Legal Memorandum: Insider-transfer Claims in MN

Issue: Are insider-transfer claims considered constructive or actual fraud cases?

Area of Law: Banking & Finance Law, Corporate & Securities
Keywords: Insider-transfer claims; Constructive or actual fraud; Equity
Jurisdiction: Federal, Minnesota
Cited Cases: 602 N.W.2d 243; 763 N.W.2d 686; 283 N.W.2d 877
Cited Statutes: Minnesota Uniform Fraudulent Transfer Act (MUFTA) §513.41 – §513.51; 37 Am. Jur. 2d Fraud and Deceit § 9 (2012); 30A C.J.S. Equity § 52 (2012)
Date: 02/01/2013

Insider-transfer claims under the Minnesota Uniform Fraudulent Transfer Act (MUFTA) §513.41 – §513.51 are essentially constructive (rather than actual) fraud cases.  See, e.g., Thommes v. Thommes, No. A11–1591 (Minn. Ct. App. June 25, 2012); In re Northgate Computer Sys., Inc., 240 B.R. 328, 367 (Bankr. D. Minn. 1999). 

Constructive fraud is defined as an act done or omitted that amounts to positive fraud, or is construed as a fraud by the court because of its detrimental effect upon public interests and public or private confidence, even though the act is not done or omitted with an actual design to perpetrate positive fraud or injury upon other persons.


37 Am. Jur. 2d Fraud and Deceit § 9 (2012).  Stated another way, “‘constructive fraud’ arises by operation of law from a course of conduct which, if sanctioned by law, would secure an unconscionable advantage.”  Id. 

Nearly four years after the global economic meltdown began, U.S. financial services and banking industries remain among the least trusted by consumers, according to a global survey conducted by a public relations firm that performs these surveys annually. The survey data show that only about a quarter of respondents trusted the financial services industry in 2011, the lowest level in recent years, although 2012 saw a modest improvement.  See Trust in U.S. Financial Services Still Low, Despite Economic, Market Gains, Edelman Trust Barometer 2012 Annual Global Survey, Mar. 13, 2012, available at http://trust.edelman.com/slides/trust-in-u-s-financial-services-still-low-despite-economic-market-gains/.  Another source reports that, […]

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