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TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined petitioner did not demonstrate the tenant, Cohen, violated a court order directing Cohen to pay his rent directly to the petitioner, who had a judgment against Cohen’s landlord. The court order required that Cohen pay any rent due under the lease to petitioner (CPLR 5225). However, the landlord terminated Cohen’s lease. Therefore Cohen did not not violate the order and should not have been held in civil contempt:

Here, the petitioner failed to establish that Cohen disobeyed the … order, which required him to “pay rent to petitioner as due under the lease” … . J…  Since Cohen’s lease … expired on July 31, 2015, on August 1, 2015, Cohen became a holdover tenant. Damages attributable to Cohen’s continued occupation of the premises were not due “under the lease,” but rather, were due as use and occupancy for the reasonable value of the premises … . “The obligation to pay for use and occupancy does not arise from an underlying contract between the landlord and the occupant” … . “Rather, an occupant’s duty to pay the landlord for its use and occupancy of the premises is predicated upon the theory of quantum meruit, and is imposed by law for the purpose of bringing about justice without reference to the intention of the parties” … . Accordingly, the motion to hold Cohen in contempt should have been denied. Matter of First Am. Tit. Ins. Co. v Cohen, 2018 NY Slip Op 05306, Second Dept 7-18-18

CIVIL PROCEDURE (DEBTOR-CREDITOR, CONTEMPT, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))/CPLR 5225 (DEBTOR-CREDITOR, CONTEMPT, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))/DEBTOR-CREDITOR (CONTEMPT, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))/CPLR 5225 (DEBTOR-CREDITOR, CONTEMPT, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))/LANDLORD-TENANT (CONTEMPT, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))/CPLR 5225 (DEBTOR-CREDITOR, CONTEMPT, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))/CONTEMPT (DEBTOR-CREDITOR, LANDLORD-TENANT, TENANT DID NOT VIOLATE THE COURT ORDER DIRECTING HIM TO PAY RENT DUE UNDER THE LEASE TO THE LANDLORD’S CREDITOR, TENANT STOPPED PAYING THE RENT TO THE CREDITOR ONLY AFTER THE LANDLORD TERMINATED THE LEASE (SECOND DEPT))

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EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT).

The Third Department determined the Office of Victim Services (OVS) properly paid out the assets of an incarcerated offender to the first crime victim to obtain a judgment. The statute does not provide for retaining assets for other crime victims who may subsequently obtain a judgment against the offender:

“Executive Law § 632—a sets forth a statutory scheme intended to improve the ability of crime victims to obtain full and just compensation from the person(s) convicted of the crime” …  by “allow[ing] crime victims or their representatives to sue the convicted criminals who harmed them when the criminals receive substantial sums of money from virtually any source” and protecting those funds while litigation is pending … . …

There is no doubt that OVS complied with its express obligations under the statute. The problem is that the statute provides no guidance as to how OVS is to respond where, as here, multiple crime victims seek to recover and the preserved assets of a convicted person are inadequate … . OVS viewed its response to be governed by the general rule that, “[w]here two or more . . . orders affecting the same interest in personal property or debt are filed, the proceeds of the property or debt shall be applied in the order of filing,” and acted to have the preserved assets released to satisfy the first judgment obtained by a victim (CPLR 5234 [c]). …

The Legislature could have easily included language in Executive Law § 632-a that substituted a special rule of priority for the one set forth in CPLR 5234 (c), directed OVS to leave any provisional remedies in place until all victims had obtained judgments or created some mechanism for dividing the preserved assets between them. It did not do so, and “‘[a] court cannot by implication supply in a statute a provision which it is reasonable to suppose the Legislature intended intentionally to omit'” … . Waldman v State of New York, 2018 NY Slip Op 05000, Third Dept 7-5-18

