| Citicorp Trust Bank, FSB v Makkas |
| 2009 NY Slip Op 08775 [67 AD3d 950] |
| November 24, 2009 |
| Appellate Division, Second Department |
| Citicorp Trust Bank, FSB, Respondent, v Ligerie L.Makkas, et al., Defendants, and Leshold Realty Corp., Appellant. |
—[*1] Dollinger, Gonski & Grossman, Carle Place, N.Y. (Michael J. Spithogiannis of counsel), forrespondent.
In a consolidated action, inter alia, to foreclose a mortgage, the defendant Leshold RealtyCorp. appeals, as limited by its brief, from so much of an order of the Supreme Court, OrangeCounty (Giacomo, J.), dated May 7, 2008, as granted that branch of the plaintiff's motion whichwas for summary judgment dismissing its causes of action, counterclaims, and defenses.
Ordered that the order is modified, on the law, by deleting the provision thereof granting thatbranch of the plaintiff's motion which was for summary judgment dismissing the causes ofaction, counterclaims, and defenses of Leshold Realty Corp. to the extent that they are predicatedupon Debtor and Creditor Law § 276, and substituting therefor a provision denying thatbranch of the motion; as so modified, the order is affirmed insofar as appealed from, withoutcosts or disbursements.
On December 28, 1993, Leshold Realty Corp. (hereinafter Leshold) commenced aproceeding against Angelo Makkas (hereinafter Angelo) seeking, inter alia, to evict him fromcommercial premises he operated as a diner, and to obtain a judgment for rent arrears. On March31, 1994, while the eviction proceeding was still pending, Angelo transferred title to his personalresidence, the property at issue on this appeal, to his brother Konstaneinous Makkas (hereinafterKonstaneinous). Shortly thereafter, Leshold obtained a judgment against Angelo in the principalsum of $67,120.75, which was docketed in the Orange County Clerk's Office on September 16,1994. More than three years later, on October 21, 1997, Konstaneinous transferred title to theresidence to Angelo's daughter, Ligerie Makkas (hereinafter Ligerie). Travelers Bank and Trust,FSB, now known as Citicorp Trust Bank, FSB (hereinafter the bank) subsequently loaned thesum of $119,651 to Ligerie, which was secured by a mortgage on the Makkas residence.
Leshold's president claims that he was unaware that Angelo had transferred title to thesubject residence until November 2001, when he noticed a "For Sale" sign on the front lawn,which prompted him to check the records of the Orange County Clerk's office to confirmwhether Angelo was still the owner. Thereafter, by summons and complaint filed on May 9,2002, Leshold [*2]commenced an action pursuant to Debtor andCreditor Law article 10 seeking to set aside both the 1994 and 1997 conveyances as fraudulent.Angelo, Konstaneinous, Ligerie, and the bank were all named as defendants in Leshold's action.Ligerie subsequently defaulted on her payment obligations to the bank, and the bank commencedthe present action to foreclose the mortgage on the Makkas residence against several defendants,including Ligerie and her immediate predecessor in title, Konstaneinous. Leshold was alsoincluded as a defendant in the foreclosure action based as its status as holder of a judgmentagainst Angelo. In its answer in the foreclosure action, Leshold alleged as an affirmative defensethat its judgment against Angelo was a lien against the Makkas residence by virtue of its pendingaction to set aside the intra-family conveyances as fraudulent, and that its judgment was superiorto the bank's mortgage lien.
After depositions were conducted, the bank moved, inter alia, to consolidate the fraudulentconveyance action with the foreclosure action and, upon consolidation, to award it summaryjudgment dismissing all of Leshold's causes of action, counterclaims, and defenses. In support ofits motion, the bank contended that Leshold's claim that the 1994 prejudgment transfer of theMakkas residence from Angelo to Konstaneinous constituted a fraudulent conveyance wastime-barred by CPLR 213 (8), which requires an action alleging fraud to be commenced withinsix years of the date the cause of action accrued, or within two years of the date the fraud wasdiscovered, or could with reasonable diligence have been discovered, whichever is longer. Inopposition to the motion, Leshold's president submitted an affidavit in which he averred that, bychecking the records of the Orange County Clerk's Office, he had confirmed that Angelo was theowner of the Makkas residence at or about the time that Leshold commenced its evictionproceeding in December 1993. Furthermore, after Leshold obtained the judgment, he continuedto see Angelo and other members of the Makkas family at the residence on a regular basis, andwas not aware that Angelo had transferred title to his brother. The Supreme Court granted thebank's motion in its entirety, concluding that Leshold's fraudulent conveyance claims weretime-barred because it had failed to show that it could not have discovered, with the exercise ofreasonable diligence, the alleged fraudulent conveyance of the residence from Angelo toKonstaneinous earlier than two years before it commenced the action alleging fraudulentconveyance. We modify.
