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Criteria for Fraudulent Conveyance

In reversing Supreme Court, the Second Department determined the plaintiff was entitled to summary judgment in a fraudulent conveyance action.  The court explained the relevant legal principles as follows:

Pursuant to Debtor and Creditor Law § 276, [e]very 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'” …. “Direct evidence of fraudulent intent is often elusive. Therefore, courts will consider badges of fraud,’ which are circumstances that accompany fraudulent transfers so commonly that their presence gives rise to an inference of intent”…. A plaintiff that successfully establishes actual intent to defraud is entitled to a reasonable attorney’s fee under Debtor and Creditor Law § 276-a …. * * *

The plaintiff presented evidence of badges of fraud, including, inter alia, a close relationship between the parties to the transaction, inadequate consideration for the transaction, and the retention of the benefit of the property by Elyahou, who continued to reside in the premises following the transfer… .  5706 Fifth Ave LLC v Louzieh, 2013 NY Slip Op 05187, 2nd Dept, 7-10-13

 

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Criteria for Causes of Action Discussed in Extensive Modification of Supreme Court’s Orders

In extensively modifying Supreme Court’s rulings in an action to foreclose a mechanic’s lien, to set aside alleged fraudulent conveyances pursuant to Debtor and Creditor Law section 273, and to recover damages for diversion of trust assets pursuant to article 3-a of the Lien Law, the Second Department explained (1) the effect of obtaining a bond on the Debtor/Creditor and Lien Law causes of action; when the Lien Law cause of action accrues; and (3) the Lien Law has an exception designed to protect purchasers of realty:

The Supreme Court improperly awarded judgment … to set aside conveyances of the property as fraudulent pursuant to Debtor and Creditor Law § 273. Once [defendant] “obtained a bond to discharge the mechanic’s lien, the debt no longer existed for the purposes of Debtor and Creditor Law § 273″… .

However, contrary to the appellants’ contention, the discharge of a mechanic’s lien by the filing of a bond is not equivalent to payment or discharge of a trust claim pursuant to Lien Law article 3-A … Further, contrary to the appellants’ contention, those causes of action were not time-barred by Lien Law § 77(2), which provides that no action to enforce a trust under article 3-A of the Lien Law “shall be maintainable if commenced more than one year after the completion of such improvement.” “The one-year period does not begin to run from the date of substantial completion, but from the date of completion of all work”… .

“While the Lien Law is generally designed to protect contractors, material providers and other classes of workers who supply labor or furnish materials, subdivision (5) of section 13 is an exception which is specifically designed to protect purchasers of realty”… . Holt Constr Corp v Grand Palais LLC, 2013 NY Slip Op 05189, 2nd Dept 7-10-13

 

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Family Offense Must Be Established by Fair Preponderance

The Second Department determined the family offense of attempted assault in the second degree had not been “established by a fair preponderance of the evidence” in Family Court:

A family offense must be established by a fair preponderance of the evidence (see Family Court Act § 832;…). “The determination of whether a family offense was committed is a factual issue to be resolved by the Family Court, and the credibility determinations of that court, which has the advantage of seeing and hearing the witnesses, are entitled to considerable deference on appeal” … .Here, a fair preponderance of the credible evidence did not support the Family Court’s determination that the appellant committed the family offense of attempted assault in the second degree (see Family Court Act §§ 812[1], 832; Penal Law §§ 110.00, 120.05[1]… .  Matter of Hubbard v Ponce DeLeon, 2013 NY slip Op 05211, 2nd Dept 7-10-13

 

No Constructive Emancipation or Abandonment

In affirming Family Court’s denial of father’s petition to modify child support, the Second Department explained the doctrine of constructive emancipation, noting that a child’s reluctance to see a parent is not abandonment:

The father claimed that he should no longer be required to pay support because the mother had alienated the child from him. Under the doctrine of constructive emancipation, a child of employable age who actively abandons the noncustodial parent by refusing all contact and visitation may forfeit any entitlement to support…. However, a child’s reluctance to see a parent is not abandonment…. There is no evidence in the record that the child has refused all contact and visitation with the father.  Matter of Grucci v Villanti, 2013 NY Slip Op 05209, 2nd Dept 7-10-13

 

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Family Court Had Jurisdiction But New York Not a Convenient Forum

The Second Department determined Family Court’s finding that it did not have jurisdiction (over a visitation petition) under the Uniform Child Custody Jurisdiction and Enforcement Act was error.  But the Second Department went on to determine that New York was an inconvenient forum for the proceeding:

A New York Family Court has jurisdiction to make an initial custody determination if “(a) this state is the home state of the child on the date of the commencement of the proceeding, or was the home state of the child within six months before the commencement of the proceeding and the child is absent from this state but a parent . . . continues to live in this state” (Domestic Relations Law § 76[1][a]). ” Home state’ means the state in which a child lived with a parent . . . for at least six consecutive months immediately before the commencement of a child custody proceeding” (Domestic Relations Law § 75-a[7]).

