Florida Senate - 2018 SB 1316
By Senator Simmons
9-00986A-18 20181316__
1 A bill to be entitled
2 An act relating to the Uniform Voidable Transactions
3 Act; providing a directive to the Division of Law
4 Revision and Information; amending s. 726.101, F.S.;
5 revising a short title; amending s. 726.102, F.S.;
6 revising and defining terms; amending s. 726.103,
7 F.S.; removing conditions under which a partnership is
8 insolvent; imposing upon certain debtors the burden of
9 proving insolvency; amending ss. 726.105 and 726.106,
10 F.S.; imposing upon certain creditors the burden of
11 proving elements of a claim for relief; amending s.
12 726.107, F.S.; conforming provisions to changes made
13 by the act; amending s. 726.108, F.S.; providing
14 conditions under which attachments or other
15 provisional remedies are available to creditors;
16 amending s. 726.109, F.S.; revising the parties
17 subject to judgments for recovery of a creditor’s
18 claim; revising conditions under which a transfer is
19 not voidable; imposing upon specified persons the
20 burden of proving certain applicability, claim
21 elements, and adjustments; providing requirements for
22 standard of proof; amending ss. 726.110, 726.111, and
23 726.112, F.S.; conforming provisions to changes made
24 by the act; creating s. 726.113, F.S.; providing that
25 claims for relief are governed by specified claims
26 law; creating s. 726.114, F.S.; defining terms;
27 providing applicability of specified provisions for
28 series organizations and the protected series of such
29 organizations; creating s. 726.115, F.S.; providing
30 applicability of a specified federal act; providing an
31 effective date.
32
33 Be It Enacted by the Legislature of the State of Florida:
34
35 Section 1. The Division of Law Revision and Information is
36 directed to rename chapter 726, Florida Statutes, entitled
37 “FRAUDULENT TRANSFERS,” as “VOIDABLE TRANSACTIONS.”
38 Section 2. Section 726.101, Florida Statutes, is amended to
39 read:
40 726.101 Short title.—This act may be cited as the “Uniform
41 Voidable Transactions Fraudulent Transfer Act.”
42 Section 3. Section 726.102, Florida Statutes, is amended to
43 read:
44 726.102 Definitions.—As used in this chapter ss. 726.101
45 726.112:
46 (1) “Affiliate” means:
47 (a) A person that who directly or indirectly owns,
48 controls, or holds with power to vote, 20 percent or more of the
49 outstanding voting securities of the debtor, other than a person
50 that who holds the securities:
51 1. As a fiduciary or agent without sole discretionary power
52 to vote the securities; or
53 2. Solely to secure a debt, if the person has not in fact
54 exercised the power to vote;.
55 (b) A corporation 20 percent or more of whose outstanding
56 voting securities are directly or indirectly owned, controlled,
57 or held with power to vote, by the debtor or a person that who
58 directly or indirectly owns, controls, or holds, with power to
59 vote, 20 percent or more of the outstanding voting securities of
60 the debtor, other than a person that who holds the securities:
61 1. As a fiduciary or agent without sole discretionary power
62 to vote the securities; or
63 2. Solely to secure a debt, if the person has not in fact
64 exercised the power to vote;.
65 (c) A person whose business is operated by the debtor under
66 a lease or other agreement, or a person substantially all of
67 whose assets are controlled by the debtor; or
68 (d) A person that who operates the debtor’s business under
69 a lease or other agreement or controls substantially all of the
70 debtor’s assets.
71 (2) “Asset” means property of a debtor, but the term does
72 not include:
73 (a) Property to the extent it is encumbered by a valid
74 lien;
75 (b) Property to the extent it is generally exempt under
76 nonbankruptcy law; or
77 (c) An interest in property held in tenancy by the
78 entireties to the extent it is not subject to process by a
79 creditor holding a claim against only one tenant.
80 (3) “Charitable contribution” means a charitable
81 contribution as that term is defined in s. 170(c) of the
82 Internal Revenue Code of 1986, if that contribution consists of:
83 (a) A financial instrument as defined in s. 731(c)(2)(C) of
84 the Internal Revenue Code of 1986; or
85 (b) Cash.
