Pennsylvania Act 1993-70 — COMMERCE AND TRADE (12 PA.C.S.) - AMEND ENACTMENT

Act text

COMMERCE AND TRADE (12 PA.C.S.) - AMEND ENACTMENT
                  Act of Dec. 3, 1993, P.L. 479, No. 70               Cl. 12
                             Session of 1993

                               No. 1993-70

                                  AN ACT

     SB 1015

     Amending Title 12 (Commerce and Trade) of the Pennsylvania
        Consolidated Statutes, adding provisions relating to
        fraudulent transfers; and making repeals.

        The General Assembly of the Commonwealth of Pennsylvania
     hereby enacts as follows:

        Section 1.  Title 12 of the Pennsylvania Consolidated Statutes
     is amended by adding a chapter to read:
                                CHAPTER 51
                           FRAUDULENT TRANSFERS
     Sec.
     5101.  Short title of chapter and definitions.
     5102.  Insolvency.
     5103.  Value.
     5104.  Transfers fraudulent as to present and future
            creditors.
     5105.  Transfers fraudulent as to present creditors.
     5106.  When transfer is made or obligation is incurred.
     5107.  Remedies of creditors.
     5108.  Defenses, liability and protection of transferee.
     5109.  Extinguishment of cause of action.
     5110.  Supplementary provisions.
      § 5101.  Short title of chapter and definitions.
        (a)  Short title of chapter.--This chapter shall be known and
     may be cited as the Pennsylvania Uniform Fraudulent Transfer
     Act.
        (b)  Definitions.--The following words and phrases when used
     in this chapter shall have the meanings given to them in this
     subsection unless the context clearly indicates otherwise:
        "Asset."  Property of a debtor. The term does not include:
            (1)  property to the extent it is encumbered by a valid
        lien;
            (2)  property to the extent it is generally exempt under
        nonbankruptcy law; or
            (3)  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.
        "Claim."  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.
        "Creditor."  A person who has a claim.
        "Debt."  Liability on a claim.
        "Debtor."  A person who is liable on a claim.
        "Lien."  A charge against or an interest in property to
     secure payment of a debt or performance of an obligation. The
     term 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.
        "Person."  An individual, partnership, corporation,
     association, organization, government or governmental
     subdivision or agency, business trust, estate, trust or any
     other legal or commercial entity.
        "Property."  Anything that may be the subject of ownership.
        "Transfer."  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 term
     includes payment of money, release, lease and creation of a lien
     or other encumbrance.
        "Valid lien."  A lien that is effective against the holder of
     a judicial lien subsequently obtained by legal or equitable
     process or proceedings.
      § 5102.  Insolvency.
        (a)  General rule.--A debtor is insolvent if, at fair
     valuations, the sum of the debtor's debts is greater than all of
     the debtor's assets.
        (b)  Presumption of insolvency.--A debtor who is generally
     not paying the debtor's debts as they become due is presumed to
     be insolvent. This presumption shall impose on the party against
     whom the presumption is directed the burden of proving that the
     nonexistence of insolvency is more probable than its existence.
        (c)  When partnerships are insolvent.--A partnership is
     insolvent under subsection (a) if, at fair valuations, the sum
     of the partnership's debts is greater than the aggregate 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.
        (d)  Exclusion of certain assets.--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
     fraudulent under this chapter.
        (e)  Exclusion of certain debts.--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.
      § 5103.  Value.
        (a)  General rule.--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)  Reasonably equivalent value.--For the purposes of
     sections 5104(a)(2) (relating to transfers fraudulent as to
     present and future creditors) and 5105 (relating to transfers
     fraudulent as to present creditors), a person gives reasonably
     equivalent value if the person acquires an interest of the
     debtor in an asset pursuant to a regularly conducted,
     noncollusive foreclosure sale or the exercise of a power of sale
     for the acquisition or disposition of the interest of the debtor
     upon default under a mortgage, deed of trust or security
     agreement or pursuant to a regularly conducted, noncollusive
     execution sale.
      § 5104.  Transfers fraudulent as to present and future
                creditors.
        (a)  General rule.--A transfer made or obligation incurred by
     a debtor is fraudulent 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)  Certain factors.--In determining actual intent under
     subsection (a)(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 who transferred the assets to an insider
        of the debtor.
      § 5105.  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.
      § 5106.  When transfer is made or obligation is incurred.
        For the purposes of this chapter:
            (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 whom
            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 this chapter
            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 this chapter, the transfer is made immediately
        before the commencement of the action.
            (3)  If applicable law does not permit the transfer to be
        perfected as provided in paragraph (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.
