 493.010 of the Code
17of Civil Procedure, may exercise any and all of the rights and
18remedies specified in this section if they are available to any one
19or more creditors of the assignor who are beneficiaries of the
20assignment, and, in that event (1) only to the extent the rights or
21remedies are so available and (2) only for the benefit of those
22creditors whose rights are asserted by the assignee.

23

SEC. 10.  

Section 3439.08 of the Civil Code is amended to
24read:

25

3439.08.  

(a) A transfer or obligation is not voidable under
26paragraph (1) of subdivision (a) of Section 3439.04, against a
27person that took in good faith and for a reasonably equivalent value
28given the debtor or against any subsequent transferee or obligee.

29(b) To the extent a transfer is avoidable in an action by a creditor
30under paragraph (1) of subdivision (a) of Section 3439.07, the
31following rules apply:

32(1) Except as otherwise provided in this section, the creditor
33may recover judgment for the value of the asset transferred, as
34adjusted under subdivision (c), or the amount necessary to satisfy
35the creditor’s claim, whichever is less. The judgment may be
36entered against the following:

37(A) The first transferee of the asset or the person for whose
38benefit the transfer was made.

39(B) An immediate or mediate transferee of the first transferee,
40other than either of the following:

P8    1(i) A good faith transferee that took for value.

2(ii) An immediate or mediate good faith transferee of a person
3described in clause (i).

begin delete

4(2) Recovery pursuant to paragraph (1) of subdivision (a) or
5subdivision (b) of Section 3439.07 of or from the asset transferred
6or its proceeds, by levy or otherwise, is available only against a
7person described in subparagraph (A) or (B) of paragraph (1).

end delete
begin insert

8(2) Recovery pursuant to paragraph (1) of subdivision (a), or
9subdivision (b), or subdivision (c) of Section 3439.07 of or from
10the asset transferred or its proceeds, or other property of the
11transferee, as applicable, by levy or otherwise, is available only
12against a person described in subparagraph (A) or (B) of
13paragraph (1).

end insert

14(c) If the judgment under subdivision (b) is based upon the value
15of the asset transferred, the judgment shall be for an amount equal
16to the value of the asset at the time of the transfer, subject to
17adjustment as the equities may require.

18(d) Notwithstanding voidability of a transfer or an obligation
19under this chapter, a good faith transferee or obligee is entitled, to
20the extent of the value given the debtor for the transfer or
21obligation, to the following:

22(1) A lien on or a right to retain an interest in the asset
23transferred.

24(2) Enforcement of an obligation incurred.

25(3) A reduction in the amount of the liability on the judgment.

26(e) A transfer is not voidable under paragraph (2) of subdivision
27(a) of Section 3439.04 or Section 3439.05 if the transfer results
28from either of the following:

29(1) Termination of a lease upon default by the debtor when the
30termination is pursuant to the lease and applicable law.

31(2) Enforcement of a lien in a noncollusive manner and in
32compliance with applicable law, including Division 9 (commencing
33with Section 9101) of the Commercial Code, other than a retention
34of collateral under Sections 9620 and 9621 of the Commercial
35Code and other than a voluntary transfer of the collateral by the
36debtor to the lienor in satisfaction of all or part of the secured
37obligation.

38(f) The following rules determine the burden of proving matters
39referred to in this section:

P9    1(1) A party that seeks to invoke subdivision (a), (d), or (e) has
2the burden of proving the applicability of that subdivision.

3(2) Except as otherwise provided in paragraph (3) or (4), the
4creditor has the burden of proving each applicable element of
5subdivision (b) or (c).

6(3) The transferee has the burden of proving the applicability
7to the transferee of subparagraph (B) of paragraph (1) of
8subdivision (b).

9(4) A party that seeks adjustment under subdivision (c) has the
10burden of proving the adjustment.

11(g) The standard of proof required to establish matters referred
12to in this section is preponderance of the evidence.

13

SEC. 11.  

Section 3439.09 of the Civil Code is amended to
14read:

15

3439.09.  

A cause of action with respect to a transfer or
16obligation under this chapter is extinguished unless action is
17brought pursuant to subdivision (a) of Section 3439.07 or levy
18made as provided in subdivision (b) or (c) of Section 3439.07:

19(a) Under paragraph (1) of subdivision (a) of Section 3439.04,
20not later than four years after the transfer was made or the
21obligation was incurred or, if later, not later than one year after
22the transfer or obligation was or could reasonably have been
23discovered by the claimant.

24(b) Under paragraph (2) of subdivision (a) of Section 3439.04
25or Section 3439.05, not later than four years after the transfer was
26made or the obligation was incurred.