​CRIMINAL LAW (ASSETS OF THE OFFENDER, CRIME VICTIMS, EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT))/CRIME VICTIMS (ASSETS OF THE OFFENDER,  EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT))/OFFICE OF VICTIM SERVICES (OVS) (ASSETS OF THE OFFENDER, CRIME VICTIMS, EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT))/DEBTOR-CREDITOR (CRIME VICTIMS, ASSETS OF THE OFFENDER, EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT))/CIVIL PROCEDURE (DEBTOR-CREDITOR, CRIME VICTIMS, ASSETS OF THE OFFENDER, PRIORITY OF JUDGMENTS, EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT))/CPLR 5234 (DEBTOR-CREDITOR, CRIME VICTIMS, ASSETS OF THE OFFENDER, PRIORITY OF JUDGMENTS, EXECUTIVE LAW DOES NOT PROVIDE FOR THE CIRCUMSTANCE WHERE MORE THAN ONE CRIME VICTIM OBTAINS A JUDGMENT AGAINST THE ASSETS OF THE OFFENDER, HERE THE OFFICE OF VICTIM SERVICES PROPERLY PAID OUT THE ASSETS TO THE FIRST CRIME VICTIM WHO OBTAINED A JUDGMENT (THIRD DEPT))

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PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT).

The Fourth Department, modifying Supreme Court, determined plaintiff did not show that there was a continuity of ownership such that, pursuant to the de facto merger doctrine, the assets of defendant NYP Ag should be used to satisfy a judgment against NYP Management:

“Traditionally, courts have considered several factors in determining whether a de facto merger has occurred: (1) continuity of ownership; (2) a cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; (3) assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and (4) a continuity of management, personnel, physical location, assets, and general business operation” … . …

… [C]ourts have flexibility in determining whether a transaction constitutes a de facto merger. While factors such as shareholder and management continuity will be evidence that a de facto merger has occurred . . . , those factors alone should not be determinative” … . … “[I]n non-tort actions, continuity of ownership is the essence of a merger’ ” … , and is a necessary predicate to finding a de facto merger…  Here, inasmuch as [plaintiff] failed to establish continuity of ownership, it failed to establish that there was a de facto merger between the two corporations … . R&D Electronics, Inc. v NYP Mgt., Co., Inc., 2018 NY Slip Op 04151, Fourth Dept 6-8-18

CORPORATION LAW (PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT))/DEBTOR-CREDITOR (CORPORATION LAW, PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT))/DE FACTOR MERGER (CORPORATION LAW, DEBTOR-CREDITOR, PLAINTIFF DID NOT DEMONSTRATE THE CONTINUITY OF OWNERSHIP ELEMENT OF THE DE FACTO MERGER DOCTRINE SUCH THAT THE ASSETS OF ONE DEFENDANT SHOULD BE USED TO SATISFY THE DEBT OF ANOTHER (FOURTH DEPT))

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SUBSTANTIAL EVIDENCE SUPPORTED THE DEPARTMENT OF HEALTH’S DETERMINATION THAT LOANS, NOTES AND MORTGAGES WERE PROHIBITED TRANSFERS UNDER THE MEDICAID LAW, TRIGGERING A PENALTY PERIOD BEFORE ELIGIBILITY FOR MEDICAID NURSING HOME BENEFITS (THIRD DEPT).

The Third Department determined substantial evidence supported the Department of Health’s (DOH’s) determination that loans, notes and mortgages were transfers for less than market value in an attempt to qualify for Medicaid payments for nursing home care. Therefore a penalty period of ineligibility was properly imposed:

Assets conveyed through a note or a mortgage during the look-back period are considered to be transfers for full market value when the underlying loan is actuarially sound based upon the lender’s life expectancy, provides for equal payments throughout the life of the loan — with no deferrals or balloon payments — and includes a provision prohibiting cancellation upon the lender’s death … . Here, the mortgage was not actuarially sound, as its 30-year repayment term significantly exceeded the anticipated life expectancy of the spouse, who was 76 years old at the time of the transfer. After the rejection of petitioner’s Medicaid application, the spouse executed an amended mortgage that reduced the repayment term to five years. However, this amended mortgage provided for the same monthly payment as had the original document, with a balloon payment at the end of the five-year term; it thus did not comply with the separate requirement for equal payments throughout the life of the loan. Moreover, neither the original nor the amended version of the mortgage included the required provision prohibiting cancellation upon the spouse’s death; the 2010 note likewise included no such provision. Accordingly, substantial evidence supports DOH’s determination that neither transaction was made for fair market value … . Matter of Wellner v Jablonka, 2018 NY Slip Op 02701, Third Dept 4-19-18

MEDICAID (SUBSTANTIAL EVIDENCE SUPPORTED THE DEPARTMENT OF HEALTH’S DETERMINATION THAT LOANS, NOTES AND MORTGAGES WERE PROHIBITED TRANSFERS UNDER THE MEDICAID LAW, TRIGGERING A PENALTY PERIOD BEFORE ELIGIBILITY FOR MEDICAID NURSING HOME BENEFITS (THIRD DEPT))/MORTGAGES (MEDICAID, SUBSTANTIAL EVIDENCE SUPPORTED THE DEPARTMENT OF HEALTH’S DETERMINATION THAT LOANS, NOTES AND MORTGAGES WERE PROHIBITED TRANSFERS UNDER THE MEDICAID LAW, TRIGGERING A PENALTY PERIOD BEFORE ELIGIBILITY FOR MEDICAID NURSING HOME BENEFITS (THIRD DEPT))/NURSING HOMES (MEDICAID, SUBSTANTIAL EVIDENCE SUPPORTED THE DEPARTMENT OF HEALTH’S DETERMINATION THAT LOANS, NOTES AND MORTGAGES WERE PROHIBITED TRANSFERS UNDER THE MEDICAID LAW, TRIGGERING A PENALTY PERIOD BEFORE ELIGIBILITY FOR MEDICAID NURSING HOME BENEFITS (THIRD DEPT))

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ABSENCE OF ADMISSIBLE EVIDENCE OF CONSIDERATION RENDERED ANY WRITTEN OR ORAL GUARANTEE UNENFORCEABLE (FIRST DEPT).

The First Department, reversing Supreme Court, determined a written guarantee to pay the debt of another was not enforceable because no consideration for the guarantee was included in the written guarantee. The 2nd Department further held that an oral guarantee would have been enforceable if it was induced by plaintiff’s promise to hold off on bringing suit.  But only plaintiff’s counsel made that argument unsupported by an affidavit from the plaintiff:

… “[N]othing” in the writing supported the plaintiff’s claim that [she] had agreed to “forbear() pursuing a claim” in exchange for the promised payments]). In the absence of such a binding promise by plaintiff, the guaranty is unenforceable for want of consideration. “Unless both parties to a contract are bound, so that either can sue the other for a breach, neither is bound” … . …

Case law has established that an oral promise to guarantee the debt of another may be enforced, notwithstanding General Obligations Law § 5-701(a)(2), if the plaintiff “prove[s the promise] is supported by new consideration moving to the promisor and beneficial to him and that the promisor has become in the intention of the parties a principal debtor primarily liable” … . Thus, plaintiff could enforce [the] guaranty if she could prove, through parol evidence, that he gave her the guaranty in exchange for her unwritten promise to forbear from suing him until the due date of the guaranty, which would constitute new consideration beneficial to him. Plaintiff fails, however, to offer any admissible evidence (as opposed to unsupported assertions by her counsel) that she actually made such a promise. Reddy v Mihos, 2018 NY Slip Op 02565, First Dept 4-17-18

