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SF 1816

as introduced - 89th Legislature (2015 - 2016) Posted on 05/11/2015 09:36am

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to property; regulating property transfers; enacting amendments to the
Uniform Fraudulent Transfer Act recommended by the National Conference of
Commissioners on Uniform State Laws for enactment by the states; amending
Minnesota Statutes 2014, sections 513.41; 513.42; 513.43; 513.44; 513.45;
513.46; 513.47; 513.48; 513.51; proposing coding for new law in Minnesota
Statutes, chapter 513.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2014, section 513.41, is amended to read:


513.41 DEFINITIONS.

As used in sections 513.41 to 513.51:

(1) "Affiliate" means:

(i) a person deleted text beginwhodeleted text endnew text begin thatnew text end directly or indirectly owns, controls, or holds with power to
vote, 20 percent or more of the outstanding voting securities of the debtor, other than a
person deleted text beginwhodeleted text endnew text begin thatnew text end holds the securities,

(A) as a fiduciary or agent without sole discretionary power to vote the securities; or

(B) solely to secure a debt, if the person has notnew text begin in factnew text end exercised the power to vote;

(ii) a corporation 20 percent or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote, by the debtor or a
person deleted text beginwhodeleted text endnew text begin thatnew text end directly or indirectly owns, controls, or holds with power to vote, 20
percent or more of the outstanding voting securities of the debtor, other than a person deleted text beginwhodeleted text endnew text begin
that
new text end holds the securities,

(A) as a fiduciary or agent without solenew text begin discretionarynew text end power to vote the securities; or

(B) solely to secure a debt, if the person has not in fact exercised the power to vote;

(iii) a person whose business is operated by the debtor under a lease or other
agreement, or a person substantially all of whose assets are controlled by the debtor; or

(iv) a person deleted text beginwhodeleted text endnew text begin thatnew text end operates the debtor's business under a lease or other agreement
or controls substantially all of the debtor's assets.

(2) "Asset" means property of a debtor, but the term does not include:

(i) property to the extent it is encumbered by a valid lien;

(ii) property to the extent it is generally exempt under nonbankruptcy law; or

(iii) an interest in property held in tenancy by the entireties to the extent it is not
subject to process by a creditor holding a claim against only one tenant.

(3) "Claim" means a right to payment, whether or not the right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured.

(4) "Creditor" means a person deleted text beginwhodeleted text endnew text begin thatnew text end has a claim.

(5) "Debt" means liability on a claim.

(6) "Debtor" means a person deleted text beginwhodeleted text endnew text begin thatnew text end is liable on a claim.

new text begin (7) "Electronic" means relating to technology having electrical, digital, magnetic,
wireless, optical, electromagnetic, or similar capabilities.
new text end

deleted text begin (7)deleted text endnew text begin (8)new text end "Insider" includes:

(i) if the debtor is an individual,

(A) a relative of the debtor or of a general partner of the debtor;

(B) a partnership in which the debtor is a general partner;

(C) a general partner in a partnership described in deleted text beginclausedeleted text endnew text begin subitemnew text end (B); or

(D) a corporation of which the debtor is a director, officer, or a person in control;

(ii) if the debtor is a corporation,

(A) a director of the debtor;

(B) an officer of the debtor;

(C) a person in control of the debtor;

(D) a partnership in which the debtor is a general partner;

(E) a general partner in a partnership described in deleted text beginclausedeleted text endnew text begin subitemnew text end (D); or

(F) a relative of a general partner, director, officer, or person in control of the debtor;

(iii) if the debtor is a partnership,

(A) a general partner in the debtor;

(B) a relative of a general partner in, or a general partner of, or a person in control
of the debtor;

(C) another partnership in which the debtor is a general partner;

(D) a general partner in a partnership described in subitem (C); or

(E) a person in control of the debtor;

(iv) an affiliate, or an insider of an affiliate as if the affiliate were the debtor; and

(v) a managing agent of the debtor.

deleted text begin (8)deleted text endnew text begin (9)new text end "Lien" means a charge against or an interest in property to secure payment
of a debt or performance of an obligation, and includes a security interest created by
agreement, a judicial lien obtained by legal or equitable process or proceedings, a
common-law lien, or a statutory lien.

deleted text begin (9) "Person" means an individual, partnership, corporation, association, organization,
government or governmental subdivision or agency, business trust, estate, trust, or any
other legal or commercial entity.
deleted text end

new text begin (10) "Organization" means a person other than an individual.
new text end

new text begin (11) "Person" means an individual, estate, business or nonprofit entity, public
corporation, government or governmental subdivision, agency, or instrumentality, or
other legal entity.
new text end

deleted text begin (10)deleted text endnew text begin (12)new text end "Property" means anything that may be subject of ownership.