27(c) Notwithstanding any other provision of law, a cause of action
28under this chapter with respect to a transfer or obligation is
29extinguished if no action is brought or levy made within seven
30years after the transfer was made or the obligation was incurred.

31

SEC. 12.  

Section 3439.10 of the Civil Code is amended and
32renumbered to read:

33

3439.12.  

Unless displaced by the provisions of this chapter,
34the principles of law and equity, including the law merchant and
35the law relating to principal and agent, estoppel, laches, fraud,
36misrepresentation, duress, coercion, mistake, insolvency, or other
37validating or invalidating cause, supplement its provisions.

38

SEC. 13.  

Section 3439.10 is added to the Civil Code, to read:

39

3439.10.  

(a) In this section, the following rules determine a
40debtor’s location:

P10   1(1) A debtor who is an individual is located at the individual’s
2principal residence.

3(2) A debtor that is an organization and has only one place of
4business is located at its place of business.

5(3) A debtor that is an organization and has more than one place
6of business is located at its chief executive office.

7(b) A claim in the nature of a claim under this chapter is
8governed by the local law of the jurisdiction in which the debtor
9is located when the transfer is made or the obligation is incurred.

10

SEC. 14.  

Section 3439.11 of the Civil Code is amended and
11renumbered to read:

12

3439.13.  

This chapter shall be applied and construed to
13effectuate its general purpose to make uniform the law with respect
14to the subject of this chapter among states enacting it.

begin delete
15

SEC. 15.  

Section 3439.11 is added to the Civil Code, to read:

16

3439.11.  

(a) For purposes of this section, the following
17definitions apply:

18(1) “Protected series” means an arrangement, however
19denominated, created by a series organization that, pursuant to the
20law under which the series organization is organized, has the
21characteristics set forth in paragraph (2).

22(2) “Series organization” means an organization that, pursuant
23to the law under which it is organized, has the following
24characteristics:

25(A) The organic record of the organization provides for creation
26by the organization of one or more protected series, however
27denominated, with respect to specified property of the organization,
28and for records to be maintained for each protected series that
29identify the property of or associated with the protected series.

30(B) Debt incurred or existing with respect to the activities of,
31or property of, or associated with, a particular protected series is
32enforceable against the property of or associated with the protected
33series only, and not against the property of or associated with the
34organization or other protected series of the organization.

35(C) Debt incurred or existing with respect to the activities or
36property of the organization is enforceable against the property of
37the organization only, and not against the property of or associated
38with a protected series of the organization.

39(b) A series organization and each protected series of the
40organization is a separate person for purposes of this chapter, even
P11   1if for other purposes a protected series is not a person separate
2from the organization or other protected series of the organization.

end delete
3

begin deleteSEC. 16.end delete
4begin insertSEC. 15.end insert  

Section 3439.12 of the Civil Code is amended and
5renumbered to read:

6

3439.14.  

(a) The changes to this chapter made by the act
7adding this subdivision apply only to a right of action that accrued,
8transfer made, or obligation incurred, on or after the effective date
9of that act.

10(b) This chapter, and the other changes in the law made by
11Chapter 383 of the Statutes of 1986, apply only to transfers made
12or obligations incurred before the effective date of the act that
13added subdivision (a) and on or after January 1, 1987. As to
14transfers made or obligations incurred prior to January 1, 1987,
15the law in effect at the time the transfer was made or the obligation
16was incurred shall apply.

17(c) Section 3439.06 shall determine the date that a transfer was
18made or obligation incurred.

19(d) The provisions of this chapter, insofar as they are
20substantially the same as the provisions of this chapter in effect
21onbegin delete the effective date as the act adding subdivision (a),end deletebegin insert December
2231, 2015,end insert
shall be construed as restatements and continuations,
23and not as new enactments.

24

begin deleteSEC. 17.end delete
25begin insertSEC. 16.end insert  

The heading of Chapter 3 (commencing with Section
263445) of Title 2 of Part 2 of Division 4 of the Civil Code is
27amended to read:

28 

29Chapter  3. Undertaking in Voidable Transfer Action
30

 

31

begin deleteSEC. 18.end delete
32begin insertSEC. 17.end insert  

Section 3446 of the Civil Code is amended to read:

33

3446.  

(a) In an action by a creditor for relief against a transfer
34or obligation under Chapter 1 (commencing with Section 3439)
35of Title 2 of Part 2 of Division 4 on the ground that the transfer or
36obligation is voidable as to the creditor, the transferee may give
37an undertaking as provided in this chapter.

