Bill Text: MI SB0982 | 2015-2016 | 98th Legislature | Introduced
Bill Title: Law; uniform or model acts; uniform fraudulent transfer act; update to uniform voidable transactions act. Amends title & secs. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 & 13 of 1998 PA 434 (MCL 566.31 et seq.) & adds secs. 14 & 15.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2016-12-30 - Assigned Pa 0552'16 With Immediate Effect [SB0982 Detail]
Download: Michigan-2015-SB0982-Introduced.html
SENATE BILL No. 982
May 24, 2016, Introduced by Senator SCHUITMAKER and referred to the Committee on Judiciary.
A bill to amend 1998 PA 434, entitled
"Uniform fraudulent transfer act,"
by amending the title and sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10,
11, 12, and 13 (MCL 566.31, 566.32, 566.33, 566.34, 566.35, 566.36,
566.37, 566.38, 566.39, 566.40, 566.41, 566.42, and 566.43),
section 1 as amended by 2009 PA 44 and section 8 as amended by 2000
PA 362, and by adding sections 14 and 15.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An
act to define and regulate fraudulent transfers and
conveyances;
to set provide for the
setting aside and modify
modification
of certain transfers, and
conveyances, and
obligations; to make uniform the law of fraudulent transfers; and
to
repeal acts and parts of acts.provide
remedies.
Sec. 1. As used in this act:
(a) "Affiliate" means a person that is 1 or more of the
following:
(i) A person who that directly or indirectly
owns, controls,
or holds with power to vote, 20% or more of the outstanding voting
securities
of the debtor, other than a person who that holds the
securities in either of the following circumstances:
(A) As a fiduciary or agent without sole discretionary power
to vote the securities.
(B) Solely to secure a debt, if the person has not in fact
exercised the power to vote.
(ii) A corporation 20% 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 who that directly
or
indirectly owns, controls, or holds, with power to vote, 20% or
more of the outstanding voting securities of the debtor, other than
a
person who that holds the securities in either of the following
circumstances:
(A) As a fiduciary or agent without sole discretionary power
to vote the securities.
(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.
(iv) A person who that operates the debtor's
business under a
lease or other agreement or controls substantially all of the
debtor's assets.
(b) "Asset" means property of a debtor, but the term does not
include any of the following:
(i) Property to the extent it is encumbered by a valid lien.
(ii) Property to the extent it is generally exempt under
nonbankruptcy law.
(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 1 tenant.
(c) "Claim", except as used in "claim for relief", 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.
(d)
"Creditor" means a person who that has a claim.
(e) "Debt" means liability on a claim.
(f)
"Debtor" means a person who that is liable on a claim.
(g) "Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical, electromagnetic,
or similar capabilities.
(h) (g)
"Insider" includes all of
the following:
(i) If the debtor is an individual, all of the following:
(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 sub-
subparagraph (B).
(D) A corporation of which the debtor is a director, officer,
or person in control.
(ii) If the debtor is a corporation, all of the following:
(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 sub-
subparagraph (D).
(F) A relative of a general partner, director, officer, or
person in control of the debtor.
(iii) If the debtor is a partnership, all of the following:
(A) A general partner in the debtor.
(B) A relative of a general partner in, 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 sub-
subparagraph (C).
(E) A person in control of the debtor.
(iv) An affiliate, or an insider of an affiliate as if the
affiliate were the debtor.
(v) A managing agent of the debtor.
(i) (h)
"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.
(j) "Organization" means a person other than an individual.
(k) (i)
"Person" means an
individual, partnership,
corporation,
association, organization, estate,
business or
nonprofit entity, public corporation, government or governmental
subdivision, or
agency, business trust, estate, trust, or
instrumentality,
or any other legal or
commercial entity.
(l) (j)
"Property" means anything
that may be the subject of
ownership.
(m) "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.
(n) (k)
"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.
(o) "Sign" means to do any of the following with present
intent to authenticate or adopt a record:
(i) Execute or adopt a tangible symbol.
(ii) Attach to or logically associate with the record an
electronic symbol, sound, or process.
(p) (l) "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. Transfer
includes payment of money, release, lease, license, and creation of
a lien or other encumbrance. Transfer does not include any of the
following:
(i) The lapse, release, waiver, or disclaimer of a power of
appointment given to a donee by a third party. As used in this
subparagraph, "donee" means that term as defined in section 2 of
the powers of appointment act of 1967, 1967 PA 224, MCL 556.112.
(ii) The disposing of or parting with an asset or interest in
an asset held in trust to the person who created the trust if all
of the following apply:
(A) The trust is an irrevocable trust for the benefit of third
parties.
(B) The trust is a grantor trust with regard to the person for
income tax purposes pursuant to sections 671 to 679 of the internal
revenue code of 1986, 26 USC 671 to 679.
(C) The trustee has the discretionary authority to reimburse
or advance trust property to the person for taxes concerning income
attributable to the trust property.
(D) The disposing of or parting with the asset or interest in
the asset is the exercise by the trustee of the discretionary
authority described in sub-subparagraph (C).
