FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

780 N.Y.S.2d 409 Page 29 A.D.3d 553, 780 N.Y.S.2d 409, 2004 N.Y. Slip Op. 05710(Cite as: 9 A.D.3d 553, 780 N.Y.S.2d 409)judgment in transferee's action seeking determinationthat funds it received from judgment debtor were notsubject to restraint by judgment creditors.**410 Tabner, Ryan & Keniry, Albany (Eric N.Dratler of counsel), for Mega Personal Lines, Inc.,appellant.McNamee, Lochner, Titus & Williams P.C., Albany(Scott C. Paton of counsel), for Mega Group, Inc.,appellant.Ianniello, Anderson & Reilly P.C., Clifton Park(Matthew I. Mazur of counsel), for Dianne Halton,respondent.Before: SPAIN, J.P., CARPINELLO, MUGGLIN,ROSE and LAHTINEN, JJ.*554 ROSE, J.Appeal from an order and judgment of the SupremeCourt (Nolan Jr., J.), entered June 26, 2003 in SaratogaCounty, which, in a proceeding pursuant toCPLR 5239, inter alia, granted a motion by respondentDianne Halton and Robert L. Halton for partialsummary judgment.Petitioner Mega Group, Inc. commenced an actionagainst Robert L. Halton [FN1] and respondent DianneHalton (hereinafter collectively referred to asrespondents) and respondents then interposed a counterclaimfor money damages. During the pendency oftheir counterclaim, Mega Group transferred substantiallyall of its assets to petitioner Mega PersonalLines, Inc. (hereinafter MPL). Respondents later obtaineda judgment against Mega Group and sought toenforce it by restraining certain funds held by thirdparties. MPL then commenced this proceeding seekinga determination that the restrained funds are, infact, the property of MPL and not Mega Group. Respondentsmoved to dismiss the petition on theground, among others, that the transfer of substantiallyall of Mega Group's assets to MPL, after respondentshad interposed their counterclaim againstMega Group, was fraudulent within the meaning ofDebtor and Creditor Law § 273-a. Treating themotion as one for summary judgment and findingthat questions of fact existed as to whether there wasequivalent value given for the transfer of MegaGroup's assets, Supreme Court denied the motion andwe affirmed (297 A.D.2d 428, 746 N.Y.S.2d 204[2002] ).FN1. Robert L. Halton, a named respondentin this proceeding, died while this appealwas pending and his wife, respondent DianneHalton, has been substituted for him.Following discovery, respondents moved for partialsummary judgment, this time arguing Mega Group'slack of good faith. Finding the good faith componentof fair consideration as defined by Debtor and CreditorLaw § 272 to be lacking as a matter of law--regardless of whether Mega Group received equivalentvalue for its assets--because Steven Gregory,Mega Group's president and majority shareholder,also held an ownership interest in MPL at the time ofthe transfer, Supreme Court granted respondents'motion. Petitioners now appeal.[1] Initially, we reject petitioners' procedural contentionthat Supreme Court erred by entertaining a secondsummary judgment *555 motion. Because respondents'second motion was made after the completionof discovery and, significantly, it turns upon anissue not previously decided, Supreme Court actedwell within its broad discretion (see Baker v. VanderbiltCo., 260 A.D.2d 750, 751-752, 688 N.Y.S.2d 726[1999]; Robbins v. K-Mart Corp., 248 A.D.2d 867,868, 669 N.Y.S.2d 774 [1998] ).[2][3][4] We reach a different conclusion, however,as to Supreme Court's determination that summaryjudgment should be granted here. In order to prevailunder Debtor and Creditor Law § 273-a, respondentswere required to prove that the **411 transferorwas a defendant in an action for money damages atthe time of the transfer, the transferor has not satisfiedthe resulting judgment and the transfer was madewithout fair consideration (see Berner Trucking v.Brown, 281 A.D.2d 924, 925, 722 N.Y.S.2d 656[2001] ). There is no real dispute here as to the firsttwo elements. The third element, fair consideration,exists when, in exchange for property or an obligation,"as a fair equivalent therefor, and in good faith,property is conveyed or an antecedent debt is satisfied"(Debtor and Creditor Law § 272[a] [emphasisadded] ). The good faith of both the transferor andtransferee is an indispensable component of fair consideration(see Matter of Superior Leather Co. v.Lipman Split Co., 116 A.D.2d 796, 797, 496N.Y.S.2d 845 [1986]; Studley, Inc. v. Lefrak, 66© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.