Opinion
008862/09.
November 5, 2009.
Allen M. Rosenthal, Esq., Attorney for Plaintiff, Hicksville, NY.
Robert Starr, Defendant Pro Se, Old Westbury, NY.
Honey Starr, Defendant Pro Se, Old Westbury, NY.
Citibank N.A., New York, NY.
The following papers have been read on this motion:
Notice of Motion, dated 9-23-09 ............................... 1 Affidavit in Opposition, dated 10-13-09 ....................... 2 Reply Affirmation, dated 10-14-09 ............................. 3 Response to Plaintiffs Response (Sur-Reply), dated 10-27-09 ... 4
This motion by the plaintiff for summary judgment pursuant to CPLR 3212 is granted to the extent indicated in this order.
This is an action brought under various sections of the Debtor and Creditor Law, in which the plaintiff asserts that a June, 2007 transfer by the defendants Robert Starr and Honey Starr of their interest in their marital home, located at 10 Horseshoe Road, Old Westbury, New York into Honey Starr alone, was fraudulent as to the plaintiff.
In its complaint, plaintiff alleges that as of May, 2007 Robert Starr ("Starr"), as guarantor, owed plaintiff money as a result of a business relationship between the plaintiff, apparently as a wholesale supplier, and a retail company Starr owned, Foremost Furniture Showrooms, Inc. ("Foremost"). As noted, the transfer of Starr's interest in the Westbury home occurred in June of 2007, approximately one month later. Plaintiff sued Foremost and Starr as guarantor in the Civil Court, New York County in August of 2007. Summary judgment in favor of the plaintiff was granted on default in December, 2008, and a judgment against both Foremost and Starr for $30,061.03 was entered in March, 2009. A transcript of the judgment was subsequently filed in Nassau County later that month, and this current action was begun in May, 2009.
Based on the foregoing, the plaintiffs allege a fraudulent transfer pursuant to both Debtor and Creditor Law § 273 (debtor rendered insolvent by transfer), § 275 (conveyance when debtor intends or believes future debts will be beyond ability to pay) and § 276 (conveyance with actual intent to defraud). All such transfers must be without fair consideration, as that term is defined by § 272. Plaintiff seeks to levy on the house and to have the Court establish a constructive trust in favor of the plaintiff. It also seeks attorneys' fees pursuant to Debtor and Creditor Law § 276-a. Plaintiff now moves for summary judgment against the two individual defendants.
Counsel for plaintiff informs the Court that defendant Citibank, N.A. has not yet answered or appeared in the action.
Generally speaking, to obtain summary judgment it is necessary that the movant establish its claim or defense by the tender of evidentiary proof in admissible form sufficient to warrant the court, as a matter of law, in directing judgment in its favor. CPLR 3212 (b). If this initial burden is not met, the Court should deny the motion, or any part thereof for which the burden has not been met, irrespective of the strength of the opposing papers. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 (1985).
If a sufficient prima facie showing is made, however, the burden shifts to the non-moving party. To defeat the motion for summary judgment the opposing party must come forward with evidence to demonstrate the existence of a material issue of fact requiring a trial. CPLR 3212 (b); see also GTF Marketing, Inc. v Colonial Aluminum Sales, Inc., 66 NY2d 965 (1985); Zuckerman v. City of New York, 49 NY2d 557 (1980). In performing its review of the record, the court must draw all reasonable inferences in favor of the nonmoving party. Nicklas v Tedlen Realty Corp., 305 AD2d 385 (2d Dept. 2003); Rizzo v. Lincoln Diner Corp., 215 AD2d 546 (2d Dept. 1995). It should not attempt to resolve matters of credibility. Heller v. Hicks Nurseries, Inc., 198 AD2d 330 (2d Dept. 1993). However, a Court need not ignore the fact that an allegation is patently false or that an issue sought to be raised is merely feigned. See Village Bank v Wild Oaks Holding, Inc., 196 AD2d 812 (2d Dept. 1993); Barclays Bank of N.Y. v Sokol, 128 AD2d 492 (2d Dept. 1987).
In support of their motion, the plaintiff submits copies of the following documents: the order of the Civil Court, New York County granting summary judgment against Starr and Foremost; the transcript of judgment filed with the New York County and Nassau County Clerks; the deed transferring Starr's interest to his wife; and 2008 tax warrants from the New York City Department of Taxation and Finance against Starr as the person responsible for Foremost's taxes. These are admissible on this motion. Olan v Farrell Lines, 64 NY2d 1092 (1985). Plaintiff also relies on statements made by defendants in their answer, essentially as admissions.
