Comment.
(1) This section defines
"value" as used in various contexts in this Act, frequently
with a qualifying adjective. The word appears in the following
sections: 4(a)(2) ("reasonably equivalent value"); 4(b)(8)
("value ... reasonably equivalent); 5(a) ("reasonably
equivalent value"); 5(b) ("present, reasonably equivalent
value"); 8(a) ("reasonably equivalent value"); 8(b), (c), (d),
and (e) ("value"); 8(f)(1) ("new value"); and 8(f)(3)
("present value").
Comment. (2) Section
3(a) is adapted from § 548(d)(2)(A) of the Bankruptcy Code.
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).
Comment. (3) Section
3(a) does not indicate what is "reasonably equivalent value"
for a transfer or obligation. Under this Act, as under §
548(a)(2) of the Bankruptcy Code, 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, since 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, however, a transfer purports to secure
more than the debt actually incurred or to be incurred, it may
be found to be for less than a reasonably equivalent value.
See e.g., In re Peoria Braumeister Co., 138 F.2d
520, 523 (7th Cir. 1943) (chattel mortgage securing a $3,000
note held to be fraudulent when the debt secured was only
$2,500); Hartford Acc. & Indemnity Co. v. Jirasek, 254
Mich. 131, 140, 235 N.W. 836, 839 (1931) (quitclaim deed given
as mortgage held to be fraudulent to the extent the value of
the property transferred exceeded the indebtedness secured).
If the debt is a fraudulent obligation under this Act, a
transfer to secure it as well as the obligation would be
vulnerable to attack as fraudulent. 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).
Comment. (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, a transfer for an unperformed
promise by an individual to support a parent or other
transferor has generally been held voidable as a fraud on
creditors of the transferor. 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.E. 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.