new text begin (13) "Record" means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.
new text end

deleted text begin (11)deleted text endnew text begin (14)new text end "Relative" means an individual related by consanguinity within the third
degree as determined by the common law, a spouse, or an individual related to a spouse
within the third degree as so determined, and includes an individual in an adoptive
relationship within the third degree.

new text begin (15) "Sign" means, with present intent to authenticate or adopt a record:
new text end

new text begin (i) to execute or adopt a tangible symbol; or
new text end

new text begin (ii) to attach to or logically associate with the record an electronic symbol, sound,
or process.
new text end

deleted text begin (12)deleted text endnew text begin (16)new text end "Transfer" means 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,
and includes payment of money, release, lease,new text begin license,new text end and creation of a lien or other
encumbrance. Transfer does not include a contribution of money or an asset made to a
qualified charitable or religious organization or entity unless the contribution was made
within two years of commencement of an action under sections 513.41 to 513.51 against
the qualified charitable or religious organization or entity and:

(i) the debtor made the charitable contribution with actual intent to hinder, delay,
or defraud any creditor of the debtor; or

(ii) the debtor:

(A) was insolvent at the time of the contribution or would be rendered insolvent by
reason of the contribution;

(B) was engaged or was about to engage in a business or a transaction for which
the remaining assets of the debtor were unreasonably small in relation to the business or
transaction; or

(C) intended to incur, or the charitable or religious organization or entity believed
or had reason to believe that the debtor would incur, debts beyond the debtor's ability
to pay as the debts become due.

A transfer of a charitable contribution to a qualified charitable or religious
organization or entity is not considered a transfer covered under item (ii) if the amount
of that contribution did not exceed 15 percent of the gross annual income of the debtor
for the year in which the transfer of the contribution was made; or the contribution
exceeded that amount but the transfer was consistent with practices of the debtor in
making charitable contributions.

Transfer does include a return on investment made by a qualified charitable
or religious organization or entity. "Qualified charitable or religious organization or
entity" means an organization or entity described in United States Code, title 26, section
170(c)(1), (2), or (3).

deleted text begin (13)deleted text endnew text begin (17)new text end "Valid lien" means a lien that is effective against the holder of a judicial
lien subsequently obtained by legal or equitable process or proceedings.

Sec. 2.

Minnesota Statutes 2014, section 513.42, is amended to read:


513.42 INSOLVENCY.

(a) A debtor is insolvent ifnew text begin, at a fair valuation,new text end the sum of the debtor's debts is greater
than deleted text beginalldeleted text endnew text begin the sumnew text end of the debtor's assetsdeleted text begin, at a fair valuationdeleted text end.

(b) A debtor deleted text beginwhodeleted text endnew text begin thatnew text end is generally not payingnew text begin the debtor'snew text end debts as they become duenew text begin
other than as a result of a bona fide dispute
new text end is presumed to be insolvent.new text begin The presumption
imposes on the party against which the presumption is directed the burden of proving that
the nonexistence of insolvency is more probable than its existence.
new text end

deleted text begin (c) A partnership is insolvent under subsection (a) if the sum of the partnership's
debts is greater than the aggregate, at a fair valuation, of all of the partnership's assets and
the sum of the excess of the value of each general partner's nonpartnership assets over the
partner's nonpartnership debts.
deleted text end

deleted text begin (d)deleted text endnew text begin (c)new text end Assets under this section do not include property that has been transferred,
concealed, or removed with intent to hinder, delay, or defraud creditors or that has been
transferred in a manner making the transfer voidable under sections 513.41 to 513.51.

deleted text begin (e)deleted text endnew text begin (d)new text end Debts under this section do not include an obligation to the extent it is secured
by a valid lien on property of the debtor not included as an asset.

Sec. 3.

Minnesota Statutes 2014, section 513.43, is amended to read:


513.43 VALUE.

(a) Value is given for a transfer or an obligation if, in exchange for the transfer or
obligation, property is transferred or an antecedent debt is secured or satisfied, but value
does not include an unperformed promise made otherwise than in the ordinary course of
the promisor's business to furnish support to the debtor or another person.

(b) For the purposes of deleted text beginsectionsdeleted text endnew text begin sectionnew text end 513.44new text begin, paragraph new text end(a)new text begin, clause new text end(2)new text begin,new text end andnew text begin sectionnew text end
513.45, a person gives a reasonably equivalent value if the person acquires an interest of
the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or
execution of a power of sale for the acquisition or disposition of the interest of the debtor
upon default under a mortgage, deed of trust, deleted text beginordeleted text end security agreementnew text begin, or agricultural liennew text end.