However, there is no affidavit submitted by a person with knowledge, nor is the complaint verified by a person with knowledge. Therefore, the affirmation by the attorney for the plaintiff is without probative value and will be disregarded. JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373 (2005); Warrington v Ryder Truck Rental, Inc., 35 AD3d 455 (2d Dept. 2006). The Court will thus consider only the admissions contained in the pro se answer of Robert Starr and Honey Starr as a basis for summary judgment, as well as the documents described above.
The complaint is verified by the attorney, as his office is in another county than the corporate plaintiff's.
The admissions referred to by the plaintiff are contained in a single affirmative defense. The defendants there state as follows: Starr owned a Bronx warehouse appraised at $7 million in January, 2005. At the time, all creditors knew that payment would be made based upon a sale of this warehouse. It was encumbered by a $2 million dollar mortgage, and Foremost owed approximately $1.5 million to its creditors, indicating sufficient funds to satisfy all claims. Under these circumstances, the transfer to Honey Starr could not have been to defraud creditors, but rather was done "to make it easier for her upon the decease of Robert Starr."
In June, 2007 Starr received a deposit from a buyer for the warehouse but that buyer backed out. These defendants state that as a result there was "no choice left" other than to sell the building at an auction, which occurred in January, 2008. The sale yielded $3.1 million, which produced a "big shortage" after payment of mortgage, taxes and employees. The answer goes on to recite that Starr had used up all his personal funds that was not enough to continue "both businesses" before they closed.
The only business mentioned in the papers before the Court is Foremost. There is no indication as to what the other business might be.
The affirmative defense concludes with the statement that both the defendants are surviving on monthly income from Social Security and unemployment insurance, and that Starr is studying for a paralegal degree and is actively seeking employment. There are no dates given as to when the conditions stated in this concluding portion of the pleading began.
By failing to controvert the allegations found in paragraphs 6 and 9 of the complaint, the defendants have admitted that Starr had executed a personal guarantee to the plaintiff to induce it to continue doing business with Foremost, and that on August 9, 2007 plaintiff began an action against him. CPLR 3018(a). The deed transferring the home to Honey Starr is dated June 29, 2007. The decision of the Civil Court annexed to the moving papers shows that Starr ultimately defaulted on the summary judgment motion, leading that Court to grant judgment against both Foremost and Starr personally in the amount of $25,000.
Given the time periods involved, this is sufficient as prima facie proof that Stan-anticipated that such a debt would exist in the future when he transferred his interest in the house. Further, the transfer is effectively acknowledged to have been made without fair consideration. However, there is a failure to demonstrate that the transfer rendered Starr insolvent (Debtor and Creditor Law § 273), or beyond his ability to pay future debts (Debtor and Creditor Law § 275). The debt was later shown to be $25,000 and at the time of the transfer Starr owned a warehouse valued at $7 million. The sale, although for far less, and which ultimately left the defendants in their self-described poor economic circumstances, did not take place until January, 2008. Accordingly, as to the claims built on these sections of the statute the motion must be denied, irrespective of the strength of the moving papers. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, supra.
Because of the absence of an affidavit or complaint verified by a person with knowledge, and defendants' denial of the allegation contained in paragraph 7 (in which plaintiff alleges that in May of 2007 Foremost could not meet its credit obligations), the Court cannot find, prima facie, that money was owed as of that date. However, these are enough other admissions to conclude, at minimum, that such a debt was anticipated.
However, a prima facie showing has been made with regard to the allegations made pursuant to Debtor and Creditor Law § 276, actual intent "to hinder, delay or defraud" creditors has been made out. This fraudulent intent may be proved circumstantially and courts will consider certain "badges of fraud" which are circumstances that accompany fraudulent transfers so commonly that their presence gives rise to an inference of intent. Such badges of fraud include a close relationship of the parties to the transaction, inadequacy of consideration, the transferor's knowledge of the claims or claims that are likely to arise, and retention of control by the transferor. Dempster v. Overview Equities, Inc., 4 AD3d 495 (2d Dept. 2004); In re Sharp Intern. Corp., 403 F. 3d 43, 56 (2d Cir. 2005). Sufficient circumstances have been shown here, in that notwithstanding the presence of the warehouse, Starr acknowledged that his business was failing, he had knowledge that he owed significant amounts of money to his creditors, and he transferred his interest to his wife without any sufficient explanation therefor.
Defendants have been unable to rebut this showing. Initially, neither their joint statement, nor Starr's individual sur-reply, is affidavit form, rendering both inadmissible. Starr is an attorney who affirmed his statements, but they remain defective in any event. The 'statement of an attorney who is also a party should be in affidavit form (CPLR 2106), and, if not, may be excluded from consideration. Lessoff v 26 Court Street Assocs., LLC, 58 AD3d 610 (2d Dept. 2009); LaRusso v Katz, 30 AD3d 240 (1st Dept. 2006); Samuel Weininger v Belovin Franzblau, 5 AD3d 466 (2d Dept. 2004). Insofar as the joint statement is executed by Honey Starr, it is clearly inadmissible, as she is not claimed to be an attorney by any party. More importantly, the content of Starr's statements, even if considered, is inadequate.
