Opinion
110426/10.
October 8, 2010.
Thomas H. Herndon, Jr., Silverman Sclar Shin Byrne PLLC, for Petitioner.
Daniel F. Markham, Coughlin Duffy LLP, for Respondent Doris Ingber.
Blair C. Fensterstock, Fensterstock Partners LLP, for Respondent Dr. Joel Ingber.
Judgment creditor Dr. Howard Kudler ("Petitioner") brings this special proceeding for an order deeming certain transfers of stocks, securities and/or monies from judgment debtor Dr. Joel Ingber ("Dr. Ingber") to his wife Doris B. Ingber ("Mrs. Ingber") (collectively "Respondents") to be fraudulent conveyances pursuant to Debtor Creditor Law ("DCL") §§ 273, 273-a, and 276. Petitioner further and accordingly seeks an order "voiding, nullifying, and/or unwinding the transfer of those stocks, securities, and/or monies and putting these stocks, securities, and/or monies back in the hands of [Dr. Ingber]."
On September 26, 2005, Petitioner filed a demand for arbitration with American Arbitration Association against Dr. Ingber and Doctors Barry Truffelman and David Ingber ("arbitration defendants"). On August 7, 2009, the arbitrator issued an award in favor of Petitioner, wherein: (1) Petitioner was awarded $414,407.09 against the arbitration defendants, jointly and severally; (2) the arbitration defendants were directed to return three specified life insurance policies covering the life of Petitioner to Petitioner with "all outstanding loans taken out by them" repaid; (3) Petitioner was awarded punitive damages in the amount of $5,000 from Truffelman, and $10,000 each from Joel and David Ingber; (4) Petitioner was awarded attorneys fees totaling $137,813.87 from the arbitration defendants, jointly and severally; and (5) the arbitration defendants were directed to reimburse Petitioner for AAA administrative fees and the arbitrator's compensation in the amount of $7,749.93 each from Truffelman and Joel Ingber, and $10,450.00 from David Ingber.
On February 8, 2010, this court issued a Decision, Order, and Judgment confirming said arbitration award in the matter titled Kudler v. Truffelman, Index No. 600237/08.
Petitioner now moves by order to show cause against Dr. Ingber and Mrs. Ingber, alleging that Dr. Ingber made a number of transfers to his wife that were without consideration, and were in fact an attempt to avoid any payment on an anticipated or actual judgment against him. Petitioner states that, "[u]pon information and belief, in or about 2005/2006 (or sometime thereafter), the Judgment Debtor transferred stocks and/or securities worth approximately $750,000.00 to his wife Doris B. Ingber." Petitioner further states that, "[u]pon information and belief, on or about January 27, 2006 (or sometime thereafter), the Judgment Debtor transferred the property located at 1212 Fox Drive, Norwalk Connecticut, to his wife Doris B. Ingber.
Dr. Ingber and Mrs. Ingber submit a memorandum of law in opposition to the motion, as well as affidavits from Dr. Ingber, Mrs. Ingber, attorney Edward Marcantonio, and personal financial planner Sheila Hartwell. According to Ms. Hartwell, in September 2004, Respondents contracted with Ms. Hartwell's firm, Hartwell Planning, LLC, to establish a financial plan, and that she provided Respondents with a financial plan on January 20, 2005. Thereafter, on or around February 2, 2005, Hartwell provided with a report wherein she recommended, among other measures, "rebalanc[ing] ownership of assets [among Respondents] equally" in order to minimize estate tax liability. Respondents claim their concern about their financial future was prompted by a number of deaths and illnesses of several close family members in the years leading up to 2005.
Respondents state that their financial and estate planning was sidetracked in August 2005 (the same month Petitioner commenced the arbitration proceeding) when Mrs. Ingber's uncle suffered a massive stroke and was hospitalized. Respondents state that in early December 2005, Dr. Ingber discovered that he urgently needed hip replacement surgery. Respondents claim that, due to Dr. Ingber's weight, the surgery carried significant additional risks. Concern for Dr. Ingber's life and health in light of the upcoming surgery prompted Respondents to resume their financial and estate planning, according to Respondents.