…”[T]he inquiry is not completed merely by a determination that a jurisdictional predicate exists in the forum State, for then the court must determine whether to exercise its jurisdiction” … . A court of this state which has jurisdiction under the UCCJEA may decline to exercise it if it finds, upon consideration of certain enumerated factors, that New York is an inconvenient forum and that a court of another state is a more appropriate forum (see Domestic Relations Law § 76-f[1];…). While the Family Court did not consider the enumerated factors, the record is sufficient to permit this Court to consider and evaluate those factors…

…[T]he “evidence regarding [the children’s] care, well-being, and personal relationships is more readily available” in Georgia… Under these circumstances, Georgia is the more appropriate and convenient forum … . Matter of Balde v Barry, 2013 NY slip Op 05204, 2nd Dept 7-10-13

 

Policy Exclusions Not Affected by Additional Insured Endorsement

The Second Department explained how the exclusion provisions of a policy are affected by the language of an additional insured endorsement:

Here, the plain meaning of the exclusion … was that the …policy did not provide coverage for damages arising out of bodily injury sustained by an employee of any insured in the course of his or her employment…. Contrary to the plaintiffs’ contentions, the fact that the blanket additional insured endorsement contained its own additional exclusions did not eliminate the exclusions contained in the …policy. In construing an endorsement to an insurance policy, the endorsement and the policy must be read together, and the words of the policy remain in full force and effect except as altered by the words of the endorsement…. Accordingly, since the employee exclusion clause in the …policy unambiguously recited that coverage was precluded, the Supreme Court properly granted … a judgment declaring that [the insurer] is not obligated to defend and indemnify the plaintiffs in the underlying action. Soho Plaza Corp v Birnbaum, 2013 NY Slip Op 05058, 2nd Dept 7-3-13

 

Criteria for Easement Granted in General Terms

In determining Supreme Court should have denied defendant’s motion to dismiss, the Second Department explained the criteria for an easement granted in general terms:

Where, as here, an easement is granted in general terms, “the extent of its use includes any reasonable use necessary and convenient for the purpose for which it is created”…. Further, the holder of an access easement “cannot materially increase the burden of the servient estate or impose new and additional burdens on the servient estate” … . Shuttle Contr Corp v Peikarian, 2013 NY Slip Op 05057, 2nd Dept 7-3-13

 

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No Need for Proof of Agent’s Authority—Five-Day Notice Demanding Rent Valid

The Second Department determined a five-day notice demanding unpaid rent under a lease was not invalid because it was signed by a purported agent of the landlord without proof of the agent’s authority to act for the landlord.  In so finding, the Second Department distinguished a case relied upon by the tenant:

…[T]he Appellate Term properly distinguished this Court’s decision in Siegel v Kentucky Fried Chicken of Long Is. (108 AD2d at 221). … Siegel is limited to the “factual peculiarities” of the lease in that case. The lease in Siegel, unlike the lease in the case at bar, designated certain rights that were to be exercised by “the Landlord or Landlord’s agent[ ]” and designated the landlord’s attorney by name, while the three-day forfeiture notice that was the subject of that dispute was sent by another attorney, who was unknown to the tenant …. The relevant provision of the lease herein (hereinafter the notice provision), provided that the “Landlord shall give Tenant written notice of default stating the type of default,” and, unlike the lease in Siegel, did not expressly obligate [landlord] to act only personally or through an identified agent. Consequently, although the notice indicated that it was signed by [landlord’s] previously unidentified agent, the failure to include evidence of the agent’s authority to bind the landlord, which we found necessary in Siegel, did not render [landlord] noncompliant with the requirements of the notice provision (see RPAPL 711[2]), and did not render the notice invalid. Matter of QPII-143-45 Sanford Ave, LLC v Spinner, 2013 NY Slip Op 05083, 2nd Dept 7-3-13

 

Question of Fact About Whether Plaintiff Had Standing to Bring Foreclosure Proceeding

The Second Department reversed Supreme Court, finding that the plaintiff was not entitled to summary judgment in a mortgage foreclosure proceeding.  The defendant alleged plaintiff did not have standing to bring the action. The Second Department determined the plaintiff failed to present sufficient evidence of its standing to support summary judgment in plaintiff’s favor.  In explaining the underlying legal principles, the Second Department wrote:

“In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced”…. “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident”…. However, “a transfer or assignment of only the mortgage without the debt is a nullity and no interest is acquired by it,” since a mortgage is merely security for a debt and cannot exist independently of it…. “Where, as here, the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief”…. Homecomings Financial, LLC v Guldi, 2013 NY Slip Op 05048, 2nd Dept 7-3-13

 

Proceeds of Sale of Property After Dissolution of Partnership Not “Profits”

The Second Department determined that the appreciation in the value of commercial real estate owned by a partnership after the date of dissolution did not constitute “profits” within the meaning of Partnership Law 73:

Partnership Law § 73 provides, in relevant part, “[W]hen any partner retires or dies, and the business is continued . . . he or his legal representative . . . shall receive as an ordinary creditor an amount equal to the value of his interest in the dissolved partnership with interest, or, at his option or at the option of his legal representative, in lieu of interest, the profits attributable to the use of his right in the property of the dissolved partnership.” * *

…[T]he Appellate Division, [4th] Department, held that the plaintiff’s share of the fair market value of a parcel of real property was fixed as of the date the partnership dissolved, and thus determined that the profits the plaintiff was entitled to in that case did not include increases in the value of real property after the date of dissolution. Here, since the partnership dissolved on April 12, 2000, the plaintiffs were not entitled to a share in the appreciation of partnership assets after that date… . Breidbart v Wiesenthal, 2013 NY Slip Op 05040, 2nd Dept 7-3-13

 

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