Leshold's claims and defenses are predicated upon both constructive fraud (seeDebtor and Creditor Law §§ 273, 273-a) and actual fraud (see Debtor andCreditor Law § 276). Constructive fraud claims predicated upon Debtor and Creditor Law§§ 273 and 273-a, are governed by the six-year statute of limitations set forth inCPLR 213 (1), and arise at the time that the alleged fraudulent conveyance is made (see Ehrler v Cataffo, 42 AD3d424, 425 [2007]; Metzger vYuenger Woodworking Corp., 33 AD3d 678, 679 [2006]; Wall St. Assoc. vBrodsky, 257 AD2d 526, 530 [1999]). Since Leshold's constructive fraud claims arepredicated upon Angelo's transfer of his residence to his brother Konstaneinous, they accrued onMarch 31, 1994, when that conveyance was made, and were time-barred when interposed by thefiling of Leshold's action on May 9, 2002.
In cases of actual fraud, however, a claim is timely if brought either within six years of thedate that the fraud or conveyance occurs, or within two years of the date that the fraud orconveyance is discovered or should have been discovered, whichever is longer (seeCPLR 203 [g]; Ehrler v Cataffo, 42AD3d 424, 425; Metzger v Yuenger Woodworking Corp., 33 AD3d at 679; WallStreet Assoc. v Brodsky, 257 AD2d at 530; Barristers Abstract Corp. v Caulfield,203 AD2d 406 [1994]; Leone v Sabbatino, 235 AD2d 460, 461 [1997]). "The two-yearperiod begins to run when the circumstances reasonably would suggest to the plaintiff that he orshe may have been defrauded, so as to trigger a duty to inquire on his or her part" (Pericon v Ruck, 56 AD3d 635,636 [2008]; Saphir Intl., SA v UBSPaineWebber Inc., 25 AD3d 315, 316 [2006]; Prestandrea v Stein, 262 AD2d621 [1999]). The failure to ascertain that an allegedly fraudulent conveyance has occurredthrough the inspection of public records is not a basis for imputing knowledge of the fraud in theabsence of circumstances that would require the plaintiff to investigate (see Guedj v Dana, 11 AD3d 368[2004]; McGuinness v Standard Drywall Corp., 193 AD2d 518 [1993]; Azoy vFowler, 57 AD2d 541, 542 [1977]). "Where it does not conclusively appear that a plaintiffhad knowledge of facts from which the fraud could reasonably be inferred, a complaint shouldnot be dismissed on motion and the question should be left to the trier of the facts" (Trepuk vFrank, 44 NY2d 723, 725 [1978]; see Oggioni v Oggioni, 46 AD3d 646, 649 [2007]).[*3]
To the extent that Leshold's claims and defenses allegeactual fraud based upon the October 21, 1997, conveyance of the residence, they are not barredby the statute of limitations because they were interposed within six years of that conveyance.Moreover, to the extent that Leshold's claims allege actual fraud based upon the March 31, 1994,conveyance of the residence, the bank failed to conclusively demonstrate, as a matter of law, thatLeshold's president had knowledge of facts which would have put him on notice of fraud morethan two years prior to the interposition of its claims, and triggered a duty to inquire (seeTrepuk v Frank, 44 NY2d at 725; Pericon v Ruck, 56 AD3d at 636-637; Ehrler vCataffo, 42 AD3d at 425; Metzger v Yuenger Woodworking Corp., 33 AD3d at 680;Miller v Polow, 14 AD3d 368,369 [2005]; cf. Sabbatini v Galati,43 AD3d 1136, 1140 [2007]). Contrary to the bank's contention, nonpayment of a judgmentdoes not, standing alone, provide such notice. Accordingly, to the extent that Leshold's claimsand defenses are predicated upon actual fraud (see Debtor and Creditor Law §276), they should not have been dismissed as time-barred. Rivera, J.P., Florio, Eng andLeventhal, JJ., concur.