In his affidavit, attorney Edward Marcantonio states that he was retained by Respondents in or around December 2005 for purposes of planning their estates for purposes of minimizing estate tax liability upon the death of either Respondent. Having been informed of Dr. Ingber's upcoming surgery, Marcantonio prepared temporary wills, durable powers of attorney, living wills and health care proxies, and a warranty deed for the property located at 1212 Foxboro Drive in Norwalk, Connecticut which was executed on January 27, 2006. Marcantonio further states that he was unaware of any arbitration proceeding against Dr. Ingber prior to 2009.
Respondents state that, pursuant to Marcantonio's advice to "rebalance and equalize" their assets, Dr. Ingber transferred the assets in his Smith Barney brokerage accounts to Mrs. Ingber. Respondents contend that this transfer was not a fraudulent conveyance under the DCL. Dr. Ingber claims that, at the time of the transfer, he retained a one-third interest in his dental partnership, which was valued at $1.6 million, and thus argues that the transfers did not render him insolvent. Respondents also argue that the transfers were for fair consideration, stating in the opposition memorandum that "the conveyances were made pursuant to professional advice and a financial plan" which "existed prior to Petitioner's demand for arbitration and was established to minimize their estate tax liability." Lastly, Respondents assert that the fact that the conveyances were effectuated pursuant to financial and estate planning advice given prior to the commencement of the arbitration proceeding establishes that the conveyances were not made with actual intent to defraud.
Petitioner submits a reply affirmation in further support of his motion.
The relevant sections of the DCL provide as follows:
§ 273. Conveyances by insolvent
Every conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration.
§ 273-a. Conveyances by defendants
Every conveyance made without fair consideration when the person making it is a defendant in an action for money damages or a judgment in such an action has been docketed against him, is fraudulent as to the plaintiff in that action without regard to the actual intent of the defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment.
§ 276. Conveyance with intent to defraud
Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.
DCL § 276-a provides for reasonable attorney's fees for the creditor upon a finding of actual fraud under § 276-a.
Here, the Court finds that Petitioner has failed to prove actual fraud under DCL § 276, or constructive fraud under DCL § 273. First, with respect to DCL § 276, a finding of actual fraud must be proven by clear and convincing evidence ( see Micalden Invs. S.A. v. Guerrand-Hermes, 2006 NY Slip Op 5203, *2 [1st Dept. 2006]). Here, Respondents have proffered sworn affidavits from their financial advisor and their estate planning attorney, two disinterested individuals who attest to being unaware of any proceeding pending against Dr. Ingber, that Respondents were advised to limit Dr. Ingber's assets for estate tax purposes prior to commencement of the arbitration proceeding. Second, with respect to DCL § 273, Petitioner cannot demonstrate that the conveyances rendered Dr. Ingber insolvent. Dr. Ingber states in his affidavit that, at around the time of the subject conveyances, his partnership, of which he is a one-third shareholder, was valued at $1.6 million. Petitioner neither disputes nor contradicts this figure.
However, the Court does find that the subject conveyances are fraudulent conveyances as defined by DCL § 273-a. First, the record indicates that the conveyances occurred after Petitioner commenced the arbitration proceeding, in which Dr. Ingber was a defendant ( see Garden City Co. v. Kassover, 251 AD2d 9, 10 [1st Dept. 1998]) (applying DCL § 273-a to conveyances made after commencement of arbitration proceedings). Secondly, Respondents fail to demonstrate that the conveyances were for fair consideration as defined by DCL § 272, which provides as follows:
§ 272. Fair consideration
Fair consideration is given for property, or obligation.
a. When in exchange for such property, or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied, or
b. When such property, or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared with the value of the property, or obligation obtained.
Here, Respondents contend that the conveyances were for fair consideration because they "were made pursuant to professional advice and a financial plan that existed prior to Petitioner filing a demand for arbitration," and state that "Petitioner refers to no authority that suggests that this kind of financial planning is illegal." However, just because the conveyances at issue herein were arguably advisable pursuant to Respondents' estate planning objectives, that in no way alters the fact that Respondents cannot point to any form of consideration that was furnished by Mrs. Ingber in exchange for Dr. Ingber's accounts. Accordingly, inasmuch as the judgment against Dr. Ingber has yet to be satisfied, the conveyances are deemed to be fraudulent as to Petitioner, irrespective of the intent underlying them ( see DCL § 273-a).
Wherefore it is hereby
ORDERED that Petitioner's motion is granted. Settle order on notice.
This constitutes the decision and order of the court. All other relief requested is denied.