| Coyle v Lefkowitz |
| 2011 NY Slip Op 08721 [89 AD3d 1054] |
| November 29, 2011 |
| Appellate Division, Second Department |
| Terence Coyle et al., Respondents-Appellants, v ThomasLefkowitz et al., Appellants-Respondents, et al., Defendant. |
—[*1] Amos Alter, New York, N.Y. (Robert L. Lewis of counsel), for respondents-appellants.
In an action, inter alia, to set aside certain conveyances as fraudulent pursuant to Debtor andCreditor Law §§ 273-a and 276, the defendants Thomas Lefkowitz, Mayer Realty Corp.,and Moore Management, LLC, appeal, as limited by their brief, from so much of an order of theSupreme Court, Kings County (Lewis, J.), entered September 28, 2010, as granted those branches ofthe plaintiffs' motion which were pursuant to CPLR 3211 (b) to dismiss their first affirmative defensebased on the statute of limitations and to disqualify counsel for those defendants, and the plaintiffscross-appeal from so much of the same order as denied those branches of their motion which were forsummary judgment on so much of the second cause of action as alleged a violation of Debtor andCreditor Law § 273-a and pursuant to CPLR 3211 (b) to dismiss the second through fourthaffirmative defenses.
Ordered that the order is modified, on the law, (1) by deleting the provision thereof granting thatbranch of the plaintiffs' motion which was pursuant to CPLR 3211 (b) to dismiss the first affirmativedefense based on the statute of limitations as to so much of the third cause of action as alleged aviolation of Debtor and Creditor Law § 276 with respect to the allegedly fraudulent conveyancesmade in 2000 and 2001, and substituting therefor a provision denying that branch of the motion, (2) bydeleting the provision thereof denying that branch of the plaintiffs' motion which was pursuant to CPLR3211 (b) to dismiss the second affirmative defense, and substituting therefor a provision granting thatbranch of the motion, (3) by deleting the provision thereof granting that branch of the plaintiffs' motionwhich was to disqualify counsel for the defendants Thomas Lefkowitz, Mayer Realty Corp., and MooreManagement, LLC, and substituting therefor a provision denying that branch of the motion, and (4) bydeleting the provision thereof denying that branch of the plaintiffs' motion which was for summaryjudgment on so much of the second cause of action as alleged a violation of Debtor and Creditor Law§ 273-a with respect to the allegedly fraudulent conveyance made in 2001, and substitutingtherefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar asappealed and cross-appealed from, with costs to the plaintiffs.[*2]
In 2000, the plaintiff firefighters commenced an action against,among others, Mayer Realty Corp. (hereinafter Mayer), to recover damages for personal injuriesallegedly sustained in responding to a fire at certain premises owned by Mayer. On November 24,2003, a judgment was entered against Mayer and in favor of the plaintiffs in the principal sum of$2,400,000. In February 2010 the plaintiffs commenced this action, inter alia, pursuant to Debtor andCreditor Law §§ 273-a and 276 to set aside allegedly fraudulent conveyances made in2000 and 2001 by Mayer, and in 2005 by nonparty Joshua Wagschal, an alleged business partner ofthe defendant Thomas Lefkowitz. The plaintiffs moved, among other things, pursuant to CPLR 3211(b) to dismiss the affirmative defenses of Mayer and the defendants Thomas Lefkowitz and MooreManagement, LLC (hereinafter collectively the defendants), for summary judgment on so much of thesecond cause of action as alleged a violation of Debtor and Creditor Law § 273-a, and todisqualify counsel for the defendants.
"CPLR 3211 (b) authorizes a plaintiff to move, at any time, to dismiss a defendant's affirmativedefense on the ground that it 'has no merit' " (Greco v Christoffersen, 70 AD3d 769, 771 [2010]). In moving todismiss an affirmative defense, "the plaintiff bears the burden of demonstrating that the affirmativedefense is 'without merit as a matter of law' " (id., quoting Vita v New York Waste Servs., LLC, 34 AD3d 559, 559 [2006]; see Bank of Am., N.A. v 414 Midland Ave.Assoc., LLC, 78 AD3d 746, 748-749 [2010]). Here, the Supreme Court properly grantedthat branch of the plaintiffs' motion which was pursuant to CPLR 3211 (b) to dismiss the first affirmativedefense based on the statute of limitations as to so much of the first and second causes of action asalleged a violation of Debtor and Creditor Law § 273-a.
Section 273-a provides that: "Every conveyance made without fair consideration when the personmaking it is a defendant in an action for money damages or a judgment in such an action has beendocketed against him, is fraudulent as to the plaintiff in that action without regard to the actual intent ofthe defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment"(emphasis added).
