Summary
granting the plaintiff's motion for summary judgment on its constructive fraudulent conveyance claim pursuant to sections 273 and 275 where the defendant "failed to overcome the presumption of insolvency that arises when a conveyance is made without consideration"
Summary of this case from Cambridge Valley Machining, Inc. v. Hudson MFG LLCOpinion
November 15, 1995
Appeal from the Supreme Court, Chautauqua County, Cass, Jr., J.
Present — Green, J.P., Lawton, Callahan, Balio and Boehm, JJ.
Order unanimously modified on the law and as modified affirmed without costs in accordance with the following Memorandum: In 1987 Lyona Steward gave real property in Lakewood to her daughters, defendant Beverly Ann Edwards (Edwards) and Shirley Rae Rankin (Rankin), who is now deceased. At that time, Steward was the recipient of supplemental social security and medical assistance benefits administered by plaintiff, which she continued to receive until her death in 1991. On May 7, 1992, Edwards and Rankin conveyed the Lakewood property to defendants John F. Richard and Judy A. Richard (Richards) for $47,000. The Richards borrowed the purchase money and gave the lender a mortgage that was subsequently assigned to defendant Dominion Bankshares Mortgage Corporation (Dominion). It is undisputed that neither the Richards nor Dominion had knowledge of the circumstances surrounding the transfer from Steward to her daughters. The recitation in her deed that the consideration was $1 and that it was given for "no consideration — gift — value less than gift tax exemptions" was not sufficient to impose upon the Richards or Dominion the duty to inquire regarding the possibility that the property had been fraudulently conveyed. Evidence of a gratuitous transfer in the chain of title does not, without knowledge of fraud, render a conveyance fraudulent and voidable as against a purchaser or mortgagee for value (see, Real Property Law § 266; Debtor and Creditor Law § 278; Anderson v. Blood, 152 N.Y. 285, rearg denied 153 N.Y. 649; Stearns v. Gage, 79 N.Y. 102).
It is only if the "facts within the knowledge of the purchaser are of such a nature, as, in reason, to put him upon inquiry, and to excite the suspicion of an ordinarily prudent person and he fails to make some investigation, [that] he will be chargeable with that knowledge which a reasonable inquiry, as suggested by the facts, would have revealed" (Anderson v Blood, supra, at 293). In our view, a transfer without consideration, designated as a gift, from a mother to her daughters, is not one "to excite the suspicion of an ordinarily prudent person." We note further that, at the date of the conveyance to Richards, nearly seven months after the death of Steward and more than five years after the conveyance to her daughters, plaintiff had not filed a notice of lien under Social Services Law § 369.
Thus, Supreme Court properly denied plaintiff's motion for summary judgment against the Richards and Dominion. The court should, however, have granted plaintiff's motion for summary judgment against Edwards (see, Social Services Law § 369 [b] [i] [B]; Debtor and Creditor Law §§ 273, 275; Hoke v Ortiz, 83 N.Y.2d 323, 328, cert denied ___ US ___, 115 S Ct 182; Hickland v Hickland, 100 A.D.2d 643, 645, appeal dismissed 63 N.Y.2d 951). Edwards failed to overcome the presumption of insolvency that arises when a conveyance is made without consideration (see, Hickland v Hickland, supra; Elliott v Elliott, 365 F. Supp. 450 [SD NY]).
We, therefore, modify the order on appeal by granting plaintiff's motion for summary judgment on its first and second causes of action against Edwards, and otherwise affirm.