CO Code § 38-8-106 (2021)
2021 Colorado Code|Title 38 - Property - Real and Personal|Article 8 - Fraudulent Transfers|§ 38-8-106. Transfers Fraudulent as to Present Creditors

  A transfer made or obligation incurred by a debtor is fraudulent 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.    A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.     History. Source: L. 91: Entire article added, p. 1686, § 1, effective July 1.    Editor's note - Colorado legislative change: This section was numbered as section 5 in the uniform act.   OFFICIAL COMMENT    Subsection (a) (numbered as subsection (1) in C.R.S.) is derived from § 4 of the Uniform Fraudulent Conveyance Act. It adheres to the limitation of the protection of that section to a creditor who extended credit before the transfer or obligation described. As pointed out in Comment (2) accompanying § 4 (section 38-8-105 in C.R.S.), this Act substitutes “reasonably equivalent value” for “fair consideration.”    Subsection (b) (subsection (2) in C.R.S.) renders a preferential transfer--i.e., a transfer by an insolvent debtor for or on account of an antecedent debt--to an insider vulnerable as a fraudulent transfer when the insider had reasonable cause to believe that the debtor was insolvent. This subsection adopts for general application the rule of such cases as Jackson Sound Studios, Inc. v. Travis, 473 F.2d 503 (5th Cir. 1973) (security transfer of corporation's equipment to corporate principal's mother perfected on eve of bankruptcy of corporation held to be fraudulent); In re Lamie Chemical Co., 296 F. 24 (4th Cir. 1924) (corporate preference to corporate officers and directors held voidable by receiver when corporation was insolvent or nearly so and directors had already voted for liquidation); Stuart v. Larson, 298 F. 223 (8th Cir. 1924), noted 38 Harv.L.Rev. 521 (1925) (corporate preference to director held voidable). See generally 2 G. Glenn, Fraudulent Conveyances and Preferences 386 (rev. ed. 1940). Subsection (b) overrules such cases as Epstein v. Goldstein, 107 F.2d 755, 757 (2d Cir. 1939) (transfer by insolvent husband to wife to secure his debt to her sustained against attack by husband's trustee); Hartford Accident & Indemnity Co. v. Jirasek, 254 Mich. 131, 139, 235 N.W. 836, 389 (1931) (mortgage given by debtor to his brother to secure an antecedent debt owed the brother sustained as not fraudulent).    Subsection (b) (subsection (2) in C.R.S.) does not extend as far as § 8(a) of the Uniform Fraudulent Conveyance Act and § 548(b) of the Bankruptcy Code in rendering voidable a transfer or obligation incurred by an insolvent partnership to a partner, who is an insider of the partnership. The transfer to the partner is not vulnerable to avoidance under § 4(b) (section 38-8-105 (2) in C.R.S.) unless the transfer was for an antecedent debt and the partner had reasonable cause to believe that the partnership was insolvent. The cited provisions of the Uniform Fraudulent Conveyance Act and the Bankruptcy Act make any transfer by an insolvent partnership to a partner voidable. Avoidance of the partnership transfer without reference to the partner's state of mind and the nature of the consideration exchanged would be unduly harsh treatment of the creditors of the partner and unduly favorable to the creditors of the partnership.     ANNOTATION   The failure to pay the taxes due results in a forfeiture of the original owner's interest in the property, by operation of law, to the state, which then grants title to the property to the holder of the lien free and clear of any other claims. Because the state transferred the tax deeds free of all prior interests, there was no transfer by a debtor, as is required to violate the Colorado Uniform Fraudulent Transfer Act. In re Grandote Country Club Co., Ltd., 252 F.3d 1146 (10th Cir. 2001).   A collusive foreclosure under power of sale is a fraudulent conveyance. The fundamental element of a fraudulent conveyance is whether the debtor's estate is unjustly diminished. Megabank Fin. v. Alpha Gamma Rho, 841 P.2d 318 (Colo. App. 1992).   A chattel mortgage is collusive if it is a transaction intended to delay creditors and to prevent the property of the debtor coming to their use. Megabank Fin. v. Alpha Gamma Rho, 841 P.2d 318 (Colo. App. 1992).   A fraudulent conveyance results whether of real or personal property if, as a result of the debtor's operations on the title to his property, the creditor loses by reason of finding less to seize and apply to his claim; however, no injury can result from a sale of an asset at its fair value since the estate does not abate as a result of what was done. Megabank Fin. v. Alpha Gamma Rho, 841 P.2d 318 (Colo. App. 1992).   Trial court did not err in setting aside preferential transfers from a corporation to the corporation's sole officer, shareholder, and director, because the corporation was insolvent at the time of the transfers and transfer was made to a corporate insider. Morris v. Askeland Enter., Inc., 17 P.3d 830 (Colo. App. 2000).   Where property was acquired through a regularly conducted tax sale subject to a competitive bidding procedure, the tax sale constitutes transfer for “reasonably equivalent value” under the Colorado Uniform Fraudulent Transfer Act. In re Grandote Country Club Co., Ltd., 252 F.3d 1146 (10th Cir. 2001).   Debtors did not receive reasonably equivalent value in exchange for their tithes and contributions to their church, therefore, the transfers were avoided. In re Bloch, 207 B.R. 944 (D. Colo. 1997 ).   To succeed on a fraudulent transfer claim, a creditor must show that the debtor did not receive a reasonably equivalent value in exchange for the property. Schempp v. Lucre Mgmt. Group, LLC, 18 P.3d 762 (Colo. App. 2000).   “Reasonable equivalence” is not wholly synonymous with market value, even though market value is an important factor to be used in the assessment, and the determination of reasonably equivalent value requires analysis of all the facts and circumstances surrounding the transaction. Silverberg v. Colantuno, 991 P.2d 280 (Colo. App. 1998); Schempp v. Lucre Mgmt. Group, LLC, 18 P.3d 762 (Colo. App. 2000).   The standard of “reasonably equivalent value” implies a rule of reasonableness in light of the particular circumstances. Schempp v. Lucre Mgmt. Group, LLC, 18 P.3d 762 (Colo. App. 2000).   In considering whether judgment debtor's distribution of proceeds from real estate sale was constructively fraudulent, trial court applied proper test with regard to insolvency under subsection (1). In dispute over real estate commission between real estate broker and judgment debtor, trial court correctly concluded that debtor's reserve asset was sufficient and reasonable to keep it solvent despite the distribution. CB Richard Ellis, Inc. v. CLGP, LLC, 251 P.3d 523 (Colo. App. 2010).