86 (4) “Claim,” except as used in “claim for relief,” means a
87 right to payment, whether or not the right is reduced to
88 judgment, liquidated, unliquidated, fixed, contingent, matured,
89 unmatured, disputed, undisputed, legal, equitable, secured, or
90 unsecured.
91 (5) “Claims law” means fraudulent conveyance, fraudulent
92 transfer, or voidable transfer laws or other laws of similar
93 effect.
94 (6)(5) “Creditor” means a person that who has a claim.
95 (7)(6) “Debt” means liability on a claim.
96 (8)(7) “Debtor” means a person that who is liable on a
97 claim.
98 (9) “Electronic” means technology having electrical,
99 digital, magnetic, wireless, optical, electromagnetic, or
100 similar capabilities.
101 (10)(8) “Insider” includes:
102 (a) If the debtor is an individual:
103 1. A relative of the debtor or of a general partner of the
104 debtor;
105 2. A partnership in which the debtor is a general partner;
106 3. A general partner in a partnership described in
107 subparagraph 2.; or
108 4. A corporation of which the debtor is a director,
109 officer, or person in control;
110 (b) If the debtor is a corporation:
111 1. A director of the debtor;
112 2. An officer of the debtor;
113 3. A person in control of the debtor;
114 4. A partnership in which the debtor is a general partner;
115 5. A general partner in a partnership described in
116 subparagraph 4.; or
117 6. A relative of a general partner, director, officer, or
118 person in control of the debtor;.
119 (c) If the debtor is a partnership:
120 1. A general partner in the debtor;
121 2. A relative of a general partner in, a general partner
122 of, or a person in control of the debtor;
123 3. Another partnership in which the debtor is a general
124 partner;
125 4. A general partner in a partnership described in this
126 paragraph subparagraph 3.; or
127 5. A person in control of the debtor;.
128 (d) An affiliate, or an insider of an affiliate as if the
129 affiliate were the debtor; and.
130 (e) A managing agent of the debtor.
131 (11)(9) “Lien” means a charge against or an interest in
132 property to secure payment of a debt or performance of an
133 obligation, and includes a security interest created by
134 agreement, a judicial lien obtained by legal or equitable
135 process or proceedings, a common-law lien, or a statutory lien.
136 (12) “Organization” means a person other than an
137 individual.
138 (13)(10) “Person” means an individual;, partnership;
139 limited partnership; business corporation; nonprofit business
140 corporation; public, corporation;, limited liability company;
141 limited cooperative association; unincorporated nonprofit
142 association;, organization, government or governmental
143 subdivision, instrumentality, or agency;, business trust; common
144 law business trust; statutory trust;, estate;, trust;,
145 association; joint venture; or any other legal or commercial
146 entity.
147 (14)(11) “Property” means anything that may be the subject
148 of ownership.
149 (15)(12) “Qualified religious or charitable entity or
150 organization” means:
151 (a) An entity described in s. 170(c)(1) of the Internal
152 Revenue Code of 1986; or
153 (b) An entity or organization described in s. 170(c)(2) of
154 the Internal Revenue Code of 1986.
155 (16) “Record” means information that is inscribed on a
156 tangible medium or that is stored in an electronic or other
157 medium and is retrievable in perceivable form.
158 (17)(13) “Relative” means an individual related by
159 consanguinity within the third degree as determined by the
160 common law, a spouse, or an individual related to a spouse
161 within the third degree as so determined, and includes an
162 individual in an adoptive relationship within the third degree.
163 (18) “Sign” or “signed” means, with present intent to
164 authenticate or adopt a record:
165 (a) To execute or adopt a tangible symbol; or
166 (b) To attach to or logically associate with the record an
167 electronic symbol, sound, or process.
168 (19)(14) “Transfer” means every mode, direct or indirect,
169 absolute or conditional, voluntary or involuntary, of disposing
170 of or parting with an asset or an interest in an asset, and
171 includes payment of money, release, lease, license, and creation
172 of a lien or other encumbrance.
173 (20)(15) “Valid lien” means a lien that is effective
174 against the holder of a judicial lien subsequently obtained by
175 legal or equitable process or proceedings.