​CONTRACT LAW (GUARANTEE, ABSENCE OF ADMISSIBLE EVIDENCE OF CONSIDERATION RENDERED ANY WRITTEN OR ORAL GUARANTEE UNENFORCEABLE (FIRST DEPT))/DEBTOR-CREDITOR (CONTRACT LAW, GUARANTEE,  ABSENCE OF ADMISSIBLE EVIDENCE OF CONSIDERATION RENDERED ANY WRITTEN OR ORAL GUARANTEE UNENFORCEABLE (FIRST DEPT))/GUARANTEE (CONTRACT LAW, ABSENCE OF ADMISSIBLE EVIDENCE OF CONSIDERATION RENDERED ANY WRITTEN OR ORAL GUARANTEE UNENFORCEABLE (FIRST DEPT))/CONSIDERATION (CONTRACT LAW, GUARANTEE,  ABSENCE OF ADMISSIBLE EVIDENCE OF CONSIDERATION RENDERED ANY WRITTEN OR ORAL GUARANTEE UNENFORCEABLE (FIRST DEPT))

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FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the fraudulent conveyance allegations, which were made “upon information and belief,” were insufficient, and the tortious interference with contract allegations were insufficient because there was no allegation the contract would not have been breached but for the defendant’s conduct:

Plaintiff alleges that defendants engaged in a fraudulent scheme to transfer and dispose of the assets of several related entities (the judgment debtors) in order to thwart plaintiff’s ability to collect debts owed by those entities, including judgments in two related actions.

The actual fraudulent conveyance claims, under the common law and Debtor and Creditor Law (DCL) § 276, should be dismissed because plaintiff failed to allege fraudulent intent with the particularity required by CPLR 3016(b) … . The key allegations were made “[u]pon information and belief,” without identifying the source of the information … . Moreover, the timing of the allegedly fraudulent transfers – beginning two years before the judgment debtors incurred the subject debts – undermines the claim of fraudulent intent… .

The constructive fraudulent conveyance claims pursuant to DCL 273, 274, and 275 should be dismissed because plaintiff failed to sufficiently allege that the transfers were made without fair consideration, as the relevant allegations were all made “[u]pon information and belief”…

Because the viability of the claims under DCL 276-a, 278, and 279 depends on the viability of the other fraudulent conveyance claims, these claims should likewise be dismissed.

The tortious interference claim should be dismissed because plaintiff failed to sufficiently allege that the contract “would not have been breached but for’ the defendant’s conduct” .. . The relevant allegations were vague and conclusory and supported by “mere speculation” … . Carlyle, LLC v Quik Park 1633 Garage LLC, 2018 NY Slip Op 02436, First Dept 4-10-18

​DEBTOR-CREDITOR (FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/FRAUD (DEBTOR-CREDITOR, FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/FRAUDULENT CONVEYANCES (DEBTOR-CREDITOR, FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CONTRACT LAW (TORTIOUS INTERFERENCE, FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/TORTIOUS INTERFERENCE WITH CONTRACT (FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CIVIL PROCEDURE (FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CPLR 3016 (DEBTOR-CREDITOR, FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/UPON INFORMATION AND BELIEF (COMPLAINT, (FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/COMPLAINT (UPON INFORMATION AND BELIEF, FRAUDULENT CONVEYANCE, TORTIOUS INTERFERENCE WITH CONTRACT, AND DEBTOR-CREDITOR LAW CAUSES OF ACTION INSUFFICIENTLY PLED, COMPLAINT SHOULD HAVE BEEN DISMISSED (FIRST DEPT))

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USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined Supreme Court did not have the power to find provisions of loan agreements usurious. Defendant defaulted in the action to enforce the loan agreements. Usury is an affirmative defense which is waived if not raised by a defendant:

Pursuant to CPLR 3215, a plaintiff may seek a default judgment against a defendant who fails to appear or answer … . A plaintiff moving for a default judgment against a defendant must submit proof of service of the summons and complaint, proof of the facts constituting the cause of action, and proof of the defaulting defendant’s failure to answer or appear … .

