The document provides a historical overview and summary of fraudulent transfer law in Vermont. It begins with the origins of fraudulent transfer law in 16th century England and discusses how various states, including Vermont, adopted versions of the Statute of 13 Elizabeth. It then summarizes Vermont's adoption of the Uniform Fraudulent Transfer Act in 1996 and how the Act modernized fraudulent transfer standards. The summary concludes by outlining the key elements, parties, remedies, standards of proof, and statute of limitations in fraudulent transfer cases under Vermont law.

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To: Tavian M. Mayer, Esq.
From: Jordan K. Carpenter
Date: 19 May 2014
Re: Fraudulent Transfers in Vermont
HISTORICAL OVERVIEW
A fraudulent transfer occurs when a debtor makes a transfer of assets or incurs an
obligation in order to defeat present or imminent attempts to collect by a creditor. The
formative legal opinion for the modern doctrine of fraudulent transfer (or “conveyance”)
is Twyne’s Case, 76 Eng. Rep. 809 (1601); the first statute in the English-speaking world
to outlaw conveyance of property with intent to “delay, hinder or defraud creditors” was
the Fraudulent Conveyances Act 1571, commonly known as the Statute of 13 Elizabeth,
13 Eliz. c.5 (1570) (Eng.).1
Today, the Uniform Fraudulent Transfer Act “creates a right
of action for any creditor against any debtor and any other person who has received
property from the debtor in a fraudulent transfer.” McCain Foods USA, Inc. v. Central
Processors, Inc., 61 P.3d 68, 75 (Kan. 2002).
Some states adopted identical or slightly modified versions of the Statute of 13
Elizabeth while American courts relied on principles of equity and the “badges of fraud”
originally set out in Twyne’s Case to further develop the common law regarding
fraudulent transfer. Isaac A. McBeth & Landon C. Davis III, Bulls, Bears, and Pigs:
Revisiting the Legal Minefield of Virginia Fraudulent Transfer Law, 46 U. Rich. L. Rev.
273, 277 (2011). In due course, various legal precedents arose from diverse standards
being applied to different facts. See, e.g., Platte County State Bank v. Frantz, 239 P. 531,
534–35 (Wyo. 1925) (describing split in jurisdictions on the issue of whether a creditor
1
The doctrine reaches back even further, however: “the terminology used to describe [a fraudulent
debtor’s] offense is taken bodily from the Roman law, where fraus creditorum was an elaborately
developed nominate tort.” Max Radin, Fraudulent Conveyances in California and the Uniform Fraudulent
Conveyance Act, 27 Cal. L. Rev. 1, 1 (1938).

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must obtain a judgment before bringing an action to set aside a transfer as fraudulent). In
1918, the National Conference of Commissioners on Uniform State Laws (NNCUSL)2
proposed the Uniform Fraudulent Conveyance Act (UFCA) to supersede the various
statutes enacted by the states. Twenty-six states adopted the UFCA, and its provisions
were incorporated into the Federal Bankruptcy Act of 1938. Uniform Law Commission,
Fraudulent Transfer Act Summary,
http://www.uniformlaws.org/ActSummary.aspx?title=Fraudulent%20Transfer%20Act.
In 1984, the NCCUSL revised the UFCA, renaming it the Uniform Fraudulent
Transfer Act (UFTA).3
The UFTA “provides a creditor with the means to reach assets a
debtor has transferred to another person to keep them from being used to satisfy a debt.”
Uniform Law Commission, Fraudulent Transfer Act,
http://www.uniformlaws.org/Act.aspx?title=Fraudulent%20Transfer%20Act. Accounting
for the “considerable development in both law and practice in creditor-debtor
relationships since 1918,” the UFTA modernized applicable language and made minor
distinctions in the elements required to claim fraudulent transfer. Fraudulent Transfer Act
Summary. Forty-three states, the District of Columbia, and the U.S. Virgin Islands have
adopted the UFTA. Fraudulent Transfer Act. The Vermont legislature adopted the UFTA
and codified it in Title 9, Chapter 57 of the Vermont Statutes, which took effect July 1,
1996. 9 V.S.A. §§2285–2295.
2
The NCCUSL currently operates as the Uniform Law Commission (ULC).
3
Original text of the UFTA can be found at
http://www.uniformlaws.org/shared/docs/fraudulent%20transfer/UFTA_Final_1984.pdf.

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VERMONT LAW
19th Century Cases
Early case law regarding fraudulent transfers in Vermont was decided based on
English common law and early statutes. In 1828, the Supreme Court of Vermont decided
a case involving a fraudulent transfer of land and stated, “Our statutes . . . render
fraudulent conveyances void as against the person whose right, debt or duty is intended to
be avoided; but not so with regard to the person conveying.” Martin v. Martin, 1 Vt. 191,
195–96 (1828). Although the court did not provide a remedy in its decision, it noted that
the creditors could seek remedy at law or “the court of Chancery.” Id. at 96. A few years
later, the court held that when the grantor of a conveyance is “considerably indebted . . .
and on the eve of a bankruptcy,” or the value of a gift is unreasonable and leaves a
“scanty provision for the payment of his debts[,] . . . such conveyance will be void as to
creditors.” Brackett v. Waite, 4 Vt. 389, 399 (1832). In McLane v. Johnson, the court
noted that “sec. 43, 45, 47, of ch. 52 of [Vermont’s] General Statutes . . . proceed upon
the same idea of the law as is shown to exist under said St. 13 Eliz.” 43 Vt. 48, 60 (1870).
The idea that fraud can be either actual (with intent) or constructive (intent not
necessary)—one still preserved in 9 V.S.A. § 2288—was stated by the Vermont Supreme
Court in Wilson v. Spear:
The fraud of a voluntary grantor may be an actual fraudulent purpose, or
the fraud which the law imputes to him from the condition of his estate
and the necessary consequence of his act. When the grantor is found to
have conveyed for the express purpose of defrauding his creditors, the
condition of his estate is immaterial.
34 A. 429, 430 (Vt. 1895).