(q) (m)
"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. (1) A debtor is insolvent if, at a fair valuation, the
sum
of the debtor's debts is greater than all the sum of the
debtor's
assets. at a fair valuation.
(2)
A debtor who that is generally not paying his or her the
debtor's debts as they become due other than as a result of a bona
fide dispute is presumed to be insolvent. 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.
(3)
A partnership is insolvent under subsection (1) 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.
(3) (4)
As used in this section:
(a) Assets 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 this act.
(b) Debts 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. (1) 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. 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.
(2)
For the purposes of sections 4(a)(2) section 4(1)(b) and
section 5, 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, or
security agreement.
(3) 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. (1) A transfer made or obligation incurred by a debtor
is
fraudulent voidable 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 in either of the following circumstances:
(a) With actual intent to hinder, delay, or defraud any
creditor of the debtor.
(b) Without receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor did either
of the following:
(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.
(ii) Intended to incur, or believed or reasonably should have
believed
that he or she the debtor would incur, debts beyond his or
her
the debtor's ability to pay as they became due.
(2) In determining actual intent under subsection (1)(a),
consideration may be given, among other factors, to whether 1 or
more of the following occurred:
(a) The transfer or obligation was to an insider.
(b) The debtor retained possession or control of the property
transferred after the transfer.
(c) The transfer or obligation was disclosed or concealed.
(d) Before the transfer was made or obligation was incurred,
the debtor had been sued or threatened with suit.
(e) The transfer was of substantially all of the debtor's
assets.
(f) The debtor absconded.
(g) The debtor removed or concealed assets.
(h) 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.
(i) The debtor was insolvent or became insolvent shortly after
the transfer was made or the obligation was incurred.
(j) The transfer occurred shortly before or shortly after a
substantial debt was incurred.
(k) The debtor transferred the essential assets of the
business to a lienor who transferred the assets to an insider of
the debtor.
(3) A creditor making a claim for relief under subsection (1)
has the burden of proving the elements of the claim for relief by a
preponderance of the evidence.
Sec. 5. (1) A transfer made or obligation incurred by a debtor
is
fraudulent voidable 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.
(2)
A transfer made by a debtor is fraudulent voidable 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.
(3) Subject to section 2(2), a creditor making a claim for
relief under subsection (1) or (2) has the burden of proving the
elements of the claim for relief by a preponderance of the
evidence.
Sec. 6. (1) A transfer is made under this act when 1 of the
following occurs:
(a) 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 which applicable law permits the transfer to be
perfected cannot acquire an interest in the asset that is superior
to the interest of the transferee.
(b) 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 act that is superior to the interest of the transferee.
(2) If applicable law permits the transfer to be perfected as
provided in subsection (1) and the transfer is not so perfected
before the commencement of an action for relief under this act, the
transfer is considered made immediately before the commencement of
the action.
(3) If applicable law does not permit the transfer to be
perfected as provided in subsection (1), the transfer is made when
it becomes effective between the debtor and the transferee.
(4) A transfer is not made under this act until the debtor has
acquired rights in the asset transferred.
(5) An obligation is incurred under this act if 1 of the
following occurs:
(a) If oral, when it becomes effective between the parties.
(b)
If evidenced by a writing, record,
when the writing
executed
record signed by the obligor is delivered to or for the
benefit of the obligee.
Sec. 7. (1) In an action for relief against a transfer or
obligation under this act, a creditor, subject to the limitations
in section 8, may obtain 1 or more of the following:
(a) Avoidance of the transfer or obligation to the extent
necessary to satisfy the creditor's claim.
(b) An attachment or other provisional remedy against the
asset
transferred or other property of the transferee to the extent
authorized
under section 4001 of the revised judicature act of
1961,
1961 PA 236, MCL 600.4001, and applicable court rules.if
available under applicable law.
(c) Subject to applicable principles of equity and in
accordance with applicable court rules and statutes, 1 or more of
the following:
(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.
(iii) Any other relief the court determines appropriate.
(2) 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. (1) A transfer or obligation is not voidable under
section
4(1)(a) against a person who that
took in good faith and
for a reasonably equivalent value given the debtor or against any
subsequent transferee or obligee.
(2) To the extent a transfer is avoidable in an action by a
creditor under section 7(1)(a), all of the following rules apply:
(a) Except as otherwise provided in this section, to
the
extent
a transfer is voidable in an action by a creditor under
section
7(1)(a), the creditor may recover a
judgment for the value
of the asset transferred, as adjusted under subsection (3), or the
amount necessary to satisfy the creditor's claim, whichever is
less. The judgment may be entered against either of the following:
(i) (a)
The first transferee of the asset
or the person for
whose benefit the transfer was made.
(ii) (b)
Any subsequent An immediate
or mediate transferee of
the
first transferee,
other than a either of the
following:
(A)
A good-faith transferee who took for
value. or from any
subsequent
transferee.
(B) An immediate or mediate good-faith transferee of a person
described in sub-subparagraph (A).
(b) Recovery pursuant to section 7(1)(a) or (2) of or from the
asset transferred or its proceeds, by levy or otherwise, is
available only against a person described in subdivision (a)(i) or
(ii).
