Opinion ID: 2625291
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Heading: The Statutory Texts

Text: The UFTA was enacted in 1986; it is the most recent in a line of statutes dating to the reign of Queen Elizabeth I. This Act, like its predecessor and the Statute of 13 Elizabeth, declares rights and provides remedies for unsecured creditors against transfers that impede them in the collection of their claims. (Legis. Com. com., 12A West's Ann. Civ.Code (1997 ed.) foll. § 3439.01, p. 272.) Under the UFTA, a transfer is fraudulent, both as to present and future creditors, if it is made [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor. (Civ.Code, § 3439.04, subd. (a).) 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. (Civ. Code, § 3439.05.) On its face, the UFTA applies to all transfers. Civil Code, section § 3439.01, subdivision (i) defines [t]ransfer as every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset.... The UFTA excepts only certain transfers resulting from lease terminations or lien enforcement. (Civ.Code, § 3439.08, subd. (e).) Thus, the UFTA on its face encompasses transfers made under an MSA. Consequently, most decisions of other states construing parallel provisions of the UFTA hold that it does apply to marital property transfers, including those in connection with divorce. (See, e.g., Scholes v. Lehmann (7th Cir. 1995) 56 F.3d 750, 758-759 [applying 111. law]; Kardynalski v. Fisher (1985) 135 Ill.App.3d 643, 90 Ill.Dec. 410, 482 N.E.2d 117, 121-122; Dowell v. Dennis (Okla.Ct. App.2000) 998 P.2d 206, 209, 212-213; Greeninger v. Cromwell (1996) 140 Or. App. 241, 915 P.2d 479, 482; see also Federal Deposit Ins. Co. v. Malin (2d Cir. 1986) 802 F.2d 12, 18 [under New York law, UFTA applies but ex-wife was good faith purchaser for value]; but see Britt v. Damson (9th Cir.1964) 334 F.2d 896, 901 [Wash, law]; Witbart v. Witbart (1983) 204 Mont. 446, 666 P.2d 1217, 1219.) Civil Code section 3439.11 provides expressly that the UFTA shall be applied and construed to effectuate its general purpose to make uniform the law .. . among states enacting it. Husband here points to section 10 of the UFTA (Civ.Code, § 3439.10), which provides: Unless displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement its provisions. He argues that Family Code section 916 is a law that supplements] the provisions of the UFTA by, in effect, establishing an exception to its provisions. But to supplement the UFTA means to provide something additional to the law, not to narrow or nullify the law. This point is illustrated in Monastra v. Konica Business Machines, U.S.A., Inc. (1996) 43 Cal.App.4th 1628, 51 Cal.Rptr.2d 528. The defendants there argued that compliance with the Bulk Sales Act (Cal. U. Com.Code, § 6101 et seq.) immunized a transfer from attack under the UFTA. The Court of Appeal disagreed, concluding that the protections given creditors under the Bulk Sales Law supplemented, that is, added to the protections of the UFTA. ( Monastra v. Konica Business Machines, U.S.A., Inc., supra, at pp. 1639-1640, 51 Cal.Rptr.2d 528.)
Before 1984, a spouse who received community property after a dissolution of marriage was liable for the community debts incurred by the other spouse during the marriage. ( Dawes v. Rich (1997) 60 Cal. App.4th 24, 28, 70 Cal.Rptr.2d 72; see Packard v. Arellanes (1861) 17 Cal. 525; Frankel v. Boyd (1895) 106 Cal. 608, 612-615, 39 P. 939.) Thus, a creditor of one spouse could often reach any property transferred to the other without resorting to an action to set aside a fraudulent transfer. Nevertheless, that remedy was available when needed to invalidate a fraudulent transfer made under an MSA. (See, e.g., McKnight v. Superior Court (1985) 170 Cal.App.3d 291, 295-296, 299, 215 Cal. Rptr. 909.) In 1984, however, the Legislature substantially changed the postmarital liability of spouses. The Legislature determined that, under most circumstances, after a marriage has ended, it is unwise to continue the liability of spouses for community debts incurred by former spouses. ( Dawes v. Rich, supra, 60 Cal.App.4th at p. 30, 70 Cal.Rptr.2d 72.) It enacted former Civil Code section 5120.160, which provided in pertinent part that, upon the dissolution of the marriage, the property received by [a married] person in the division is not liable for a debt incurred by the person's spouse before or during marriage, and the person is not personally liable for the debt, unless the debt was assigned for payment by the person in the division of the property. (Stats.1984, ch. 1671, § 9, p. 6021.) When the Family Code was enacted in 1992, Civil Code section 5120.160 became Family Code section 916. When the Legislature enacted former Civil Code section 5120.160, it contemplated that `[i]n allocating the debts to the parties, the court in the dissolution proceeding should take into account the rights of creditors so there will be available sufficient property to satisfy the debt by the person to whom the debt is assigned, provided the net division is equal.' ( Lezine v. Security Pacific Fin. Services, Inc. (1996) 14 Cal.4th 56, 75, 58 Cal.Rptr.2d 76, 925 P.2d 1002, quoting Recommendation Relating to Liability of Marital Property for Debts (Jan.1983) 17 Cal. Law Revision Com. Rep. (1984) pp. 23-24, fn. omitted.) Family Code section 2550, however, provides: Except upon the written agreement of the parties, or on oral stipulation of the parties in open court, or as otherwise provided in this division, in a proceeding for dissolution of marriage or for legal separation of the parties, the court shall ... divide the community estate of the parties equally. (Italics added.) Whenever, as in this case, the parties agree upon the property division, no law requires them to divide the property equally, and the court does not scrutinize the M.S.A. § to ensure that it sets out an equal division. ( In re Marriage of Cream (1993) 13 Cal.App.4th 81, 91,16 Cal.Rptr.2d 575.) The only statutory exception to Family Code section 916's grant of immunity from liability is a provision that preserves the liability of property subject to a preexisting lien (Fam.Code, § 916, subd. (a)(2)); the statute does not mention fraudulent transfers. Thus, on its face, Family Code section 916 would appear to protect transfers of marital property incident to divorce from being set aside under the UFTA. We note, however, that section 916 states that it applies [n]otwithstanding any other provision of this chapter. (Similar language appeared in former Civil Code section 5120.160.) This language indicates that section 916 may be subordinate to other statutes, such as the UFTA, not included in the same chapter of the Family Code as section 916.