PRINTER'S NO. 709
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
629
Session of
2017
INTRODUCED BY RESCHENTHALER, RAFFERTY, MENSCH, BARTOLOTTA,
FOLMER, VOGEL AND WHITE, APRIL 18, 2017
REFERRED TO BANKING AND INSURANCE, APRIL 18, 2017
AN ACT
Amending Titles 12 (Commerce and Trade) and 23 (Domestic
Relations) of the Pennsylvania Consolidated Statutes, in
fraudulent transfers, further providing for short title of
chapter and definitions, for insolvency, for value, for
transfers fraudulent as to present and future creditors, for
transfers fraudulent as to present creditors, for when
transfer is made or obligation is incurred, for remedies of
creditors, for defenses, liability and protection of
transferee and for extinguishment of cause of action,
providing for governing law and for application to series
organization, further providing for supplementary provisions
and providing for uniformity of application and construction
and for relation to Electronic Signatures in Global and
National Commerce Act; and, in support matters generally,
further providing for continuing jurisdiction over support
orders.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Chapter 51 heading of Title 12 of the
Pennsylvania Consolidated Statutes is amended to read:
CHAPTER 51
[FRAUDULENT TRANSFERS]
VOIDABLE TRANSACTIONS
Section 2. Sections 5101, 5102, 5103, 5104, 5105, 5106,
5107, 5108 and 5109 of Title 12 are amended to read:
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§ 5101. Short title of chapter and definitions.
(a) Short title of chapter.--This chapter, that was formerly
cited as the Pennsylvania Uniform Fraudulent Transfer Act, shall
be known and may be cited as the Pennsylvania Uniform
[Fraudulent Transfer] Voidable Transactions 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] Except as used in "claim for relief," 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] that has a claim.
"Debt." Liability on a claim.
"Debtor." A person [who] that is liable on a claim.
"Electronic." Relating to technology having electrical,
digital, magnetic, wireless, optical, electromagnetic or similar
capabilities.
"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
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proceedings, a common law lien or a statutory lien.
"Organization." A person other than an individual.
"Person." 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.
"Property." Anything that may be the subject of ownership.
"Record." Information that is inscribed on a tangible medium
or that is stored in an electronic or other medium and is
retrievable in perceivable form.
"Sign." With present intent to authenticate or adopt a
record:
(1) to execute or adopt a tangible symbol; or
(2) to attach to or logically associate with the record
an electronic symbol, sound or process.
"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, license 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] valuation, the sum of the debtor's debts is greater
than [all] the sum of the debtor's assets.
(b) Presumption of insolvency.--A debtor [who] that is
generally not paying the debtor's debts as they become due other
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than as a result of a bona fide dispute is presumed to be
insolvent. [This] The presumption [shall impose] imposes on the
party against [whom] which 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)] (c) 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] voidable under this chapter.
[(e)] (d) 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] transfer
or obligation voidable as to present [and] or future [creditors]
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creditor) and 5105 (relating to [transfers fraudulent] transfer
or obligation voidable as to present [creditors] creditor), 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] Transfer or obligation voidable
as to present [and] or future [creditors] creditor.
(a) General rule.--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:
(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:
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(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.
(c) Burden of proof.--A creditor making a claim for relief
under subsection (a) has the burden of proving the elements of
the claim for relief by a preponderance of the evidence.
§ 5105. [Transfers fraudulent] Transfer or obligation voidable
as to present [creditors] creditor.
(a) General rule.--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
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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) Burden of proof.--Subject to section 5102(b) (relating
to insolvency), a creditor making a claim for relief under
subsection (a) has the burden of proving the elements of the
claim for relief by a preponderance of the evidence.
§ 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] 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; 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
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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] record, when the
[writing executed] record signed by the obligor is
delivered to or for the benefit of the obligee.
§ 5107. Remedies of [creditors] creditor.
(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 or obligee) and 5109
(relating to extinguishment of [cause of action] claim for
relief), 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] if available
under 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
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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 or
obligee.
(a) Certain transfers or obligations not [fraudulent]
voidable.--A transfer or obligation is not [fraudulent] voidable
under section 5104(a)(1) (relating to [transfers fraudulent]
transfer or obligation voidable as to present [and] or future
[creditors] creditor) 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.
(b) Judgment for certain voidable transfers.--To the extent
a transfer is avoidable in an action by a creditor under section
5107(a)(1) (relating to remedies of creditor), the following
rules apply:
(1) 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)] (i) the first transferee of the asset or the
person for whose benefit the transfer was made; or
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[(2) any subsequent transferee other than] (ii) an
immediate or mediate transferee of the first transferee,
other than:
(A) a good faith transferee [who] that took for
value [or from any subsequent transferee.]; or
(B) an immediate or mediate good faith
transferee of a person described in clause (A).
(2) Recovery under section 5107(a)(1) or (b) of or from
the asset transferred or its proceeds, by levy or otherwise,
is available only against a person described in paragraph
(1).