176 Section 4. Section 726.103, Florida Statutes, is amended to
177 read:
178 726.103 Insolvency.—
179 (1) A debtor is insolvent if, at a fair valuation, the sum
180 of the debtor’s debts is greater than the sum all of the
181 debtor’s assets at a fair valuation.
182 (2) A debtor that who is generally not paying its his or
183 her debts as they become due, for reasons other than as a result
184 of a bona fide dispute, is presumed to be insolvent. The party
185 against which the presumption is directed has the burden of
186 proving that the nonexistence of insolvency is more probable
187 than its existence.
188 (3) A partnership is insolvent under subsection (1) if the
189 sum of the partnership’s debts is greater than the aggregate, at
190 a fair valuation, of all of the partnership’s assets and the sum
191 of the excess of the value of each general partner’s
192 nonpartnership assets over the partner’s nonpartnership debts.
193 (3)(4) Assets under this section do not include property
194 that has been transferred, concealed, or removed with intent to
195 hinder, delay, or defraud creditors or that has been transferred
196 in a manner making the transfer voidable under this chapter ss.
197 726.101-726.112.
198 (4)(5) Debts under this section do not include an
199 obligation to the extent it is secured by a valid lien on
200 property of the debtor not included as an asset.
201 Section 5. Section 726.105, Florida Statutes, is amended to
202 read:
203 726.105 Transfers or obligations voidable fraudulent as to
204 present and future creditors.—
205 (1) A transfer made or obligation incurred by a debtor is
206 voidable fraudulent as to a creditor, whether the creditor’s
207 claim arose before or after the transfer was made or the
208 obligation was incurred, if the debtor made the transfer or
209 incurred the obligation:
210 (a) With actual intent to hinder, delay, or defraud any
211 creditor of the debtor; or
212 (b) Without receiving a reasonably equivalent value in
213 exchange for the transfer or obligation, and the debtor:
214 1. Was engaged or was about to engage in a business or a
215 transaction for which the remaining assets of the debtor were
216 unreasonably small in relation to the business or transaction;
217 or
218 2. Intended to incur, or believed or reasonably should have
219 believed that the debtor he or she would incur, debts beyond the
220 debtor’s his or her ability to pay as they became due.
221 (2) In determining actual intent under paragraph (1)(a),
222 consideration may be given, among other factors, to whether:
223 (a) The transfer or obligation was to an insider.
224 (b) The debtor retained possession or control of the
225 property transferred after the transfer.
226 (c) The transfer or obligation was disclosed or concealed.
227 (d) Before the transfer was made or obligation was
228 incurred, the debtor had been sued or threatened with suit.
229 (e) The transfer was of substantially all the debtor’s
230 assets.
231 (f) The debtor absconded.
232 (g) The debtor removed or concealed assets.
233 (h) The value of the consideration received by the debtor
234 was reasonably equivalent to the value of the asset transferred
235 or the amount of the obligation incurred.
236 (i) The debtor was insolvent or became insolvent shortly
237 after the transfer was made or the obligation was incurred.
238 (j) The transfer occurred shortly before or shortly after a
239 substantial debt was incurred.
240 (k) The debtor transferred the essential assets of the
241 business to a lienor that who transferred the assets to an
242 insider of the debtor.
243 (3) A creditor making a claim for relief under subsection
244 (1) has the burden of proving the elements of the claim for
245 relief by a preponderance of the evidence.
246 Section 6. Section 726.106, Florida Statutes, is amended to
247 read:
248 726.106 Transfers or obligations voidable fraudulent as to
249 present creditors.—
250 (1) A transfer made or obligation incurred by a debtor is
251 voidable fraudulent as to a creditor whose claim arose before
252 the transfer was made or the obligation was incurred if the
253 debtor made the transfer or incurred the obligation without
254 receiving a reasonably equivalent value in exchange for the
255 transfer or obligation and the debtor was insolvent at that time
256 or the debtor became insolvent as a result of the transfer or
257 obligation.