As noted above, a court is not to determine matters of credibility in deciding a motion for summary judgment, but it is not thereby constrained to ignore the fact that an allegation is patently false or that an issue sought to be raised is merely feigned. Village Bank v Wild Oaks Holding, Inc., 196 AD2d 812, supra; Barclays Bank of N. Y. v Sokol, 128 AD2d 492, supra. In this case, the complete lack of supporting evidence regarding the defendants' explanation of the transfer in June of 2007 does not rebut the initial showing that the transfer was made with actual intent "to hinder, delay or defraud" the plaintiff creditor. See, Kreisler Borg Florman Gen. Const. Co., Inc. v Tower 56 LLC, 58 AD3d 694 (2d Dept 2009); Roth v Porush, 281 AD2d 612 (2d Dept. 2001); Dillon v Dean, 236 AD2d 360 (2d Dept. 1997); Spielvogel v Welborne, 175 AD2d 830 (2d Dept. 1991); see also, Joslin v Lopez, 309 AD2d 837 (2d Dept. 2003).
Starr asserts that by the time he transferred title he had what amounted to significant medical problems, including a stroke, angioplasty, and surgery to remove his gall bladder. In his sur-reply he asserts that at about the time his business problems surfaced he and his wife lost their daughter to cancer. He claims that these conditions led him to transfer his interest in his property to his wife alone.
However, no medical evidence is offered of the ailments asserted, nor, assuming that all such ailments were present, that Starr's life was in significant jeopardy at the time he conveyed his interest to his wife. In addition, he acknowledges by way of his joint statement that he understood that the house was previously held by the entireties, which of course meant that in the event of his death it would become his wife's by operation of law. This renders highly suspect his assertion that he undertook the transfer simply to make things easier for her in the event of his demise.
Further, there is no proof supporting his claim that the warehouse was worth $7 million dollars at the time of the transfer. Starr claims that in June, 2007, the same month as the transfer, he had a deposit from a buyer for a sale for $6.1 million, but the buyer cancelled. Absolutely no proof of this alleged agreement is submitted. No written contract of sale is presented, nor is there any other detail offered, even in affirmation/affidavit form, about the alleged prospective sale — including, significantly, how and why the cancellation occurred, the size of the deposit and whether it was retained by Starr, and if not, why not.
A copy of some of the closing documents of the (alleged later) sale, submitted by the defendants in opposition, reveals that the sale was ultimately for $3.65 million, which left a final balance of approximately $112,000 after certain additional payments were made to employees and other creditors, as indicated in a handwritten note which plainly was not part of the closing statement. It is also worth noting that no details of the later sale are offered beyond the simple, one page closing statement, but in the attorney's transmittal letter to Starr of such closing statement, the seller and buyer of the property are identified as 979 Brook Realty Corp. and 979 Brook Realty Associates, LLC — raising additional unanswered questions as to ownership of the described warehouse, and Starr's association with both the seller and buyer. Plaintiff, of course, was not among those paid after the building was sold, and defendants now assert, in effect, that they have barely enough resources to meet the expenses of daily living.
In sum, even accepting as admissible the defendants' statements in opposition, summary judgment should be granted to the plaintiff. The Court holds that the lien of the judgment against Robert Starr attaches to the property currently titled to Honey Starr, commonly known as 10 Horseshoe Road, Old Westbury, New York, and is subject to judgment enforcement proceedings. Debtor and Creditor Law §§ 276, 278; CPLR 5236; see, Committee of Unsecured Creditors of Interstate Cigar Co., Inc. v Interstate Distribution, Inc., 210 AD2d 283 (2d Dept. 1994).
The plaintiff is also entitled to attorney's fees pursuant to Debtor and Creditor Law § 276-a, which shall be determined at a hearing as directed herein. That sum shall be added to the judgment to be entered on this order, which judgment shall be submitted to the undersigned upon the conclusion of the hearing.
Subject to the approval of the Justice there presiding and provided a Note of Issue has been filed at least 10 days prior thereto, this matter is referred to the Calendar Control Part (CCP) for a hearing on attorney's fees inquest on December 3, 2009, at 9:30 A.M.
A copy of this order shall be served on the Calendar Clerk and accompany the Note of Issue when filed. The failure to file a Note of Issue or appear as directed may be deemed an abandonment of the claims giving rise to the hearing.
This directive with respect to a hearing is subject to the right of the Justice presiding in CCP to refer the matter to a Justice, Judicial Hearing Officer or a Court Attorney/Referee as he or she deems appropriate.
This shall constitute the Decision and Order of this Court.