(3) If the judgment under subsection (2) is based upon the
value
of the asset transferred, the judgment shall 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.
(4) Notwithstanding the voidability of a transfer or an
obligation under this act, a good-faith transferee or obligee is
entitled, to the extent of the value given the debtor for the
transfer or obligation, to 1 or more of the following:
(a)
A lien on or a right to retain any an interest in the
asset transferred.
(b)
Enforcement of any an obligation incurred.
(c) A reduction in the amount of the liability on the
judgment.
(5) A transfer is not voidable under section 4(1)(b) or
section 5 if the transfer results from either of the following:
(a) Termination of a lease upon default by the debtor when the
termination is pursuant to the lease and applicable law.
(b) Enforcement of a security interest in compliance with
article 9 of the uniform commercial code, 1962 PA 174, MCL 440.9101
to
440.9708.440.9994, other
than an acceptance of collateral in
full or partial satisfaction of the obligation it secures.
(6)
A transfer is not voidable under section 5(2) if in 1
or
more
of the following occur:circumstances:
(a) To the extent the insider gave new value to or for the
benefit
of the debtor after the transfer was made, unless except to
the extent the new value was secured by a valid lien.
(b) If made in the ordinary course of business or financial
affairs of the debtor and the insider.
(c) 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.
(7) The following rules determine the burden of proving
matters referred to in this section:
(a) A party that seeks to invoke subsection (1), (4), (5), or
(6) has the burden of proving the applicability of that subsection.
(b) Except as otherwise provided in subdivisions (c) and (d),
the creditor has the burden of proving each applicable element of
subsection (2) or (3).
(c) The transferee has the burden of proving the applicability
to the transferee of subsection (2)(a)(ii)(A) or (B).
(d) A party that seeks adjustment under subsection (3) has the
burden of proving the adjustment.
(8) The standard of proof required to establish matters
referred to in this section is preponderance of the evidence.
Sec.
9. A cause of action claim
for relief with respect to a
fraudulent
transfer or obligation under this
act is extinguished
unless
action is brought under within
1 or more of the following
time periods:
(a)
Sections If the claim for
relief is under section 4(1)(a)
and
or (b) and or 5(1), within the time
period specified in
sections
section 5813 and or 5855 of the revised judicature
act of
1961, 1961 PA 236, MCL 600.5813 and 600.5855.
(b)
Section If the claim for
relief is under section 5(2),
within 1 year after the transfer was made or the obligation was
incurred.
Sec.
10. (1) Unless in conflict with the provisions of this
act,
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 the provisions
of
this act.In this section, the
following rules determine a
debtor's location:
(a) A debtor who is an individual is located at the
individual's principal residence.
(b) A debtor that is an organization and has only 1 place of
business is located at its place of business.
(c) A debtor that is an organization and has more than 1 place
of business is located at its chief executive office.
(2) A claim for relief in the nature of a claim for relief
under this act 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.
Sec.
11. (1) This act shall be applied and construed to
effectuate
its general purpose to make uniform the law of
fraudulent
conveyance among the states enacting it.As used in this
section:
(a) "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 subdivision (b).
(b) "Series organization" means an organization that, pursuant
to the law under which it is organized, has the following
characteristics:
(i) The organic record of the organization provides for
creation by the organization of 1 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.
(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.
(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.
(2) A series organization and each protected series of the
organization is a separate person for purposes of this act, even if
for other purposes a protected series is not a person separate from
the organization or other protected series of the organization.
Sec.
12. This act shall be known and may be cited as the
"uniform
fraudulent transfer act".Unless
displaced by the
provisions of this act, 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 the provisions of this act.
Sec.
13. The uniform fraudulent conveyance act, 1919 PA 310,
MCL
566.11 to 566.23, is repealed.This
act shall be applied and
construed to effectuate its general purpose to make uniform the law
with respect to the subject of this act among the states enacting
it.
Sec. 14. This act modifies, limits, or supersedes the
electronic signatures in the global and national commerce act, 15
USC 7001 to 7031, but does not modify, limit, or supersede 15 USC
7001(c) or authorize electronic delivery of any of the notices
described in 15 USC 7003(b).
Sec. 15. (1) This act, which was formerly known and cited as
the "uniform fraudulent transfer act", shall be known and may be
cited as the "uniform voidable transactions act".
(2) All of the following apply to sections 1 to 13 as amended,
and to section 14 and this section as added, by the amendatory act
that added this section:
(a) The sections as amended or added apply to a transfer made
or obligation incurred on or after the effective date of the
amendatory act that added this section.
(b) The sections as amended or added do not apply to a
transfer made or obligation incurred before the effective date of
the amendatory act that added this section.
(c) The sections as amended and added do not apply to a right
of action that accrued before the effective date of the amendatory
act that added this section.
(d) For purposes of this subsection, a transfer is made and an
obligation is incurred at the time provided in section 6.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.
Enacting section 2. This amendatory act does not take effect
unless all of the following bills of the 98th Legislature are
enacted into law:
(a) Senate Bill No. 983.
(b) Senate Bill No. 984.
(c) Senate Bill No. 985.
