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2023 - 2024 LEGISLATURE
2023 ASSEMBLY BILL 453
September 28, 2023 - Introduced by Representatives TUSLER and O'CONNOR,
cosponsored by Senators WIMBERGER and BALLWEG. Referred to Committee on
Consumer Protection.
***AUTHORS SUBJECT TO CHANGE***
AN ACT to repeal 242.02 (4); to renumber 242.08 (2) (a); to renumber and
amend 242.08 (2) (b); to amend chapter 242 (title), 242.01 (3), 242.01 (9),
242.01 (12), 242.02 (2), 242.02 (3), 242.04 (title), 242.04 (1) (intro.), 242.05
(title), 242.05 (1), 242.05 (2), 242.06 (5) (b), 242.07 (1) (b), 242.08 (title), 242.08
(1), 242.08 (2) (intro.), 242.08 (5) (b), 402.402 (3) (b), 411.308 (2) (b), 705.07 (2),
815.18 (10) and 893.425; and to create 242.01 (6m), 242.01 (8m), 242.01 (10m),
242.01 (11m), 242.04 (3), 242.05 (3), 242.08 (2) (am) 2. b. and (bm), 242.08 (7)
and (8), 242.094, 242.096, 242.12 and 242.13 of the statutes; relating to:
adopting modifications to, and renaming, the Uniform Fraudulent Transfer
Act.
Analysis by the Legislative Reference Bureau
This bill adopts the Uniform Law Commission's 2014 modifications to the
Uniform Fraudulent Transfer Act, including its renaming as the Uniform Voidable
Transactions Law.
Current law incorporates the Uniform Fraudulent Transfer Act (1984), adopted
in this state in 1988. Under current law, a creditor may challenge certain transfers
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of property or obligations incurred by a debtor that may deprive the creditor of assets
that would otherwise be available to satisfy debts if the debtor is or is about to become
insolvent, such as the transfer of the debtor's assets to a family member or corporate
insider. A “creditor” is any person who has a claim and a “debtor” is any person who
is liable on a claim. A “claim” is a right to payment, whether it arises by contract,
tort, or otherwise, and a “debt” means liability on a claim. There are four basic
situations in which the creditor may challenge a transfer made or obligation incurred
by the debtor (hereafter referred to as voidable transactions):
1. If the transfer is made or obligation incurred by the debtor to intentionally
hinder, delay, or defraud the creditor.
2. If the debtor transfers property or incurs the obligation without receiving a
reasonably equivalent value in exchange, and the debtor engages in business or a
transaction for which the debtor's remaining assets are unreasonably small or the
debtor intends to incur debts beyond the debtor's ability to pay as they become due.
3. If there is an existing creditor-debtor relationship, the debtor makes a
transfer or incurs an obligation without receiving a reasonably equivalent value in
exchange, and the debtor was insolvent at that time or the debtor became insolvent
as a result of the transfer or obligation. 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.
4. If the debtor makes a transfer to an insider for a preexisting debt, the debtor
was insolvent at the time of the transfer, and the insider had reasonable cause to
believe that the debtor was insolvent. “Insider” is a defined term and includes
certain relatives of an individual debtor and officers and directors of a corporate
debtor.
Current law specifies various remedies available to a creditor if a voidable
transaction has occurred. These remedies include the avoidance of the transfer or
obligation to the extent necessary to satisfy the creditor's claim, attachment against
the asset transferred or other property of the person to whom the asset was
transferred, an injunction, and appointment of a receiver.
The bill adopts the ULC's 2014 modifications to the uniform act, including the
following:
1. The bill renames the provisions of the act to be the Uniform Voidable
Transactions Law and replaces the term “fraudulent” with “voidable” in various
provisions. The ULC specified that these changes were not intended to have
substantive effect and were made to more accurately convey the effect of current law,
which frequently uses the term “fraudulent” but does not actually require fraudulent
activity as a condition to its application.
2. The bill creates provisions that specify, for claims and defenses related to
voidable transactions, which party has the burden of proof and establishes the
standard of proof as a preponderance of the evidence.
3. The bill creates a choice-of-law rule for courts to determine which state's
voidable transactions law applies in a given case. Under the bill, a court must apply
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4. The bill eliminates a provision that applies a different standard for
determining insolvency for a partnership, so that the general insolvency standard
applies to partnerships.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SECTION 1. Chapter 242 (title) of the statutes is amended to read:
CHAPTER 242
UNIFORM FRAUDULENT TRANSFER ACT
VOIDABLE TRANSACTIONS LA W
SECTION 2. 242.01 (3) of the statutes is amended to read:
242.01 (3) “Claim" “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.
