Estate of Leon Tawil v Sutton

2024 NY Slip Op 30575(U)

February 23, 2024

Supreme Court, Kings County

Docket Number: Index No. 527569/2023

Judge: Leon Ruchelsman

Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York

State and local government sources, including the New

York State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for official

publication.
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SUPREME COURT OF THE STATE OF NEW YORK 

COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8 

- ----------- ------ - --------- ------· -x 

ESTATE OF LEON TAWIL, 

Plaintiff, Decision and order 

- against - Index No. 527569/2023 

MEIR SUTTON, ISAAC SUTTON, ABRAHAM 

DUSHEY, arid lSS0 EAST 5TH LLC, 

De-fendants, - -·-- - - . . -.-.. -----· ---- - - -·-.. _ .. ---·-- - -·---------2{ 

PRESENT: HON. LEON ROCHELSMAN 

February 23, 2024 

Moti6n Seq. #1 & #2 

The defendants have moved and cross-moved seeking to dismiss 

the complaint pursuant to CPLR §3211 oh the grounds it fails to 

allege any causes of action. The plaintiff opposes the motion. 

Papers were submitted by the parties and arguments held. After 

reviewing all the arguments this court how makes the following 

determination. 

On February 9, 2016 Abraham Dushey obtained a judgement 

against Isaac Sutton in the amount of $741,287.20. TQ satisfy 

the judgement, on September 27, 2017 Isaac sold property loca,ted 

at 1580 East 5ti, Street in Kings county to Dushey. The purchase 

price was-agreed upon as $1,650,000 arid the prope~ty ~as sold for 

$919, 119·. 47 which included a satisfaction of the amount Sutton 

owed Dushey satisfying the judgement. Oh May 7, 2020 Dus.hey sold 

the property to Isaac's son Meir, the defendant in this action., 

:i:hrou,gh an ent:Lty calied 1580 East 5th LLC for $'1; 700, doo. .That 

amount was based upOn an ~pprai:Sal conducted by Wells Farg'ci Barik 

which loaned eighty percent of the purchase price and then 

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obtained a mortgage on the property. 

The plaintiff has now instituted the within lawsuit. The 

plaintiff, the estate of Leon Tawil, obtained a judgement against 

Isaac Sutton on June 29, 2022 in the amount of $3,254, 537 .4 0 

which remains unsatisfied. That judgement was the result of a 

lawsuit Corrimenced in 2015. The complaint alleges that the sale 

between Dushey and Meir Sutton was made to he1p Isaac avoid 

paying its judgement to the plaintiff. The compl 9 int alleges 

three Causes of action pursuant to the Debtor Creditor Law 

(§§273, 275, 276 and 278). The defendants, the Suttons and 

Dushey have moved seeking to dismiss the law$uit on the grounds 

it fails to allege any valid causes of action. As noted, the 

motions have been opposed. 

Conclusions of Law 

It is well settled that upon a motion to dismiss the court 

must determine, accepting the allegations of the complaint as 

true, whether the party can succeed upon any reasonable view of 

those facts (Perez v. Y & M Transportation Corpo.ration, 219 AD3d 

14 49; 196 NYS3d 145 [2d Dept., 2023]) . Further, all the 

allegations in the complaint are deemed true and all reasoriable 

inferences .may .be drawn in favor of the. plaintiff (Archival Inc .. ,·. 

V. 177 Realty- Corp., 220 AD3d 909,. 198 NYS2d 567 [2d Dept. 1 

2023] i ~. Whether the c::ompiaint will late+ svrvive a motion fol:' 

surrtmary judgment, or whether the plaintiff wil.l ultimately be 

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-able ·to p,rove its. c.la.im:-s, of course·, plays no part in. t:he 

cieterm:j.;nation of a pre-tjiscovery C.P-LR -~3.2)1 motion. t.o d.i,smiss 

.(see; Lam v. Weiss, 219 AD3d 713, 195 NYS3d 488 [2d Dept., 

20231). 

