2012 North Dakota Century Code Title 13 Debtor and Creditor Relationship Chapter 13-02.1 Uniform Fraudulent Transfer Act
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CHAPTER 13-02.1
UNIFORM FRAUDULENT TRANSFER ACT
13-02.1-01. Definitions.
As used in this chapter:
1. "Affiliate" means:
a. A person who directly or indirectly owns, controls, or holds with power to vote,
twenty percent or more of the outstanding voting securities of the debtor, other
than a person who holds the securities as a fiduciary or agent without sole
discretionary power to vote the securities or solely to secure a debt, if the person
has not exercised the power to vote;
b. A corporation or a limited liability company twenty percent or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or held
with power to vote, by the debtor, or by a person who directly or indirectly owns,
controls, or holds with power to vote, twenty percent or more of the outstanding
voting securities of the debtor, other than a person who holds the securities as a
fiduciary or agent without sole power to vote the securities or solely to secure a
debt, if the person has not in fact exercised the power to vote;
c. A person whose business is operated by the debtor under a lease or other
agreement, or a person substantially all of whose assets are controlled by the
debtor; or
d. A person who operates the debtor's business under a lease or other agreement
or controls substantially all of the debtor's assets.
2. "Asset" means property of a debtor, excluding property to the extent it is encumbered
by a valid lien, property to the extent it is generally exempt under nonbankruptcy law,
or an interest in property held in tenancy by the entireties to the extent it is not subject
to process by a creditor holding a claim against only one tenant.
3. "Claim" means a right to payment, whether or not the right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured.
4. "Creditor" means a person who has a claim.
5. "Debt" means liability on a claim.
6. "Debtor" means a person who is liable on a claim.
7. "Insider" means:
a. If the debtor is an individual, an "insider" includes a relative of the debtor or of a
general partner of the debtor, a partnership in which the debtor is a general
partner, a general partner in a partnership in which the debtor is a general
partner, a corporation of which the debtor is a director, officer, or person in
control, or a limited liability company of which the debtor is a governor, manager,
or person in control.
b. If the debtor is a corporation, an "insider" includes a director of the debtor, an
officer of the debtor, a person in control of the debtor, a partnership in which the
debtor is a general partner, a general partner in a partnership in which the debtor
is a general partner, or a relative of a general partner, director, officer, or person
in control of the debtor.
c. If the debtor is a partnership, an "insider" includes a general partner in the debtor,
a relative of a general partner in, of a general partner of, or of a person in control
of the debtor, another partnership in which the debtor is a general partner, a
general partner in a partnership in which the debtor is a general partner, or a
person in control of the debtor.
d. If the debtor is a limited liability company, an "insider" includes a governor of the
debtor, a manager of the debtor, a person in control of the debtor, a partnership in
which the debtor is a general partner, a general partner in a partnership in which
the debtor is a general partner or a relative of a general partner, governor,
manager, or person in control of the debtor.
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An "insider" also includes an affiliate, or an insider of an affiliate as if the affiliate
were the debtor, and a managing agent of the debtor.
"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, a common-law lien, or a statutory lien.
"Person" means an individual, partnership, corporation, limited liability company,
association, organization, government or governmental subdivision or agency,
business trust, estate, trust, or any other legal or commercial entity.
"Property" means anything that may be the subject of ownership.
"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.
"Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or
involuntary, of disposing of or parting with an asset or an interest in an asset, and
includes payment of money, release, lease, and creation of a lien or other
encumbrance.
"Valid lien" means a lien that is effective against the holder of a judicial lien
subsequently obtained by legal process or proceedings.
13-02.1-02. Insolvency.
1. A debtor is insolvent if the sum of the debtor's debts is greater than all of the debtor's
assets at a fair valuation. A debtor who is generally not paying debts as they become
due is presumed to be insolvent. A partnership is insolvent 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.
2. Assets under this section do not include property that has been transferred,
concealed, or removed with intent to hinder, delay, or defraud creditors or that has
been transferred in a manner making the transfer voidable under this chapter.