(c) A transfer is made for present value if the exchange between the debtor and
the transferee is intended by them to be contemporaneous and is in fact substantially
contemporaneous.

Sec. 4.

Minnesota Statutes 2014, section 513.44, is amended to read:


513.44 deleted text beginTRANSFERS FRAUDULENTdeleted text endnew text begin TRANSFER OR OBLIGATION
VOIDABLE
new text end AS TO PRESENT deleted text beginANDdeleted text endnew text begin ORnew text end FUTURE deleted text beginCREDITORSdeleted text endnew text begin CREDITORnew text end.

(a) A transfer made or obligation incurred by a debtor is deleted text beginfraudulentdeleted text endnew text begin voidablenew text end as to a
creditor, whether the creditor's claim arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or

(2) without receiving a reasonably equivalent value in exchange for the transfer or
obligation, and the debtor:

(i) was engaged or was about to engage in a business or a transaction for which the
remaining assets of the debtor were unreasonably small in relation to the business or
transaction; or

(ii) intended to incur, or believed or reasonably should have believed that the debtor
would incur, debts beyond the debtor's ability to pay as they became due.

(b) In determining actual intent under deleted text beginsubsectiondeleted text endnew text begin paragraphnew text end (a)new text begin, clause new text end(1),
consideration may be given, among other factors, to whether:

(1) the transfer or obligation was to an insider;

(2) the debtor retained possession or control of the property transferred after the
transfer;

(3) the transfer or obligation was disclosed or concealed;

(4) before the transfer was made or obligation was incurred, the debtor had been
sued or threatened with suit;

(5) the transfer was of substantially all the debtor's assets;

(6) the debtor absconded;

(7) the debtor removed or concealed assets;

(8) the value of the consideration received by the debtor was reasonably equivalent
to the value of the asset transferred or the amount of the obligation incurred;

(9) the debtor was insolvent or became insolvent shortly after the transfer was made
or the obligation was incurred;

(10) the transfer occurred shortly before or shortly after a substantial debt was
incurred; and

(11) the debtor transferred the essential assets of the business to a lienor deleted text beginwhodeleted text endnew text begin thatnew text end
transferred the assets to an insider of the debtor.

new text begin (c) A creditor making a claim under paragraph (a) has the burden of proving the
elements of the claim by a preponderance of the evidence.
new text end

Sec. 5.

Minnesota Statutes 2014, section 513.45, is amended to read:


513.45 deleted text beginTRANSFERS FRAUDULENTdeleted text endnew text begin TRANSFER OR OBLIGATION
VOIDABLE
new text end AS TO PRESENT deleted text beginCREDITORSdeleted text endnew text begin CREDITORnew text end.

(a) A transfer made or obligation incurred by a debtor is deleted text beginfraudulentdeleted text endnew text begin voidablenew text end 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.

(b) A transfer made by a debtor is deleted text beginfraudulentdeleted text endnew text begin voidablenew text end 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.

new text begin (c) Subject to section 513.42, paragraph (b), a creditor making a claim under
paragraph (a) or (b) has the burden of proving the elements of the claim by a preponderance
of the evidence.
new text end

Sec. 6.

Minnesota Statutes 2014, section 513.46, is amended to read:


513.46 WHEN TRANSFER IS MADE OR OBLIGATION IS INCURRED.

For the purposes of sections 513.41 to 513.51:

(1) a transfer is made:

(i) with respect to an asset that is real property other than a fixture, but including the
interest of a seller or purchaser under a contract for the sale of the asset, when the transfer
is so far perfected that a good faith purchaser of the asset from the debtor against deleted text beginwhomdeleted text endnew text begin
which
new text end applicable law permits the transfer to be perfected cannot acquire an interest in the
asset that is superior to the interest of the transferee; and

(ii) with respect to an asset that is not real property or that is a fixture, when the
transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial
lien otherwise than under sections 513.41 to 513.51 that is superior to the interest of
the transferee;

(2) if applicable law permits the transfer to be perfected as provided in paragraph
(1) and the transfer is not so perfected before the commencement of an action for relief
under sections 513.41 to 513.51, the transfer is deemed made immediately before the
commencement of the action;

(3) if applicable law does not permit the transfer to be perfected as provided in
deleted text beginparagraphdeleted text endnew text begin clausenew text end (1), the transfer is made when it becomes effective between the debtor
and the transferee;

(4) a transfer is not made until the debtor has acquired rights in the asset transferred;new text begin
and
new text end

(5) an obligation is incurred:

(i) if oral, when it becomes effective between the parties; or

(ii) if evidenced by a deleted text beginwritingdeleted text endnew text begin recordnew text end, when the deleted text beginwriting executeddeleted text endnew text begin record signednew text end by
the obligor is delivered to or for the benefit of the obligee.