Pursuant to §2.73 cif the Debt.ar Creditor Law every conveyance 

made- by a: party which then render-s. the party inscilv.ent i=s 

fr·audulent without regard to intetit if the conveyance is made 

Without ·tair consideration ( Paragon v. Paragon, 164 AD3d 14 60, 84 

NY'S3d 582 [2d Dept., 2018]). Further, .such transfers are 

fraudul.ent if the transferor intende.d ._or believed the tr_ansferor 

woμ-ld i._ncur debts beyo.r:id his or her ab-ility to pay the:m. whE?n tl;l.ey 

ma·t.ured (Dept.or (:,re_d.i,.to"t Law §275.) or ev.en if fair consideration 

was present the trans-fer was made with. the intent to defraμd 

(Debtor Creditor Law §27.6). Pursuant to Debtor Creditor Law §278 

·any c:redi tor may have f ra-udulent conveyances set aside exc·ept 

aga:irtst any good. faith, :_purchaser for v_alue, which is. ciefin~q as 

,.any- -pe.rson who te:nd_eretj -f ai;r considE?rati..o:n without ·-knowledge of 

any fraud (.::,ee, Cornmodi ty Futures T.rading Conimi::,::,ion v .. Walsh, l 7 

NY3d 162, 927'~YS2d 821 [2011]}. 

The plaintif.f has -only oppos.ed ·the- motion seeking ·to dismiss 

·oebto_r _Creditor _Law §_2i.76 and Debto.r Cr.editor Law §2.7H. Thus, the 

motion s.eek:irtg- to dismiss any c-1.aims based upo.n Debtor Credi.to.r 

Law §2 7 3 and Debtor Crecii tor Law §275 is gr:anted; 

The fraudulent transfer law contained -within the Debtor 

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Creditor Law is designed to prevent debtors from avoiding the 

payment of their debts (Leifer v. Murphy, 149.Misc 455, 267 NYS 

701 [Supreme Court Bronx County 19331). Debtor Creditor Law 

former §27.6 states that "every conveyance made . . . with actual 

intent .. to hinder, delay, or defraud either present or 

future creditors; is fraudulent" (id), Thus, a creditor must 

demonstrate, by clear and convincing evidence that a defendant 

had the actual intent to hinder, delay or defraud creditors (see, 

Jensen v. Jensen, 256 AD2d 1162, 682 NYS2d 77 4 [ 2d Dept., 1998 ]) . 

Since fraudulent or improper intent is difficult to prove, 

courts have developed 'badges of fraud' which can give rise to 

intent. Badges of fraud include: ''a close relationship between 

the_parties to the alleged fraudulent transaction; a questionable 

transfer not in the usual course of business; inadequacy of the 

consideration; the transferorls knowledge Of the creditor's claim 

and the inability to pay it; and retention of control of the 

property by the transferor after the conveyance1' (Goldenberg v. 

Friedman, 191 AD3d 641, 141 NYS3d 111 [2d Dept., 2021]). 

In this case, as notedi the plaintiff first became a 

creditor bf Isaac on June 29; 2022 when a jury awarded the 

plaintiff a judgement against Isaac in the amount of 

$3254,547.40. 

There are three overlapping rec:1sons the plaintiff cannot 

maintain any fraudulent conveyance claims against the defendants. 

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. . 

First, the two transfers, from Isaac to Dushey and then 

Dushey to Meir all concluded two years before tll.e plaintiff 

obtained ariy judgement. Tn fact, the transfer from Isaac to 

Dushey occurred almost five years before the judgement was 

obtained. It is true that a fraudulent conveyance can be found 

even where the debt was not in existence at the time of the 

conveyance. Howeve:r:, all cases that have relied on that 

proposition·concerned events far closer in time. Tn Nonas v. 