258 (2) A transfer made by a debtor is voidable fraudulent as
259 to a creditor whose claim arose before the transfer was made if
260 the transfer was made to an insider for an antecedent debt, the
261 debtor was insolvent at that time, and the insider had
262 reasonable cause to believe that the debtor was insolvent.
263 (3) Subject to s. 726.103(2), a creditor making a claim for
264 relief under subsection (1) or subsection (2) has the burden of
265 proving the elements of the claim for relief by a preponderance
266 of the evidence.
267 Section 7. Section 726.107, Florida Statutes, is amended to
268 read:
269 726.107 When transfer made or obligation incurred.—For the
270 purposes of this chapter ss. 726.101-726.112:
271 (1) A transfer is made:
272 (a) With respect to an asset that is real property other
273 than a fixture, but including the interest of a seller or
274 purchaser under a contract for the sale of the asset, when the
275 transfer is so far perfected that a good faith purchaser of the
276 asset from the debtor against which whom applicable law permits
277 the transfer to be perfected cannot acquire an interest in the
278 asset that is superior to the interest of the transferee.
279 (b) With respect to an asset that is not real property or
280 that is a fixture, when the transfer is so far perfected that a
281 creditor on a simple contract cannot acquire a judicial lien
282 otherwise than under this chapter ss. 726.101-726.112 that is
283 superior to the interest of the transferee.
284 (2) If applicable law permits the transfer to be perfected
285 as provided in subsection (1) and the transfer is not so
286 perfected before the commencement of an action for relief under
287 this chapter ss. 726.101-726.112, the transfer is deemed made
288 immediately before the commencement of the action.
289 (3) If applicable law does not permit the transfer to be
290 perfected as provided in subsection (1), the transfer is made
291 when it becomes effective between the debtor and the transferee.
292 (4) A transfer is not made until the debtor has acquired
293 rights in the asset transferred.
294 (5) An obligation is incurred:
295 (a) If oral, when it becomes effective between the parties;
296 or
297 (b) If evidenced by a record writing, when the record
298 signed writing executed by the obligor is delivered to or for
299 the benefit of the obligee.
300 Section 8. Section 726.108, Florida Statutes, is amended to
301 read:
302 726.108 Remedies of creditors.—
303 (1) In an action for relief against a transfer or
304 obligation under this chapter ss. 726.101-726.112, a creditor,
305 subject to the limitations in s. 726.109, may obtain:
306 (a) Avoidance of the transfer or obligation to the extent
307 necessary to satisfy the creditor’s claim;
308 (b) An attachment or other provisional remedy against the
309 asset transferred or other property of the transferee if and to
310 the extent available under in accordance with applicable law; or
311 (c) Subject to applicable principles of equity and in
312 accordance with applicable rules of civil procedure:
313 1. An injunction against further disposition by the debtor
314 or a transferee, or both, of the asset transferred or of other
315 property;
316 2. Appointment of a receiver to take charge of the asset
317 transferred or of other property of the transferee; or
318 3. Any other relief the circumstances may require.
319 (2) If a creditor has obtained a judgment on a claim
320 against the debtor, the creditor, if the court so orders, may
321 levy execution on the asset transferred or its proceeds.
322 Section 9. Section 726.109, Florida Statutes, is amended to
323 read:
324 726.109 Defenses, liability, and protection of transferee
325 or obligee.—
326 (1) A transfer or obligation is not voidable under s.
327 726.105(1)(a) against a person that who took in good faith and
328 for a reasonably equivalent value given the debtor or against
329 any subsequent transferee or obligee.
330 (2)(a) Except as otherwise provided in this section, to the
331 extent a transfer is voidable in an action by a creditor under
332 s. 726.108(1)(a), the creditor may recover judgment for the
333 value of the asset transferred, as adjusted under subsection
334 (3), or the amount necessary to satisfy the creditor’s claim,
335 whichever is less. The judgment may be entered against:
336 1.(a) The first transferee of the asset or the person for
337 whose benefit the transfer was made; or
338 2.(b) An immediate or mediate transferee of the first Any
339 subsequent transferee other than:
340 a. A good faith transferee that who took for value; or
341 b. An immediate or mediate good faith transferee of a
342 person described in sub-subparagraph a from any subsequent
343 transferee.
