§ 39-1. Fee presumed, though word “heirs” omitted.

When real estate is conveyed to any person, the same shall be held and construed to be a conveyance in fee, whether the word “heir” is used or not, unless such conveyance in plain and express words shows, or it is plainly intended by the conveyance or some part thereof, that the grantor meant to convey an estate of less dignity.

History. 1879, c. 148; Code, s. 1280; Rev., s. 946; C.S., s. 991.

Cross References.

As to presumption of conveyance in fee simple when deed and registry of conveyance destroyed, see G.S. 8-21 .

Legal Periodicals.

As to use of fee simple form deed to convey other than a fee, see 39 N.C.L. Rev. 283 (1961).

For case law survey as to real property, see 45 N.C.L. Rev. 964 (1967).

For article, “Doubt Reduction Through Conveyancing Reform — More Suggestions in the Quest for Clear Land Titles,” see 46 N.C.L. Rev. 284 (1968).

For article, “The Rule in Wild’s Case in North Carolina,” see 55 N.C.L. Rev. 751 (1977).

For note on the continued use of the Artis-Oxendine rule in the construction of deeds, see 13 Wake Forest L. Rev. 478 (1977).

For article, “Class Gifts in North Carolina — When Do We ‘Call The Roll’?,” see 21 Wake Forest L. Rev. 1 (1985).

For article, “Does the Fee Tail Exist in North Carolina?,” see 23 Wake Forest L. Rev. 767 (1988).

§ 39-1.1. In construing conveyances court shall give effect to intent of the parties.

1. In construing a conveyance executed after January 1, 1968, in which there are inconsistent clauses, the courts shall determine the effect of the instrument on the basis of the intent of the parties as it appears from all of the provisions of the instrument.
2. The provisions of subsection (a) of this section shall not prevent the application of the rule in Shelley’s case.

History. 1967, c. 1182.

Legal Periodicals.

For comment on the rule in Shelley’s case, see 4 Wake Forest Intra. L. Rev. 132 (1968).

For note on the continued use of the Artis-Oxendine rule in the construction of deeds, see 13 Wake Forest L. Rev. 478 (1977).

For article, “The Rule Against Perpetuities in North Carolina,” see 57 N.C.L. Rev. 727 (1979).

For note as to the transfer of land by wills in light of Stephenson v. Rowe, 315 N.C. 330 , 338 S.E.2d 301 (1986), see 65 N.C.L. Rev. 1488 (1987).

§ 39-2. Vagueness of description not to invalidate.

No deed or other writing purporting to convey land or an interest in land shall be declared void for vagueness in the description of the thing intended to be granted by reason of the use of the word “adjoining” instead of the words “bounded by,” or for the reason that the boundaries given do not go entirely around the land described: Provided, it can be made to appear to the satisfaction of the jury that the grantor owned at the time of the execution of such deed or paper-writing no other land which at all corresponded to the description contained in such deed or paper-writing.

History. 1891, c. 465, s. 2; Rev., s. 948; C.S., s. 992.

Cross References.

As to vagueness of description in paper-writing offered as evidence, see G.S. 8-39 .

Legal Periodicals.

For note as to the transfer of land by wills in light of Stephenson v. Rowe, 315 N.C. 330 , 338 S.E.2d 301 (1986), see 65 N.C.L. Rev. 1488 (1987).

§ 39-3. [Repealed]

Repealed by Session Laws 1961, c. 52.

§ 39-4. Conveyances by infant trustees.

When an infant is seized or possessed of any estate in trust, whether by way of mortgage or otherwise, for another person who may be entitled in law to have a conveyance of such estate, or may be declared to be seized or possessed, in the course of any proceeding in the superior court, the court may decree that the infant shall convey and assure such estate, in such manner as it may direct, to such other person; and every conveyance and assurance made in pursuance of such decree shall be as effectual in law as if made by a person of full age.

History. 1821, c. 1116, ss. 1, 2; R.C., c. 37, s. 27; Code, s. 1265; Rev., s. 1036; C.S., s. 994.

Legal Periodicals.

For discussion of section, see 3 N.C.L. Rev. 110 (1925).

§ 39-5. Official deed, when official selling or empowered to sell is not in office.

When a sheriff, coroner, or tax collector, in virtue of his office, sells any real or personal property and goes out of office before executing a proper deed therefor, he may execute the same after his term of office has expired; and when he dies or removes from the State before executing the deed, his successor in office shall execute it. When a sheriff or tax collector dies having a tax list in his hands for collection, and his personal representative or surety, in collecting the taxes, makes sale according to law, his successor in office shall execute the conveyance for the property to the person entitled.

History. R.C., c. 37, s. 30; Code, s. 1267; 1891, c. 242; Rev., ss. 950, 951; C.S., s. 995; 1971, c. 528, s. 36.

Cross References.

As to authority of sheriff to execute deed to land sold under execution, see G.S. 1-309 .

As to sheriff’s deed for trust estate, see G.S. 1-316 .

As to sheriff’s deed on sale of equity of redemption, see G.S. 1-317 .

§ 39-6. Revocation of deeds of future interests made to persons not in esse.

The grantor in any voluntary conveyance in which some future interest in real estate is conveyed or limited to a person not in esse may, at any time before he comes into being, revoke by deed such interest so conveyed or limited. This deed of revocation shall be registered as other deeds; and the grantor of like interest for a valuable consideration may, with the joinder of the person from whom the consideration moved, revoke said interest in like manner. The grantor, maker or trustor who has heretofore created or may hereafter create a voluntary trust estate in real or personal property for the use and benefit of himself or of any other person or persons in esse with a future contingent interest to some person or persons not in esse or not determined until the happening of a future event may at any time, prior to the happening of the contingency vesting the future estates, revoke the grant of the interest to such person or persons not in esse or not determined by a proper instrument to that effect; and the grantor of like interest for a valuable consideration may, with the joinder of the person from whom the consideration moved, revoke said interest in like manner: Provided, that in the event the instrument creating such estate has been recorded, then the deed of revocation of such estate shall be likewise recorded before it becomes effective: Provided, further, that this section shall not apply to any instrument hereafter executed creating such a future contingent interest when said instrument shall expressly state in effect that the grantor, maker, or trustor may not revoke such interest: Provided, further, that this section shall not apply to any instrument heretofore executed whether or not such instrument contains express provisions that it is irrevocable unless the grantor, maker, or trustor shall within six months after the effective date of this proviso either revoke such future interest, or file with the trustee an instrument stating or declaring that it is his intention to retain the power to revoke under this section: Provided, further, that in the event the instrument creating such estate has been recorded, then the revocation or declaration shall likewise be recorded before it becomes effective.

History. 1893, c. 498; Rev., s. 1045; C.S., s. 996; 1929, c. 305; 1941, c. 264; 1943, c. 437.

Cross References.

As to validation of certain deeds of revocation not in conformity with this section, see G.S. 39-6.1 .

As to registration of deeds, see G.S. 47-17 et seq.

Legal Periodicals.

For comment on the 1941 amendment, see 19 N.C.L. Rev. 507 (1941).

For article on this section, see 20 N.C.L. Rev. 278 (1942).

For comment on the 1943 amendment, see 21 N.C.L. Rev. 359 (1943).

For article, “The Rule Against Perpetuities in North Carolina,” see 57 N.C.L. Rev. 727 (1979).

For survey of 1979 property law, see 58 N.C.L. Rev. 1509 (1980).

§ 39-6.1. Validation of deeds of revocation of conveyances of future interests to persons not in esse.

All deeds or instruments heretofore executed, revoking any conveyance of future interest made to persons not in esse, are hereby validated insofar as any such deed of revocation may be in conflict with the provisions of G.S. 39-6 .

All such deeds of revocation heretofore executed are hereby validated and no such deed of revocation shall be held to be invalid by reason of not having been executed within the six-month period prescribed in the third proviso of G.S. 39-6 .

History. 1947, c. 62.

Legal Periodicals.

For article, “The Rule Against Perpetuities in North Carolina,” see 57 N.C.L. Rev. 727 (1979).

§ 39-6.2. Creation of interest or estate in personal property.

Any interest or estate in personal property which may be created by last will and testament may also be created by a written instrument of transfer.

History. 1953, c. 198.

Legal Periodicals.

For comment on this section, see 31 N.C.L. Rev. 408 (1953).

For article, “The Rule Against Perpetuities in North Carolina,” see 57 N.C.L. Rev. 727 (1979).

§ 39-6.3. Inter vivos and testamentary conveyances of future interests permitted.

1. The conveyance, by deed or will, of an existing future interest shall not be ineffective on the sole ground that the interest so conveyed is future or contingent. All future interests in real or personal property, including all reversions, executory interests, vested and contingent remainders, rights of entry both before and after breach of condition and possibilities of reverter may be conveyed by the owner thereof, by an otherwise legally effective conveyance, inter vivos or testamentary, subject, however, to all conditions and limitations to which such future interest is subject.
2. The power to convey as provided in subsection (a), can be exercised by any form of conveyance, inter vivos or testamentary, which is otherwise legally effective in this State at the date of such conveyance to transfer a present estate of the same duration in the property.
3. This section shall apply only to conveyances which become operative to transfer title on or after October 1, 1961.

History. 1961, c. 435.

Legal Periodicals.

For article, “The Rule Against Perpetuities in North Carolina,” see 57 N.C.L. Rev. 727 (1979).

For article, “The North Carolina Historic Preservation and Conservation Agreements Act: Assessment and Implications for Historic Preservation,” see 11 N.C. Cent. L.J. 362 (1980).

For article, “Class Gifts in North Carolina — When Do We ‘Call The Roll’?,” see 21 Wake Forest L. Rev. 1 (1985).

For a comment on the acquisition, abandonment, and preservation of rail corridors in North Carolina, see 75 N.C.L. Rev. 1989 (1997).

§ 39-6.4. Creation of easements, restrictions, and conditions.

1. The holder of legal or equitable title of an interest in real property may create, grant, reserve, or declare valid easements, restrictions, or conditions of record burdening or benefiting the same interest in real property.
2. Subsection (a) of this section shall not affect the application of the doctrine of merger after the severance and subsequent reunification of title to all of the benefited or burdened real property or interests therein.

History. 1997-333, s. 1.

§ 39-6.5. Elimination of seal.

The seal of the signatory shall not be necessary to effect a valid conveyance of an interest in real property; provided, that this section shall not affect the requirement for affixing a seal of the officer taking an acknowledgment of the instrument.

History. 1999-221, s. 2.

§ 39-6.6. Subordination agreements.

1. A subordination agreement shall be given effect in accordance with its terms and is not required to state any interest rate, principal amount secured, or other financial terms.
2. The trustee of a deed of trust shall not be a necessary party to a subordination agreement unless the deed of trust provides otherwise.
3. For purposes of G.S. 1-47 , a subordination agreement is deemed a conveyance of an interest in real property.
4. This section is not exclusive. No subordination agreement that is otherwise valid shall be invalidated by this section.
5. This section applies to a subordination agreement regardless of when the agreement was signed by the party or parties thereto, except that this section does not apply to an agreement that (i) is the subject of litigation pending on the effective date of this subsection, and (ii) was filed or recorded before October 1, 2003.
6. In this section:
   1. “Interest in real property” includes all rights, title, and interest in and to land, buildings, and other improvements of an owner, tenant, subtenant, secured lender, materialman, judgment creditor, lienholder, or other person, whether the interest in real property is evidenced by a deed, easement, lease, sublease, deed of trust, mortgage, assignment of leases and rents, judgment, claim of lien, or any other record, instrument, document, or entry of court.
   2. “Subordination agreement” means a written commitment or agreement to subordinate or that subordinates an interest in real property signed by a person entitled to priority.

History. 2003-219, s. 1; 2005-212, s. 1.

Effect of Amendments.

Session Laws 2005-212, s. 1, effective July 20, 2005, rewrote the section.

§ 39-6.7. Construction of conveyances to or by trusts.

1. A deed, will, beneficiary designation, or other instrument that purports to convey, devise, or otherwise transfer any ownership or security interest in real or personal property to a trust shall be deemed to be a transfer to the trustee or trustees of that trust.
2. A deed or other instrument which purports to convey or otherwise transfer any ownership or security interest in real or personal property by a trust shall be deemed to be a transfer by the trustee or trustees of that trust. This rule of construction shall apply:
   1. Regardless of whether the instrument is signed by the trustee or trustees as such, or by the trustee or trustees purportedly for or on behalf of the trust; and
   2. Regardless of whether the instrument by which the trustee or trustees acquired title transferred that title to the trustee or trustees as such, or purportedly to the trust.
3. A deed or other instrument by which the trustee or trustees of a trust convey or otherwise transfer any ownership or security interest in real or personal property shall be deemed sufficient:
   1. Regardless of whether the instrument is signed by the trustee or trustees as such, or by the trustee or trustees purportedly for or on behalf of the trust; and
   2. Regardless of whether the instrument by which the trustee or trustees acquired title transferred that title to the trustee or trustees as such, or purportedly to the trust.
4. The trustee or trustees of a trust may convey or otherwise transfer any ownership or security interest in real or personal property as trustee or trustees even though the deed or instrument by which the trustee or trustees acquired title purported to convey or transfer that title to the trust.
5. Nothing in this section shall be construed to limit the manner in which title to real or personal property may be conveyed or transferred to or by trustees.

History. 2007-106, s. 53.

§ 39-7. Instruments affecting married person’s title; joinder of spouse; exceptions.

1. In order to waive the elective life estate of either husband or wife as provided for in G.S. 29-30 , every conveyance or other instrument affecting the estate, right or title of any married person in lands, tenements or hereditaments must be executed by such husband or wife, and due proof or acknowledgment thereof must be made and certified as provided by law.
2. A married person may bargain, sell, lease, mortgage, transfer and convey any of his or her separate real estate without joinder or other waiver by his or her spouse if such spouse is incompetent and a guardian or trustee has been appointed as provided by the laws of North Carolina, and if the appropriate instrument is executed by the married person and the guardian or trustee of the incompetent spouse and is probated and registered in accordance with law, it shall convey all the estate and interest as therein intended of the married person in the land conveyed, free and exempt from the elective life estate as provided in G.S. 29-30 and all other interests of the incompetent spouse.
3. Subsection (a) shall not be construed to require the spouse’s joinder or other waiver of the elective life estate of such spouse as provided for in G.S. 29-30 where a different provision is made or provided for in the General Statutes including, but not limited to, G.S. 39-13 , 39-13.3, 39-13.4, 31A-1(d), and 52-10.

History. C.C.P., s. 429; subsec. 6; 1868-9, c. 277, s. 15; Code, s. 1256; 1899, c. 235, s. 9; Rev., s. 952; C.S., s. 997; 1945, c. 73, s. 4; 1957, c. 598, s. 3; 1965, c. 855.

Cross References.

As to property of married women secured to them, see N.C. Const., Art. X, § 4.

As to abolition of dower, see G.S. 29-4 .

As to acknowledgment at different times and places and before different officers, and order of acknowledgment, see G.S. 39-8 .

For validation of certain instruments executed without private examination of married woman, see G.S. 39-13.1 .

For repeal of laws requiring private examination of married women, see G.S. 47-14.1 .

As to husband’s acknowledgement and wife’s acknowledgement before the same officer, see G.S. 47-40 .

As to married persons generally, see G.S. 52-1 et seq.

Legal Periodicals.

For comment on this section prior to the 1957 and 1965 amendments, see 12 N.C.L. Rev. 68 (1934).

For note on wife’s conveyance of her realty by virtue of husband’s power of attorney, see 31 N.C.L. Rev. 228 (1953).

For comment on the enforceability of marital contracts, see 47 N.C.L. Rev. 815 (1969).

§ 39-7.1. Certain instruments affecting married woman’s title not executed by husband validated.

No conveyance, power of attorney, or other instrument affecting the estate, right or title of any married woman in lands, tenements or hereditaments which was executed by such married woman prior to June 8, 1965, shall be invalid for the reason that the instrument was not also executed by the husband of such married woman.

History. 1965, c. 857; 1973, c. 853, s. 1.

Legal Periodicals.

For survey of 1978 property law, see 57 N.C.L. Rev. 1103 (1979).

§ 39-8. Acknowledgment at different times and places; before different officers; order immaterial.

In all cases of deeds, or other instruments executed by husband and wife and requiring registration, the probate of such instruments as to the husband and due proof or acknowledgment of the wife may be taken before different officers authorized by law to taken probate of deeds, and at different times and places, whether both of said officials reside in this State or only one in this State and the other in another state or country. And in taking the probate of such instruments executed by husband and wife, it is immaterial whether the execution of the instrument was proven as to or acknowledged by the husband before or after due proof as to or acknowledgment of the wife.

History. 1895, c. 136; 1899, c. 235, s. 9; Rev., s. 953; C.S., s. 998; 1945, c. 73, s. 5.

Cross References.

For repeal of laws requiring private examination of married women, see G.S. 47-14.1 .

§ 39-9. Absence of wife’s acknowledgment does not affect deed as to husband.

When an instrument purports to be signed by a husband and wife the instrument may be ordered registered, if the acknowledgment of the husband is duly taken, but no such instrument shall be the act or deed of the wife unless proven or acknowledged by her according to law.

History. 1889, c. 235, s. 8; 1901, c. 637; Rev., s. 954; C.S., s. 999; 1945, c. 73, s. 6.

Cross References.

For provision that clerk of superior court pass on certificate of acknowledgment and order registration, see G.S. 47-14 .

For repeal of laws requiring private examination of married women, see G.S. 47-14.1 .

§ 39-10. [Repealed]

Repealed by Session Laws 1977, c. 375, s. 16.

§ 39-11. Certain conveyances not affected by fraud if acknowledgment or privy examination regular.

