FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

Page 34 A.D.3d 495, 773 N.Y.S.2d 71, 2004 N.Y. Slip Op. 01149(Cite as: 4 A.D.3d 495, 773 N.Y.S.2d 71)ter, on August 4, 1995, the defendant confessedjudgments in favor of the defendant Island HelicopterLeasing Corp. (hereinafter Island) for $1,181,364.50and in favor of the defendant Rio Manufacturing ofDelaware, Inc. (hereinafter Rio), for $291,998.24.The Island confession was purportedly in exchangefor a promissory note executed by the defendant onAugust 1, 1983, in exchange for an $800,000 constructionloan from Island. The Rio confession waspurportedly in exchange for a promissory note executedby the defendant on January 2, 1984, in exchangefor a $200,000 construction loan from Rio.On the same day that the defendant confessed judgmentin favor of Island and Rio, Overview separatelyconfessed judgment in favor of Island for$1,181,364.50 and in favor of Rio for $291,998.24.On April 14, 1999, Overview filed a Chapter 11bankruptcy *497 petition in the United States DistrictCourt for the Eastern District of New York. The defendant'sresidence was listed as an asset of the corporationand was approved for sale. All net proceedsfrom the sale of this property, which totaled over $1million, were placed in an escrow account. The netproceeds are the subject of this action.The complaint in this action seeks, inter alia, to recoverdamages for fraudulent conveyance of realproperty. The first cause of action seeks recoverybased on the alleged fraudulent conveyance of thedefendant's residence to Overview in violation ofDebtor and Creditor Law § 273-a. The third cause ofaction alleges the fraudulent conveyance of the defendant'sresidence**74 to Overview in violation ofDebtor and Creditor Law § 276. The sixth cause ofaction alleges that the confessions of judgment providedto Island and Rio from the defendant were enteredinto with the intent to defraud the plaintiff andhinder the collection of her judgments against thedefendant in violation of Debtor and Creditor Law §276. The Supreme Court granted the plaintiff's motionfor summary judgment. We affirm.[1] A party moving for summary judgment mustmake a prima facie showing of entitlement to judgmentas a matter of law offering sufficient evidenceto demonstrate the absence of any triable issue of fact(see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 508N.Y.S.2d 923, 501 N.E.2d 572; Zuckerman v. City ofNew York, 49 N.Y.2d 557, 427 N.Y.S.2d 595, 404N.E.2d 718). The plaintiff demonstrated the absenceof any triable issue of fact with respect to her claimspursuant to Debtor and Creditor Law § 273-a and §276. Therefore, the motion was sufficient to make outa prima facie case for summary judgment (seeWinegrad v. New York Univ. Med. Ctr., 64 N.Y.2d851, 487 N.Y.S.2d 316, 476 N.E.2d 642; Zuckermanv. City of New York, supra ). In opposition, the defendantfailed to raise a triable issue of fact.[2] The plaintiff established her cause of action pursuantto Debtor and Creditor Law § 273-a by provingthat the conveyance of the defendant's residence wasmade without fair consideration, a judgment wasdocketed against the defendant, and the defendantfailed to satisfy the judgment (see Taylor-Outten v.Taylor, 248 A.D.2d 934, 670 N.Y.S.2d 295). Withrespect to the element of fair consideration, the deeditself reflects that no money was paid for the defendant'sresidence. Notwithstanding this fact, the appellantscontend that extinguishing an antecedent debtconstituted fair consideration for the transfer. TheSupreme Court properly determined that, even assumingthat the Island and Rio notes were valid, atthe time of the transfer, they had expired and thereforewere unenforceable (see Matter of Friedgood,137 A.D.2d 688, 524 N.Y.S.2d 777). Consequently,the notes *498 could not serve as fair considerationand summary judgment was properly granted on theplaintiff's first cause of action (see Interpool Ltd. v.Patterson, 890 F.Supp. 259).[3][4] The plaintiff also established a prima faciecase of entitlement to summary judgment on her thirdand sixth causes of action pursuant to Debtor andCreditor Law § 276. Debtor and Creditor Law § 276provides that “[e]very conveyance made and everyobligation incurred with actual intent, as distinguishedfrom intent presumed in law, to hinder, delay,or defraud either present or future creditors, isfraudulent as to both present and future creditors.”Moreover, “[d]irect evidence of fraudulent intent isoften elusive. Therefore, courts will consider ‘badgesof fraud’ which are circumstances that accompanyfraudulent transfers so commonly that their presencegives rise to an inference of intent” (Pen Pak Corp. v.LaSalle Nat. Bank of Chicago, 240 A.D.2d 384, 658N.Y.S.2d 407 quoting MFS/Sun Life Trust-High YieldSeries v. Van Dusen Airport Servs., Co., 910 F.Supp.913, 935). Badges of fraud include (1) the close relationshipamong the parties to the transaction, (2) theinadequacy of the consideration, (3) the transferor's© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.