344 (b) Recovery pursuant to s. 726.108(1)(a) or (2) of or from
345 the asset transferred or its proceeds, by levy or otherwise, is
346 available only against a person described in subparagraph (a)1.
347 or subparagraph (a)2.
348 (3) If the judgment under subsection (2) is based upon the
349 value of the asset transferred, the judgment must be for an
350 amount equal to the value of the asset at the time of the
351 transfer, subject to adjustment as the equities may require.
352 (4) Notwithstanding voidability of a transfer or an
353 obligation under this chapter ss. 726.101-726.112, a good faith
354 transferee or obligee is entitled, to the extent of the value
355 given the debtor for the transfer or obligation, to:
356 (a) A lien on or a right to retain an any interest in the
357 asset transferred;
358 (b) Enforcement of an any obligation incurred; or
359 (c) A reduction in the amount of the liability on the
360 judgment.
361 (5) A transfer is not voidable under s. 726.105(1)(b) or s.
362 726.106 if the transfer results from:
363 (a) Termination of a lease upon default by the debtor when
364 the termination is pursuant to the lease and applicable law; or
365 (b) Enforcement of a security interest in compliance with
366 Article 9 of the Uniform Commercial Code other than acceptance
367 of collateral in full or partial satisfaction of the obligation
368 it secures.
369 (6) A transfer is not voidable under s. 726.106(2):
370 (a) To the extent the insider gave new value to or for the
371 benefit of the debtor after the transfer was made, except to the
372 extent unless the new value was secured by a valid lien;
373 (b) If made in the ordinary course of business or financial
374 affairs of the debtor and the insider; or
375 (c) If made pursuant to a good faith effort to rehabilitate
376 the debtor and the transfer secured present value given for that
377 purpose as well as an antecedent debt of the debtor.
378 (7)(a) The transfer of a charitable contribution that is
379 received in good faith by a qualified religious or charitable
380 entity or organization is not a fraudulent transfer under s.
381 726.105(1)(b) or s. 726.106(1).
382 (b) However, a charitable contribution from a natural
383 person is a fraudulent transfer if the transfer was received on,
384 or within 2 years before, the earlier of the date of
385 commencement of an action under this chapter, the filing of a
386 petition under the federal Bankruptcy Code, or the commencement
387 of insolvency proceedings by or against the debtor under any
388 state or federal law, including the filing of an assignment for
389 the benefit of creditors or the appointment of a receiver,
390 unless:
391 1. The transfer was consistent with the practices of the
392 debtor in making the charitable contribution; or
393 2. The transfer was received in good faith and the amount
394 of the charitable contribution did not exceed 15 percent of the
395 gross annual income of the debtor for the year in which the
396 transfer of the charitable contribution was made.
397 (8)(a) A party that seeks to invoke subsection (1),
398 subsection (4), subsection (5), or subsection (6) has the burden
399 of proving the applicability of that subsection.
400 (b) Except as otherwise provided in paragraphs (c) and (d),
401 the creditor has the burden of proving each applicable element
402 of subsection (2) or subsection (3).
403 (c) The transferee has the burden of proving the
404 applicability to the transferee under subparagraph (2)(a)2.
405 (d) A party that seeks adjustment under subsection (3) has
406 the burden of proving the adjustment.
407 (9) The standard of proof required to establish matters
408 referred to in this section is a preponderance of the evidence.
409 (10) The creditor has the burden of proving the requisite
410 elements of any claim under this chapter, as set forth in ss.
411 726.105(3) and 726.106(3).
412 Section 10. Section 726.110, Florida Statutes, is amended
413 to read:
414 726.110 Extinguishment of claim for relief cause of
415 action.—A claim for relief cause of action with respect to a
416 fraudulent transfer or obligation under this chapter ss.
417 726.101-726.112 is extinguished unless action is brought:
418 (1) Under s. 726.105(1)(a), within 4 years after the
419 transfer was made or the obligation was incurred or, if later,
420 within 1 year after the transfer or obligation and its wrongful
421 nature was or could reasonably have been discovered by the
422 claimant;
423 (2) Under s. 726.105(1)(b) or s. 726.106(1), within 4 years
424 after the transfer was made or the obligation was incurred; or
425 (3) Under s. 726.106(2), within 1 year after the transfer
426 was made or the obligation was incurred.