The existence of an unsatisfied judgment is an "essential element" of a constructive fraud cause ofaction pursuant to Debtor and Creditor Law § 273-a (Frybergh v Weissman, 145AD2d 531, 531-532 [1988]; see Carey v Crescenzi, 923 F2d 18, 20-21 [1991]; Cohan vMisthopoulos, 118 AD2d 530, 531 [1986]). Thus, contrary to the defendants' contention, thesix-year limitations period for such a claim (see CPLR 213 [1]) begins to run on the date ofentry of the judgment (see Grace v Rosenstock, 228 F3d 40, 54 [2000], cert denied532 US 923 [2001]; Carey v Crescenzi, 923 F2d at 20-21; Frybergh vWeissman, 145 AD2d at 531-532). To the extent that prior decisions of this Court have held thata constructive fraud claim predicated upon Debtor and Creditor Law § 273-a arises at the timethat the alleged fraudulent conveyance is made (see e.g. Citicorp Trust Bank, FSB v Makkas, 67 AD3d 950, 952[2009]; Metzger v Yuenger WoodworkingCorp., 33 AD3d 678, 679 [2006]), they should no longer be followed.
Although the plaintiffs herein commenced this action in February 2010, more than six years afterentry of the judgment on November 24, 2003, so much of the first and second causes of action asalleged a violation of Debtor and Creditor Law § 273-a were not time-barred because thestatute of limitations was tolled for a period of approximately 23 months. The November 24, 2003,judgment was vacated by an order of the Supreme Court dated October 2, 2006. The October 2,2006, order was reversed by this Court on September 9, 2008 (see Coyle v Mayer Realty Corp., 54 AD3d 713 [2008]). "As a matterof basic common sense, a plaintiff cannot be expected to commence an action while effectivelyprecluded from pleading the necessary elements of his case" (Roldan v Allstate Ins. Co., 149AD2d 20, 33 [1989]). Consequently, the statute of limitations was suspended from the date of theOctober 2, 2006, order, when the Supreme Court vacated the underlying judgment, until this Courtreversed that order in September 2008 (id. at 34-35; cf. Cohan v Misthopoulos, 118AD2d at 531). Accordingly, so much of the first and second causes of action as alleged a violation ofDebtor and Creditor Law § 273-a were not time-barred.[*3]
However, the Supreme Court erred in granting that branch ofthe plaintiffs' motion which was to dismiss the first affirmative defense based on the statute of limitationsas to so much of the third cause of action as alleged a violation of Debtor and Creditor Law §276 with respect to the allegedly fraudulent conveyances made in 2000 and 2001. "A cause of actionbased on actual fraud pursuant to Debtor and Creditor Law § 276 must be brought within sixyears of the date that the fraud or conveyance occurs or within two years of the date that the fraudshould have been discovered, whichever is longer" (Liberty Co. v Boyle, 272 AD2d 380, 381[2000]; see Miller v Polow, 14 AD3d368, 368 [2005]; Leone v Sabbatino, 235 AD2d 460, 461 [1997]). Here, the plaintiffsfailed to meet their burden of demonstrating that so much of the third cause of action as alleged aviolation of Debtor and Creditor Law § 276 with respect to the conveyances occurring in 2000and 2001 was timely under the six-year limitations period. We do not reach the plaintiffs' contentionthat the alleged fraudulent conveyance in 2000 was discovered within two years of the commencementof the instant action, since that contention is improperly raised for the first time on appeal (see Panteleon v Amaya, 85 AD3d 993,995 [2011]).
The Supreme Court erred in denying the unopposed branch of the plaintiffs' motion which waspursuant to CPLR 3211 (b) to dismiss the second affirmative defense, as the plaintiffs established thatthis affirmative defense was without merit as a matter of law.
Turning to that branch of the plaintiffs' motion which was for summary judgment, the plaintiffsestablished their prima facie entitlement to judgment as a matter of law on so much of the second causeof action as alleged a violation of Debtor and Creditor Law § 273-a with respect to theconveyance made in 2001 by demonstrating that such conveyance was made without fair considerationby Mayer at a time when that entity was a defendant in the plaintiffs' action for money damages (see Kreisler Borg Florman Gen. Constr. Co.,Inc. v Tower 56, LLC, 58 AD3d 694, 695 [2009]; Pascal v Nova Cas. Co., 226AD2d 688, 691 [1996]). In opposition to the plaintiffs' prima facie showing, the defendants failed toraise a triable issue of fact. Accordingly, the Supreme Court should have granted that branch of theplaintiffs' motion which was for summary judgment on so much of the second cause of action as allegeda violation of Debtor and Creditor Law § 273-a with respect to the allegedly fraudulentconveyance made in 2001.
However, the Supreme Court properly denied that branch of the plaintiffs' motion which was forsummary judgment on the second cause of action to the extent it was based on the 2005 conveyance,as the plaintiffs failed to make the requisite showing that the person who made that conveyance was adefendant in an action for money damages (see Debtor and Creditor Law § 273-a; cf. Murin v Estate of Schwalen, 31 AD3d1031, 1035 [2006]).
Finally, the Supreme Court should have denied that branch of the plaintiffs' motion which was todisqualify the law firm representing the defendants, since the plaintiffs failed to demonstrate that thetestimony of an attorney with that firm was necessary to their case (see Light v Light, 64 AD3d 633, 635 [2009]).
The plaintiffs' remaining contentions either are without merit or have been rendered academic inlight of our determination. Prudenti, P.J., Rivera, Austin and Roman, JJ., concur.