38(b) If an undertaking is given as provided in this chapter, the
39transferee may sell, encumber, transfer, convey, mortgage, pledge,
40or otherwise dispose of the property or obligation, or a part thereof,
P12   1and the purchaser, encumbrancer, transferee, mortgagee, grantee,
2or pledgee of the property or obligation takes, owns, holds, and
3possesses the property or obligation unaffected by the action and
4any judgment that is rendered in the action.

5

begin deleteSEC. 19.end delete
6begin insertSEC. 18.end insert  

Section 3447 of the Civil Code is amended to read:

7

3447.  

The undertaking shall be conditioned that, if it is
8determined in the action that the transfer or obligation was voidable
9as to the creditor, the transferee will pay to the creditor the lesser
10of the following amounts:

11(a) The value of the property or obligation as estimated in the
12undertaking.

13(b) The amount determined in the action to be due and owing
14to the creditor by the person who transferred the property or
15incurred the obligation.

16

begin deleteSEC. 20.end delete
17begin insertSEC. 19.end insert  

Section 5420 of the Corporations Code is amended
18to read:

19

5420.  

(a) Any person who receives any distribution is liable
20to the corporation for the amount so received by such person with
21interest thereon at the legal rate on judgments until paid.

22(b) Suit may be brought in the name of a corporation by a
23creditor, a director, the Attorney General, or, subject to meeting
24the requirements of Section 5710, a member. In any such action
25in addition to the remedy provided in subdivision (a), the court
26may award punitive damages for the benefit of the corporation
27against any director, officer, member or other person who with
28intent to defraud the corporation caused, received or aided and
29abetted in the making of any distribution.

30(c) Any person sued under this section may implead all other
31persons liable under this section and may in the absence of fraud
32by a moving party compel contribution, either in that action or in
33an independent action against persons not joined in the action.

34(d) This section shall not affect any liability which any person
35may have under the Uniform Voidable Transactions Act (Chapter
361 (commencing with Section 3439) of Title 2 of Part 2 of Division
374 of the Civil Code).

38

begin deleteSEC. 21.end delete
39begin insertSEC. 20.end insert  

Section 7420 of the Corporations Code is amended
40to read:

P13   1

7420.  

(a) Any person who with knowledge of facts indicating
2the impropriety thereof receives any distribution, including a
3payment in redemption of a membership, prohibited by this chapter
4is liable to the corporation for the amount so received by the person
5with interest thereon at the legal rate on judgments until paid.

6(b) Any person who with knowledge of facts indicating the
7impropriety thereof receives any distribution, including a payment
8in redemption of a membership, prohibited by this chapter is liable
9to the corporation for the benefit of the head organization, or of
10all of the creditors entitled to institute an action under subdivision
11(c), for the amount so received by the person with interest thereon
12at the legal rate on judgments until paid, but not exceeding the
13obligations of the corporation owed to the head organization at the
14time of the violation, or the liabilities of the corporation owed to
15nonconsenting creditors at the time of the violation, as the case
16may be.

17(c) Suit may be brought in the name of the corporation to enforce
18the liability (1) to creditors arising under subdivision (b) for a
19violation of Section 7411 or 7412 against any or all persons liable
20by any one or more creditors of the corporation whose debts or
21claims arose prior to the time of the distribution and who have not
22consented thereto, whether or not they have reduced their claims
23to judgment, or (2) to the head organization arising under
24subdivision (b) for a violation of Section 7413 against any or all
25persons liable by any head organization which pursuant to the
26corporation’s articles is entitled to a distribution of assets upon
27dissolution.

28(d) Any person sued under subdivision (b) may implead all other
29persons liable under subdivision (b) and may in the absence of
30fraud by the moving party compel contribution, either in that action
31or in an independent action against persons not joined in that action.

32(e) Nothing contained in this section affects any liability which
33any person may have under the Uniform Voidable Transactions
34Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part
352 of Division 4 of the Civil Code).

36

begin deleteSEC. 22.end delete
37begin insertSEC. 21.end insert  

Section 15905.02 of the Corporations Code is
38amended to read:

39

15905.02.  

(a) A partner’s obligation to contribute money or
40other property or other benefit to, or to perform services for, a
P14   1limited partnership is not excused by the partner’s death, disability,
2or other inability to perform personally.

3(b) If a partner does not make a promised nonmonetary
4contribution, the partner is obligated at the option of the limited
5partnership to contribute money equal to the value of that portion,
6as stated in the required information, of the stated contribution
7which has not been made.