            (5)  An obligation is incurred:
                (i)  if oral, when it becomes effective between the
            parties; or
                (ii)  if evidenced by a writing, when the writing
            executed by the obligor is delivered to or for the
            benefit of the obligee.
      § 5107.  Remedies of creditors.
        (a)  Available remedies.--In an action for relief against a
     transfer or obligation under this chapter, a creditor, subject
     to the limitations in sections 5108 (relating to defenses,
     liability and protection of transferee) and 5109 (relating to
     extinguishment of cause of action), 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 in
        accordance with the procedure prescribed by applicable law.
            (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)  Execution.--If a creditor has obtained a judgment on a
     claim against the debtor, the creditor, if the court so orders,
     subject to the limitations of sections 5108 and 5109, may levy
     execution on the asset transferred or its proceeds.
      § 5108.  Defenses, liability and protection of transferee.
        (a)  Certain transfers or obligations not fraudulent.--A
     transfer or obligation is not fraudulent under section
     5104(a)(1) (relating to transfers fraudulent as to present and
     future creditors) against a person who took in good faith and
     for a reasonably equivalent value or against any subsequent
     transferee or obligee.
        (b)  Judgment for certain voidable transfers.--Except as
     otherwise provided in this section, to the extent a transfer is
     voidable in an action by a creditor under section 5107(a)(1)
     (relating to remedies of creditors), the creditor may recover
     judgment for the value of the asset transferred, as adjusted
     under subsection (c), or the amount necessary to satisfy the
     creditor's claim, whichever is less. The judgment may be entered
     against:
            (1)  the first transferee of the asset or the person for
        whose benefit the transfer was made; or
            (2)  any subsequent transferee other than a good faith
        transferee who took for value or from any subsequent
        transferee.
        (c)  Measure of recovery.--If the judgment under subsection
     (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)  Rights of good faith transferee or obligee.--
     Notwithstanding voidability of a transfer or an obligation under
     this chapter, 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 any interest in the
        asset transferred;
            (2)  enforcement of any obligation incurred; or
            (3)  a reduction in the amount of the liability on the
        judgment.
        (e)  Certain transfers not fraudulent.--A transfer is not
     fraudulent under section 5104(a)(2) or 5105 (relating to
     transfers fraudulent as to present creditors) 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 13 Pa.C.S. Div. 9 (relating to secured transactions),
        other than a retention of collateral under 13 Pa.C.S. §
        9505(b) (relating to acceptance of collateral as discharge of
        obligation).
     The references to 13 Pa.C.S. Div. 9 and 13 Pa.C.S. § 9505(b) in
     paragraph (2) shall also be deemed to refer to the corresponding
     provisions of the Uniform Commercial Code as in effect in any
     other jurisdiction.
      § 5109.  Extinguishment of cause of action.
        A cause of action with respect to a fraudulent transfer or
     obligation under this chapter is extinguished unless action is
     brought:
            (1)  under section 5104(a)(1) (relating to transfers
        fraudulent as to present and future creditors), within four
        years after the transfer was made or the obligation was
        incurred or, if later, within one year after the transfer or
        obligation was or could reasonably have been discovered by
        the claimant; or
            (2)  under section 5104(a)(2) or 5105 (relating to
        transfers fraudulent as to present creditors), within four
        years after the transfer was made or the obligation was
        incurred.
      § 5110.  Supplementary provisions.
        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.
        Section 2.  In applying and construing 12 Pa.C.S. Ch. 51
     (relating to fraudulent transfers), added by this act, comments
     or reports of the type referred to in 1 Pa.C.S. § 1939 (relating
     to use of comments and reports) shall control in the event of a
     conflict between such comments or reports and the policy of
     uniformity provided under 1 Pa.C.S. § 1927 (relating to
     construction of uniform laws).
        Section 3.  (a)  The act of May 21, 1921 (P.L.1045, No.379),
     known as the Uniform Fraudulent Conveyance Act, is repealed.
        (b)  The Statute of 13 Eliz. Ch. 5 (3 Binney 621, 2 Ruffhead
     588, Rob. Dig. 295), entitled "An act against fraudulent deeds,
     alienations, etc.," is repealed insofar as it is in force in
     this Commonwealth.
        (c)  All other acts and parts of acts are repealed insofar as
     they are inconsistent with this act.
        Section 4.  This act shall apply to transfers made or
     obligations incurred on or after the effective date of this act.
     With respect to transfers made or obligations incurred prior to
     the effective date of this act, the law in effect at the time
     the transfer was made or the obligation was incurred shall
     apply. For purposes of this section, transfers shall be deemed
     made and obligations shall be deemed incurred at the times
     provided in 12 Pa.C.S. § 5106.
        Section 5.  This act shall take effect in 60 days.

     APPROVED--The 3rd day of December, A. D. 1993.

     MARK L. SINGEL
     ACTING GOVERNOR