The Texas Uniform Fraudulent Transfer Act (TUFTA) is found in Chapter 24 of the Business and Commerce Code, and its purpose is to punish and reverse any attempt by a judgment debtor to move assets out of reach from creditors.
Who Can Bring a Claim?
TUFTA allows a creditor to bring a civil cause of action against a debtor when the former attempts to negatively affect the latter’s right to payment or property. TEX. BUS. & COMM. CODE § 24.008.
The following may be found liable for evading creditor collection:
- The first transferee of the assets;
- A subsequent transferee of the assets who did not take in good faith; or
- The person for whose benefit the transfer was made.
TEX. BUS. & COMM. CODE § 24.009(b).
Statute of Limitations
The Texas Supreme Court has applied the statute of repose to TUFTA claims. Nathan v. Whittington, 408 S.W.3d 870, 874 (Tex. 2013). Like a statute of limitations, a repose cuts off certain legal rights if they are not acted on by a specified deadline. A statute of limitations may start to run at a date other than when the act occurred or may be extended in certain situations. A statute of repose is triggered by the completion of an act and is not ordinarily subject to extension or exception. TUFTA claims must be brought within one to four years of the transfer depending on the type of transferee.
When is a Transfer Fraudulent?
To recover under TUFTA, a plaintiff, does not need to prove actual fraud. Instead, the fact finder may weigh circumstantial factors known as badges of fraud. These are:
(1) The transferee or subsequent transferee was an insider;
(2) The debtor retained control of the property afterwards;
(3) The act was concealed or the assets were concealed by the debtor;
(4) The debtor had been sued or threatened with suit beforehand;
(5) The transfer was of substantially all the debtor’s assets;
(6) The debtor absconded;
(7) The transfer was not for reasonably equivalent value;
(9) The debtor was insolvent or became insolvent shortly afterwards; and
(10) The transfer occurred shortly before or after a substantial debt was incurred.
TEX. BUS. & COMM. CODE § 24.005.
There are several remedies available to a prevailing plaintiff, and courts have wide latitude to grant any “relief the circumstances may require.” TEX. BUS. & COMM. § 24.011. The more commonly used remedies are:
- Avoidance of transfer by plaintiff and attachment or other remedy against the transferred asset or other property of the transferee;
- Injunctive relief
- Monetary damages