Romantini, 271 A:D2d 292, 706 NYS2d 109 fl"t Dept., 20001 the 

court £01.ihd a fraudulent conveyance could exist because when the 

conveyance was made "there were ample indications that such 

obligation was being discussed at or about the time of s,uch 

transfer'' (id) . In First Keystone Consultants T:hc. , 

v. Schlesinger Electrical Contractors Inc., 871 F. Supp2d 103 

[E.D.N.Y. 2012] the court h.eld conveyances could be fraudulent 

when they wer·e made within weeks of arbitration appearances and 

arbitratio.n rulings against an entity, KFC, that was the subject 

6f those arbitratioris. The court concluded that "the timing and 

circumstan.:::E:s of :these transactions constitute clear and 

convinbing evidence that FKC acted With intent to defraud its 

creditors'; (id). Similarly, In Cathay Bank v. Bonilla, 2023 WL 

6812274 [E,D.N.Y. 20231 the court found a fraudulent conveyance 

existed, when among other factors, a transfer to◊-k place one 

month after :the transferor was named in a lawsuit. 

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In this case, although Isaac was aware of a lawsuit filed in 

2015, the transfers took place in 2017 and 2022. A mere lawsl1it 

filed, the merits of which required a jury determination ye.ars 

later, cannot support a finding the transfers were fraudulent. 

Moreover, this reality, without any other factors is insufficient 

tb establish a fraudulent transfer. 

In truth, as not'ed, this argument is really one factor when 

assessing whether badges of fraud exist. Indeed, Federal courts 

include additional factors that can be utilized to evaluate 

whether badges of fraud support the intent necessary to establish 

a fraudulent conveyance, including "the general chronology of the 

events and transactions under inquiry" {see; Kim v. Ji Sung Yoo, . . 

311 F.Supp3d 598 [S.D.N.Y. 2018]). That additipnal factor is not 

found in any appellate decision in New Ybrk but is found in lower 

court decisions (~, Nixon: v. Jackson, 2009 WL 1574117 [Supreme 

Court Nassau County 200.9] and ATSCO LTD. et al v. Haryati 

Zainudin Swanson; 2004 WL 5329667 [Supreme Court New York County 

2004]). The allusion to this additional factor in Nonas (supra) 

and the strength ot weakness of its relevance demands its 

consideration along with an examination of all the badges of 

fraud. 

Second, evaluating the badges of fraud necessary 

demonstrates tha1: plaintiff has not adequately pled intent of a 

fraudulent conveyance. The plaintiff asserts the two 

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transactions must be viewed as one composite transaction. The 

court will address that argument, however, to maintain a 

fraudulent conveyance action premised on badges of fraud, 

requires, first, a close relationship between the parties to the 

alleged fraudulent tr:ansaction. The two transactions involve 

Isaac and Dushey and oushey and Meir. While Isaac and Meir as . . . . . I ... 

fathek and son, obviously maintain a close relationship~ there is 

no such relationship with Dushey. The complaint states that 

Isaac and Dushey were friends .fo.r twenty years (Complaint, 'l4 

[NYSCEF Doc. No. 8]}. However, Dushey sued Isaac ahd obtained a 

judgement against l:lim in an action in Kings County entitled 

Abraham Dushey, et al. v. Isaac Sutton, Index No. 51025/2015 and 

secured a judgemen:t against Isaac for $741,287 .DO. Thus, the 

sort of "close'; relationship required to maintain a fraudulent 

conveyance action premised on badges of fraud does not 

exist here. 

✓ . 

Next, plaintiff does not allege facts sufficient to suggest 

that the transactions were questionable transfers not in the 

usual course of business. For example, "a corporation does not 

usually transfer money to; or for the benefit of, people who 

provide ho consideration. Nor does a corporation properly prepare 

and file W-2 forms for people who are not employed by the 

c::orporation'; ( see, Federal National Mortgage Association v. 

Olympia Mortgage Corporation, 792 F.Supp2d 645 IE.D.N, Y. 2011]). 

T 

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Moreover, a transaction made with an unusual amount of secrecy or 

made with efforts to conceal thi2 transaction from others 

inclU9ing debtors principles are further indications the 

transaction was not made in the ordinary course of business (Tn 

re 45 John Lofts LLC; 650 BR 602 [United States Bankruptcy Court . . 