3. 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.
13-02.1-03. Value.
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, 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.
2. For the purposes of subdivision b of subsection 1 of section 13-02.1-04 and section
13-02.1-05, 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.
13-02.1-04. Transfers fraudulent as to present and future creditors.
1. 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:
a. With actual intent to hinder, delay, or defraud any creditor of the debtor; or
b. Without receiving a reasonably equivalent value in exchange for the transfer or
obligation, and the debtor was engaged or was about to engage in a business or
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a transaction for which the remaining assets of the debtor were unreasonably
small in relation to the business or transaction or the debtor 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.
In determining actual intent under subdivision a of subsection 1, consideration may be
given, among other factors, to whether:
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 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; and
k. The debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.
13-02.1-05. Transfers fraudulent as to present creditors.
1. 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.
2. A transfer made by a debtor is fraudulent 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.
13-02.1-06. When transfer is made or obligation is incurred.
For the purposes of this chapter:
1. A transfer is made 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. A
transfer is made 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 subsection 1 and
the transfer is not so perfected before the commencement of an action for relief under
this chapter, the transfer is deemed to have been 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 until the debtor has acquired rights in the asset transferred.
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An oral obligation is incurred when it becomes effective between the parties. An
obligation evidenced by a writing is incurred when the writing executed by the obligor
is delivered to or for the benefit of the obligee.
13-02.1-07. Remedies of creditors.
1. In an action for relief against a transfer or obligation under this chapter, a creditor,
subject to the limitations in section 13-02.1-08, may obtain:
a. Avoidance of the transfer or obligation to the extent necessary to satisfy the
creditor's claim;
b. Attachment or other provisional remedy against the asset transferred or other
property of the transferee in accordance with the procedure prescribed by chapter
32-08.1; or
c. Subject to applicable principles of equity and in accordance with applicable rules
of civil procedure, an injunction against further disposition by the debtor or a
transferee, or both, of the asset transferred or of other property, an appointment
of a receiver to take charge of the asset transferred or of other property of the
transferee, or any other relief the circumstances may require.
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.
13-02.1-08. Defenses - Liability - Protection of transferee.
1. A transfer or obligation is not voidable under subdivision a of subsection 1 of section
13-02.1-04 against a person who took in good faith and for a reasonably equivalent
value or against any subsequent transferee or obligee.
2. Except as otherwise provided in this section, to the extent a transfer is voidable in an
action by a creditor under subdivision a of subsection 1 of section 13-02.1-07, the
creditor may recover 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 the first transferee of the asset or the person for
whose benefit the transfer was made or any subsequent transferee other than a
good-faith transferee who took for value or from any subsequent transferee.
3. If the judgment under subsection 2 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.
4. 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 a lien on or a right to retain any interest in the asset
transferred, enforcement of any obligation incurred, or a reduction in the amount of the
liability on the judgment.
5. A transfer is not voidable under subdivision b of subsection 1 of section 13-02.1-04 or
section 13-02.1-05 if the transfer results from termination of a lease upon default by
the debtor when the termination is pursuant to the lease and applicable law or
enforcement of a security interest in compliance with chapter 41-09.
6. A transfer is not voidable under subsection 2 of section 13-02.1-05:
a. To the extent the insider gave new value to or for the benefit of the debtor after
the transfer was made unless 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; or
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.
13-02.1-09. Extinguishment of claim for relief.
A claim for relief with respect to a fraudulent transfer or obligation under this chapter is
extinguished unless action is brought:
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Under subdivision a of subsection 1 of section 13-02.1-04, 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;
Under subdivision b of subsection 1 of section 13-02.1-04 or subsection 1 of section
13-02.1-05, within four years after the transfer was made or the obligation was
incurred; or
Under subsection 2 of section 13-02.1-05, within one year after the transfer was made
or the obligation was incurred.
13-02.1-10. 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 their provisions.
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