No deed conveying lands nor any instrument required or allowed by law to be registered, executed by husband and wife since the eleventh of March, 1889, if the acknowledgment or private examination of the wife is thereto certified as prescribed by law, shall be invalid because its execution or acknowledgment was procured by fraud, duress or undue influence, unless it is shown that the grantee or person to whom the instrument was made participated in the fraud, duress or undue influence, or had notice thereof before the delivery of the instrument. Where such participation or notice is shown, an innocent purchaser for value under the grantee or person to whom the instrument was made shall not be affected by such fraud, duress or undue influence.

History. 1889, c. 389; 1899, c. 235, s. 10; Rev., s. 956; C.S., s. 1001; 1945, c. 73, s. 7.

Cross References.

For repeal of laws requiring private examination of married women, see G.S. 47-14.1 .

As to sufficiency of probate and registration without livery, see G.S. 47-17 .

Legal Periodicals.

For discussion of section, see 12 N.C.L. Rev. 71 (1934).

§ 39-12. Power of attorney of married person.

Every competent married person of lawful age is authorized to execute, without the joinder of his or her spouse, instruments creating powers of attorney affecting the real and personal property of such married person naming either third parties or, subject to the provisions of G.S. 52-10 or 52-10.1, his or her spouse as attorney-in-fact. When such a married person executes a power of attorney authorized by the preceding sentence naming his or her spouse as attorney in fact the acknowledgment by the spouse of the grantor is not necessary. Such instruments may confer upon the attorney, and the attorney may exercise, any and all powers which lawfully can be conferred upon an attorney-in-fact, including, but not limited to, the authority to join in conveyances of real property for the purpose of waiving or quitclaiming any rights which may be acquired as a surviving spouse under the provisions of G.S. 29-30 .

History. 1798, c. 510; R.C., c. 37, s. 11; Code, s. 1257; Rev., s. 957; C.S., s. 1002; 1965, c. 856; 1977, c. 375, s. 7; 1979, c. 528, s. 8.

Cross References.

As to registration of power of attorney, see G.S. 47-28 .

§ 39-13. Spouse need not join in purchase-money mortgage.

A mortgage or deed of trust given by the purchaser of real property to secure a loan, the proceeds of which were used to pay all or a portion of the purchase price of the encumbered real property, regardless of whether the secured party is the seller of the real property or a third-party lender, shall be good and effectual against the purchaser’s spouse as well as the purchaser, without requiring the spouse to join in the execution of the mortgage or deed of trust.

History. 1868-9, c. 204; Code, s. 1272; Rev., s. 958; 1907, c. 12; C.S., s. 1003; 1965, c. 852; 2018-80, s. 1.1; 2020-50, s. 3(a); 2020-69, s. 6(a).

§ 39-13.1. Validation of certain deeds, etc., executed by married women without private examination.

1. No deed, contract, conveyance, leasehold or other instrument executed since the seventh day of November, 1944, shall be declared invalid because of the failure to take the private examination of any married woman who was a party to such deed, contract, conveyance, leasehold or other instrument.
2. Any deed, contract, conveyance, lease or other instrument executed prior to February 7, 1945, which is in all other respects regular except for the failure to take the private examination of a married woman who is a party to such deed, contract, conveyance, lease or other instrument is hereby validated and confirmed to the same extent as if such private examination had been taken, provided that this section shall not apply to any instruments now involved in any pending litigation.

History. 1945, c. 73, s. 211/2; 1969, c. 1008, s. 1.

§ 39-13.2. Married persons under 18 made competent as to certain transactions; certain transactions validated.

1. Any married person under 18 years of age is authorized and empowered and shall have the same privileges as are conferred upon married persons 18 years of age or older to:
   1. Waive, release or renounce by deed or other written instrument any right or interest which he or she may have in the real or personal property (tangible or intangible) of the other spouse; or
   2. Jointly execute with his or her spouse, if such spouse is 18 years of age or older, any note, contract of insurance, deed, deed of trust, mortgage, lien of whatever nature or other instrument with respect to real or personal property (tangible or intangible) held with such other spouse either as tenants by the entirety, joint tenants, tenants in common, or in any other manner.
2. Any transaction between a husband and wife pursuant to this section shall be subject to the provisions of G.S. 52-10 or 52-10.1 whenever applicable.
3. No renunciation of dower or curtesy or of rights under G.S. 29-30(a) by a married person under the age of 21 years after June 30, 1960, and until April 7, 1961, shall be invalid because such person was under such age. No written assent by a husband under the age of 21 years to a conveyance of the real property of his wife after June 30, 1960, and until April 7, 1961, shall be invalid because such husband was under such age.

History. 1951, c. 934, s. 1; 1955, c. 376; 1961, c. 184; 1965, c. 851; c. 878, s. 2; 1971, c. 1231, s. 1; 1977, c. 375, s. 8.

Legal Periodicals.

For brief comment on this section, see 29 N.C.L. Rev. 379 (1951).

For article on tenancy by the entirety in North Carolina, see 41 N.C.L. Rev. 67 (1962).

For article, “The Contracts of Minors Viewed from the Perspective of Fair Exchange,” see 50 N.C.L. Rev. 517 (1972).

§ 39-13.3. Conveyances between husband and wife.

1. A conveyance from a husband or wife to the other spouse of real property or any interest therein owned by the grantor alone vests such property or interest in the grantee.
2. Recodified as G.S. 41-56(b) by Session Laws 2020-50, s. 1(b), effective June 30, 2020.
3. Recodified as G.S. 41-63(4) by Session Laws 2020-50, s. 1(b), effective June 30, 2020.
4. The joinder of the spouse of the grantor in any conveyance made by a husband or a wife pursuant to the foregoing provisions of this section is not necessary.
5. Any conveyance authorized by this section is subject to the provisions of G.S. 52-10 or 52-10.1, except that acknowledgment by the spouse of the grantor is not necessary.

History. 1957, c. 598, s. 1; 1965, c. 878, s. 3; 1977, c. 375, s. 9; 2020-50, s. 1(b).

Cross References.

As to rules for construction, see G.S. 12-3 .

As to rules for construction pertaining to “husband and wife,” see G.S. 12-3(16) .

Legal Periodicals.

For article on tenancy by the entirety in North Carolina including brief discussion of this section, see 41 N.C.L. Rev. 67 (1962).

For article on joint ownership of corporate securities in North Carolina, see 44 N.C.L. Rev. 290 (1966).

For comment on tenancy by the entirety in North Carolina, see 59 N.C.L. Rev. 997 (1980).

§ 39-13.4. Conveyances by husband or wife under deed of separation.

Any conveyance of real property, or any interest therein, by the husband or wife who have previously executed a valid and lawful deed of separation which authorizes said husband or wife to convey real property or any interest therein without the consent and joinder of the other and which deed of separation or a memorandum of the deed of separation setting forth such authorization is recorded in the county where the land lies, shall be valid to pass such title as the conveying spouse may have to his or her grantee and shall pass such title free and clear of all rights in such property and free and clear of such interest in property that the other spouse might acquire solely as a result of the marriage, including any rights arising under G.S. 29-30 , unless an instrument in writing canceling the deed of separation or memorandum thereof and properly executed and acknowledged by said husband and wife is recorded in the office of said register of deeds. The instrument which is registered under this section to authorize the conveyance of an interest in real property or the cancellation of the deed of separation or memorandum thereof shall comply with the provisions of G.S. 52-10 or 52-10.1.

All conveyances of any interest in real property by a spouse who had previously executed a valid and lawful deed of separation, or separation agreement, or property settlement, which authorized the parties thereto to convey real property or any interest therein without the consent and joinder of the other, when said deed of separation, separation agreement, or property settlement, or a memorandum of the deed of separation, separation agreement, property settlement, setting forth such authorization, had been previously recorded in the county where the property is located, and when such conveyances were executed before October 1, 1981, shall be valid to pass such title as the conveying spouse may have to his or her grantee, and shall pass such to him free and clear of rights in such property and free and clear of such interest in such property that the other spouse might acquire solely as a result of the marriage, including any rights arising under G.S. 29-30 , unless an instrument in writing canceling the deed of separation, separation agreement, or property settlement, or memorandum thereof, properly executed and acknowledged by said husband and wife, is recorded in the office of said register of deeds. The instrument which is registered under this section to authorize the conveyance of an interest in real property or the cancellation of the deed of separation, separation agreement, property settlement, or memorandum thereof shall comply with G.S. 52-10 or 52-10.1.

History. 1959, c. 512; 1973, c. 133; 1977, c. 375, s. 10; 1981, c. 599, ss. 10, 11.

Cross References.

As to rules for construction pertaining to “husband and wife,” see G.S. 12-3(16) .

Legal Periodicals.

For article analyzing North Carolina’s tenancy by the entirety reform legislation of 1982, see 5 Campbell L. Rev. 1 (1982).

§ 39-13.5.

Recodified as G.S. 41-56(c) by Session Laws 2020-50, s. 1(b), effective June 30, 2020.

§ 39-13.6. Control of real property held in tenancy by the entirety.

1. Recodified as G.S. 41-58 by Session Laws 2020-50, s. 1(b), effective June 30, 2020.
2. Recodified as G.S. 41-56(a) by Session Laws 2020-50, s. 1(b), effective June 30, 2020.
3. Recodified as G.S. 41-59(b) by Session Laws 2020-50, s. 1(b), effective June 30, 2020.

History. 1981 (Reg. Sess., 1982), c. 1245, s. 1; 1983, c. 449, ss. 1, 2; 2020-50, s. 1(b).

Cross References.

As to rules for construction, see G.S. 12-3 .

Legal Periodicals.

For article analyzing North Carolina’s tenancy by the entirety reform legislation of 1982, see 5 Campbell L. Rev. 1 (1982).

For article discussing the doctrine of color of title in North Carolina, see 13 N.C. Cent. L.J. 123 (1982).

For survey of 1982 law relating to family law, see 61 N.C.L. Rev. 1155 (1983).

For comment discussing the status of the presumption of purchase money resulting trust for wives in light of Mims v. Mims, 305 N.C. 41 , 286 S.E.2d 779 (1982), see 61 N.C.L. Rev. 576 (1983).

For note, “Branch Banking & Trust Co. v. Wright — Creditors’ Rights to Entireties Property Awarded to Nondebtor Spouse Upon Divorce,” see 64 N.C.L. Rev. 1471 (1986).

For note on the retroactive application of G.S. 39-13.6 under a vested rights analysis, see 65 N.C.L. Rev. 1195 (1987).

For note, “McLean v. McLean: North Carolina Adopts the Gift Presumption in Equitable Distribution,” see 68 N.C. L. Rev. 1269 (1990).

For article, “A Spouse’s Right to Control Assets During Marriage: Is North Carolina Living in the Middle Ages?”, see 18 Campbell L. Rev. 203 (1996).

§ 39-13.7.

Recodified as G.S. 41-65 by Session Laws 2020-50, s. 1(b), effective June 30, 2020.

§ 39-14. [Repealed]

Repealed by Session Laws 1943, c. 543.

§§ 39-15 through 39-23. [Repealed]

Repealed by Session Laws 1997-291, s. 1.

§ 39-23.1. Definitions.

In this Article, the following definitions apply:

1. Affiliate. — Any of the following:
   1. A person that directly or indirectly owns, controls, or holds with power to vote, twenty percent (20%) or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
      1. As a fiduciary or agent without sole discretionary power to vote the securities; or
      2. Solely to secure a debt, if the person has not in fact exercised the power to vote.
   2. A corporation twenty percent (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 that directly or indirectly owns, controls, or holds, with power to vote, twenty percent (20%) or more of the outstanding voting securities of the debtor, other than a person that holds the securities:
      1. As a fiduciary or agent without sole discretionary power to vote the securities; or
      2. Solely to secure a debt, if the person has not in fact exercised the power to vote.
   3. 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.
   4. A person that operates the debtor’s business under a lease or other agreement or controls substantially all of the debtor’s assets.
2. Asset. — Property of a debtor, but the term does not include any of the following:
   1. Property to the extent it is encumbered by a valid lien.
   2. Property to the extent it is generally exempt under nonbankruptcy law.
   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.
3. Claim. — 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.
4. Creditor. — A person that has a claim.
5. Debt. — Liability on a claim.
6. Debtor. — A person that is liable on a claim.

   (6a) Electronic. — Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

7. Insider. — Includes any of the following:
   1. If the debtor is an individual, any of the following:
      1. A relative of the debtor or of a general partner of the debtor.
      2. A partnership in which the debtor is a general partner.
      3. A general partner in a partnership in which the debtor is a general partner.
      4. A corporation of which the debtor is a director, officer, or person in control.
   2. If the debtor is a corporation, any of the following:
      1. A director of the debtor.
      2. An officer of the debtor.
      3. A person in control of the debtor.
      4. A partnership in which the debtor is a general partner.
      5. A general partner in a partnership in which the debtor is a general partner.
      6. A relative of a general partner, director, officer, or person in control of the debtor.
   3. If the debtor is a partnership, any of the following:
      1. A general partner in the debtor.
      2. A relative of a general partner in, a general partner of, or a person in control of the debtor.
      3. Another partnership in which the debtor is a general partner.
      4. A general partner in a partnership in which the debtor is a general partner.
      5. A person in control of the debtor.
   4. An affiliate, or an insider of an affiliate as if the affiliate were the debtor.
   5. A managing agent of the debtor.
8. Lien. — 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.

   (8a) Organization. — A person other than an individual.

9. Person. — An individual, partnership, corporation, association, organization, government or governmental subdivision or agency, business trust, estate, trust, or any other legal or commercial entity.
10. Property. — Anything that may be the subject of ownership.

    (10a) 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.

11. Relative. — An individual related by consanguinity within the third degree as determined in accordance with G.S. 104A-1 , 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. (11a) Sign. — With present intent to authenticate or adopt a record, to do any of the following:
    1. Execute or adopt a tangible symbol.
    2. Attach to or logically associate with the record an electronic symbol, sound, or process.
12. 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 and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.
13. Valid lien. — A lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.
14. Repealed by Session Laws 2018-142, s. 7(a), effective December 14, 2018.

History. 1997-291, s. 2; 2015-23, s. 1; 2017-204, s. 3.3(a); 2018-142, s. 7(a).

Official Comment (2014)

1. The definition of “affiliate” is derived from Bankruptcy Code § 101(2) (1984).
2. The definition of “asset” is substantially to the same effect as the definition of “assets” in § 1 of the Uniform Fraudulent Conveyance Act. The definition in this Act, unlike that in the earlier Act, does not, however, require a determination that the property is liable for the debts of the debtor. Thus, for example, an unliquidated claim for damages resulting from personal injury or a contingent claim of a surety for reimbursement, subrogation, restitution, contribution, or the like, may be counted as an asset for the purpose of determining whether the holder of the claim is solvent as a debtor under § 2 of this Act, even if applicable law does not allow such an asset to be levied on and sold by a creditor. Cf. Manufacturers & Traders Trust Co. v. Goldman (In re Ollag Construction Equipment Corp.), 578 F.2d 904, 907-09 (2d Cir. 1978).
3. The definition of “claim” is derived from Bankruptcy Code § 101(4) (1984). Because the purpose of this Act is primarily to protect unsecured creditors against transfers and obligations injurious to their rights, the words “claim” and “debt” as used in the Act generally have reference to an unsecured claim and debt. As the context may indicate, however, usage of the terms is not so restricted. See, e.g., §§ 1(1)(i)(B) and 1(9).
4. The definition of “creditor” in combination with the definition of “claim” has substantially the same effect as the definition of “creditor” under § 1 of the Uniform Fraudulent Conveyance Act. As under that Act, the holder of an unliquidated tort claim or a contingent claim may be a creditor protected by this Act.
5. The definition of “debt” is derived from Bankruptcy Code § 101(11) (1984).
6. The definition of “debtor” had no analogue in the Uniform Fraudulent Conveyance Act.
7. The definition of “electronic” is the standard definition of that term used in acts prepared by the Uniform Law Commission as of 2014.
8. The definition of “insider” is derived from Bankruptcy Code § 101(28) (1984). In this Act, as in the Bankruptcy Code, the definition states that the term “includes” certain listed persons; it does not state that the term “means” the listed persons. Hence the definition is not exclusive, and the statutory list is merely exemplary. See also Bankruptcy Code § 102(3) (1984). Accordingly, a person may be an “insider” of a debtor that is an individual, corporation or partnership even though the person is not designated as such by the statutory list. For example, a trust may be found to be an “insider” of a beneficiary. Similarly, a court may find a person living with an individual debtor for an extended time in the same household or as a permanent companion to have the kind of close relationship intended to be covered by the term “insider.” See also, e.g., Browning Interests v. Allison (In re Holloway), 955 F.2d 1008 (5th Cir.1992) (former spouse of debtor was an “insider” because of their close and continued personal relationship, even though they had long ago divorced and remarried others). Likewise, a person may be an “insider” of a debtor that is not an individual, corporation or partnership. See, e.g., In re Longview Aluminum, L.L.C., 657 F.3d 507 (7th Cir. 2011) (holding, under the Bankruptcy Code definition, that an individual serving on the Board of Managers of, and having a 12% membership interest in, a limited liability company was an “insider” of the company; the company’s organic documents vested management authority “in the Board of Managers and the Members”).
9. The definition of “lien” is derived from paragraphs (30), (31), (43), and (45) of Bankruptcy Code § 101 (1984), which define “judicial lien,” “lien,” “security interest,” and “statutory lien” respectively.
10. The definition of “organization” is derived from Uniform Commercial Code § 1-201(b)(25) (2014).
11. The definition of “person” is the standard definition of that term used in acts prepared by the Uniform Law Commission as of 2014. Section 11 renders a “protected series” of a “series organization” a “person” for purposes of this Act, even though the “protected series” may not qualify as a “person” under paragraph (11) of this section.
12. The definition of “property” is derived from Uniform Probate Code § 1-201(33) (1969). Property includes both real and personal property, whether tangible or intangible, and any interest in property, whether legal or equitable.
13. The definition of “record” is the standard definition of that term used in acts prepared by the Uniform Law Commission as of 2014.
14. The definition of “relative” is derived from Bankruptcy Code § 101(37) (1984) but is explicit in its references to the spouse of a debtor in view of uncertainty as to whether the common law determines degrees of relationship by affinity.
15. The definition of “sign” is the standard definition of that term used in acts prepared by the Uniform Law Commission as of 2014.
16. The definition of “transfer” is derived principally from Bankruptcy Code § 101(48) (1984). The definition of “conveyance” in § 1 of the Uniform Fraudulent Conveyance Act was similarly comprehensive, and the references in this Act to “payment of money, release, lease, and the creation of a lien or encumbrance” are derived from the Uniform Fraudulent Conveyance Act. While the definition in the Uniform Fraudulent Conveyance Act did not explicitly refer to an involuntary transfer, the decisions under that Act were generally consistent with an interpretation that covered such a transfer. See, e.g., Hearn 45 St. Corp. v. Jano, 283 N.Y. 139, 27 N.E.2d 814, 128 A.L.R. 1285 (1940) (execution and foreclosure sales); Lefkowitz v. Finkelstein Trading Corp., 14 F. Supp. 898, 899 (S.D.N.Y. 1936) (execution sale); Langan v. First Trust & Deposit Co., 277 App.Div. 1090, 101 N.Y.S.2d 36 (4th Dept. 1950), aff’d, 302 N.Y. 932, 100 N.E.2d 189 (1951) (mortgage foreclosure); Catabene v. Wallner, 16 N.J.Super. 597, 602, 85 A.2d 300, 302 (1951) (mortgage foreclosure). The 2014 amendments add a reference to transfer by “license,” which is derived from the definition of “proceeds” in Uniform Commercial Code § 9-102(a)(64)(A) (2014).
17. The definition of “valid lien” had no analogue in the Uniform Fraudulent Conveyance Act. A valid lien includes an equitable lien that may not be defeated by a judicial lien creditor. See, e.g., Pearlman v. Reliance Insurance Co., 371 U.S. 132, 136 (1962) (upholding a surety’s equitable lien in respect to a fund owing a bankrupt contractor).