8(c) The obligation of a partner to make a contribution or return
9money or other property paid or distributed in violation of this
10chapter may be compromised only by consent of all partners. A
11creditor of a limited partnership which extends credit or otherwise
12acts in reliance on an obligation described in subdivision (a),
13without notice of any compromise under this subdivision, may
14enforce the original obligation.

15(d) A partnership agreement may provide that the interest of a
16partner who fails to make any contribution or other payment that
17the partner is required to make will be subject to specific remedies
18for, or specific consequences of, the failure. A provision shall be
19enforceable in accordance with its terms unless the partner seeking
20to invalidate the provision establishes that the provision was
21unreasonable under the circumstances existing at the time the
22agreement was made. The specific remedies or consequences may
23include loss of voting, approval, or other rights, loss of the partner’s
24ability to actively participate in the management and operations
25of the partnership, liquidated damages, or a reduction of the
26defaulting partner’s economic rights. The reduction of the
27defaulting partner’s economic rights may include one or more of
28the following provisions:

29(1) Diluting, reducing or eliminating the defaulting partner’s
30proportionate interest in the partnership.

31(2) Subordinating the defaulting partner’s interest in the
32partnership to that of nondefaulting partners.

33(3) Permitting a forced sale of the partnership interest.

34(4) Permitting the lending or contribution by other partners of
35the amount necessary to meet the defaulting partner’s commitment.

36(5) Adjusting the interest rates or other rates of return, preferred,
37priority, or otherwise, with respect to contributions by or capital
38accounts of the other partners.

39(6) Fixing the value of the defaulting partner’s interest in the
40partnership by appraisal, formula and redemption, or sale of the
P15   1defaulting partner’s interest in the partnership at a percentage of
2that value.

3(7) Nothing in this section shall be construed to affect the rights
4of third-party creditors of the partnership to seek equitable remedies
5nor any rights existing under the Uniform Voidable Transactions
6Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part
72 of Division 4 of the Civil Code).

8

begin deleteSEC. 23.end delete
9begin insertSEC. 22.end insert  

Section 15911.27 of the Corporations Code is
10amended to read:

11

15911.27.  

To the extent that the payment to dissenting limited
12partners of the fair market value of their dissenting interests would
13require the dissenting limited partners to return such payment or
14a portion thereof by reason of Section 15905.09 or the Uniform
15Voidable Transactions Act (Chapter 1 (commencing with Section
163439) of Title 2 of Part 2 of Division 4 of the Civil Code), then
17that payment or portion thereof shall not be made and the dissenting
18limited partners shall become creditors of the limited partnership
19for the amount not paid, together with interest thereon at the legal
20rate on judgments until the date of payment, but subordinate to all
21other creditors in any proceeding relating to the winding up and
22dissolution of the limited partnership, such debt to be payable when
23 permissible.

24

begin deleteSEC. 24.end delete
25begin insertSEC. 23.end insert  

Section 17704.03 of the Corporations Code is
26amended to read:

27

17704.03.  

(a) A person’s obligation to make a contribution to
28a limited liability company is not excused by the person’s death,
29disability, or other inability to perform personally. If a person does
30not make a required contribution, the person or the person’s estate
31is obligated to contribute money equal to the value of the part of
32the contribution that has not been made, at the option of the limited
33liability company.

34(b) The obligation of a member to make a contribution to a
35limited liability company may be compromised only by consent
36of all the members. A conditional obligation of a member to make
37a contribution to a limited liability company shall not be enforced
38unless the conditions of the obligation have been satisfied or
39waived as to or by that member. Conditional obligations include
P16   1contributions payable upon a discretionary call of a limited liability
2company before the time the call occurs.

3(c) A creditor of a limited liability company that extends credit
4or otherwise acts in reliance on an obligation described in
5subdivision (a) may enforce the obligation.

6(d) Nothing in this section shall be construed to affect the rights
7of third-party creditors of the limited liability company to seek
8equitable remedies or any rights existing under the Uniform
9Voidable Transactions Act (Chapter 1 (commencing with Section
103439) of Title 2 of Part 2 of Division 4 of the Civil Code).

11

begin deleteSEC. 25.end delete
12begin insertSEC. 24.end insert  

Section 17711.08 of the Corporations Code is
13amended to read:

14

17711.08.  

