A Colorado Uniform Fraudulent Transfer Act (“CUFTA”) claim is an equitable claim and is the culmination of centuries of fraud prevention and correction. Bertoia v. Denver Gateway, LLC, 539 P.3d 156 (Colo. App. 2023). CUFTA's purpose is to protect a debtor's estate from certain depletions that prejudice the debtor's unsecured creditors. See Leverage Leasing Co. v. Smith, 143 P.3d 1164, 1167 (Colo. App. 2006). Because it is not possible to anticipate all manners of fraudulent schemes, CUFTA is drafted and construed expansively to serve its broad remedial purpose. Wilson v. Pauling, 457 F. Supp. 3d 965, 974 (D. Colo. 2020).
A CUFTA claim springs into play when a debtor depletes his estate by transferring assets away from the grasp of unsecured creditors. This type of transaction involve a sophisticated debtor avoiding liability and taking the approach of “catch me if you can.”
As CUFTA is in derogation of common law fraud, the critical element of actual intent in a common law fraud claim is not a factor for CUFTA and recognizes that there is seldom direct evidence of actual intent to defraud. CUFTA claims involve the use of constructive fraud which allows the Court to impute actual intent to delay, hinder or defraud by finding badges of fraud.
The badges of fraud are set forth in C.R.S. §38-8-101 et seq. The list of 11 badges of fraud are not exclusive or exhaustive and nor does a Plaintiff have to prove all of the badges to establish a CUFTA violation. A combination of any of badges of fraud can result in a CUFTA violation. Perhaps one of the key badges is the solvency of the debtor at the time of the transfer. If the badges of fraud (or combination thereof) are established to the Court, which can be shown by circumstantial or direct evidence, then the requisite intent of fraud is established for a CUFTA violation.
The remedies available that can be imposed by a Court can be far more substantial and intrusive so as to prevent a debtor from becoming “judgment-proof” and escaping liability. The Court is vested with wide discretion in fashioning an appropriate legal remedy. Court remedies include an award that are 1.5 times of the actual damage of the property transferred, imposing remedies of other property that the debtor has, voiding transfers of assets, enjoining further encumbrances, appointing a receiver, and possibly imposing those remedies against a person other than the debtor if they are found to have actual intent.
Please do note that the information above cannot be construed as legal advice. Each case has its own set of unique circumstances requiring further investigation. Once you are retained as a client, we provide a full analysis of the presented facts to applicable statutes governing your case.
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