Southern District of New York 2023]), 

The first transfer was made to satisfy a debt and cart hardly 

be classified as improper in any way. There is also no indicia 

that Isaac preferred certain creditors to the detriment of the 

plaintiff and that such preference constitutes fraud (see, 

Priestly v. Partmedix Inc., 18 F. Supp3d 4 86 [S. D. N. Y. 2014] ) . At 

the time of the conveyance, Dushey had a judgement against Isaac 

and plaintiff did riot. There can be no fraudulent preference-s 

paying the debt owed to D11shey thereby frustrating the 

plaintiff's claim that would not ripen for five years. The 

unpredictability of that claim, in 2017, negates any assertions 

the transfer to Dushey .somehow consisted of any improper 

pre£erence (see, In re Sharp International Corp., 4.03 F3d 43 [2d 

Cir. 2005 J l The second transfer did hot involve Isaac the 

debtor and in isolation was not done in any unusual manner to 

raise any badge of fraud at alJ. The transfer was for full 

cohs-ideratioh, was made with a publicly recognized bank as 

mortgagee and was not done secretly or hastily. The fact the 

property may not have been publicly available to other potential 

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purchas·ers does not me-an the· conveyance·- was fraudulent in ·any 

-manner. 

Next, inadequacy of the consip.eration is. considered a 

·\\.particularly· impottan_t,,. badge- establishing a: fraudulent 

conveyance (Axginc Corporation v. Plaza Automall Ltd., 2022 WL 

21354 74 [E. ·i:). N. Y. ·2022'] ") . While the plaintif·f acknowledges that 

inadequacy o"f consider:ation is a badge o:f fraud nec.e-ssary to 

establish intent (see, Memorandum of Law in Oppositipn, page 7 

[ NYSC~)F Doc. · No . 6·5] ) the: pJ_ai"n ti f·f argu(;!·s that inadequacy· 6 f 

consid~rati.on is not rieces-sary to· establish a: claim .purSμq.nt t,o 

Debtor Creditor Law former §276. It is true that where actual 

iptent to defraud· -has been proven then th.e adequa~y _of 

consideration is not relevant to: set as.ide the conveyance {.filffi., 

In re Sharp Internation·al Corp., supra). However, where there 1-s 

no indi_c,ic1 _of actual i·ntent ·-1;1.no instead the pl-aintiff seeks to 

establi§h fr~ud by reliance upon badges 0£ fraud tben surely the 

inadequacy .of corrs.iqerat-,ion _i~ i3. £-actor that -m,tist be considered 

(see,. Wall Street Associates v. Brodsky_, 257 :AD.2:d 5_2_Q, 6$ 4 NYS2d 

244 [lst Dept., 19:99]) In Wall street, the court explained that 

"DCL "§ -276, unlike.· sect.i:Ons' 27.3 and 275, addres.ses actual -fraud, 

as opposed to constructive fraμd, and does not require proof of 

unfair c·on·sicteration or i.ns·bl ven-cy ... Due to the difficulty of· 

proving actual intent t,o hincter·, cielay, or def r~ud creditqrs, the 

ple.ader is allowed to re1y on "badges of fraud" to support his 

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case, i.e., circumstances so. c·ommo.nly as.soc::ii;l_ted with fprndμlent 

trans.rers "that t_heir presence gives. rise to an inference of 

interit" ... Among such c"ircu:mstaitces are: a clos·e. rel·ationship 

t.,etwe.en- the parties to the a.lJeged. fraudulent transactiqn;· a 

questionable. tri::l.nsfer not in the usual course bf business; 

inadequacy .of the ·cons·iderati-on; the tra-risferor' s knowledg.e of 

the er.editor's c-laim and the inability to pay it; a.nd re.tention 

of control of the property by the transferor after the 

<;::-9nveyance" (id) . 