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Previous Fraudulent Conveyance Statute & Relevant Common Law
Although the UFTA is the relevant statute, “[m]ost of Vermont's fraudulent
transfer case law has interpreted this earlier fraudulent conveyance statute [the UFCA].”
In re Montagne, 417 B.R. 232, 239 (Bankr.D.Vt. 2009). In Becker v. Becker, 138 Vt. 372
(1980), the Vermont Supreme Court made clear that the common law developed in the
past would not be discarded simply because a new fraudulent transfer statute was in
place. The court recognized that an “action is statutory, but it is subject to all the
requirements of our case law since the enactment of the statute of 13 Elizabeth c. 5
(1570), from which the Vermont statute derives.” Id. at 375.
Elements
The U.S. Bankruptcy Court for the District of Vermont noted that “elements of
the Vermont fraudulent conveyance statute . . . are identical to [11 U.S.C.A.] § 548.” In
re Chase, 328 B.R. 675, 681 (Bankr.D.Vt. 2005). Summarizing the elements set forth at
length in Chase, the Supreme Court of Vermont noted that “a transfer may be set aside if
tainted with actual fraud, requiring a showing of an actual intent to defraud a creditor, or
if ‘constructively fraudulent,’ which requires a showing, inter alia, that the debtor
received ‘less than a reasonably equivalent value’ in exchange for the transfer.” Bacon v.
Reimer & Braunstein, LLP, 182 Vt. 553, 555 n.2 (2007).
Establishing fraud under subsection (a)(1) requires a plaintiff to show “actual
intent to hinder, delay or defraud any creditor.” 9 V.S.A. § 2288. Proving a defendant's
fraudulent intent involves a “fact-intensive inquiry and is nearly always proven from
surrounding circumstances rather than direct evidence. In determining ‘actual intent’
under subsection (1) of § [2288(a)], consideration may be given, among other factors, to

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the eleven factors under § 2288(b).” Montagne at 238 (quoting National Council on
Compensation Ins., Inc. v. Caro & Graifman, P.C., 2008 WL 450413 at *21 (D.Conn.
Feb. 15, 2008)).4
Those factors, known as “badges of fraud,” “may give rise to an
inference or presumption of fraud.” Greystone Community Reinvestment Association, Inc.
v. Berean Capital, Inc., 638 F.Supp.2d 278, 292 (D.Conn.2009). To bring a cause of
action under the theory of constructive fraud,5
[a] plaintiff must establish (1) that there existed a right, debt or duty owed
to her by the defendant, which . . . arose before or near the time of the
defendant's conveyance; (2) that the defendant conveyed property which
was subject to execution in satisfaction of the defendant's debt; (3) that the
conveyance here was without adequate consideration, and (4) . . . that the
defendant acted fraudulently to the hindrance of the plaintiff's rights
against him.
Becker at 375.
Pursuant to 9 V.S.A. § 2291, a prevailing plaintiff creditor may obtain (1)
avoidance of the fraudulent transfer, (2) an attachment of the transferred property or
“other property of the transferee,” or (3) other equitable relief (i.e. an injunction
preventing further disposition of the transferred property or an appointed receiver who
takes charge of the property). A creditor who obtains judgment against a debtor may
collect on the property or its proceeds “if the court so orders.” That judgment could be
entered against the first transferee (usually the debtor) or any subsequent transferee who
did not act in good faith. The only defense to fraudulent transfer in the statute is “good
4
Because there was little case law interpreting the UFTA in Vermont, the Montagne court “look[ed] to case
law in Connecticut for guidance because Connecticut, like Vermont, is part of the Second Circuit and
because it adopted the UFTA in 1991.” Montagne at 238 n.6.
5
Since Becker’s four-part test is for cases “which allege that transfers of property were made without
consideration,” it is the test for constructive fraud. Gore v. Green Mountain Lakes, Inc., 140 Vt. 262, 265
(1981).

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faith.” This protects any person who takes in good faith and any subsequent transferees. 9
V.S.A. § 2292.
Standard of Proof
The Becker decision also discussed the appropriate burdens of proof for both
parties in a fraud case:
[F]raud may be inferred, but the party seeking to sustain the transfer may
rebut it by meeting its burden of going forward with evidence which
shows that at the time of the transfer the debtor had resources sufficient to
answer his debts. The burden of persuasion remains throughout the trial
with the proponent of the position that the conveyance was fraudulent.
Id. at 378–79.
The U.S. Bankruptcy Court for the District of Vermont affirmed the Becker court, noting
that “because the law in no way ‘presumes’ fraud, Trustee must prove his case under [9
V.S.A.] § 2281 by the same evidentiary standard of proof required under Vermont civil
actions involving fraud, that is, by ‘clear and convincing’ proof.” In re Kelton Motors,
Inc., 130 B.R. 170, 181 (Bankr.D.Vt. 2005).
Statute of Limitations
Generally, any claim of fraudulent transfer must be brought within four (4) years
after the transfer was made or the obligation was incurred. Two exceptions exist: (1) if
the transfer involved actual fraud (with intent) and the statute of limitations has run, a
cause of action may be brought “within one year after the transfer or obligation was or
could reasonably have been discovered by the claimant”; or (2) a claim alleging transfer
from an insolvent debtor to an insider for an antecedent debt, when the insider had
reasonable cause to believe the debtor was insolvent, must be brought within one year. 9
V.S.A. § 2293.