Subparagraphs (i), (ii), and (iii) provide clarification by excluding from the term not only generally exempt property but also an interest in a tenancy by the entirety in many states and an interest that is generally beyond reach by unsecured creditors because subject to a valid lien. This Act, like the Uniform Fraudulent Conveyance Act and the Statute of 13 Elizabeth, declares rights and provides remedies for unsecured creditors against transfers that impede them in the collection of their claims. The laws protecting valid liens against impairment by levying creditors, exemption statutes, and the rules restricting levyability of interest in entireties property are limitations on the rights and remedies of unsecured creditors, and it is therefore appropriate to exclude property interests that are beyond the reach of unsecured creditors from the definition of “asset” for the purposes of this Act.

A creditor of a joint tenant or tenant in common may ordinarily collect a judgment by process against the tenant’s interest, and in some states a creditor of a tenant by the entirety may likewise collect a judgment by process against the tenant’s interest. See 2 American Law of Property 10, 22, 28-32 (1952); Craig, An Analysis of Estates by the Entirety in Bankruptcy , 48 Am.Bankr.L.J. 255, 258-59 (1974). The levyable interest of such a tenant is included as an asset under this Act.

The definition of “assets” in the Uniform Fraudulent Conveyance Act excluded property that is exempt from liability for debts. The definition did not, however, exclude all property that cannot be reached by a creditor through judicial proceedings to collect a debt. Thus, it included the interest of a tenant by the entirety although in nearly half the states such an interest cannot be subjected to liability for a debt unless it is an obligation owed jointly by the debtor with his or her cotenant by the entirety. See 2 American Law of Property 29 (1952); Craig, An Analysis of Estates by the Entirety in Bankruptcy , 48 Am.Bankr.L.J. 255, 258 (1974). The definition in this Act requires exclusion of interests in property held by tenants by the entirety that are not subject to collection process by a creditor without a right to proceed against both tenants by the entirety as joint debtors.

The reference to “generally exempt” property in § 1(2)(ii) recognizes that all exemptions are subject to exceptions. Creditors having special rights against generally exempt property typically include claimants for alimony, taxes, wages, the purchase price of the property, and labor or materials that improve the property. See Uniform Exemptions Act § 10 (1979) and the accompanying Comment. The fact that a particular creditor may reach generally exempt property by resorting to judicial process does not warrant its inclusion as an asset in determining whether the debtor is insolvent.

Because this Act is not an exclusive law on the subject of voidable transfers and obligations (see Comment 9 to § 4), it does not preclude the holder of a claim that may be collected by process against property generally exempt as to other creditors from obtaining relief from a transfer of such property that hinders, delays, or defrauds the holder of such a claim. Likewise the holder of an unsecured claim enforceable against tenants by the entirety is not precluded by the Act from pursuing a remedy against a transfer of property held by the entirety that hinders, delays, or defrauds the holder of such a claim.

Nonbankruptcy law is the law of a state or federal law that is not part of the Bankruptcy Code, Title 11 of the United States Code. The definition of an “asset” thus does not include property that would be subject to administration for the benefit of creditors under the Bankruptcy Code unless it is subject under other applicable law, state or federal, to process for the collection of a creditor’s claim against a single debtor.

The differences between the definition in this Act and that in the Bankruptcy Code are slight. In this Act, the definition has been restricted in clauses (i)(C), (ii)(E), and (iii)(D) to make clear that a partner is not an insider of an individual, corporation, or partnership if any of these latter three persons is only a limited partner. The definition of “insider” in the Bankruptcy Code does not purport to make a limited partner an insider of the partners or of the partnership with which the limited partner is associated, but it is susceptible of a contrary interpretation and one which would extend unduly the scope of the defined relationship when the limited partner is not a person in control of the partnership. The definition of “insider” in this Act also omits the reference in Bankruptcy Code § 101(28)(D) (1984) to an elected official or relative of such an official as an insider of a municipality.

§ 39-23.2. Insolvency.

1. A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater than the sum of the debtor’s assets.
2. A debtor that 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.
3. Repealed by Session Laws 2015-23, s. 1, effective October 1, 2015, and applicable to a transfer made or obligation incurred on or after that date.
4. 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 transfer voidable under this Article.
5. 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.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. Subsection (a) is derived from the definition of “insolvent” in Bankruptcy Code § 101(29)(A) (1984). The definition in subsection (a) contemplates a fair valuation of the debts as well as the assets of the debtor. The 2014 amendments reword subsection (a) in order to eliminate the elegant variation in the original text between “the sum of” debts and “all of” assets, and to make clearer that “fair valuation” applies to debts as well as to assets. No change in meaning is intended.
2. Subsection (b) establishes a rebuttable presumption of insolvency from the fact of general nonpayment of debts as they become due. Such general nonpayment is a ground for the filing of an involuntary petition under Bankruptcy Code § 303(h)(1) (1978). See also U.C.C. § 1-201(23) (1962) (defining a person to be “insolvent” who “has ceased to pay his debts in the ordinary course of business”). The 2014 amendments to this Act clarify that general nonpayment of debts does not count nonpayment as a result of a bona fide dispute. That was the intended meaning of the language before 2014, as stated in the official comments, and the cited provisions of the Bankruptcy Code and the Uniform Commercial Code have been similarly clarified. See Bankruptcy Code § 303(h)(1) (2014); U.C.C. § 1-203(b)(23) (2014) (defining “insolvent” to include “having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute”).
3. Subsection (c) follows the approach of the definition of “insolvency” in Bankruptcy Code § 101(29) (1984) by excluding from the computation of the value of the debtor’s assets any value that can be realized only by avoiding a transfer of an interest formerly held by the debtor or by discovery or pursuit of property that has been concealed or removed with intent to hinder, delay, or defraud creditors.
4. Subsection (d) has no analogue in Bankruptcy Code § 101(29) (1984). It makes clear that a person is not rendered insolvent under this section by counting as a debt an obligation secured by property of the debtor that is not counted as an asset. See also Comment 2 to § 1 and Comment 1 to § 2.

Financial accounting standards may permit or require fair value measurement of an asset or a debt. The fair value of an asset or a debt for financial accounting purposes may be based on standards that are not appropriate for use in subsection (a). For example, Fin. Accounting Standards Bd., Accounting Standards Codification /P¶ 820-10-35-17 to -18 (2014) (formerly Statement of Financial Accounting Standards No. 157: Fair Value Measurement ¶ 15 (2006)) requires for financial accounting purposes that the “fair value” of a liability reflect nonperformance risk (i.e., the risk that the debtor will not pay the liability as and when due). By contrast, proper application of subsection (a) excludes any adjustment to the face amount of a liability on account of nonperformance risk. Such an adjustment would be contrary to the purpose of subsection (a), which is to assess the risk that the debtor will not be able to satisfy its liabilities. Only in unusual circumstances would the “fair valuation” for the purpose of subsection (a) of a liquidated debt be other than its face amount. Examples of such circumstances include discounting the face amount of a contingent debt to reflect the probability that the contingency will not occur, and discounting the face amount of a non-interest-bearing debt that is due in the future in order to reduce the debt to its present value.

As under the definition of the term “insolvent” in § 2 of the Uniform Fraudulent Conveyance Act, exempt property is excluded from the computation of the value of the assets. See § 1(2). For similar reasons interests in valid spendthrift trusts and interests in tenancies by the entireties that are not subject to process by a creditor of only one tenant are not included. See Comment 2 to § 1. Because a valid lien also precludes an unsecured creditor from collecting the creditor’s claim from the encumbered interest in a debtor’s property, both the encumbered interest and the debt secured thereby are excluded from the computation of insolvency under this Act. See § 1(2) and subsection (d) of this section.

Subsection (b) defines the effect of the presumption to be (in paraphrase) that the burden of persuasion on the issue of insolvency shifts to the defendant. That conforms to the default definition of the effect of a presumption in civil cases set forth in Uniform Rules of Evidence (1974 Act), Rule 301(a) (later Rule 302(a) (1999 Act as amended 2005)). It also conforms to the Final Draft of Federal Rule 301 as submitted to the United States Supreme Court by the Advisory Committee on Federal Rules of Evidence in 1973. “The so-called ‘bursting bubble’ theory, under which a presumption vanishes upon the introduction of evidence which would support a finding of the nonexistence of the presumed fact, even though not believed, is rejected as according presumptions too ‘slight and evanescent’ an effect.” Advisory Committee’s Note to Rule 301, 56 F.R.D. 183, 208 (1973). See also 1 J. Weinstein & M. Berger, Evidence ¶ 301[01] (1982). It should be noted that the Federal Rule of Evidence as finally enacted gave by default a different effect to presumptions in civil cases, in effect adopting the “bursting bubble” definition. See Fed. R. Evid. 301 (1975) (carried forward in the 2011 revision). The statement of the effect of the presumption in subsection (b) was added by the 2014 amendments to this Act, but subsection (b) was intended to have the same meaning before 2014, as stated in the official comments.

The presumption is established in recognition of the difficulties typically imposed on a creditor in proving insolvency in the bankruptcy sense, as provided in subsection (a). See generally Levit, The Archaic Concept of Balance-Sheet Insolvency, 47 Am.Bankr.L.J. 215 (1973). Not only is the relevant information in the possession of a debtor that is apt to be noncooperative, but the debtor’s records are apt to be incomplete and inaccurate. As a practical matter, insolvency is most cogently evidenced by a general cessation of payment of debts, as has long been recognized by the laws of other countries and is now reflected in the Bankruptcy Code. See Honsberger, Failure to Pay One’s Debts Generally as They Become Due: The Experience of France and Canada , 54 Am.Bankr.L.J. 153 (1980); J. MacLachlan, Bankruptcy 13, 63-64, 436 (1956). In determining whether a debtor is paying its debts generally as they become due, the court should look at more than the amount and due dates of the indebtedness. The court should also take into account such factors as the number of the debtor’s debts, the proportion of those debts not being paid, the duration of the nonpayment, and the existence of bona fide disputes or other special circumstances alleged to constitute an explanation for the stoppage of payments. The court’s determination may be affected by a consideration of the debtor’s payment practices prior to the period of alleged nonpayment and the payment practices of the trade or industry in which the debtor is engaged. The case law that has developed under Bankruptcy Code § 303(h)(1) (1984) has not required a showing that a debtor has failed or refused to pay a majority in number and amount of the debtor’s debts in order to prove general nonpayment of debts as they become due. See, e.g., Hill v. Cargill, Inc. .(In re Hill) , 8 B.R. 779, 3 C.B.C.2d 920 (Bankr. D.Minn. 1981) (nonpayment of three largest debts held to constitute general nonpayment, although small debts were being paid); In re All Media Properties, Inc ., 5 B.R. 126, 6 B.C.D. 586, 2 C.B.C.2d 449 (Bankr. S.D.Tex. 1980) (missing significant number of payments or regularly missing payments significant in amount said to constitute general nonpayment; missing payments on more than 50% of aggregate of claims said not to be required to show general nonpayment; nonpayment for more than 30 days after billing held to establish nonpayment of a debt when it is due); In re Kreidler Import Corp ., 4 B.R. 256, 6 B.C.D. 608, 2 C.B.C.2d 159 (Bankr. D.Md. 1980) (nonpayment of one debt constituting 97% of debtor’s total indebtedness held to constitute general nonpayment).

§ 39-23.3. 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 G.S. 39-23.4(a)(2) and G.S. 39-23.5 , 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.

History. 1997-291, s. 2; 1998-217, s. 6.

Official Comment (2014)

1. This section defines when “value” is given for a transfer or an obligation. “Value” is used in that sense in various contexts in this Act, frequently with a qualifying adjective. Used in that sense the word appears in the following provisions:
2. Section 3(a) is adapted from Bankruptcy Code § 548(d)(2)(A) (1984). See also § 3(a) of the Uniform Fraudulent Conveyance Act. The definition in Section 3 is not exclusive. “Value” is to be determined in light of the purpose of the Act to protect a debtor’s estate from being depleted to the prejudice of the debtor’s unsecured creditors. Consideration having no utility from a creditor’s viewpoint does not satisfy the statutory definition. The definition does not specify all the kinds of consideration that do not constitute value for the purposes of this Act—e.g., love and affection. See, e.g., United States v. West, 299 F. Supp. 661, 666 (D.Del. 1969).
3. Section 3(a) does not indicate what is “reasonably equivalent value” for a transfer or obligation. Under this Act, as under Bankruptcy Code § 548(a)(2) (1984), a transfer for security is ordinarily for a reasonably equivalent value notwithstanding a discrepancy between the value of the asset transferred and the debt secured, because the amount of the debt is the measure of the value of the interest in the asset that is transferred. See, e.g., Peoples-Pittsburgh Trust Co. v. Holy Family Polish Nat’l Catholic Church, Carnegie, Pa., 341 Pa. 390, 19 A.2d 360 (1941). If the debt is a voidable obligation under this Act, a transfer to secure it as well as the obligation would be vulnerable to attack as voidable. A transfer to satisfy or secure an antecedent debt owed an insider is also subject to avoidance under the conditions specified in Section 5(b).
4. Section 3(a) of the Uniform Fraudulent Conveyance Act has been thought not to recognize that an unperformed promise could constitute fair consideration. See McLaughlin, Application of the Uniform Fraudulent Conveyance Act, 46 Harv.L.Rev. 404, 414 (1933). Courts construing these provisions of the prior law nevertheless have held unperformed promises to constitute value in a variety of circumstances. See, e.g., Harper v. Lloyd’s Factors, Inc., 214 F.2d 662 (2d Cir. 1954) (transfer of money for promise of factor to discount transferor’s purchase-money notes given to fur dealer); Schlecht v. Schlecht, 168 Minn. 168, 176-77, 209 N.W. 883, 886-87 (1926) (transfer for promise to make repairs and improvements on transferor’s homestead); Farmer’s Exchange Bank v. Oneida Motor Truck Co., 202 Wis. 266, 232 N.W. 536 (1930) transfer in consideration of assumption of certain of transferor’s liabilities; see also Hummel v. Cernocky, 161 F.2d 685 (7th Cir. 1947) (transfer in consideration of cash, assumption of a mortgage, payment of certain debts, and agreement to pay other debts). Likewise a transfer in consideration of a negotiable note discountable at a commercial bank, or the purchase from an established, solvent institution of an insurance policy, annuity, or contract to provide care and accommodations clearly appears to be for value. On the other hand, an unperformed promise by an individual to support a parent or other transferor has generally been held not to constitute value. See, e.g., Springfield Ins. Co. v. Fry, 267 F. Supp. 693 (N.D.Okla. 1967); Sandler v. Parlapiano, 236 App.Div. 70, 258 N.Y.Supp. 88 (1st Dep’t 1932); Warwick Municipal Employees Credit Union v. Higham, 106 R.I. 363, 259 A.2d 852 (1969); Hulsether v. Sanders, 54 S.D. 412, 223 N.W. 335 (1929); Cooper v. Cooper, 22 Tenn.App. 473, 477, 124 S.W.2d 264, 267 (1939); Note, Rights of Creditors in Property Conveyed in Consideration of Future Support, 45 Iowa L.Rev. 546, 550-62 (1960). This Act adopts the view taken in the cases cited in determining whether an unperformed promise is value.
5. Subsection (b) rejects the rule of such cases as Durrett v. Washington Nat. Ins. Co., 621 F.2d 201 (5th Cir. 1980) (nonjudicial foreclosure of a mortgage avoided as a voidable transfer when the property of an insolvent mortgagor was sold for less than 70% of its fair value); and Abramson v. Lakewood Bank & Trust Co., 647 F.2d 547 (5th Cir. 1981), cert. denied, 454 U.S. 1164 (1982) (nonjudicial foreclosure held to be voidable transfer if made without fair consideration). Subsection (b) adopts the view taken in Lawyers Title Ins. Corp. v. Madrid (In re Madrid), 21 B.R. 424 (B.A.P. 9th Cir. 1982), aff’d on another ground, 725 F.2d 1197 (9th Cir. 1984), that the price bid at a regularly conducted and noncollusive foreclosure sale determines the fair value of the property sold for purposes of voidable transfer law. See also BFP v. Resolution Trust Corp., 511 U.S. 531, 537 n.3 (1994) (similarly construing Bankruptcy Code § 548; opinion expressly limited to foreclosure of real estate mortgages).
6. Subsection (c) is an adaptation of Bankruptcy Code § 547(c)(1) (1984). A transfer to an insider for an antecedent debt may be voidable under § 5(b).