T.he ,adequacy .of co.nsidera_tio.ri.. conc$.rning .the tr~nsfE;ixs in 

this case i$ apparent. Indeed, the plaintiff _does not even . . . 

question their a_dequacy ·other than tci no.te the second transaction 

was not arms..:..alengthbecause the price wcis virtually the same as 

the 2017 transfer and the property was riot listed fo-r sale on the 

open m,a:rket.- However, those facto:.ts do not impugn adequate 

consideration at a.11. In any event, those objections are equally 

_u_navailing and .fail to :raise- any question of fraud. While the 

two transfers, thre$ years apart, were for almost identici:ll 

prices,. tha_t does nc:it evince any questi.on of fraud. This .is 

:particulariy· tru·e where. :ther~- is no quest.ion fair -c.or;isideration 

was ex-changed and Well.a Fargq Bank provided an appraisal arid 

,obta:·ined a mortgage in the second trap-$~ctipn. Any qμestio.n in 

thi-s reg~rd is_ sheer speculation. Moreover:,- the -fact the 

property may not have beeri offered to sale to others does not 

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undermine. the adequacy of consideration. That is an irrelevant 

fact that has no bearing upon this litigation. 

The next badge of fraud is the transferor's knowledge of the 

creditor's claim and the inability to pay it. This badge is 

entirely absent in these transactions and to be sure the badge 

makes little sense considering the specifics facts. DUshey as 

one of the transferors was never a debtor and whether Dushey knew 

of Isaac's debts is entirely irrelevant. As the court observed 

in In re Tribune Co. Fraudulent Conveyance Litigation, 2017 WL 

8-2391 [S. D. N. Y. 2017] "when considering whether a debtor had an 

actual intent to hinder, delay, or defraud its crE'!ditors, courts 

focus on the intent of the transferor not on the intent of the 

transferee" (id). Thus, the intent of Dushey or Meir as 

transferees is entirely irrelevant. 

The last badge of fraud demonstrating intent recited by New 

York cases is whether there is any retention of control of the 

property by the transferor after the conveyance. Th this case 

that badge. Of fraud is not even asserted. There is no dispute 

that after Isaac transferred the property to Dushey he did not 

ma.in ta in any retention Cir control ov_er the property. Likewise, 

upon Dushey's sale of· the property to Meir, again, Isaac retained 

no control over the property. 

As noted, the Federal courts include further badges of 

fraud, namely, the financial condition of the party sought to be 

ll 

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charged both before and after the transaction in question, the 

existence or cumulative effect of a pattern or series of 

transactions or course of conduct after the incurring of debt, 

onset of financial difficulties, or pendency or threat of suits 

by creditors c:rnd the general chronology of the events and 

trarisactioris under inquiry (see, Emerson Electric Company v. 

Asset Management Associates of New York, 2023 WL 4850528 

[E. n. N. Y. 2023]) . These badges of fraud are also absent in this 

case. 

The financial cortdi tion of the party sought 1:o be charged, 

Isaac in this case, is similar to the transferor's knowledge of 

the creditor's claim and the inability to pay it. That badge has 

adequately been discus·sed. The next bad.ge, a series of 

transactions will be dealt with presently regarding the 

collapsing doctrine. The last badge, the chronology of events 

surely provides no indicia that any intent existed to 

frauciulently convey the property. As already explained, a 

lawsuit was comrri.enced against Is.a:ac .in 2015. In 2016 Dushey 

obtained a judgement against Isaac. As a result of that 

judgement Isaac sold his property to Du.Shey to satisfy the debt 

that arose from the 2016 lawsuit. The further transaction from 

Dushey to Meir in 2020 did not involve Ts.aac at all and the 

c:hronology of these events does not serve to indicate any fraud .. 

The mere fact the 2015 lawsuit was concluded with a judgement 

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against Isaac in 2022, a full two years after the property was 

sold to Meir fails to allege any fraudulent conveyances in any 

manner. Thus, considering all the badges of fraud, the. only one 

that could possibly be utilized to infer fraudulent intent is the 

fact Isaac and Meir are related to each other. However, that one 

possible badge is entirely inadequate. As the court Observed in 

In re Tops Holding II Corporation, 646 BR 617 [United States 

Bankruptcy Court Southern District of New York 2022] ''the 

presence or absence of any single badge of fraud is not 

conclusive; The proper inquiry is whether the badges of fraud 

are present, not wh?ther some facts are absent. Although the 

presence of a single facto'r, i.e. a badge of f:r-aud, may cast 

suspicion .Oh the transferor's intent, the confluence of several 

in one transaction generally provides conclusive evidence of an 

actual intent to defraud" (id). Thus, when no badges of fraud 

are found no such intent to engage in any fraudμlent conveyance 

has been presented. 