Here, the plaintiff, by its submissions, met all of these requirements and, thus, demonstrated its entitlement to a default judgment against the defendants … . The Supreme Court erred when it severed those provisions of the agreements which it found to be illegal pursuant to the criminal usury statute. Usury is an affirmative defense which a defendant must either assert in an answer or as a ground to move to dismiss the complaint pursuant to CPLR 3211. Otherwise, the defense is waived … . Power Up Lending Group, Ltd. v Cardinal Resources, Inc., 2018 NY Slip Op 02351, Second Dept 4-4-18

​DEBTOR-CREDITOR (USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))/USURY (DEBTOR-CREDITOR, USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))/CIVIL PROCEDURE (AFFIRMATIVE DEFENSE, (USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))/AFFIRMATIVE DEFENSE (USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))/WAIVER (CIVIL PROCEDURE, AFFIRMATIVE DEFENSE, USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))/CPLR 3215  (USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))/CPLR 3211 (USURY IS AN AFFIRMATIVE DEFENSE WHICH IS WAIVED IF NOT RAISED, SUPREME COURT SHOULD NOT HAVE SEVERED USURIOUS PROVISIONS OF LOAN AGREEMENTS WHERE DEFENDANT DEFAULTED (SECOND DEPT))

QUESTIONS OF FACT WHETHER FORGED NOTE AND GUARANTIES WERE RATIFIED (FOURTH DEPT).

The Fourth Department, modifying Supreme Court, determined, inter alia, that there were questions of fact whether a note and  guaranties were ratified, despite forged signatures:

It is well established that a forged instrument may be ratified where “the principal retains the benefit of an unauthorized transaction with knowledge of the material facts” … . The evidence submitted in support of the motion contained sworn statements of Wheeler and his business partner establishing that the proceeds of the loan were used to provide the corporation with capital and that its president, Wheeler, knew that his signature had been forged on the documents authorizing the loan. Wheeler, however, never attempted to return the proceeds of the loan, and the loan “cannot now be repudiated” … . Thus, Wheeler’s own submissions raised issues of fact whether he ratified the forged note … . …

Even assuming, arguendo, that Wheeler established as a matter of law that the guaranties were forged, we conclude that plaintiff raised issues of fact whether he had knowledge of the guaranties and thus whether he ratified them … . Adirondack Bank v Midstate Foam & Equip., Inc., 2018 NY Slip Op 01713, Fourth Dept 3-16-18

DEBTOR-CREDITOR (QUESTIONS OF FACT WHETHER FORGED NOTE AND GUARANTIES WERE RATIFIED (FOURTH DEPT))/FORGERY (DEBTOR-CREDITOR, QUESTIONS OF FACT WHETHER FORGED NOTE AND GUARANTIES WERE RATIFIED (FOURTH DEPT))/NOTES (FORGERY, QUESTIONS OF FACT WHETHER FORGED NOTE AND GUARANTIES WERE RATIFIED (FOURTH DEPT))/GUARANTIES (DEBTOR-CREDITOR, QUESTIONS OF FACT WHETHER FORGED NOTE AND GUARANTIES WERE RATIFIED (FOURTH DEPT))/RATIFICATION (NOTES, GUARANTIES, QUESTIONS OF FACT WHETHER FORGED NOTE AND GUARANTIES WERE RATIFIED (FOURTH DEPT))

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INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Rivera, affirmed the appellate division’s ruling that the complaint by an indenture trustee stated causes of action on behalf of noteholders for fraudulent conveyances under a corporate veil-piercing theory. The court explained the issues before it as follows:

On this appeal we must determine whether an indenture trustee may seek recovery on behalf of noteholders for defendants’ alleged fraudulent redemptions intended to siphon off assets, leaving corporate obligors unable to pay the noteholders. The indenture at issue authorizes the trustee to “pursue any available remedy to collect . . . the payment of principal, premium, if any, and interest on the Notes,” and thus empowers that trustee to proceed at law and in equity to recover losses incurred by all noteholders from the unpaid notes. As such, the trustee may assert causes of action to recover pro-rata losses caused by defendants’ scheme to render the note debtor insolvent. The trustee may also seek to pierce the corporate veil and impose corporate obligations on defendants under an alter ego theory of liability based on properly pleaded factual allegations — here that defendants created, for unlawful purposes, a corporate structure over which they exercised complete control and domination, and which they used to incur corporate debt so they could distribute the loan proceeds to themselves through fraudulent transfers, leaving the corporation unable to pay its creditors. * * *