4(a)(2) (“reasonably equivalent value”);

4(b)(8) (“value ... reasonably equivalent”);

5(a) (“reasonably equivalent value”);

8(a) (“reasonably equivalent value”);

8(b)(1)(ii)(A) and (d) (“value”);

8(f)(1) (“new value”); and

8(f)(3) (“present value”).

“Value” is also used in other senses in this Act, to which this section is not relevant. See, e.g. , §§ 8(b)(1), 8(c) (“value” in the sense of the value of a transferred asset).

Subsection (b) prescribes the effect of a sale meeting its requirements, whether the asset sold is personal or real property. It applies only to a sale under a mortgage, deed of trust, or security agreement. Subsection (b) thus does not apply to a sale foreclosing a nonconsensual lien, such as a tax lien. However, the subsection does apply to a foreclosure by sale of the interest of a vendee under an installment land contract in accordance with applicable law that requires or permits the foreclosure to be effected by a sale in the same manner as the foreclosure of a mortgage. See G. Osborne, G. Nelson, & D. Whitman, Real Estate Finance Law 83-84, 95-97 (1979).

If a lien given an insider for a present consideration is not perfected as against a subsequent bona fide purchaser or is so perfected after a delay following an extension of credit secured by the lien, foreclosure of the lien may result in a transfer for an antecedent debt that is voidable under Section 5(b). Subsection (b) does not apply to an action under Section 4(a)(1) to avoid a transfer or obligation because made or incurred with actual intent to hinder, delay, or defraud any creditor.

§ 39-23.4. Transfer or obligation voidable as to present or future creditor.

1. A transfer made or obligation incurred by a debtor is 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 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:
      1. 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
      2. Intended to incur, or believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.
2. In determining intent under subdivision (a)(1) of this section, consideration may be given, among other factors, to whether:
   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;
   11. The debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor;
   12. 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 reasonably should have believed that the debtor would incur debts beyond the debtor’s ability to pay as they became due; and
   13. The debtor transferred the assets in the course of legitimate estate or tax planning.
3. A creditor making a claim for relief under subsection (a) of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. Section 4(a)(1) is derived from § 7 of the Uniform Fraudulent Conveyance Act, which in turn was derived from the Statute of 13 Elizabeth, c. 5 (1571).  Factors appropriate for consideration in determining actual intent under Section 4(a)(1) are specified in subsection (b).
2. Section 4, unlike § 5, protects creditors of a debtor whose claims arise after as well as before the debtor made or incurred the challenged transfer or obligation. Similarly, there is no requirement in § 4(a)(1) that the intent referred to be directed at a creditor existing or identified at the time of transfer or incurrence. For example, promptly after the invention in Pennsylvania of the spendthrift trust, the assets and beneficial interest of which are immune from attachment by the beneficiary’s creditors, courts held that a debtor’s establishment of a spendthrift trust for the debtor’s own benefit is a voidable transfer under the Statute of 13 Elizabeth, without regard to whether the transaction is directed at an existing or identified creditor. Mackason’s Appeal, 42 Pa. 330, 338-39 (1862); see also, e.g., Ghormley v. Smith, 139 Pa. 584, 591-94 (1891); Patrick v. Smith, 2 Pa. Super. 113, 119 (1896). Cf. Restatement (Third) of Trusts § 58(2) (2003) (setting forth a substantially similar rule as a matter of trust law). Likewise, for centuries § 4(a)(1) and its predecessors have been employed to invalidate nonpossessory property interests that are thought to be potentially deceptive, without regard to whether the deception is directed at an existing or identified creditor. See, e.g., McGann v. Capital Sav. Bank & Trust Co., 89 A.2d 123, 183-84 (Vt. 1952) (seller’s retention of possession of goods after sale held voidable); Superior Partners v. Prof’l Educ. Network, Inc., 485 N.E.2d 1218, 1221 (Ill. App. Ct. 1985) (similar); Clow v. Woods, 5 Serg. & Rawle 275 (Pa. 1819) (holding that a nonpossessory chattel mortgage is voidable, in the absence of a system for giving public notice of such interests such as is today supplied by Article 9 of the Uniform Commercial Code).
3. Section 4(a)(2) is derived from §§ 5 and 6 of the Uniform Fraudulent Conveyance Act but substitutes “reasonably equivalent value” for “fair consideration.”  The transferee’s good faith was an element of “fair consideration” as defined in § 3 of the Uniform Fraudulent Conveyance Act, and lack of fair consideration was one of the elements of a fraudulent transfer as defined in four sections of the Uniform Fraudulent Conveyance Act.  The transferee’s good faith is irrelevant to a determination of the adequacy of the consideration under this Act, but lack of good faith may be a basis for withholding protection of a transferee or obligee under § 8.
4. Unlike the Uniform Fraudulent Conveyance Act, this Act does not prescribe different tests for voidability of a transfer that is made for the purpose of security and a transfer that is intended to be absolute.  The premise of this Act is that when a transfer is for security only, the equity or value of the asset that exceeds the amount of the debt secured remains available to unsecured creditors and thus cannot be regarded as the subject of a voidable transfer merely because of the encumbrance resulting from an otherwise valid security transfer.  Disproportion between the value of the asset securing the debt and the size of the debt secured does not, in the absence of circumstances indicating a purpose to hinder, delay, or defraud creditors, constitute an impermissible hindrance to the enforcement of other creditors’ rights against the debtor-transferor.  Cf. U.C.C. § 9-401(b) (2014) (providing that a debtor’s interest in collateral subject to a security interest is transferable notwithstanding an agreement with the secured party prohibiting transfer).
5. Subparagraph (i) of § 4(a)(2) is an adaptation of § 5 of the Uniform Fraudulent Conveyance Act but substitutes “unreasonably small [assets] in relation to the business or transaction” for “unreasonably small capital.”  The reference to “capital” in the Uniform Fraudulent Conveyance Act might be interpreted, incorrectly, to refer to the par value of stock or to the consideration received for stock issued.  The special meanings of “capital” in corporation law have no relevance in the law of voidable transfers.  The subparagraph focuses attention on whether the amount of all the assets retained by the debtor was inadequate, i.e., unreasonably small, in light of the needs of the business or transaction in which the debtor was engaged or about to engage.
6. Subsection (b) is a nonexclusive catalogue of factors appropriate for consideration by the court in determining whether the debtor had an actual intent to hinder, delay, or defraud one or more creditors.  Proof of the existence of any one or more of the factors enumerated in subsection (b) may be relevant evidence as to the debtor’s actual intent but does not create a presumption that the debtor has made a voidable transfer or incurred a voidable obligation.  The list of factors includes most of the so-called “badges of fraud” that have been recognized by the courts in construing and applying the Statute of 13 Elizabeth and § 7 of the Uniform Fraudulent Conveyance Act.  Proof of the presence of certain badges in combination establishes voidability conclusively—i.e., without regard to the actual intent of the debtor—when they concur as provided in § 4(a)(2) or in § 5.  The fact that a transfer has been made to a relative or to an affiliated corporation has not been regarded as a badge of fraud sufficient to warrant avoidance when unaccompanied by any other evidence of intent to hinder, delay, or defraud creditors.  The courts have uniformly recognized, however, that a transfer to a closely related person warrants close scrutiny of the other circumstances, including the nature and extent of the consideration exchanged.  See 1 G. Glenn, Fraudulent Conveyances and Preferences § 307 (Rev. ed. 1940).  The second, third, fourth, and fifth factors listed are all adapted from the classic catalogue of badges of fraud provided by Lord Coke in Twyne’s Case, 3 Coke 80b, 76 Eng.Rep. 809 (Star Chamber 1601).  Lord Coke also included the use of a trust and the recitation in the instrument of transfer that it “was made honestly, truly, and bona fide,” but the use of the trust is voidable only when accompanied by indicia of intent to hinder, delay, or defraud creditors, and recitals of “good faith” can no longer be regarded as significant evidence of intent to hinder, delay, or defraud creditors.
7. In considering the factors listed in § 4(b) a court should evaluate all the relevant circumstances involving a challenged transfer or obligation. Thus the court may appropriately take into account all indicia negativing as well as those suggesting intent to hinder, delay, or defraud creditors, as illustrated in the following reported cases:
8. Whether the transfer or obligation was to an insider: Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574, 1582-83 (2d Cir. 1983) (insolvent debtor’s purchase of two residences in the name of his spouse and the creation of a dummy corporation for the purpose of concealing assets held to evidence intent to hinder, delay, or defraud creditors); Banner Construction Corp. v. Arnold, 128 So.2d 893 (Fla.Dist.App. 1961) (assignment by one corporation to another having identical directors and stockholders constituted a badge of fraud); Travelers Indemnity Co. v. Cormaney, 258 Iowa 237, 138 N.W.2d 50 (1965) (transfer between spouses said to be a circumstance that shed suspicion on the transfer and that with other circumstances warranted avoidance); Hatheway v. Hanson, 230 Iowa 386, 297 N.W. 824 (1941) (transfer from parent to child said to require a critical examination of surrounding circumstances, which, together with other indicia of intent to hinder, delay, or defraud creditors, warranted avoidance); Lumpkins v. McPhee, 59 N.M. 442, 286 P.2d 299 (1955) (transfer from daughter to mother said to be indicative of intent to hinder, delay, or defraud creditors, but transfer held not to be voidable due to adequacy of consideration and delivery of possession by transferor).
9. The phrase “hinder, delay, or defraud” in § 4(a)(1), carried forward from the primordial Statute of 13 Elizabeth, is potentially applicable to any transaction that unacceptably contravenes norms of creditors’ rights. Section 4(a)(1) is sometimes said to require “actual fraud,” by contrast to § 4(a)(2) and § 5(a), which are said to require “constructive fraud.” That shorthand is highly misleading. Fraud is not a necessary element of a claim for relief under any of those provisions. By its terms, § 4(a)(1) applies to a transaction that “hinders” or “delays” a creditor, even if it does not “defraud” the creditor. See, e.g., Shapiro v. Wilgus, 287 U.S. 348, 354 (1932); Means v. Dowd, 128 U.S. 273, 288-89 (1888); Consove v. Cohen (In re Roco Corp.), 701 F.2d 978, 984 (1st Cir. 1983); Empire Lighting Fixture Co. v. Practical Lighting Fixture Co., 20 F.2d 295, 297 (2d Cir. 1927); Lippe v. Bairnco Corp., 249 F. Supp. 2d 357, 374 (S.D.N.Y. 2003). “Hinder, delay, or defraud” is best considered to be a single term of art describing a transaction that unacceptably contravenes norms of creditors’ rights. Such a transaction need not bear any resemblance to common-law fraud. Thus, the Supreme Court held a given transfer voidable because made with intent to “hinder, delay, or defraud” creditors, but emphasized: “We have no thought in so holding to impute to [the debtor] a willingness to participate in conduct known to be fraudulent…. [He] acted in the genuine belief that what [he] planned was fair and lawful. Genuine the belief was, but mistaken it was also. Conduct and purpose have a quality imprinted on them by the law.” Shapiro v. Wilgus. 287 U.S. 348, 357 (1932).
10. This Act is not an exclusive law on the subject of voidable transfers and obligations. See § 1, Comment 2. For example, the Uniform Commercial Code supplements or modifies the operation of this Act in numerous ways. Instances include the following:
11. Subsection (c) was added in 2014. Sections 2(b), 4(c), 5(c), 8(g), and 8(h) together provide uniform rules on burdens and standards of proof relating to the operation of this Act.
12. Subsection (c) allocates to the party making a claim for relief under § 4 the burden of persuasion as to the elements of the claim. Courts should not apply nonstatutory presumptions that reverse that allocation, and should be wary of nonstatutory presumptions that would dilute it. The command of § 13—that this Act is to be applied so as to effectuate its purpose of making uniform the law among states enacting it—applies with particular cogency to nonstatutory presumptions. Given the elasticity of key terms of this Act (e.g., “hinder, delay, or defraud”) and the potential difficulty of proving others (e.g., the financial condition tests in § 4(a)(2) and § 5), employment of divergent nonstatutory presumptions by enacting jurisdictions may render the law nonuniform as a practical matter. It is not the purpose of subsection (c) to forbid employment of any and all nonstatutory presumptions. Indeed, in some instances a judicially-crafted presumption applied under this Act or its predecessors has won such favor as to be codified as a separate statutory creation. Examples include the bulk sales laws, the absolute priority rule applicable to reorganizations under Bankruptcy Code § 1129(b)(2)(B)(ii) (2014), and the so-called “constructive fraud” provisions of § 4(a)(2) and § 5(a) of this Act itself. However, subsection (c) and § 13 mean, at the least, that a nonstatutory presumption is suspect if it would alter the statutorily-allocated burden of persuasion, would upset the policy of uniformity, or is an unwarranted carrying-forward of obsolescent principles. An example of a nonstatutory presumption that should be rejected for those reasons is a presumption that the transferee bears the burden of persuasion as to the debtor’s compliance with the financial condition tests in § 4(a)(2) and § 5, in an action under those provisions, if the transfer was for less than reasonably equivalent value (or, as another example, if the debtor was merely in debt at the time of the transfer). See Fidelity Bond & Mtg. Co. v. Brand, 371 B.R. 708, 716-22 (E.D. Pa. 2007) (rejecting such a presumption previously applied in Pennsylvania).

Section 4(a)(1) has the meaning elaborated in the preceding paragraph, but it is of course possible that a jurisdiction in which this Act is in force might enact other legislation that modifies the results of the particular examples given to illustrate that meaning. For example, some states have enacted legislation authorizing the establishment and funding of self-settled spendthrift trusts, subject to specified conditions. In such a state, such legislation will supersede the historical interpretation referred to in the preceding paragraph, either expressly or by necessary implication, with respect to allowed transfers to such a statutorily-validated trust. See, e.g. , Del. Code. Ann. tit. 12, § 3572(a), (b) (2014). See also Comment 8. Likewise, the historical skepticism of nonpossessory property interests has been superseded as to security interests in personal property by the Uniform Commercial Code. See Comment 9.

Subparagraph (ii) of § 4(a)(2) is an adaptation of § 6 of the Uniform Fraudulent Conveyance Act, which relates to a debtor that has or will have debts beyond the debtor’s ability to pay as they become due (a condition that is sometimes referred to as “insolvency in the equity sense”). Subparagraph (ii) carries forward the previous Act’s language capturing a debtor that “intends” or “believes” that the debtor is or will be unable to pay the debtor’s debts as they become due, and adds to that language capturing a debtor that “reasonably should have believed” the same. The added language makes clear that subparagraph (ii) also captures a debtor that, on the basis of objective assessment, has or will have debts beyond the debtor’s ability to pay as they become due, regardless of the debtor’s subjective belief.