(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] an interest in
the asset transferred;
(2) enforcement of [any] an obligation incurred; or
(3) a reduction in the amount of the liability on the
judgment.
(e) Certain transfers not [fraudulent] voidable.--A transfer
is not [fraudulent] voidable under section 5104(a)(2) or 5105
(relating to [transfers fraudulent] transfer or obligation
voidable as to present [creditors] creditor) if the transfer
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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 an acceptance of collateral in full or partial
satisfaction of the obligations it secures under 13 Pa.C.S. §
9620 (relating to acceptance of collateral in full or partial
satisfaction of obligation; compulsory disposition of
collateral).
The references to 13 Pa.C.S. Div. 9 and 13 Pa.C.S. § 9620 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.
(f) Burden of proof.--The following rules determine the
burden of proving matters referred to in this section:
(1) A party that seeks to invoke subsection (a), (d) or
(e) has the burden of proving the applicability of that
subsection.
(2) Except as otherwise provided in paragraphs (3) and
(4), the creditor has the burden of proving each applicable
element of subsection (b) or (c).
(3) The transferee has the burden of proving the
applicability to the transferee of subsection (b)(1)(ii)(A)
or (B).
(4) A party that seeks adjustment under subsection (c)
has the burden of proving the adjustment.
(g) Standard of proof.--The standard of proof required to
establish matters referred to in this section is preponderance
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of the evidence.
§ 5109. Extinguishment of [cause of action] claim for relief.
A [cause of action] claim for relief 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] transfer or obligation voidable as to present
[and] or future [creditors] creditor), [within] not later
than four years after the transfer was made or the obligation
was incurred or, if later, [within] not later than 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] 5105(a) (relating
to [transfers fraudulent] transfer or obligation voidable as
to present [creditors] creditor), [within] not later than
four years after the transfer was made or the obligation was
incurred.
Section 3. Title 12 is amended by adding sections to read:
§ 5110. Governing law.
(a) Location of debtor.--In this section, the following
rules determine a debtor's location:
(1) A debtor who is an individual is located at the
individual ' s principal residence.
(2) A debtor that is an organization and has only one
place of business is located at the organization's place of
business.
(3) A debtor that is an organization and has more than
one place of business is located at the organization's chief
executive office.
(b) Governing law.--A claim for relief in the nature of a
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claim for relief under this chapter 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.
§ 5111. Application to series organization.
(a) Separate person.--A series organization and a protected
series of the series organization is a separate person for
purposes of this chapter, even if for other purposes a protected
series is not a person separate from the series organization or
other protected series of the series organization.
(b) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Protected series." An arrangement, however denominated,
created by a series organization that, pursuant to the law under
which the series organization is organized, has the
characteristics specified for a series organization.
"Series organization." An organization that, pursuant to the
law under which the organization is organized, has the following
characteristics:
(1) 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 identifies the property of or
associated with the protected series.
(2) 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
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organization or other protected series of the organization.
(3) 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.
Section 4. Section 5110 of Title 12 is renumbered to read:
§ [5110] 5112. 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 5. Title 12 is amended by adding sections to read:
§ 5113. Uniformity of application and construction.
This chapter shall be applied and construed to effectuate its
general purpose to make uniform the law with respect to the
subject of this chapter among states enacting it.
§ 5114. Relation to Electronic Signatures in Global and
National Commerce Act.
This chapter modifies, limits or supersedes the Electronic
Signatures in Global and National Commerce Act (Public Law 106-
229, 15 U.S.C. § 7001 et seq.), but does not modify, limit or
supersede section 101(c) of the Electronic Signatures in Global
and National Commerce Act, or authorize electronic delivery of a
notice described in section 103(b) of the Electronic Signatures
in Global and National Commerce Act.
Section 6. Section 4352(g.3) of Title 23 is amended to read:
§ 4352. Continuing jurisdiction over support orders.
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* * *
(g.3) [Fraudulent] Voidable transfers.--The court may void
any [fraudulent] voidable transfer by the obligor pursuant to 12
Pa.C.S. Ch. 51 (relating to [fraudulent transfers] voidable
transactions). It shall be a rebuttable presumption that a
transfer by an obligor is [fraudulent] voidable as to an obligee
if the transfer was made for less than reasonably equivalent
value and the transfer occurred after the initiation of a
proceeding to establish or enforce support.
* * *
Section 7. This act shall apply as follows:
(1) This act shall apply to transfers made or
obligations incurred on or after the effective date of this
act.
(2) This act shall not apply to transfers made or
obligations incurred before the effective date of this act.
(3) This act shall not apply to rights of action that
have accrued before the effective date of the enacting
legislation.
(4) For a purpose specified under this section,
transfers are made and obligations are incurred at the time
provided under 12 Pa.C.S. § 5106.
Section 8. This act shall take effect in 60 days.
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