The [appellate division properly] concluded that the relevant language of the indenture “confers standing on the trustee to pursue . . . the fraudulent conveyance and other . . . claims, which seek recovery solely of the amounts due under the notes, for the benefit of all noteholders on a pro rata basis, as a remedy for an alleged injury suffered ratably by all noteholders by reason of their status as noteholders” … . The court also [properly] found that the complaint sufficiently states a cause of action against these defendants under a veil-piercing theory … . Cortlandt St. Recovery Corp. v Bonderman, 2018 NY Slip Op 01149, CtApp 2-20-18

SECURITIES (INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP))/DEBTOR-CREDITOR (INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP))/CORPORATION LAW  (INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP))/INDENTURE TRUSTEE  (INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP))/FRAUD  (INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP))/PIERCING THE CORPORATE VEIL (INDENTURE TRUSTEE STATED CAUSES OF ACTION FOR FRAUDULENT CONVEYANCES UNDER A VEIL-PIERCING THEORY, COMPLAINT ALLEGED FRAUDULENT REDEMPTIONS SIPHONED OFF ASSETS LEAVING CORPORATE OBLIGORS UNABLE TO PAY NOTEHOLDERS (CT APP))

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PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, in an extensive full-fledged opinion by Justice Friedman, reversing Supreme Court, determined New York courts did not have jurisdiction to enforce an Albanian judgment. The opinion is too detailed to fairly summarize here. The court explained the criteria for the enforcement of foreign money judgments under article 53 of the CPLR (Uniform Foreign Money-Judgments Recognition Act), and the applicability of Daimler AG v Bauman, 571 US ___, 134 S Ct 746 (2014) and Abu Dhabi Commercial Bank PJSC v Saad Trading, Contr. & Fin. Servs. Co.m 117 AD3d 609 (1st Dept 2014) to a CPLR article 53 proceeding. The plaintiff did not claim it had any basis for in personam or in rem jurisdiction in New York and relied upon the Abu Dhabi case for the argument such a jurisdictional demonstration was not required:

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To go beyond Abu Dhabi and hold, as [plaintiff] urges, that no jurisdictional nexus is ever required for a proceeding under article 53, even if the defendant asserts substantive defenses to recognition of the foreign judgment, would be a substantial departure from the prior general understanding of the law. For example, the Restatement (Third) of Foreign Relations Law takes the position that the creditor on a foreign country judgment “must establish a basis for the exercise of jurisdiction by the enforcing court over the judgment debtor or his property” (§ 481, Comment g). AlbaniaBEG Ambient Sh.p.k. v Enel S.p.A., 2018 NY Slip Op 00928, First Dept 2-8-18

CIVIL PROCEDURE (FOREIGN MONEY JUDGMENTS, PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/DEBTOR-CREDITOR  (FOREIGN MONEY JUDGMENTS, PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CORPORATION LAW (FOREIGN MONEY JUDGMENTS, PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/FOREIGN MONEY JUDGMENTS (PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/JURISDICTION (CIVIL PROCEDURE, FOREIGN MONEY JUDGMENTS, PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/CPLR ARTICLE 53  (FOREIGN MONEY JUDGMENTS, PLAINTIFF DID NOT DEMONSTRATE ANY BASIS FOR IN PERSONAM OR IN REM JURISDICTION BY THE NEW YORK COURTS, PROCEEDING TO ENFORCE AN ALBANIAN MONEY JUDGMENT PURSUANT TO ARTICLE 53 OF THE CPLR SHOULD HAVE BEEN DISMISSED (FIRST DEPT))