1. Whether the transferor retained possession or control of the property after the transfer: Harris v. Shaw, 224 Ark. 150, 272 S.W.2d 53 (1954) (retention of property by transferor said to be a badge of fraud and, together with other badges, to warrant avoidance of transfer); Stephens v. Reginstein, 89 Ala. 561, 8 So. 68 (1890) (transferor’s retention of control and management of property and business after transfer held material in determining transfer to be voidable); Allen v. Massey, 84 U.S. (17 Wall.) 351 (1872) (joint possession of furniture by transferor and transferee considered in holding transfer to be voidable); Warner v. Norton, 61 U.S. (20 How.) 448 (1857) (surrender of possession by transferor deemed to negate allegations of intent to hinder, delay, or defraud creditors).
2. Whether the transfer or obligation was concealed or disclosed: Walton v. First National Bank, 13 Colo. 265, 22 P. 440 (1889) (agreement between parties to conceal the transfer from the public said to be one of the strongest badges of fraud); Warner v. Norton, 61 U.S. (20 How.) 448 (1857) (although secrecy said to be a circumstance from which, when coupled with other badges, intent to hinder, delay, or defraud creditors may be inferred, transfer was held not to be voidable when made in good faith and transferor surrendered possession); W.T. Raleigh Co. v. Barnett, 253 Ala. 433, 44 So.2d 585 (1950) (failure to record a deed in itself said not to evidence intent to hinder, delay, or defraud creditors, and transfer held not to be voidable).
3. Whether, before the transfer was made or obligation was incurred, a creditor sued or threatened to sue the debtor: Harris v. Shaw, 224 Ark. 150, 272 S.W.2d 53 (1954) (transfer held to be voidable when causally connected to pendency of litigation and accompanied by other badges of fraud); Pergrem v. Smith, 255 S.W.2d 42 (Ky.App. 1953) (transfer in anticipation of suit deemed to be a badge of fraud; transfer held voidable when accompanied by insolvency of transferor who was related to transferee); Bank of Sun Prairie v. Hovig, 218 F. Supp. 769 (W.D.Ark. 1963) (although threat or pendency of litigation said to be an indicator of intent to hinder, delay, or defraud creditors, transfer was held not to be voidable when adequate consideration and good faith were shown).
4. Whether the transfer was of substantially all the debtor’s assets: Walbrun v. Babbitt, 83 U.S. (16 Wall.) 577 (1872) (sale by insolvent retail shop owner of all of his inventory in a single transaction held to be voidable); Cole v. Mercantile Trust Co., 133 N.Y. 164, 30 N.E. 847 (1892) (transfer of all property before plaintiff could obtain a judgment held to be voidable); Lumpkins v. McPhee, 59 N.M. 442, 286 P.2d 299 (1955) (although transfer of all assets said to indicate intent to hinder, delay, or defraud creditors, transfer held not to be voidable because full consideration was paid and transferor surrendered possession).
5. Whether the debtor had absconded: In re Thomas, 199 F. 214 (N.D.N.Y. 1912) (when debtor collected all of his money and property with the intent to abscond, intent to hinder, delay, or defraud creditors was held to be shown).
6. Whether the debtor had removed or concealed assets: Bentley v. Young, 210 F. 202 (S.D.N.Y. 1914), aff’d, 223 F. 536 (2d Cir. 1915) (debtor’s removal of goods from store to conceal their whereabouts and to sell them held to render sale voidable); Cioli v. Kenourgios, 59 Cal.App. 690, 211 P. 838 (1922) (debtor’s sale of all assets and shipment of proceeds out of the country held to be voidable notwithstanding adequacy of consideration).
7. Whether 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: Toomay v. Graham, 151 S.W.2d 119 (Mo.App. 1941) (although mere inadequacy of consideration said not to be a badge of fraud unless it is grossly inadequate, transfer held to be voidable when accompanied by other badges of fraud); Texas Sand Co. v. Shield, 381 S.W.2d 48 (Tex. 1964) (inadequate consideration said to be an indicator of intent to hinder, delay, or defraud creditors, and transfer held to be voidable because of inadequate consideration, pendency of suit, family relationship of transferee, and fact that all nonexempt property was transferred); Weigel v. Wood, 355 Mo. 11, 194 S.W.2d 40 (1946) (although inadequate consideration said to be a badge of fraud, transfer held not to be voidable when inadequacy not gross and not accompanied by any other badge; fact that transfer was from father to son held not sufficient to establish intent to hinder, delay, or defraud creditors).
8. Whether the debtor was insolvent or became insolvent shortly after the transfer was made or obligation was incurred:  Harris v. Shaw, 224 Ark. 150, 272 S.W. 2d 53 (1954) (insolvency of transferor said to be a badge of fraud and transfer held voidable when accompanied by other badges of fraud); Bank of Sun Prairie v. Hovig, 218 F. Supp. 769 (W.D. Ark. 1963) (although the insolvency of the debtor said to be a badge of fraud, transfer held not voidable when debtor was shown to be solvent, adequate consideration was paid, and good faith was shown, despite the pendency of suit); Wareheim v. Bayliss, 149 Md. 103, 131 A. 27 (1925) (although insolvency of debtor acknowledged to be an indicator of intent to hinder, delay, or defraud creditors, transfer held not to be voidable when adequate consideration was paid and whether debtor was insolvent in fact was doubtful).
9. Whether the transfer occurred shortly before or shortly after a substantial debt was incurred:  Commerce Bank of Lebanon v. Halladale A Corp., 618 S.W. 2d 288, 292 (Mo.App. 1981) (when transferors incurred substantial debts near in time to the transfer, transfer was held to be voidable due to inadequate consideration, close family relationship, the debtor’s retention of possession, and the fact that almost all the debtor’s property was transferred).
10. Whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor: The wrong addressed by § 4(b)(11) is collusive and abusive use of a lienor’s superior position to eliminate junior creditors while leaving equity holders in place, perhaps unaffected.  The kind of disposition sought to be reached is exemplified by that found in Northern Pacific Co. v. Boyd, 228 U.S. 482, 502-05 (1913), the leading case in establishing the absolute priority doctrine in reorganization law.  There the Court held that a reorganization whereby the secured creditors and the management-owners retained their economic interests in a railroad through a foreclosure that cut off claims of unsecured creditors against its assets was in effect a voidable disposition. See Bruce A. Markell, Owners, Auctions and Absolute Priority in Bankruptcy Reorganizations, 44 Stan.L.Rev. 69, 74-83 (1991). For cases in which an analogous injury to unsecured creditors was inflicted by a lienor and a debtor, see Voest-Alpine Trading USA Corp. v. Vantage Steel Corp., 919 F.2d 206 (3d Cir. 1990) (lender foreclosed on assets of steel company at 5:00 p.m. on a Friday, then transferred the assets to an affiliate of the debtor; lender made a loan to the affiliate to enable it to purchase at the foreclosure sale on almost the same terms as the old loan; new business opened Monday morning); Jackson v. Star Sprinkler Corp. of Florida, 575 F.2d 1223, 1231-34 (8th Cir. 1978); Heath v. Helmick, 173 F.2d 157, 161-62 (9th Cir. 1949); Toner v. Nuss, 234 F. Supp. 457, 461-62 (E.D.Pa. 1964); and see In re Spotless Tavern Co., Inc., 4 F. Supp. 752, 753, 755 (D.Md. 1933).

Diminution of the assets available to the debtor’s creditors is not necessarily required to “hinder, delay, or defraud” creditors. For example, the age-old legal skepticism of nonpossessory property interests, which stems from their potential for deception, has often resulted in their avoidance under § 4(a)(1) or its predecessors. See Comments 2 and 7(b); cf. Comment 9. A transaction may “hinder, delay, or defraud” creditors although it neither reduces the assets available to the debtor’s creditors nor involves any potential deception. See, e.g., Shapiro v. Wilgus , 287 U.S. 348 (1932) (holding voidable a solvent individual debtor’s conveyance of his assets to a wholly-owned corporation for the purpose of instituting a receivership proceeding not available to an individual).

A transaction that does not place an asset entirely beyond the reach of creditors may nevertheless “hinder, delay, or defraud” creditors if it makes the asset more difficult for creditors to reach. Simple exchange by a debtor of an asset for a less liquid asset, or disposition of liquid assets while retaining illiquid assets, may be voidable for that reason. See, e.g., Empire Lighting Fixture Co. v. Practical Lighting Fixture Co. , 20 F.2d 295, 297 (2d Cir. 1927) (L. Hand, J.) (credit sale by a corporation to an affiliate of its plant, leaving the seller solvent with ample accounts receivable, held voidable because made with intent to hinder creditors of the seller, due to the comparative difficulty of creditors realizing on accounts receivable under then-current collection practice). Overcollateralization of a debt that is made with intent to hinder the debtor’s creditors, by rendering the debtor’s equity in the collateral more difficult for creditors to reach, is similarly voidable. See Comment 4. Likewise, it is voidable for a debtor intentionally to hinder creditors by transferring assets to a wholly-owned corporation or other organization, as may be the case if the equity interest in the organization is more difficult to realize upon than the assets (either because the equity interest is less liquid, or because the applicable procedural rules are more demanding). See, e.g., Addison v. Tessier , 335 P.2d 554, 557 (N.M. 1959); First Nat’l Bank. v. F. C. Trebein Co. , 52 N.E. 834, 837-38 (Ohio 1898); Anno., 85 A.L.R. 133 (1933).

Under the same principle, § 4(a)(1) would render voidable an attempt by the owners of a corporation to convert it to a different legal form ( e.g. , limited liability company or partnership) with intent to hinder the owners’ creditors, as may be the case if an owner’s interest in the alternative organization would be subject only to a charging order, and not to execution (which would typically be available against stock in a corporation). See, e.g., Firmani v. Firmani , 752 A.2d 854, 857 (N.J. Super. Ct. App. Div. 2000); cf. Interpool Ltd. v. Patterson , 890 F. Supp. 259, 266-68 (S.D.N.Y. 1995) (similar, but relying on a “good faith” requirement of the former Uniform Fraudulent Conveyance Act rather than that act’s equivalent of § 4(a)(1)). If such a conversion is done with intent to hinder creditors, it contravenes § 4(a)(1) regardless of whether it is effected by conveyance of the corporation’s assets to a new entity or by conversion of the corporation to the alternative form. In both cases the owner begins with the stock of the corporation and ends with an ownership interest in the alternative organization, a property right with different attributes. Either is a “transfer” under the designedly sweeping language of § 1(16), which encompasses “every mode…of…parting with an asset or an interest in an asset.” Cf., e.g., United States v. Sims (In re Feiler) , 218 F.3d 948 (9th Cir. 2000) (debtor’s irrevocable election under the Internal Revenue Code to waive carryback of net operating losses is a “transfer” under the substantially similar definition in the Bankruptcy Code); Weaver v. Kellogg , 216 B.R. 563, 573-74 (S.D. Tex. 1997) (exchange of notes owed to the debtor for new notes having different terms is a “transfer” by the debtor under that definition).

In § 4(a)(1), the phrase “hinder, delay, or defraud,” like the word “intent,” is a term of art whose words do not have their dictionary meanings. For example, every grant of a security interest “hinders” the debtor’s unsecured creditors in the dictionary sense of that word. Yet it would be absurd to suggest that every grant of a security interest contravenes § 4(a)(1). The line between permissible and impermissible grants cannot coherently be drawn by reference to the debtor’s subjective mental state, for a rational person knows the natural consequences of his actions, and that includes the adverse consequences to unsecured creditors of any grant of a security interest. See, e.g., Dean v. Davis , 242 U.S. 438, 444 (1917) (equating an act whose “obviously necessary effect” is to hinder, delay, or defraud creditors with an act intended to hinder, delay, or defraud creditors); United States v. Tabor Court Realty Corp. , 803 F.3d 1288, 1305 (3rd Cir. 1986) (holding that the trial court’s finding of intent to hinder, delay, or defraud creditors properly followed from its finding that the debtor could have foreseen the effect of its act on its creditors, because “a party is deemed to have intended the natural consequences of his acts”); In re Sentinel Management Group Inc. , 728 F.3d 660, 667 (7th Cir. 2013). Whether a transaction is captured by § 4(a)(1) ultimately depends upon whether the transaction unacceptably contravenes norms of creditors’ rights, given the devices legislators and courts have allowed debtors that may interfere with those rights. Section 4(a)(1) is the regulatory tool of last resort that restrains debtor ingenuity to decent limits.

Thus, for example, suppose that entrepreneurs organize a business as a limited liability company, contributing assets to capitalize it, in the ordinary situation in which none of the owners has particular reason to anticipate personal liability or financial distress and no other unusual facts are present. Assume that the LLC statute has the creditor-thwarting feature of precluding execution upon equity interests in the LLC and providing only for charging orders against such interests. Notwithstanding that feature, the owners’ transfers of assets to capitalize the LLC is not voidable under § 4(a)(1) as in force in the same state. The legislature in that state, having created the LLC vehicle having that feature, must have expected it to be used in such ordinary circumstances. By contrast, if owners of an existing business were to reorganize it as an LLC under such a statute when the clouds of personal liability or financial distress have gathered over some of them, and with the intention of gaining the benefit of that creditor-thwarting feature, the transfer effecting the reorganization should be voidable under § 4(a)(1), at least absent a clear indication that the legislature truly intended the LLC form, with its creditor-thwarting feature, to be available even in such circumstances.

Because the laws of different jurisdictions differ in their tolerance of particular creditor-thwarting devices, choice of law considerations may be important in interpreting § 4(a)(1) as in force in a given jurisdiction. For example, as noted in Comment 2, the language of § 4(a)(1) historically has been interpreted to render voidable a transfer to a self-settled spendthrift trust. Suppose that jurisdiction X, in which this Act is in force, also has in force a statute permitting an individual to establish a self-settled spendthrift trust and transfer assets thereto, subject to stated conditions. If an individual Debtor whose principal residence is in X establishes such a trust and transfers assets thereto, then under § 10 of this Act the voidable transfer law of X applies to that transfer. That transfer cannot be considered voidable in itself under § 4(a)(1) as in force in X, for the legislature of X, having authorized the establishment of such trusts, must have expected them to be used. (Other facts might still render the transfer voidable under X’s enactment of § 4(a)(1).) By contrast, if Debtor’s principal residence is in jurisdiction Y, which also has enacted this Act but has no legislation validating such trusts, and if Debtor establishes such a trust under the law of X and transfers assets to it, then the result would be different. Under § 10 of this Act, the voidable transfer law of Y would apply to the transfer. If Y follows the historical interpretation referred to in Comment 2, the transfer would be voidable under § 4(a)(1) as in force in Y.

(a) U.C.C. § 2-402(2) (2014) recognizes the generally prevailing rule that retention of possession of goods by a seller may be voidable, but limits the application of the rule by negating any imputation of voidability from “retention of possession in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification.” (Indeed, independently of § 2-402(2), retention of possession of goods in good faith and current course of trade by a merchant-seller for a commercially reasonable time after a sale or identification should not in itself be considered to “hinder, delay, or defraud” any creditor of the merchant-seller under § 4(a)(1).)

(b) Section 2A-308(1) provides a rule analogous to § 2-402(2) for situations in which a lessor retains possession of goods that are subject to a lease contract. Section 2A-308(3) provides that retention of possession of goods by the seller-lessee in a sale-leaseback transaction does not render the transaction voidable by a creditor of the seller-lessee if the buyer bought for value and in good faith.

(c) This Act does not preempt statutes governing bulk transfers, including Article 6 of the Uniform Commercial Code in jurisdictions in which it remains in force.

(d) Section 9-205 precludes treating a security interest in personal property as voidable on account of various enumerated features it may have. Among other things, § 9-205 immunizes a security interest in tangible property from being avoided on account of the secured party not being in possession of the property, notwithstanding the historical skepticism of nonpossessory property interests.

This Act operates independently of rules in an organic statute applicable to a business organization that limit distributions by the organization to its equity owners. Compliance with those rules does not insulate such a distribution from being voidable under this Act. It is conceivable that such an organic statute might contain a provision preempting the application of this Act to such distributions. Cf. Model Business Corporation Act § 152 (optional provision added in 1979 preempting the application of “any other statutes of this state with respect to the legality of distributions”; deleted 1984). Such a preemptive statute of course must be respected if applicable, but choice of law considerations may well render it inapplicable. See, e.g., Faulkner v. Kornman (In re The Heritage Organization, L.L.C.) , 413 B.R. 438, 462-63 (Bankr. N.D. Tex. 2009) (action under the Texas enactment of this Act challenging a distribution by a Delaware limited liability company to its members; held, a provision of the Delaware LLC statute imposing a three-year statute of repose on an action under “any applicable law” to recover a distribution by a Delaware LLC did not apply, because choice of law rules directed application of the voidable transfer law of Texas).

Pursuant to subsection (c), proof of intent to “hinder, delay, or defraud” a creditor under § 4(a)(1) is sufficient if made by a preponderance of the evidence. That is the standard of proof ordinarily applied in civil actions. Subsection (c) thus rejects cases that have imposed an extraordinary standard, typically “clear and convincing evidence,” by analogy to the standard commonly applied to proof of common-law fraud. That analogy is misguided. By its terms, § 4(a)(1) applies to a transaction that “hinders” or “delays” a creditor even if it does not “defraud,” and a transaction to which § 4(a)(1) applies need not bear any resemblance to common-law fraud. See Comment 8. Furthermore, the extraordinary standard of proof commonly applied to common-law fraud originated in cases that were thought to involve a special danger that claims might be fabricated. In the earliest such cases, a court of equity was asked to grant relief on claims that were unenforceable at law for failure to comply with the Statute of Frauds, the Statute of Wills, or the parol evidence rule. In time, extraordinary proof also came to be required in actions seeking to set aside or alter the terms of written instruments. See Herman & MacLean v. Huddleston , 459 U.S. 375, 388-89 (1983) and sources cited therein. Those reasons for extraordinary proof do not apply to claims for relief under § 4(a)(1).

For similar reasons, a procedural rule that imposes extraordinary pleading requirements on a claim of “fraud,” without further gloss, should not be applied to a claim under § 4(a)(1). The elements of a claim under § 4(a)(1) are very different from the elements of a claim of common-law fraud. Furthermore, the reasons for such extraordinary pleading requirements do not apply to a claim under § 4(a)(1). Unlike common-law fraud, a claim under § 4(a)(1) is not unusually susceptible to abusive use in a “strike suit,” nor is it apt to be of use to a plaintiff seeking to discover unknown wrongs. Likewise, a claim under § 4(a)(1) is unlikely to cause significant harm to the defendant’s reputation, for the defendant is the transferee or obligee, and the elements of the claim do not require the defendant to have committed even an arguable wrong. See Janvey v. Alguire , 846 F. Supp.2d 662, 675-77 (N.D. Tex. 2011); Carter-Jones Lumber Co. v. Benune , 725 N.E.2d 330, 331-33 (Ohio App. 1999). Cf. Federal Rules of Civil Procedure, Appendix, Form 21 (2010) (illustrative form of complaint for a claim under § 4(a)(1) or similar law, which Rule 84 declares sufficient to comply with federal pleading rules).

§ 39-23.5. Transfer or obligation voidable as to present creditor.