Sec. 7.

Minnesota Statutes 2014, section 513.47, is amended to read:


513.47 REMEDIES OF deleted text beginCREDITORSdeleted text endnew text begin CREDITORnew text end.

(a) In an action for relief against a transfer or obligation under sections 513.41 to
513.51, a creditor, subject to the limitations in section 513.48, may obtain:

(1) avoidance of the transfer or obligation to the extent necessary to satisfy the
creditor's claim;

(2) an attachment or other provisional remedy against the asset transferred or other
property of the transferee deleted text beginin accordance with the procedure prescribed by chapter 570deleted text endnew text begin if
available under applicable law
new text end;new text begin and
new text end

(3) subject to applicable principles of equity and in accordance with applicable
Rules of Civil Procedure:

(i) an injunction against further disposition by the debtor or a transferee, or both, of
the asset transferred or of other property;

(ii) appointment of a receiver to take charge of the asset transferred or of other
property of the transferee; or

(iii) any other relief the circumstances may require.

(b) If a creditor has obtained a judgment on a claim against the debtor, the creditor, if
the court so orders, may levy execution on the asset transferred or its proceeds.

Sec. 8.

Minnesota Statutes 2014, section 513.48, is amended to read:


513.48 DEFENSES, LIABILITY, AND PROTECTION OF TRANSFEREEnew text begin
OR OBLIGEE
new text end.

(a) A transfer or obligation is not voidable under section 513.44new text begin, paragraph new text end(a)new text begin,
clause
new text end(1)new text begin,new text end against a person deleted text beginwhodeleted text endnew text begin thatnew text end took in good faith and for a reasonably equivalent
valuenew text begin given the debtornew text end or against any subsequent transferee or obligee.

(b)new text begin To the extent a transfer is avoidable in an action by a creditor under section
513.47, paragraph (a), clause (1), the following rules apply:
new text end

new text begin (1)new text end Except as otherwise provided in this section, deleted text beginto the extent a transfer is voidable
in an action by a creditor under section 513.47(a)(1),
deleted text end the creditor may recover judgment
for the value of the asset transferred, as adjusted under deleted text beginsubsectiondeleted text endnew text begin paragraphnew text end (c), or the
amount necessary to satisfy the creditor's claim, whichever is less. The judgment may
be entered against:

deleted text begin (1)deleted text endnew text begin (i)new text end the first transferee of the asset or the person for whose benefit the transfer
was made; or

deleted text begin (2) any subsequent transfereedeleted text endnew text begin (ii) an immediate or mediate transferee of the first
transferee,
new text end other than

new text begin (A)new text end a good faith transferee deleted text beginwhodeleted text endnew text begin thatnew text end took for valuenew text begin,new text end or

deleted text begin from any subsequent transfereedeleted text endnew text begin (B) an immediate or mediate good faith transferee of
a person described in subitem (A)
new text end.

new text begin (2) Recovery pursuant to section 513.47, paragraph (a), clause (1), or (b), of or from
the asset transferred or its proceeds, by levy or otherwise, is available only against a
person described in clause (1), item (i) or (ii).
new text end

(c) If the judgment under deleted text beginsubsectiondeleted text endnew text begin paragraphnew text end (b) is based upon the value of the
asset transferred, the judgment must be for an amount equal to the value of the asset at the
time of the transfer, subject to adjustment as the equities may require.

(d) Notwithstanding voidability of a transfer or an obligation under sections 513.41
to 513.51, a good faith transferee or obligee is entitled, to the extent of the value given
the debtor for the transfer or obligation, to

(1) a lien on or a right to retain deleted text beginanydeleted text endnew text begin annew text end interest in the asset transferred;

(2) enforcement of deleted text beginanydeleted text endnew text begin annew text end obligation incurred; or

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

(e) A transfer is not voidable under section 513.44new text begin, paragraph new text end(a)new text begin, clause new text end(2)new text begin,new text end or
513.45 if the transfer results from:

(1) termination of a lease upon default by the debtor when the termination is
pursuant to the lease and applicable law; or

(2) enforcement of a security interest in compliance with article 9 of the Uniform
Commercial Codenew text begin, other than acceptance of collateral in full or partial satisfaction of
the obligation it secures
new text end.