SECTION 3. 242.01 (6m) of the statutes is created to read:
242.01 (6m) “Electronic" means relating to technology having electrical,
digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
SECTION 4. 242.01 (8m) of the statutes is created to read:
242.01 (8m) “Organization” means a person other than an individual.
SECTION 5. 242.01 (9) of the statutes is amended to read:
242.01 (9) “Person" means an individual, estate, partnership, corporation,
limited liability company, association, organization, trust, 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.
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SECTION 6. 242.01 (10m) of the statutes is created to read:
242.01 (10m) “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.
SECTION 7. 242.01 (11m) of the statutes is created to read:
242.01 (11m) “Sign" means, with present intent to authenticate or adopt a
record, any of the following:
(a) To execute or adopt a tangible symbol.
(b) To attach to or logically associate with the record an electronic symbol,
sound, or process.
SECTION 8. 242.01 (12) of the statutes is amended to read:
242.01 (12) “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, license, and
creation of a lien or other encumbrance.
SECTION 9. 242.02 (2) of the statutes is amended to read:
242.02 (2) 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.
SECTION 10. 242.02 (3) of the statutes is amended to read:
242.02 (3) A debtor who is generally not paying 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.
SECTION 11. 242.02 (4) of the statutes is repealed.
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SECTION 12. 242.04 (title) of the statutes is amended to read:
242.04 (title) Transfers fraudulent Transfer or obligation voidable as
to present and or future creditors creditor.
SECTION 13. 242.04 (1) (intro.) of the statutes is amended to read:
242.04 (1) (intro.) A transfer made or obligations 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:
SECTION 14. 242.04 (3) of the statutes is created to read:
242.04 (3) A creditor making a claim for relief under sub. (1) has the burden
of proving the elements of the claim for relief by a preponderance of the evidence.
SECTION 15. 242.05 (title) of the statutes is amended to read:
242.05 (title) Transfers fraudulent Transfer or obligation voidable as
to present creditors creditor.
SECTION 16. 242.05 (1) of the statutes is amended to read:
242.05 (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.
SECTION 17. 242.05 (2) of the statutes is amended to read:
242.05 (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
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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.
SECTION 18. 242.05 (3) of the statutes is created to read:
242.05 (3) Subject to s. 242.02 (3), a creditor making a claim for relief under
sub. (1) or (2) has the burden of proving the elements of the claim for relief by a
preponderance of the evidence.
SECTION 19. 242.06 (5) (b) of the statutes is amended to read:
242.06 (5) (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.
SECTION 20. 242.07 (1) (b) of the statutes is amended to read:
242.07 (1) (b) An attachment or other provisional remedy against the asset
transferred or other property of the transferee in accordance with if available under
chs. 810 to 813 or other applicable law.
SECTION 21. 242.08 (title) of the statutes is amended to read:
242.08 (title) Defenses, liability, and protection of transferee or obligee.
SECTION 22. 242.08 (1) of the statutes is amended to read:
242.08 (1) A transfer or obligation is not voidable under s. 242.04 (1) (a) against
a person who took in good faith and for a reasonably equivalent value given the
debtor or against any subsequent transferee or obligee.
SECTION 23. 242.08 (2) (intro.) of the statutes is amended to read:
242.08 (2) (intro.) Except as otherwise provided in this section, to To the extent
a transfer is voidable in an action by a creditor under s. 242.07 (1) (a), all of the
following rules apply:
(am) Except as otherwise provided in this section, the creditor may recover
judgment for the value of the asset transferred, as adjusted under sub. (3), or the
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amount necessary to satisfy the creditor's claim, whichever is less. The judgment
may be entered against any of the following:
SECTION 24. 242.08 (2) (a) of the statutes is renumbered 242.08 (2) (am) 1.
SECTION 25. 242.08 (2) (am) 2. b. and (bm) of the statutes are created to read:
242.08 (2) (am) 2. b. An immediate or mediate good faith transferee of a person
described in subd. 2. a.
(bm) Recovery pursuant to s. 242.07 (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
par. (am) 1. or 2.
SECTION 26. 242.08 (2) (b) of the statutes is renumbered 242.08 (2) (am) 2. and
amended to read:
242.08 (2) (am) 2. Any subsequent An immediate or mediate transferee of the
first transferee, other than a any of the following:
a. A good faith transferee who took for value or from any subsequent transferee.
SECTION 27. 242.08 (5) (b) of the statutes is amended to read:
242.08 (5) (b) Enforcement of a security interest in compliance with ch. 409,
other than acceptance of collateral in full or partial satisfaction of the obligation it
secures.
SECTION 28. 242.08 (7) and (8) of the statutes are created to read:
242.08 (7) The following rules determine the burden of proving matters
referred to in this section:
(a) A party that seeks to invoke sub. (1), (4), (5), or (6) has the burden of proving
the applicability of that subsection.