1. A transfer made or obligation incurred by a debtor is 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 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 G.S. 39-23.2(b) , a creditor making a claim for relief under subsection (a) or subsection (b) of this section has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. Subsection (a) is derived from § 4 of the Uniform Fraudulent Conveyance Act.  It adheres to the limitation of the protection of that section to a creditor whose claim arose before the transfer or obligation described.  As pointed out in Comment 3 accompanying § 4, this Act substitutes “reasonably equivalent value” for “fair consideration.”
2. Subsection (b) renders a preferential transfer—i.e., a transfer by an insolvent debtor for or on account of an antecedent debt—to an insider voidable when the insider had reasonable cause to believe that the debtor was insolvent.  This subsection adopts for general application the rule of such cases as Jackson Sound Studios, Inc. v. Travis, 473 F.2d 503 (5th Cir. 1973) (security transfer of corporation’s equipment to corporate principal’s mother perfected on eve of bankruptcy of corporation held to be voidable); In re Lamie Chemical Co., 296 F. 24 (4th Cir. 1924) (corporate preference to corporate officers and directors held voidable by receiver when corporation was insolvent or nearly so and directors had already voted for liquidation); Stuart v. Larson, 298 F. 223 (8th Cir. 1924), noted 38 Harv.L.Rev. 521 (1925) (corporate preference to director held voidable).  See generally 2 G. Glenn, Fraudulent Conveyances and Preferences 386 (Rev. ed. 1940). Subsection (b) overrules such cases as Epstein v. Goldstein, 107 F.2d 755, 757 (2d Cir. 1939) (transfer by insolvent husband to wife to secure his debt to her sustained against attack by husband’s trustee); Hartford Accident & Indemnity Co. v. Jirasek, 254 Mich. 131, 139, 235 N.W. 836, 389 (1931) (mortgage given by debtor to his brother to secure an antecedent debt owed the brother sustained as not voidable).
3. Subsection (b) does not extend as far as § 8(a) of the Uniform Fraudulent Conveyance Act and Bankruptcy Code § 548(b) (1984) in rendering voidable a transfer made by an insolvent partnership to a partner. A general partner is an insider of the partnership, but a transfer by the partnership to the partner nevertheless is not vulnerable to avoidance under § 5(b) unless the transfer is for an antecedent debt and the partner has reasonable cause to believe that the partnership is insolvent. By contrast, the cited provisions of the Uniform Fraudulent Conveyance Act and the Bankruptcy Code make any transfer by an insolvent partnership to a general partner voidable. Avoidance of the partnership transfer without reference to the partner’s state of mind and the nature of the consideration exchanged would be unduly harsh treatment of the creditors of the partner and unduly favorable to the creditors of the partnership.
4. Subsection (c) was added in 2014. Sections 2(b), 4(c), 5(c), 8(g), and 8(h) together provide uniform rules on burdens and standards of proof relating to the operation of this Act. The principles stated in Comment 11 to § 4 apply to subsection (c).

§ 39-23.6. When transfer is made or obligation is incurred.

For the purposes of this Article:

1. A transfer is made:
   1. 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 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
   2. 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 Article that is superior to the interest of the transferee.
2. If applicable law permits the transfer to be perfected as provided in subdivision (1) of this section and the transfer is not so perfected before the commencement of an action for relief under this Article, the transfer is deemed made immediately before the commencement of the action.
3. If applicable law does not permit the transfer to be perfected as provided in subdivision (1) of this section, 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:
   1. If oral, when it becomes effective between the parties; or
   2. If evidenced by a record, when the record signed by the obligor is delivered to or for the benefit of the obligee.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. One of the uncertainties in the law governing the avoidance of transfers and obligations of the nature governed by this Act is the time at which the cause of action arises. Section 6 clarifies that point in time. For transfers of real property other than a fixture, paragraph (1)(i) fixes the time as the date of perfection against a good-faith purchaser from the transferor. For transfers of fixtures and assets constituting personalty, paragraph (1)(ii) fixes the time as the date of perfection against a judicial lien creditor not asserting rights under this Act. Perfection under paragraph (1) typically is effected by notice-filing, recordation, or delivery of unequivocal possession. See U.C.C. §§ 9-310, 9-313 (2014) (security interest in personal property generally is perfected by notice-filing or delivery of possession to transferee); 4 American Law of Property §§ 17.10-17.12 (1952) (recordation of transfer or delivery of possession to grantee required for perfection against bona fide purchaser from grantor). The provision for postponing the time a transfer is made until its perfection is an adaptation of Bankruptcy Code § 548(d)(1) (1984). When no steps are taken to perfect a transfer that applicable law permits to be perfected, the transfer is deemed by paragraph (2) to be perfected immediately before the filing of an action to avoid it; without such a provision to cover that eventuality, an unperfected transfer arguably would be immune to attack. Some transfers may not be amenable to perfection as against a bona fide purchaser or judicial lien creditor. In the event that a transfer may not be perfected as provided in paragraph (1), paragraph (3) provides that the transfer occurs for the purpose of this Act when the transferor effectively parts with an interest in the asset.
2. Paragraph (4) requires the transferor to have rights in the asset transferred before the transfer is made for the purpose of this section.  This provision makes clear that the purpose of this section may not be circumvented by notice-filing or recordation of a document evidencing an interest in an asset to be acquired in the future. Cf. Bankruptcy Code § 547(e) (1984); U.C.C. § 9-203(b)(2) (2014).
3. Paragraph (5) had no analogue in the Uniform Fraudulent Conveyance Act.  It is intended to resolve uncertainty arising from Rubin v. Manufacturers Hanover Trust Co., 661 F.2d 979, 989-91, 997 (2d Cir. 1981), insofar as that case holds that an obligation of guaranty may be deemed to be incurred when advances covered by the guaranty are made rather than when the guaranty first became effective between the parties.  Compare Rosenberg, Intercorporate Guaranties and the Law of Fraudulent Conveyances: Lender Beware, 125 U.Pa.L.Rev. 235, 256-57 (1976).

An obligation may be avoided under this Act if it is incurred under the circumstances specified in § 4(a) or § 5(a). The debtor may receive reasonably equivalent value in exchange for an obligation incurred even though the benefit to the debtor is indirect. See Rubin v. Manufacturers Hanover Trust Co ., 661 F.2d at 991-92; Williams v. Twin City Co ., 251 F.2d 678, 681 (9th Cir. 1958); Rosenberg, supra , at 243-46.

Under paragraph (5), an oral obligation is incurred when it becomes effective between the parties, and later confirmation of the oral obligation by a record does not reset the time of incurrence to that later time.

§ 39-23.7. Remedies of creditor.

1. In an action for relief against a transfer or obligation under this Article, a creditor, subject to the limitations in G.S. 39-23.8 , 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 if available under applicable law; and
   3. Subject to applicable principles of equity and in accordance with applicable rules of civil procedure:
      1. An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;
      2. Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or
      3. 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.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. This section is derived from §§ 9 and 10 of the Uniform Fraudulent Conveyance Act.  Section 9 of that Act specified the remedies of creditors whose claims have matured, and § 10 enumerated the remedies available to creditors whose claims have not matured. A creditor holding an unmatured claim may be denied the right to receive payment from the proceeds of a sale on execution until the claim has matured, but the proceeds may be deposited in court or in an interest-bearing account pending the maturity of the creditor’s claim.  The remedies specified in this section are not exclusive.
2. The availability of an attachment or other provisional remedy has been restricted by amendments of statutes and rules of procedure in response to Connecticut v. Doehr, 501 U.S. 1 (1991), Sniadach v. Family Finance Corp., 395 U.S. 337 (1969), and their progeny.  This judicial development and the procedural changes that followed in its wake do not preclude resort to attachment by a creditor in seeking avoidance of a transfer or obligation.  See, e.g., Britton v. Howard Sav. Bank, 727 F.2d 315, 317-20 (3d Cir. 1984); Computer Sciences Corp. v. Sci-Tek Inc., 367 A.2d 658, 661 (Del. Super. 1976); Great Lakes Carbon Corp. v. Fontana, 54 A.D.2d 548, 387 N.Y.S. 2d 115 (1st Dep’t 1976).  Section 7(a)(2) continues the authorization for the use of attachment contained in § 9(b) of the Uniform Fraudulent Conveyance Act, or of a similar provisional remedy, when applicable law provides therefor, subject to the constraints imposed by the due process clauses of the United States and state constitutions.
3. Subsections (a) and (b) of § 10 of the Uniform Fraudulent Conveyance Act authorized the court, in an action on a voidable transfer or obligation, to restrain the defendant from disposing of his property, to appoint a receiver to take charge of his property, or to make any order the circumstances may require.  Section 10, however, applied only to a creditor whose claim was unmatured.  There is no reason to restrict the availability of these remedies to such a creditor, and the courts have not so restricted them.  See, e.g., Lipskey v. Voloshen, 155 Md. 139, 143-45, 141 Atl. 402, 404-05 (1928) (judgment creditor granted injunction against disposition of property by transferee, but appointment of receiver denied for lack of sufficient showing of need for such relief); Matthews v. Schusheim, 36 Misc. 2d 918, 922-23, 235 N.Y.S.2d 973, 976-77, 991-92 (Sup.Ct. 1962) (injunction and appointment of receiver granted to holder of claims for fraud, breach of contract, and alimony arrearages; whether creditor’s claim was mature said to be immaterial); Oliphant v. Moore, 155 Tenn. 359, 362-63, 293 S.W. 541, 542 (1927) (tort creditor granted injunction restraining alleged tortfeasor’s disposition of property).
4. As under the Uniform Fraudulent Conveyance Act, a creditor is not required to obtain a judgment against the debtor-transferor or to have a matured claim in order to proceed under subsection (a).  See §§ 1(3) and 1(4); American Surety Co. v. Conner, 251 N.Y. 1, 166 N.E. 783, 65 A.L.R. 244 (1929); 1 G. Glenn, Fraudulent Conveyances and Preferences 129 (Rev. ed. 1940).
5. The provision in subsection (b) for a creditor to levy execution on a transferred asset continues the availability of a remedy provided in § 9(b) of the Uniform Fraudulent Conveyance Act.  See, e.g., Doland v. Burns Lbr. Co., 156 Minn. 238, 194 N.W. 636 (1923); Montana Ass’n of Credit Management v. Hergert, 181 Mont. 442, 449, 453, 593 P.2d 1059, 1063, 1065 (1979); Corbett v. Hunter, 292 Pa.Super. 123, 128, 436 A.2d 1036, 1038 (1981); see also American Surety Co. v. Conner, 251 N.Y. 1, 6, 166 N.E. 783, 784, 65 A.L.R. 244, 247 (1929) (“In such circumstances he [the creditor] might find it necessary to indemnify the sheriff and, when the seizure was erroneous, assumed the risk of error”); McLaughlin, Application of the Uniform Fraudulent Conveyance Act, 46 Harv.L.Rev. 404, 441-42 (1933).
6. The remedies specified in § 7, like those enumerated in §§ 9 and 10 of the Uniform Fraudulent Conveyance Act, are cumulative.  Lind v. O. N. Johnson Co., 204 Minn. 30, 40, 282 N.W. 661, 667, 119 A.L.R. 940 (1939) (Uniform Fraudulent Conveyance Act held not to impair or limit availability of the “old practice” of obtaining judgment and execution returned unsatisfied before proceeding in equity to set aside a transfer); Conemaugh Iron Works Co. v. Delano Coal Co., Inc., 298 Pa. 182, 186, 148 A. 94, 95 (1929) (Uniform Fraudulent Conveyance Act held to give an “additional optional remedy” and not to “deprive a creditor of the right, as formerly, to work out his remedy at law”); 1 G. Glenn, Fraudulent Conveyances and Preferences 120, 130, 150 (Rev. ed. 1940).
7. If a transfer or obligation is voidable under § 4 or § 5, the basic remedy provided by this Act is its avoidance under subsection (a)(1). “Avoidance” is a term of art in this Act, for it does not mean that the transfer or obligation is simply rendered void. It has long been established that a transfer avoided by a creditor under this Act or its predecessors is nevertheless valid as between the debtor and the transferee. For example, in the case of a transfer of property worth $100 by Debtor to Transferee, held voidable in a suit by Creditor-1 who is owed $80 by Debtor, “avoidance” of the transfer leaves the $20 surplus with Transferee. Debtor is not entitled to recover the surplus. Nor is Debtor’s Creditor-2 entitled to pursue the surplus by reason of Creditor-1’s action (though Creditor-2 may be entitled to bring its own avoidance action to pursue the surplus). The foregoing principle is embedded in the language of subsection (a)(1), which prescribes “avoidance” only “to the extent necessary to satisfy the creditor’s claim.” Section 9(a) of the Uniform Fraudulent Conveyance Act was similarly limited. See, e.g., Becker v. Becker, 416 A.2d 156, 162 (Vt. 1980); De Martini v. De Martini, 52 N.E.2d 138, 141 (Ill. 1943); Markward v. Murrah, 156 S.W.2d 971, 974 (Tex. 1941); Society Milion Athena, Inc. v. National Bank of Greece, 22 N.E.2d 374, 377 (N.Y. 1939); National Radiator Corp. v. Parad, 8 N.E.2d 794, 796-97 (Mass. 1937); 1 G. Glenn, Fraudulent Conveyances and Preferences § 114, at 225 (Rev. ed. 1940). The transferee’s mental state is irrelevant to the foregoing, but a good-faith transferee may also be afforded protection by § 8.

It follows that “avoidance” of an obligation under subsection (a)(1) likewise should not mean its cancellation, but rather a remedy that recognizes the existence of the obligation and the superiority of the plaintiff creditor’s interest over the obligee’s interest. Ordinarily that should mean subordination of the obligation to the plaintiff creditor’s claim against the debtor. That would entail disgorgement by the obligee of any payments received or receivable on the obligation, to the extent necessary to satisfy the plaintiff creditor’s claim, with the obligee being subrogated to the plaintiff creditor when the latter’s claim is paid. Of course, if the obligation is unenforceable for reasons other than contravention of this Act, contravention of this Act does not render the obligation enforceable.

This Comment relates to the meaning of subsection (a)(1). If this Act is invoked in a bankruptcy proceeding, the remedial entitlements provided by the Bankruptcy Code may differ from those provided by this Act.

§ 39-23.8. Defenses, liability, and protection of transferee or obligee.

1. A transfer or obligation is not voidable under G.S. 39-23.4(a)(1) against a person 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 G.S. 39-23.7(a)(1), the following rules apply:
   1. Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (c) of this section, or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against any of the following:
      1. The first transferee of the asset or the person for whose benefit the transfer was made.
      2. An immediate or mediate transferee of the first transferee, other than any of the following:
         1. A good-faith transferee that took for value.
         2. An immediate or mediate good-faith transferee of a person described in sub-sub-subdivision 1. of this sub-subdivision.
   2. Recovery pursuant to G.S. 39-23.7(a)(1) or G.S. 39-23.7(b) of or from the asset transferred or its proceeds, by levy or otherwise, is available only against a person described in sub-subdivision a. or b. of subdivision (1) of this subsection.
3. If the judgment under subsection (b) of this section is based upon the value of the asset transferred, the judgment shall 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 Article, a good-faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to any of the following:
   1. A lien on or a right to retain an interest in the asset transferred.
   2. Enforcement of an obligation incurred.
   3. A reduction in the amount of the liability on the judgment.
5. A transfer is not voidable under G.S. 39-23.4(a)(2) or G.S. 39-23.5 if the transfer results from one or more of the following:
   1. Termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law.
   2. Enforcement of a security interest in compliance with Article 9 of Chapter 25 of the General Statutes, the Uniform Commercial Code, other than acceptance of collateral in full or partial satisfaction of the obligation it secures.
   3. The payment of taxes, debts, fines, penalties, or other obligations or amounts to the State or to any political subdivision of the State.
6. A transfer is not voidable under G.S. 39-23.5(b) :
   1. To the extent the insider gave new value to or for the benefit of the debtor after the transfer was made, except to the extent the new value was secured by a valid lien;
   2. If made in the ordinary course of business or financial affairs of the debtor and the insider; or
   3. 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:
   1. A party that seeks to invoke subsection (a), (d), (e), or (f) of this section has the burden of proving the applicability of that subsection.
   2. Except as otherwise provided in subdivisions (3) and (4) of this subsection, the creditor has the burden of proving each applicable element of subsection (b) or (c) of this section.
   3. The transferee has the burden of proving the applicability to the transferee of sub-sub-subdivision (b)(1)b.1. or 2. of this section.
   4. A party that seeks adjustment under subsection (c) of this section 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.

History. 1997-291, s. 2; 2015-23, s. 1; 2017-204, s. 3.3(b); 2018-142, s. 7(b).

