In Re Joseph B. Prejean, Debtor. Ursula Maddox v. Jerome E. Robertson

Before 1986, California- adhered to a version of the Uniform Fraudulent Conveyance Act. That Act provided in part that a conveyance was not constructively fraudulent if a debtor received a “fair consideration” for the conveyance. See former Cal.Civ.Code § 3439.04 (West 1970). The California Court of Appeal determined that the payment of an antecedent debt that is partially time-barred is “fair consideration.” See United States Fidelity & Guaranty Co. v. Postel, 64 Cal.App.2d 567 , 149 P.2d 183, 186 (1944).

This appeal raises the question whether California’s recent adoption of the Uniform Fraudulent Transfer Act, which substitutes “reasonably equivalent value” for “fair consideration,” implies a rejection of the rule of United States Fidelity regarding time-barred debt. The Bankruptcy Appellate Panel (BAP) concluded that it did. We disagree, and reverse.

I

The relevant facts in this case are undisputed. Ursula Maddox lent her brother, Joseph Prejean, $40,000 between 1968 and 1971 to assist him in attending medical school. The two did not memorialize the loan in writing. Between 1974 and 1984, Maddox also eared for Prejean’s child. Nothing was set down in writing during that…