(f) A transfer is not voidable under section 513.45new text begin, paragraph new text end(b):

(1) to the extent the insider gave new value to or for the benefit of the debtor after the
transfer was made deleted text beginunlessdeleted text endnew text begin, except to the extentnew text end the new value was secured by a valid lien;

(2) if made in the ordinary course of business or financial affairs of the debtor and
the insider; or

(3) if made pursuant to a good faith effort to rehabilitate the debtor and the transfer
secured present value given for that purpose as well as an antecedent debt of the debtor.

new text begin (g) The following rules determine the burden of proving matters referred to in this
section:
new text end

new text begin (1) A party that seeks to invoke paragraph (a), (d), (e), or (f) has the burden of
proving the applicability of that subsection.
new text end

new text begin (2) Except as otherwise provided in clauses (3) and (4), the creditor has the burden
of proving each applicable element of paragraph (b) or (c).
new text end

new text begin (3) The transferee has the burden of proving the applicability to the transferee of
paragraph (b), clause (1), item (ii)(A) or (B).
new text end

new text begin (4) A party that seeks adjustment under paragraph (c) has the burden of proving
the adjustment.
new text end

new text begin (h) Proof of matters referred to in this section is sufficient if established by a
preponderance of the evidence.
new text end

Sec. 9.

new text begin [513.485] GOVERNING LAW.
new text end

new text begin (a) In this section, the following rules determine a debtor's location:
new text end

new text begin (1) A debtor who is an individual is located at the individual's principal residence.
new text end

new text begin (2) A debtor that is an organization and has only one place of business is located
at its place of business.
new text end

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

new text begin (b) A claim in the nature of a claim under sections 513.41 to 513.51 is governed
by the local law of the jurisdiction in which the debtor is located when the transfer is
made or the obligation is incurred.
new text end

Sec. 10.

new text begin [513.49] APPLICATION TO SERIES ORGANIZATION.
new text end

new text begin (a) In this section:
new text end

new text begin (1) "Protected series" means an arrangement, however denominated, created by
a series organization that, pursuant to the law under which the series organization is
organized, has the characteristics set forth in clause (2).
new text end

new text begin (2) "Series organization" means an organization that, pursuant to the law under
which it is organized, has the following characteristics:
new text end

new text begin (i) The organic record of the organization provides for creation by the organization
of one or more protected series, however denominated, with respect to specified property
of the organization and for records to be maintained for each protected series that identify
the property of or associated with the protected series.
new text end

new text begin (ii) Debt incurred or existing with respect to the activities of, or property of or
associated with, a particular protected series is enforceable against the property of or
associated with the protected series only, and not against the property of or associated with
the organization or other protected series of the organization.
new text end

new text begin (iii) Debt incurred or existing with respect to the activities or property of the
organization is enforceable against the property of the organization only, and not against
the property of or associated with a protected series of the organization.
new text end

new text begin (b) A series organization and each protected series of the organization is a separate
person for purposes of sections 513.41 to 513.51, even if for other purposes a protected
series is not a person separate from the organization or other protected series of the
organization.
new text end

Sec. 11.

new text begin [513.495] RELATION TO ELECTRONIC SIGNATURES IN GLOBAL
AND NATIONAL COMMERCE ACT.
new text end

new text begin Sections 513.41 to 513.51 modify, limit, or supersede the Electronic Signatures in
Global and National Commerce Act, United States Code, title 15, section 7001 et seq., but
do not modify, limit, or supersede section 101(c) of that act, United States Code, title 15,
section 7001(c), or authorize electronic delivery of any of the notices described in section
103(b) of that act, United States Code, title 15, section 7003(b).
new text end

Sec. 12.

Minnesota Statutes 2014, section 513.51, is amended to read:


513.51 SHORT TITLE.

Sections 513.41 to 513.51new text begin, which was formerly cited as the Uniform Fraudulent
Transfer Act,
new text end may be cited as the "Uniform deleted text beginFraudulent Transferdeleted text endnew text begin Voidable Transactionsnew text end Act."

Sec. 13. new text beginEFFECTIVE DATE; APPLICATION.
new text end

new text begin (a) Sections 1 to 12 apply to a transfer made or an obligation incurred on or after
August 1, 2015.
new text end

new text begin (b) Sections 1 to 12 do not apply to a transfer made, an obligation incurred, or a right
of action accrued before August 1, 2015.
new text end

new text begin (c) For purposes of this section, a transfer is made and an obligation is incurred at
the time provided in Minnesota Statutes, section 513.46.
new text end