To the extent that the payment to dissenting members
15of the fair market value of their dissenting interests would require
16the dissenting members to return payment or a portion of the
17payment by reason of Section 17711.09 or the Uniform Voidable
18Transactions Act (Chapter 1 (commencing with Section 3439) of
19Title 2 of Part 2 of Division 4 of the Civil Code), then that payment
20or portion thereof shall not be made and the dissenting members
21shall become creditors of the limited liability company for the
22amount not paid, together with interest thereon at the legal rate on
23judgments until the date of payment, but subordinate to all other
24creditors in any proceeding relating to the winding up and
25dissolution of the limited liability company, such debt to be payable
26when permissible.

27

begin deleteSEC. 26.end delete
28begin insertSEC. 25.end insert  

Section 18640 of the Corporations Code is amended
29to read:

30

18640.  

Nothing in this chapter limits application of the Uniform
31Voidable Transactions Act (Chapter 1 (commencing with Section
323439) of Title 2 of Part 2 of Division 4 of the Civil Code).

33

begin deleteSEC. 27.end delete
34begin insertSEC. 26.end insert  

Section 283 of the Probate Code is amended to read:

35

283.  

A disclaimer is not a voidable transfer by the beneficiary
36under the Uniform Voidable Transactions Act (Chapter 1
37(commencing with Section 3439) of Title 2 of Part 2 of Division
384 of the Civil Code).

39

begin deleteSEC. 28.end delete
40begin insertSEC. 27.end insert  

Section 9653 of the Probate Code is amended to read:

P17   1

9653.  

(a) On application of a creditor of the decedent or the
2estate, the personal representative shall commence and prosecute
3an action for the recovery of real or personal property of the
4decedent for the benefit of creditors if the personal representative
5has insufficient assets to pay creditors and the decedent during
6lifetime did any of the following with respect to the property:

7(1) Made a conveyance of the property, or any right or interest
8in the property, that is voidable as to creditors under the Uniform
9Voidable Transactions Act (Chapter 1 (commencing with Section
103439) of Title 2 of Part 2 of Division 4 of the Civil Code).

11(2) Made a gift of the property in view of impending death.

12(3) Made a direction to transfer a vehicle, undocumented vessel,
13manufactured home, mobilehome, commercial coach, truck camper,
14or floating home to a designated beneficiary on the decedent’s
15death pursuant to Section 18102.2 of the Health and Safety Code,
16or Section 5910.5 or 9916.5 of the Vehicle Code, and the property
17has been transferred as directed.

18(b) A creditor making application under this section shall pay
19such part of the costs and expenses of the suit and attorney’s fees,
20or give an undertaking to the personal representative for that
21purpose, as the personal representative and the creditor agree, or,
22absent an agreement, as the court or judge orders.

23(c) The property recovered under this section shall be sold for
24the payment of debts in the same manner as if the decedent had
25died seized or possessed of the property. The proceeds of the sale
26shall be applied first to payment of the costs and expenses of suit,
27including attorney’s fees, and then to payment of the debts of the
28decedent in the same manner as other property in possession of
29the personal representative. After all the debts of the decedent have
30been paid, the remainder of the proceeds shall be paid to the person
31from whom the property was recovered. The property may be sold
32in its entirety or in such portion as necessary to pay the debts.

33

begin deleteSEC. 29.end delete
34begin insertSEC. 28.end insert  

Section 2104 of the Public Utilities Code is amended
35to read:

36

2104.  

(a) Except as provided by Sections 2100 and 2107.5,
37actions to recover penalties under this part shall be brought in the
38name of the people of the State of California, in the superior court
39in and for the county, or city and county, in which the cause or
40some part thereof arose, or in which the corporation complained
P18   1of has its principal place of business, or in which the person
2complained of resides. The action shall be commenced and
3prosecuted to final judgment by the attorney or agent of the
4commission. All fines and penalties may be sued for and recovered.
5The commission may enjoin the sale of a public utility’s or
6common carrier’s assets to satisfy unpaid fines and penalties. The
7commission may use any of the remedies afforded to a creditor
8under the Uniform Voidable Transactions Act (Chapter 1
9(commencing with Section 3439) of Title 2 of Part 2 of Division
104 of the Civil Code). Respondents who fraudulently transfer assets
11to avoid paying commission-imposed fines or penalties are subject
12to prosecution under Sections 154, 531, and 531a of the Penal
13Code. In all of these actions, the procedure and rules of evidence
14shall be the same as in ordinary civil actions, except for
15prosecutions under the Penal Code or as otherwise herein provided.
16All fines and penalties recovered by the state in any action, together
17with the costs thereof, shall be paid into the State Treasury to the
18credit of the General Fund. Any action may be compromised or
19discontinued on application of the commission upon the terms the
20court approves and orders.

21(b) This section shall become operative on January 1, 2014.



O

    98