Official Comment (2014)

1. Subsection (a) sets forth a complete defense to an action for avoidance under § 4(a)(1).  The subsection is an adaptation of the exception stated in § 9 of the Uniform Fraudulent Conveyance Act.  Pursuant to subsection (g), the person invoking this defense carries the burden of establishing good faith and the reasonable equivalence of the consideration exchanged.
2. Subsection (b) is derived from Bankruptcy Code §§ 550(a), (b) (1984). The value of the asset transferred is limited to the value of the levyable interest of the transferor, exclusive of any interest encumbered by a valid lien. See § 1(2).
3. Subsection (c) has no analogue in Bankruptcy Code § 550(a), (b) (1984). The measure of the recovery of a creditor against a transferee is usually limited to the value of the asset transferred at the time of the transfer. See, e.g., United States v. Fernon, 640 F.2d 609, 611 (5th Cir. 1981); Hamilton Nat’l Bank of Boston v. Halstead, 134 N.Y. 520, 31 N.E. 900 (1892); cf. Buffum v. Peter Barceloux Co., 289 U.S. 227 (1932) (transferee’s objection to trial court’s award of highest value of asset between the date of the transfer and the date of the decree of avoidance rejected because an award measured by value as of time of the transfer plus interest from that date would have been larger). The premise of § 8(c) is that changes in value of the asset transferred that occur after the transfer should ordinarily not affect the amount of the creditor’s recovery. Circumstances may require a departure from that measure of the recovery, however, as the cases decided under the Uniform Fraudulent Conveyance Act and other laws derived from the Statute of 13 Elizabeth illustrate. Thus, if the value of the asset at the time of levy and sale to enforce the judgment of the creditor has been enhanced by improvements of the asset transferred or discharge of liens on the property, a good-faith transferee should be reimbursed for the outlay for such a purpose to the extent the sale proceeds were increased thereby. See Bankruptcy Code § 550(d) (1984); Janson v. Schier, 375 A.2d 1159, 1160 (N.H. 1977); Anno., 8 A.L.R. 527 (1920). If the value of the asset at the time of the transfer has been diminished by severance and disposition of timber or minerals or fixtures, the transferee should be liable for the amount of the resulting reduction. See Damazo v. Wahby, 269 Md. 252, 257, 305 A.2d 138, 142 (1973). If the transferee has collected rents, harvested crops, or derived other income from the use or occupancy of the asset after the transfer, the liability of the transferee should be limited in any event to the net income after deduction of the expense incurred in earning the income. Anno., 60 A.L.R.2d 593 (1958). On the other hand, adjustment for the equities does not warrant an award to the creditor of consequential damages alleged to accrue from mismanagement of the asset after the transfer.
4. Subsection (d) is an adaptation of Bankruptcy Code § 548(c) (1984). An insider that receives property or an obligation from an insolvent debtor as security for or in satisfaction of an antecedent debt of the transferor or obligor is not a good-faith transferee or obligee if the insider has reasonable cause to believe that the debtor was insolvent at the time the transfer was made or the obligation was incurred. If a foreclosure sale is voidable and does not qualify for the benefit of § 3(b) or § 8(e)(2) because it was not conducted in accordance with the requirements of applicable law, the buyer, if in good faith, will still be entitled to the benefit of subsection (d) to the extent of the price paid by the buyer.
5. Subsection (e)(1) rejects the rule adopted in Darby v. Atkinson (In re Farris), 415 F. Supp. 33, 39-41 (W.D.Okla. 1976), that termination of a lease on default in accordance with its terms and applicable law may constitute a voidable transfer.
6. Subsection (f) provides additional defenses against the avoidance of a preferential transfer to an insider under § 5(b).
7. Subsections (g) and (h) were added in 2014. Sections 2(b), 4(c), 5(c), 8(g), and 8(h) together provide uniform rules on burdens and standards of proof relating to the operation of this Act. The principles stated in Comment 11 to § 4 apply to subsections (g) and (h).
8. The provisions of § 8 are integral elements of the rights created by this Act. Accordingly, they should apply if this Act is invoked in a bankruptcy proceeding pursuant to Bankruptcy Code § 544(b) (2014). That follows from the fundamental principle that property rights in bankruptcy should be the same as outside bankruptcy, unless a federal interest compels a different result. See Butner v. United States, 440 U.S. 48, 55 (1979). Section 8(b) limits damages under this Act to the amount of the plaintiff creditor’s claim, and that limitation is overridden in bankruptcy by the rule of Moore v. Bay, 284 U.S. 4 (1931), which Congress unmistakably maintained when it enacted the Bankruptcy Code. In the absence of a clear override by the Bankruptcy Code or other federal law, however, other aspects of § 8 should apply if this Act is invoked in bankruptcy. See, e.g., Decker v. Tramiel (In re JTS Corp.), 617 F.3d 1102, 1110-16 (9th Cir. 2010) (holding that § 8(d) applies to a claim for relief brought under this Act in a bankruptcy proceeding pursuant to Bankruptcy Code § 544(b)).

The requirement of Bankruptcy Code § 550(b)(1) (1984) that a transferee be “without knowledge of the voidability of the transfer” in order to be protected has been omitted as inappropriate. Knowledge of the facts rendering the transfer voidable would be inconsistent with the good faith that is required of a protected transferee. Knowledge of the voidability of a transfer would seem to involve a legal conclusion. Determination of the voidability of the transfer ought not to require the court to inquire into the legal sophistication of the transferee.

A transfer of property by the transferee of a voidable transfer might, on appropriate facts, be avoidable for reasons independent of the original voidable transfer. In such a case the subsequent transferee may be entitled to a defense under § 8(b) to an action based on the original voidable transfer, but that defense would not apply to an action based on the subsequent transfer that is independently voidable. For example, suppose that X transfers property to Y in a transfer voidable under this Act, and that Y later transfers the property to Z, who is a good-faith transferee for value. In general, C-1, a creditor of X, would have the right to a money judgment against Y pursuant to § 8(b), but C-1 could not recover under this Act from Z, who would be protected by § 8(b)(1)(ii)(A). However, it might be the case that Y’s transfer to Z is independently voidable as to Y’s creditors (including C-1, as creditor of Y by dint of its rights under this Act). Such might be the case if, for example, the value received by Y in exchange for the transfer is not reasonably equivalent and Y is in financial distress, or if Y made the transfer with intent to hinder, delay, or defraud any of its creditors. In such a case creditors of Y may pursue remedies against Z with respect to that independently voidable transfer, and the defense afforded to Z by § 8(b)(1)(ii)(A) would not apply to that action. Of course choice of law must be considered in such a situation: the jurisdiction whose law governs the voidability of the original transfer from X to Y and the consequent liability of Y and subsequent transferees need not be the same as the jurisdiction whose law governs the voidability of the independently voidable transfer from Y to Z and the consequent liability of Z and subsequent transferees.

Subsection (e)(2) protects a transferee that acquires a debtor’s interest in an asset as a result of the enforcement by a secured party (which may but need not be the transferee) of rights pursuant to and in compliance with the provisions of Part 6 of Article 9 of the Uniform Commercial Code. Cf. Calaiaro v. Pittsburgh Nat’l Bank (In re Ewing) , 33 B.R. 288, 9 C.B.C.2d 526, CCH B.L.R. ¶ 69,460 (Bankr. W.D.Pa. 1983) (sale of pledged stock held subject to avoidance under § 548 of the Bankruptcy Code), rev’d , 36 B.R. 476 (W.D.Pa. 1984) (transfer held not voidable because deemed to have occurred more than one year before bankruptcy petition filed). The global requirement of Article 9 that the secured party enforce its rights in good faith, and the further requirement of Article 9 that certain remedies be conducted in a commercially reasonable manner, provide substantial protection to the other creditors of the debtor. See U.C.C. §§ 1-304, 9-607(b), 9-610(b) (2014). The exemption afforded by subsection (e)(2) does not extend to acceptance of collateral in full or partial satisfaction of the obligations it secures. That remedy, contemplated by U.C.C. §§ 9-620—9-622 (2014), is sometimes referred to as “strict foreclosure.” An exemption for strict foreclosure is inappropriate because compliance with the rules of Article 9 relating to strict foreclosure may not sufficiently protect the interests of the debtor’s other creditors if the debtor does not act to protect equity the debtor may have in the asset.

Paragraph (1) is adapted from Bankruptcy Code § 547(c)(4) (1984), which permits a preferred creditor to set off the amount of new value subsequently advanced against the recovery of a voidable preference by a trustee in bankruptcy to the debtor without security. The new value may consist not only of money, goods, or services delivered on unsecured credit but also of the release of a valid lien. See, e.g., In re Ira Haupt & Co ., 424 F.2d 722, 724 (2d Cir. 1970); Baranow v. Gibraltor Factors Corp. (In re Hygrade Envelope Co.) , 393 F.2d 60, 65-67 (2d Cir.), cert. denied, 393 U.S. 837 (1968); In re John Morrow & Co ., 134 F. 686, 688 (S.D.Ohio 1901). It does not include an obligation substituted for a prior obligation. If the insider receiving the preference thereafter extends new credit to the debtor but also takes security from the debtor, the injury to the other creditors resulting from the preference remains undiminished by the new credit. On the other hand, if a lien taken to secure the new credit is itself voidable by a judicial lien creditor of the debtor, the new value received by the debtor may appropriately be treated as unsecured and applied to reduce the liability of the insider for the preferential transfer.

Paragraph (2) is derived from Bankruptcy Code § 547(c)(2) (1984), which excepts certain payments made in the ordinary course of business or financial affairs from avoidance by the trustee in bankruptcy as preferential transfers. Whether a transfer was in the “ordinary course” requires a consideration of the pattern of payments or secured transactions engaged in by the debtor and the insider prior to the transfer challenged under § 5(b). See Tait & Williams, Bankruptcy Preference Laws: The Scope of Section 547(c)(2) , 99 Banking L.J. 55, 63-66 (1982). The defense provided by paragraph (2) is available, irrespective of whether the debtor or the insider or both are engaged in business, but the prior conduct or practice of both the debtor and the insider-transferee are relevant.

Paragraph (3) has no analogue in Bankruptcy Code § 547 (1984). It reflects a policy judgment that an insider who has previously extended credit to a debtor should not be deterred from extending further credit to the debtor in a good-faith effort to save the debtor from a forced liquidation in bankruptcy or otherwise. A similar rationale has sustained the taking of security from an insolvent debtor for an advance to enable the debtor to stave off bankruptcy and extricate itself from financial stringency. Blackman v. Bechtel , 80 F.2d 505, 508-09 (8th Cir. 1935); Olive v. Tyler .(In re Chelan Land Co.) , 257 F. 497, 5 A.L.R. 561 (9th Cir. 1919); In re Robin Bros. Bakeries, Inc ., 22 F. Supp. 662, 663-64 (N.D.Ill. 1937); see Dean v. Davis , 242 U.S. 438, 444 (1917). The amount of the present value given, the size of the antecedent debt secured, and the likelihood of success for the rehabilitative effort are relevant considerations in determining whether the transfer was in good faith.

§ 39-23.9. Extinguishment of claim for relief.

A claim for relief with respect to a voidable transfer or obligation under this Article is extinguished unless action is brought:

1. Under G.S. 39-23.4(a)(1), not later than four years after the transfer was made or the obligation was incurred or, if later, not later than one year after the transfer or obligation was or could reasonably have been discovered by the claimant;
2. Under G.S. 39-23.4(a)(2) or G.S. 39-23.5(a) , not later than four years after the transfer was made or the obligation was incurred; or
3. Under G.S. 39-23.5(b) , not later than one year after the transfer was made.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. This section had no analogue in the Uniform Fraudulent Conveyance Act. Its purpose is to make clear that lapse of the statutory periods prescribed by the section bars the right and not merely the remedy. The section rejects the rule applied in United States v. Gleneagles Inv. Co., 565 F. Supp. 556, 583 (M.D.Pa. 1983) (state statute of limitations held not to apply to action by United States based on Uniform Fraudulent Conveyance Act). Another consequence of barring the right and not merely the remedy is that, under Restatement (Second) of Conflict of Laws § 143 (1971), if an action is brought in jurisdiction A and the action is determined to be governed by this Act as enacted in jurisdiction B, the action cannot be maintained if it is time-barred in jurisdiction B. The 1988 revision of §§ 142 and 143 of the Restatement (Second) of Conflict of Laws, which eliminated the right/remedy distinction, should not be applied to this Act. Because a voidable transfer or obligation may injure all of a debtor’s many creditors, there is need for a uniform and predictable cutoff time.
2. Statutes of limitations applicable to the avoidance of transfers and obligations vary widely from state to state and are frequently subject to uncertainties in their application. See Hesson, The Statute of Limitations in Actions to Set Aside Fraudulent Conveyances and in Actions Against Directors by Creditors of Corporations, 32 Cornell L.Q. 222 (1946); Annos., 76 A.L.R. 864 (1932), 128 A.L.R. 1289 (1940), 133 A.L.R. 1311 (1941), 14 A.L.R.2d 598 (1950), and 100 A.L.R.2d 1094 (1965).  Together with § 6, this section should mitigate the uncertainty and diversity that have characterized the decisions applying statutes of limitations to actions to avoid transfers and obligations.  The periods prescribed apply, whether the action under this Act is brought by a creditor or by a purchaser at a sale on execution levied pursuant to § 7(b) and whether the action is brought against the original transferee or subsequent transferee.  The prescription of statutory periods of limitation does not preclude the barring of an avoidance action for laches.  See § 12 and the accompanying Comment.
3. Subsection (a) provides that the four-year period ordinarily applicable to a claim for relief under § 4(a)(1) is extended to “one year after the transfer or obligation was or could reasonably have been discovered by the claimant.” Antecedents to that “discovery rule” have long existed in common law and in other statutes, and courts may take different approaches to filling out the meaning of subsection (a) by reference to such precedents. Thus, subsection (a) literally starts the one-year period when the transfer was or could reasonably have been discovered by the claimant, but cases applying subsection (a) have held that the period starts only when the transfer and its wrongful nature were or could reasonably have been discovered. See, e.g., Freitag v. McGhie, 947 P.2d 1186 (Wash. 1997); State Farm Mut. Auto. Ins. Co. v. Cordua, 834 F. Supp.2d 301, 306-08 (E.D. Pa. 2011). A recurring situation to which that distinction may be relevant is Spouse X’s transfer of assets beyond the reach of creditors, made in anticipation of divorcing Spouse Y after the four-year period has elapsed and made for the purpose of thwarting Spouse Y’s economic interests in the divorce. Spouse Y may well know of the transfer long before Spouse Y learns its wrongful purpose. Of course, even if the period specified in subsection (a) is held to have lapsed in a given case, law other than this Act might allow the transferred assets to be considered in making a division of assets in the ensuing divorce case.

§ 39-23.9A. Governing law.

1. 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 its place of business.
   3. A debtor that is an organization and 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 Article 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.

History. 2015-23, s. 1.

Official Comment (2014)

1. Section 10, added in 2014, is a simple and predictable choice of law rule applicable to claims for relief of the nature governed by the Act. It provides that a claim for relief in the nature of a claim for relief under the Act is governed by the local law of the jurisdiction in which the debtor is “located” at the time the challenged transfer is made or the challenged obligation is incurred. “Local” law means the substantive law of the referenced jurisdiction, and not its choice of law rules. Section 6 determines the time at which a transfer is made or obligation is incurred for purposes of the Act, including this section. Section 10 applies equally to a candidate jurisdiction that is a sister state and to a candidate jurisdiction that is a foreign nation.
2. The choice of law rule set forth in § 10(b) applies to any claim for relief in the nature of a claim for relief under this Act—in other words, any claim for relief sufficiently similar to a claim for relief under this Act as to warrant the application of this Act’s choice of law rule. “This Act” of course refers to the enactment of this Act that is in force in the jurisdiction whose enactment of § 10(b) is being applied. Section 10(b) could not properly have been written to apply merely to “a claim for relief under this Act,” for such a formulation would presuppose the applicability of the substantive provisions of this Act as in force in that jurisdiction. If a question should arise as to whether a given claim for relief is sufficiently similar to a claim for relief under this Act that § 10(b) should apply to it, tAs he answer is left to judicial determination.
3. As used in subsection (a), the terms “principal residence,” “place of business,” and “chief executive office” are to be evaluated on the basis of authentic and sustained activity, not on the basis of manipulations employed to establish a location artificially (e.g., by such means as establishing a notional “chief executive office” by use of straw-man officers or directors in a jurisdiction in which creditors’ rights are substantially debased, or establishing a notional “principal residence” for a short term in such a jurisdiction for the purpose of making an asset transfer while there). Notwithstanding the adaptation of subsection (a) from U.C.C. § 9-307(b) (2014), the foregoing terms need not necessarily have the same meanings in both statutes. Debtors are likely to have greater incentive and ability to employ “asset tourism” for the purpose of seeking to evade the substantive rules of this Act than for the purpose of seeking to manipulate the perfection and priority rules of secured transactions law. Interpretation and application of this Act should so recognize.
4. “Location” under this Act is completely independent from the concept of “center of main interests” (“COMI”), as that term is used in Chapter 15 of the Bankruptcy Code. Chapter 15, which applies to transnational insolvency proceedings, requires United States courts to defer in various ways to a foreign proceeding in the jurisdiction of the debtor’s COMI. Those consequences are quite different from the consequences of “location” under this Act. Furthermore, if the debtor is an organization, the debtor’s jurisdiction of organization has no bearing on the debtor’s “location” under subsection (a), by contrast to the presumption in Bankruptcy Code § 1516(c) (2014) that the jurisdiction in which the debtor has its registered office (i.e., its jurisdiction of organization) is its COMI.
5. Section 10(b) determines the governing law only for a claim for relief in the nature of a claim for relief under this Act. Furthermore, this Act, like the earlier Uniform Fraudulent Conveyance Act, has never purported to be an exclusive law on the subject of voidable transfers and obligations. See Comment 2 to § 15. Accordingly, the choice of law rule set forth in this § 10 is by no means applicable to all assertions that a transfer was made or an obligation incurred in contravention of law.

Basing choice of law on the location of the debtor is analogous to the rule set forth in U.C.C. § 9-301 (2014), which provides that the priority of a security interest in intangible property is generally governed by the local law of the jurisdiction in which the debtor is located. The analogy is apt, because the substantive rules of this Act are a species of priority rule, in that they determine the circumstances in which a debtor’s creditors, rather than the debtor’s transferee, have superior rights in property transferred by the debtor. In keeping with that analogy, the definition of the debtor’s “location” in subsection (a) is identical to the baseline definition of that term in U.C.C. § 9-307(b) (2014). Subsection (a) does not include any of the exceptions to the baseline definition that are set forth in Article 9 of the Uniform Commercial Code, such as U.C.C. § 9-307(e) (2014) (providing that the location of a domestic corporation or other “registered organization” is its jurisdiction of organization), and U.C.C. § 9-307(c) (2014) (providing in effect that if the baseline definition would locate a debtor in a jurisdiction that lacks an Article 9-style filing system, then the debtor is instead located in the District of Columbia). Those exceptions are not included in subsection (a) because their primary purpose relates to the operation of Article 9’s perfection rules, which have no analogue in this Act.

