Colorado § 38-8-109 - Defenses, liability, and protection of transferee or obligee.

§ 38-8-109. Defenses, liability, and protection of transferee or obligee.

(1) A transfer or obligation is not voidable under section 38-8-105 (1)(a) against a person that took in good faith and for a reasonably equivalent value given to the debtor or against a subsequent transferee or obligee.

(2) To the extent a transfer is voidable in an action by a creditor under section 38-8-108 (1)(a), the following rules apply:

(a) Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (3) of this section, or the amount necessary to satisfy the creditor's claim, whichever is less. The judgment may be entered against:

(I) The first transferee of the asset or the person for whose benefit the transfer was made; or

(II) A direct or indirect transferee of the first transferee, other than:

(A) A good faith transferee that took for value; or

(B) A direct or indirect good faith transferee of a person described in subsection (2)(a)(II)(A) of this section.

(3) If the judgment under subsection (2) of this section is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.

(4) Notwithstanding voidability of a transfer or an obligation under this article 8, a good faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to:

(a) A lien on or a right to retain an interest in the asset transferred;

(b) Enforcement of an obligation incurred; or

(c) A reduction in the amount of the liability on the judgment.

(5) A transfer is not voidable under section 38-8-105 (1)(b) or 38-8-106 if the transfer results from:

(a) Termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law; or

(b) Enforcement of a security interest in compliance with the "Uniform Commercial Code - Secured Transactions", article 9 of title 4, other than the acceptance of collateral in full or partial satisfaction of the obligation it secures.

(6) A transfer is not voidable under section 38-8-106 (2):

(a) To the extent the insider gave new value to or for the benefit of the debtor after the transfer was made unless the new value was secured by a valid lien;

(b) If made in the ordinary course of business or financial affairs of the debtor and the insider; or

(c) If made pursuant to a good-faith effort to rehabilitate the debtor and the transfer secured present value given for that purpose as well as an antecedent debt of the debtor.

(7) The burden of proving matters referred to in this section is determined according to the following:

(a) A party that seeks to invoke subsection (1), (4), (5), or (6) of this section has the burden of proving the applicability of that section;

(b) Except as provided in subsections (7)(c) and (7)(d) of this section, the creditor has the burden of proving each applicable element of subsection (2) or (3) of this section;

(c) The transferee has the burden of proving the applicability to the transferee of subsection (2)(a)(II)(A) or (2)(a)(II)(B) of this section; and

(d) A party that seeks adjustment under subsection (3) of this section has the burden of proving the adjustment.

(8) The standard of proof required to establish matters referred to in this section is preponderance of the evidence.

Source: L. 91: Entire article added, p. 1687, § 1, effective July 1. L. 2025: (1), (2), IP(4), (4)(a), (4)(b), and (5)(b) amended and (7) and (8) added, (SB 25-133), ch. 57, p. 240, § 8, effective August 6.

Editor's note - Colorado legislative change: This section was numbered as section 8 in the uniform act. In subsection (2)(b), the phrase "or obligee" has been added after "transferee" the second and third times "transferee" appears.

ANNOTATION

Whether "reasonably equivalent value" has been received is a question of fact. What constitutes "reasonably equivalent value" for the transfer requires an analysis of all of the facts and circumstances surrounding the transaction. The standard of reasonably equivalent value implies a rule of reasonableness in light of the particular circumstances. Reasonable equivalence is not synonymous with market value, even though market value is an important factor to be utilized in the assessment. For purposes of the Colorado Uniform Fraudulent Transfer Act, equity looks to the substance of the transaction rather than its form. Krol v. Unglaub, 332 B.R. 303 (Bankr. N.D. Ill. 2005).

The time value of money does not constitute reasonably equivalent value in an equity-type Ponzi scheme, so a transfer of profits or interest is voidable. When an innocent investor has no guarantee of profit or the payment of interest, the debtor's fraudulent transfer of profits to the investor from the scheme does not satisfy an antecedent debt and is not a transfer of reasonably equivalent value. Lewis v. Taylor, 2018 CO 76, 427 P.3d 796.

Subsection (2) of this section does not provide an additional remedy to creditors but instead limits the remedy provided under § 38-8-108 (1)(a) by limiting the creditor's recovery in an action to avoid a fraudulent transfer to the lesser of the adjusted value of the transferred asset or the amount of the creditor's claim. Because a bankruptcy trustee thus has the power to recover the same amount sought by the plaintiff creditor for the benefit of all creditors and because allowing individual creditors to file actions for recovery would interfere with the bankruptcy estate and the equitable distribution scheme dependent upon it, the plaintiff creditor lacked standing. Summers v. Perkins, 81 P.3d 1141 (Colo. App. 2003).

The ordinary course of business defense is available only to insiders. Sender v. Mann, 423 F. Supp. 2d 1155 (D. Colo. 2006).

Because ranch was encumbered by valid liens that exceeded its value, it was not an asset under this article. Because ranch did not constitute an asset under this article, jury's verdict in favor of plaintiff on his fraudulent conveyance claim must be reversed. Bd. of Cty. Comm'rs v. Sportsmen's Ranch, 271 P.3d 562 (Colo. App. 2011).