(b) Except as otherwise provided in pars. (c) and (d), the creditor has the burden
of proving each applicable element of sub. (2) or (3).
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(c) The transferee has the burden of proving the applicability to the transferee
of sub. (2) (am) 2. a. or b.
(d) A party that seeks adjustment under sub. (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.
SECTION 29. 242.094 of the statutes is created to read:
242.094 Governing law. (1) 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 one place of business is located
at its place of business.
(c) A debtor that is an organization and that has more than one 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 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.
SECTION 30. 242.096 of the statutes is created to read:
242.096 Application to series organization. (1) 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 par. (b).
(b) “Series organization” means an organization that, pursuant to the law
under which it is organized, has the following characteristics:
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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 identify 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 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.
(2) A series organization and each protected series of the 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 organization or other protected series of the
organization.
SECTION 31. 242.12 of the statutes is created to read:
242.12 Relation to electronic signatures in global and national
commerce act. This chapter modifies, limits, or supersedes the federal Electronic
Signatures in Global and National Commerce Act, 15 USC 7001 to 7031, but does not
modify, limit, or supersede section 101 (c) of that act, 15 USC 7001 (c), or authorize
electronic delivery of any of the notices described in section 103 (b) of that act, 15 USC
7003 (b).
SECTION 32. 242.13 of the statutes is created to read:
242.13 Short title. This chapter may be cited as the Uniform Voidable
Transactions Law.
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SECTION 33 ASSEMBLY BILL 453
SECTION 33. 402.402 (3) (b) of the statutes is amended to read:
402.402 (3) (b) Where identification to the contract or delivery is made not in
current course of trade but in satisfaction of or as security for a preexisting claim for
money, security or the like and is made under circumstances which under any rule
of law of the state where the goods are situated would apart from this chapter
constitute the transaction a fraudulent or voidable transfer or voidable preference.
SECTION 34. 411.308 (2) (b) of the statutes is amended to read:
411.308 (2) (b) The lease contract is made under circumstances that under any
statute or rule of law apart from this chapter would constitute the transaction a
fraudulent or voidable transfer or voidable preference.
SECTION 35. 705.07 (2) of the statutes is amended to read:
705.07 (2) For purposes of ch. 242, a debtor party shall be deemed to have made
a transfer only at the time some other party withdraws all or part of the sums on
deposit, or at the time of the debtor party's death as to sums not previously
withdrawn. In the case of a withdrawal while the debtor party is living, the sole
grounds for determining any such transfer to be fraudulent voidable shall be
whether the debtor party is or will be thereby rendered insolvent under s. 242.05 (1)
or whether the debtor party is engaged or is about to engage in a business or
transaction for which the assets remaining in the debtor party's hands after the
transfer are unreasonably small under s. 242.04 (1) (b) 1. In the case of a transfer
by reason of the death of the debtor party, the sole ground for determining any such
transfer to be fraudulent voidable shall be whether the debtor party's estate subject
to administration is insolvent under s. 242.02. For purposes of this subsection, the
amount transferred shall be deemed to consist of those assets which the creditors of
the debtor party could have made subject to their claims immediately prior to the
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transfer, less any sums which such creditors could have made so subject to their
claims immediately after the transfer.
SECTION 36. 815.18 (10) of the statutes is amended to read:
815.18 (10) FRAUDULENT AND VOIDABLE TRANSFERS. A conveyance or transfer of
wholly exempt property shall not be considered a fraudulent conveyance or a
fraudulent or voidable transfer. Property that is not totally exempt in value under
this section may be subject to a fraudulent voidable transfer action under ch. 242 to
set aside that transfer to the extent that the property's value is not exempt under this
section. If a court is required to satisfy the claim of a creditor and if that relief is
demanded, the court may determine the manner of dividing fraudulently transferred
property or property for which the transfer is voidable into exempt and nonexempt
portions, or may order the sale of the whole property and an accounting of the exempt
portion. Any or all of the exemptions granted by this section may be denied if, in the
discretion of the court having jurisdiction, the debtor procured, concealed or
transferred assets with the intention of defrauding creditors.
SECTION 37. 893.425 of the statutes is amended to read:
893.425 Fraudulent Voidable transfers and obligations. An action with
respect to a fraudulent transfer or obligation under ch. 242 shall be barred unless the
action is commenced:
(1) Under s. 242.04 (1) (a), within not later than 4 years after the transfer is
made or the obligation is incurred or, if later, within not later than one year after the
transfer or obligation is or could reasonably have been discovered by the claimant.
(2) Under s. 242.04 (1) (b) or 242.05 (1), within not later than 4 years after the
transfer is made or the obligation is incurred.
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(3) Under s. 242.05 (2), within not later than one year after the transfer is made
or the obligation is incurred.
(END)
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