For example, suppose that the principal residence of Spouse X is State A and the principal residence of Spouse Y is State B. Spouse Y, anticipating a future divorce, transfers assets to Transferee for the purpose of thwarting X’s economic interests in the divorce. Later a divorce action between X and Y is properly brought in the courts of State A, which has enacted this Act. Law other than this Act (presumably the family law of State A) will govern such matters as the classification of the transferred property as marital or separate and the remedies available against Y for wrongful dissipation of assets, such as awarding a larger share of marital property to X or imposing a lien on the separate property of Y. The choice of law rule set forth in § 10 does not apply to those matters, for they do not involve a claim for relief in the nature of a claim for relief under this Act. However, if Transferee is subject to personal jurisdiction in State A and X brings an action in State A against Transferee seeking avoidance of the transfer, or a money judgment against Transferee in lieu of avoidance, on the ground that the transfer had been made by Y with intent to hinder, delay, or defraud X, the choice of law rule set forth in § 10 would apply to that action, and as a result that action would be governed by the voidable transfer law of State B.

§ 39-23.9B. Application to series organization.

1. In this section, the following definitions apply:
   1. 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 set forth in subdivision (2) of this subsection.
   2. Series organization. — An organization that, pursuant to the law under which it is organized, has all 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 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 Article, even if for other purposes a protected series is not a person separate from the organization or other protected series of the organization.

History. 2015-23, s. 1.

Official Comment (2014)

This section, added in 2014, accommodates developments in business organization statutes exemplified by the Uniform Statutory Trust Entity Act §§ 401-404 (2009) and Del. Code Ann. tit. 6, § 18-215 (2012) (pertaining to Delaware limited liability companies). The definition of “series organization” in subsection (a)(2) is adapted from §§ 401-402 of the Uniform Statutory Trust Entity Act. If the statute under which an organization is organized permits it to divide its assets and debts among “protected series” (however denominated), such that assets and debts of, or associated with, each “protected series” are separated in accordance with subsections (a)(2)(ii) and (iii), and if the organization does so, then the provisions of this Act apply to each “protected series” as if it were a legal entity, regardless of whether it is considered to be a legal entity for other purposes. The conditions referred to in subsections (a)(2)(ii) and (iii) are satisfied if the law under which the organization is organized so provides. It does not matter whether the separation of assets and debts described in subsections (a)(2)(ii) and (iii) would be respected by another jurisdiction in which the organization does business, or would be given effect by the Bankruptcy Code in the bankruptcy of the organization. An organization may be a “series organization” having “protected series,” as those terms are used in this section, even though the statute under which the organization is organized uses different terminology. This section uses the term “protected series,” which is not used in either the Uniform Statutory Trust Entity Act or the Delaware provisions cited above, to emphasize that the application of this section does not depend upon the terminology used by the applicable statute.

The addition of this section to the Act does not imply any judgment about the desirability of legislation enabling the creation of protected series.

§ 39-23.10. Supplementary provisions.

Unless displaced by the provisions of this Article, 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.

History. 1997-291, s. 2.

Official Comment (2014)

This section is derived from § 11 of the Uniform Fraudulent Conveyance Act and Uniform Commercial Code § 1-103 (1984) (later § 1-103(b) (2014)). The section adds a reference to “laches” in recognition of the particular appropriateness of the application of this equitable doctrine to an untimely action to avoid a transfer under this Act. See Louis Dreyfus Corp. v. Butler , 496 F.2d 806, 808 (6th Cir. 1974) (action to avoid transfers to debtor’s wife when debtor was engaged in speculative business held to be barred by laches or applicable statutes of limitations); Cooch v. Grier , 30 Del.Ch. 255, 265-66, 59 A.2d 282, 287-88 (1948) (action under the Uniform Fraudulent Conveyance Act held barred by laches when the creditor was chargeable with inexcusable delay and the defendant was prejudiced by the delay).

§ 39-23.11. Uniformity of application and construction.

This Article shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this Article among states enacting it.

History. 1997-291, s. 2; 2015-23, s. 1.

§ 39-23.11A. Relation to Electronic Signatures in Global and National Commerce Act.

This Article modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).

History. 2015-23, s. 1.

§ 39-23.12. Short title.

This Article, which was formerly cited as the Uniform Fraudulent Transfer Act, may be cited as the Uniform Voidable Transactions Act.

History. 1997-291, s. 2; 2015-23, s. 1.

Official Comment (2014)

1. The 2014 amendments change the short title of the Act from “Uniform Fraudulent Transfer Act” to “Uniform Voidable Transactions Act.” The change of title is not intended to effect any change in the meaning of the Act. The retitling is not motivated by the substantive revisions made by the 2014 amendments, which are relatively minor. Rather, the word “Fraudulent” in the original title, though sanctioned by historical usage, was a misleading description of the Act as it was originally written. Fraud is not, and never has been, a necessary element of a claim for relief under the Act. The misleading intimation to the contrary in the original title of the Act led to confusion in the courts. See, e.g., § 4, Comment 10. The misleading insistence on “fraud” in the original title also contributed to the evolution of widely-used shorthand terminology that further tends to distort understanding of the provisions of the Act. Thus, several theories of recovery under the Act that have nothing whatever to do with fraud (or with intent of any sort) came to be widely known by the oxymoronic and confusing shorthand tag “constructive fraud.” See §§ 4(a)(2), 5(a). Likewise, the primordial theory of recovery under the Act, set forth in § 4(a)(1), came to be widely known by the shorthand tag “actual fraud.” That shorthand is misleading, because that provision does not in fact require proof of fraudulent intent. See § 4, Comment 8.
2. The Act, like the earlier Uniform Fraudulent Conveyance Act, has never purported to be an exclusive law on the subject of voidable transfers and obligations. See Prefatory Note (1984), ¶ 5; § 1, Comment 2, ¶ 6; § 4, Comment 9, ¶ 1; § 10, Comment 5. It remains the case that the Act is not the exclusive law on the subject of voidable transfers and obligations.
3. The retitling of the Act should not be construed to affect references to the Act in other statutes or international instruments that use the former terminology. See, e.g., Convention on International Interests in Mobile Equipment, art. 30(a)(3), opened for signature Nov. 16, 2001, S. Treaty Doc. No. 108-10 (referring to “any rules of law applicable in insolvency proceedings relating to the avoidance of a transaction as a … transfer in fraud of creditors”).
4. The 2014 amendments also make a correction to the text of the Act that is consonant with the change of the Act’s title. As originally written, the Act inconsistently used different words to denote a transfer or obligation for which the Act provides a remedy: sometimes “voidable” (see original § 2(d), §§ 8(a), (d), (e), (f)), and sometimes “fraudulent” (see original § 4(a), §§ 5(a), (b), § 9). The amendments resolve that inconsistency by using “voidable” consistently or deleting the word as unnecessary. No change in meaning is intended.
5. The Act does not address the extent to which a person who facilitates the making of a transfer or the incurrence of an obligation that is voidable under the Act may be subject to liability for that reason, whether under a theory of aiding and abetting, civil conspiracy, or otherwise. The Act leaves that subject to supplementary principles of law. See § 12. Cf. § 8(b)(1)(i) (imposing liability upon, inter alia, “the person for whose benefit the transfer was made”). Other law also governs such matters as (i) the circumstances in which a lawyer who assists a debtor in making a transfer or incurring an obligation that is voidable under the Act violates rules of professional conduct applicable to lawyers, (ii) the circumstances in which communications between the debtor and the lawyer in respect of such a transfer or obligation are excepted from attorney-client privilege, and (iii) the extent to which criminal sanctions apply to a debtor, transferee, obligee, or person who facilitates the making of a transfer or the incurrence of an obligation that is voidable under the Act. Neither the retitling of the Act, nor the consistent use of “voidable” in its text per Comment 4, effects any change in the meaning of the Act, and those amendments should not be construed to affect any of the foregoing matters.

In addition, the word “Transfer” in the original title of the Act was underinclusive, because the Act applies to incurrence of obligations as well as to transfers of property.

Cross References.

As to arrest and bail in action for fraud on creditors, see G.S. 1-410 , subdivision (5).

As to attachment in action for fraud, see G.S. 1-440.1 et seq.

As to preferences in deeds of trust or deeds of assignment for benefit of creditors, see G.S. 23-1 et seq.

As to registration of conveyances, contracts to convey, and leases of land, see G.S. 47-18 .

As to registration, see the Connor Act, see G.S. 47-17 et seq.

As to statutes concerning married persons generally, see G.S. 52-1 et seq.

§§ 39-24, 39-25. [Repealed]

Repealed by Session Laws 2006-226, s. 2(a), effective January 1, 2007.

§ 39-26.

Recodified as G.S. 59B-15(a) by Session Laws 2006-226, s. 2(b), effective January 1, 2007.

§ 39-27. [Repealed]

Recodified as G.S. 59B-15(b) by Session Laws 2006-226, s. 2(b), effective January 1, 2007.

§§ 39-28 through 39-32. [Repealed]

Repealed by Session Laws 1981, c. 358.

§§ 39-32.1 through 39-32.4. [Repealed]

Repealed by Session Laws 2017-27, s. 2, effective July 1, 2017.

History. G.S. 39-32.1 ; 1947, c. 816, s. 1; 1959, c. 1159; repealed by Session Laws 2017-27, s. 2, effective July 1, 2017. G.S. 39-32.2; 1947, c. 816, s. 2; repealed by Session Laws 2017-27, s. 2, effective July 1, 2017. G.S. 39-32.3; 1947, c. 816, s. 3; 1997-309, s. 1; repealed by Session Laws 2017-27, s. 2, effective July 1, 2017. G.S. 39-32.4; 1947, c. 816, s. 4; repealed by Session Laws 2017-27, s. 2, effective July 1, 2017.

§§ 39-33, 39-34. [Repealed]

Repealed by Sessions Laws 2017-102, s. 13(a), effective July 12, 2017.

History. G.S. 39-33 ; 1943, c. 665, s. 1; repealed by Session Laws 2017-102, s. 13(a), effective July 12, 2017. G.S. 39-34; 1943, c. 665, s. 2; repealed by Session Laws 2017-102, s. 13(a), effective July 12, 2017.

§ 39-35.

Recodified as G.S. 31D-5-505 by Session Laws 2017-102, s. 13(b), effective July 12, 2017.

§ 39-36.

Recodified as G.S. 31D-4-403 .1 by Sessions Laws 2017-102, s. 13(c), effective July 12, 2017.

§ 39-37. Short title.

This Article may be cited as the Uniform Vendor and Purchaser Risk Act.

History. 1959, c. 514.

Legal Periodicals.

For article on installment land contracts in North Carolina, see 3 Campbell L. Rev. 29 (1981).

For comment, “Offer to Purchase and Contract: Buyer Beware,” see 8 Campbell L. Rev. 473 (1986).

§ 39-38. Uniformity of interpretation.

This Article shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it.

History. 1959, c. 514.

Legal Periodicals.

For article on installment land contracts in North Carolina, see 3 Campbell L. Rev. 29 (1981).

For comment, “Offer to Purchase and Contract: Buyer Beware,” see 8 Campbell L. Rev. 473 (1986).

§ 39-39. Risk of loss.

Any contract hereafter made in this State for the purchase and sale of realty shall be interpreted as including an agreement that the parties shall have the following rights and duties, unless the contract expressly provides otherwise:

1. If, when neither the legal title nor the possession of the subject matter of the contract has been transferred, all or a material part thereof is destroyed without fault of the purchaser, the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price that he has paid;
2. If, when either the legal title or the possession of the subject matter of the contract has been transferred, all or any part thereof is destroyed without fault of the vendor, the purchaser is not thereby relieved from a duty to pay the price, nor is he entitled to recover any portion thereof that he has paid.

History. 1959, c. 514.

Legal Periodicals.

For article on options to purchase real property in North Carolina, see 44 N.C.L. Rev. 63 (1965).

For article on installment land contracts in North Carolina, see 3 Campbell L. Rev. 29 (1981).

For comment, “Offer to Purchase and Contract: Buyer Beware,” see 8 Campbell L. Rev. 473 (1986).

§§ 39-40 through 39-43.

Reserved for future codification purposes.

§ 39-44. Definition.

The term “business trust” whenever used or referred to in this Article shall mean any unincorporated association, including an Illinois land trust, a Delaware statutory trust, or a Massachusetts business trust, engaged in any business or trade under a written instrument or declaration of trust under which the beneficial interest therein is divided into shares represented by certificates or shares of beneficial interest.

History. 1977, c. 768, s. 1; 2009-174, s. 1.

Effect of Amendments.

Session Laws 2009-174, s. 1, effective October 1, 2009, and applicable to all instruments recorded on or after that date, substituted “an Illinois land trust, a Delaware statutory trust, or” for “but not limited to” near the middle.

Legal Periodicals.

For survey of 1977 law on business associations, see 56 N.C.L. Rev. 939 (1977).

§ 39-45. Authority to acquire and hold real estate.

Business trusts are hereby authorized and empowered to acquire real estate and interests therein and to hold the same in their trust names and may sue and be sued in their trust names.

History. 1977, c. 768, s. 1.

§ 39-46. Title vested; conveyance; probate.

1. Where real estate has been or may be hereafter conveyed to a business trust in its trust name or in the names of its trustees in their capacity as trustees of such business trust, the said title shall vest in said business trust, and the said real estate and interests therein may be conveyed, encumbered or otherwise disposed of by said business trust in its trust name by an instrument signed by at least one of its trustees, its president, a vice-president or other duly authorized officer, the said conveyance to be proven and probated in the same manner as provided by law for conveyances by corporations. Any conveyance, encumbrance or other disposition thus made by any such business trust shall convey good and sufficient title to said real estate and interests therein in accordance with the provisions of said conveyance; provided, however, that with respect to any such conveyance, encumbrance or other disposition effected after June 28, 1977, there must be recorded in the county where the land lies a memorandum of the written instrument or declaration of trust referred to in G.S. 39-44 . As a minimum such memorandum shall set forth the name, date and place of filing, if any, of such written instrument or declaration of trust, and the place where the written instrument or declaration of trust, and all amendments thereto, is kept and may be examined upon reasonable notice, which place need not be a public office. Such memorandum may include designation of trustees and duly authorized officers and the authority granted to them with regard to real estate matters, pursuant to subsection (b) of this section.
2. Any business trust may convey or encumber an interest in real property that is transferable by either (i) an instrument duly executed by either an officer of the business trust other than one of its trustees, its president, a vice president, or other authorized agent identified in the recorded memorandum, or (ii) a declaration of trust described in subsection (a) of this section, if the conveyance has attached to it a signed resolution adopted by the board of trustees, as certified by an officer authorized to make such certifications of the business trust, authorizing the officer to execute, sign, seal, and deliver deeds, conveyances, or other instruments. This section is deemed to have been complied with if a resolution required by this subsection is recorded separately in the office of the register of deeds in the county where the land lies. Such a resolution shall be applicable to all instruments executed subsequently to the recording of the resolution and pursuant to its authority.Notwithstanding the foregoing, this section does not require a signed resolution adopted by the board of directors, as certified by an officer authorized to make such certifications, to be attached to an instrument or separately recorded in the case of an instrument duly executed by one of its trustees, its president, or a vice president of the business trust. All deeds, conveyances, or other instruments so executed shall, if otherwise sufficient, be valid and shall have the effect to pass the title to the real or personal property described in the instrument. Notwithstanding anything to the contrary in the trust agreement, and absent any provision otherwise in the recorded memorandum or declaration of trust required under subsection (a) of this section, when it appears on the face of an instrument registered in the office of the register of deeds that the instrument was signed in the ordinary course of business on behalf of a business trust by at least one of its trustees, its president, a vice president, or an assistant vice president, such an instrument shall be as valid with respect to the rights of innocent third parties for value without notice of a defect or breach of fiduciary duty as if executed pursuant to authorization from the board of trustees, unless the instrument reveals on its face a breach of fiduciary obligation. The provisions of this subsection shall not apply to parties who had actual knowledge of lack of authority or of a breach of fiduciary obligation.
3. Nothing in this section shall be deemed to exclude the power of any representatives of a business trust to bind the business trust pursuant to express, implied, inherent, or apparent authority, ratification, estoppel, or otherwise.
4. Nothing in this section shall relieve trustees or officers of a business trust from liability to the business trust or from any other liability that they may have incurred from any violation of their actual authority.

History. 1977, c. 768, s. 1; 2009-174, s. 2.

Effect of Amendments.

Session Laws 2009-174, s. 2, effective October 1, 2009, and applicable to all instruments recorded on or after that date, designated the previously existing provisions as subsection (a), and in subsection (a), deleted “and attested or countersigned by its secretary, assistant secretary or such other officer as is the custodian of its common seal, not acting in dual capacity, with its official seal affixed,” preceding “the said conveyance” in the first sentence, and added the last sentence; and added subsections (b) through (d).

§ 39-47. Prior deeds validated.

All deeds, leases, mortgages, deeds of trust or other conveyances heretofore executed in conformity with this Article and which are proper in all other respects are declared to be sufficient to pass title to real estate held by such business trusts in accordance with the provisions of such instruments.

History. 1977, c. 768, s. 1.

§§ 39-48, 39-49.

Reserved for future codification purposes.

§ 39-50. Death, illness, or conviction of certain crimes not a material fact.

In offering real property for sale it shall not be deemed a material fact that the real property was occupied previously by a person who died or had a serious illness while occupying the property or that a person convicted of any crime for which registration is required by Article 27A of Chapter 14 of the General Statutes occupies, occupied, or resides near the property; provided, however, that no seller may knowingly make a false statement regarding any such fact.

History. 1989, c. 592, s. 1; 1998-212, s. 17.16A(a).

§§ 39-51 through 39-59.

Reserved for future codification purposes.

§ 39-60. Property tax proration on sale of real property.

Unless otherwise provided by contract, property taxes on the real property being sold shall be prorated between the seller and buyer of the real property on a calendar-year basis.

History. 2006-106, s. 7.