427 Section 11. Section 726.111, Florida Statutes, is amended
428 to read:
429 726.111 Supplementary provisions.—Unless displaced by the
430 provisions of this chapter ss. 726.101-726.112, the principles
431 of law and equity, including the law merchant and the law
432 relating to principal and agent, estoppel, laches, fraud,
433 misrepresentation, duress, coercion, mistake, insolvency, or
434 other validating or invalidating cause, supplement those
435 provisions.
436 Section 12. Section 726.112, Florida Statutes, is amended
437 to read:
438 726.112 Uniformity of application and construction.—Chapter
439 87-79, Laws of Florida, shall be applied and construed to
440 effectuate its general purpose to make uniform the law with
441 respect to the subject of the law among states enacting the law
442 it.
443 Section 13. Section 726.113, Florida Statutes, is created
444 to read:
445 726.113 Governing law.—
446 (1) For the purposes of this section, the following
447 provisions determine a debtor’s physical location:
448 (a) A debtor that is an individual is located at his or her
449 principal residence.
450 (b) A debtor that is an organization and has only one place
451 of business is located at its place of business.
452 (c) A debtor that is an organization and has more than one
453 place of business is located at its chief executive office.
454 (2) A claim for relief in the nature of a claim for relief
455 under this chapter is governed by the claims law of the
456 jurisdiction in which the debtor is located when the transfer is
457 made or the obligation is incurred.
458 (3) This section does not affect the governing law for any
459 other claims or issues between the parties arising outside of
460 this chapter or other claims law. If this section requires the
461 application of the claims law of a foreign jurisdiction, such a
462 determination does not affect which jurisdiction’s exemption
463 laws apply, the availability of exemptions under applicable law,
464 or the debtor’s entitlement to any protections afforded to the
465 debtor’s homestead under the Florida Constitution.
466 Section 14. Section 726.114, Florida Statutes, is created
467 to read:
468 726.114 Application to series organization.—
469 (1) As used in this section, the term:
470 (a) “Protected series” means an arrangement, however
471 denominated, created by a series organization that, pursuant to
472 the law under which the series organization is organized, meets
473 the criteria set forth in paragraph (b).
474 (b) “Series organization” means an organization that,
475 pursuant to the law under which it is organized, has the
476 following characteristics:
477 1. The organic record of the organization provides for
478 creation by the organization of one or more protected series,
479 however denominated, with respect to specified property of the
480 organization, and for records to be maintained for each
481 protected series that identify the property of, or associated
482 with, the protected series.
483 2. Debt incurred or existing with respect to the activities
484 of, or property of or associated with, a particular protected
485 series is enforceable against the property of, or associated
486 with, the protected series only, and not against the property
487 of, or associated with, the organization or other protected
488 series of the organization.
489 3. Debt incurred or existing with respect to the activities
490 or property of the organization is enforceable against the
491 property of the organization only, and not against the property
492 of, or associated with, a protected series of the organization.
493 (2) A series organization and each protected series of the
494 organization is a separate person for purposes of this chapter,
495 even if for other purposes a protected series is not a person
496 separate from the organization or other protected series of the
497 organization. Provisions of law other than this chapter
498 determine whether and to what extent a series organization and
499 each protected series of the organization is a separate person
500 for purposes other than the purposes of this chapter.
501 Section 15. Section 726.115, Florida Statutes, is created
502 to read:
503 726.115 Relation to Electronic Signatures in Global and
504 National Commerce Act.—This chapter modifies, limits, and
505 supersedes the federal Electronic Signatures in Global and
506 National Commerce Act, 15 U.S.C. ss. 7001, et seq., but does not
507 modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s.
508 7001(c), or authorize electronic delivery of any of the notices
509 described in s. 103(b) of that act, 15 U.S.C. s. 7003(b).
510 Section 16. This act shall take effect July 1, 2018.