Lastly, the plaintiff asserts the collapsing doctrine can 

enable both transactions to be viewed as one overall transaction 

wherein Isaac really transferred the property to his son 

establishing a fraudulent conveyance. 

This doctrine permits mμltiple trarisactions to be viewed as 

steps in a single transaction when analyzing a fraudulent 

conveyance allegation (HBE Leasing Corporation v. Frank, 48 F.3d 

B 

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623. [-2d Cir. 1995]) -. Fo-r example in HBE the court explain'ed the 

doctrin.e would apply wh·ere ~'one tran.s-f~J:"_ee gives fair v-~l_μe to 

the debtor in exchange for the debtors properiy, and the debtor 

then gratuitously trans.fers the proceeds of the first exchange tc.i 

a s~c:c.ind transferee. The first transferee thereby receives the 

d.e-bt.or:s prope.rty, and the se.cond trar:i.sfer~e rece!ive.fi· the . . . 

··¢.ons.-idf,!ra-i:ion, wh11'3, th_e debtor retains -nothiri.g" (id:) .• Thus, for 

this doctrine to apply the party seeking .its applicability must 

demonstrate t!J.at the qoqsideration the debtor gave the first 

transferee was th:e:n ;:r~convey~d by the debtor for less.. than fair 

,c.oris-ideration or with· art actual intent to defraud cred-i.to,r~ . 

.Howeve.r,. if the df.!btor ,does not transf.e_r the conside,ra-:t,io.n. but 

rather keeps it then the first transfer is not fraudulent. 

Furthe.r, "the initial transferee must have a,ctual or construct:Lve 

_lcn-owle<;i_ge of the entire .scheme that re_nders the exchange- with the 

·.tjep.tor f:raudulent" ("se'e, In re M. -Fabrikant &. Sons Inc., ·.3-94 BR 

721 [United States Ba·nkruptcy Court s:o.:uthern bistri.ct o_f" N.ew York 

2>ooa J ) • 

In this case none. of the elements o.f the collapsing doctrine 

.are present. Firs·t, the debtor di"d ·not. gratuitously tran.s.f er the 

·p_r-oc.eeq_s to any t.hird pa-rty. Rather_, s·ome of the proc~~ds were 

used to s:ati-sf.y a debt ow·ea to Dushey and the remainder of the 

proceeds were :retained by Isaac. Second, th.ere is. no allegation 

that Dusheyi tbci initial ttansferee, had any tnbwledge of any 

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.scheme· ·to defraud. the plaintiff. t:-3'-or could Dus.hey possibly have 

.a_ny sue}} kJ:"l.Qwledge of a!l.y int_ent t:o defx;a_ud Isa_ac s_ince .nq 

j\idge::inent had even been obtained arid thus. there was ho fraudulent 

.a.ctlvi.ty. Es·sentia1ly, the plaintiff argues that in 2017 Isaa.c 

thought that perh,aps he may owe the plaintiff money ciue to a 

iawsui t commenced. two years ea·rlier and embarked upon a ~rnheine-. 

Pursuant t.o. this -scl:1.eme Isaac wo.uld sell prope·rty to Dushey (to 

satisfy a debt) then wait three years and allow Dushey to sell 

the property to h:i,.-s son Meil;' for full v-alue be.lievin:9 that at 

some future point he rnay los-e the-. lawsuit to .the plainti!f.. Even 

if all those facts are true that do.e-s not atiege any frauciulent 

conveyance f9.r the rea·9:ons e_xplain.ed. Therefo--r.et the motion 

seeking_ to dismiss all causes of action :pursuant to Debtor_ 

Credi tor Law ·§27 6 is granted, Conseque·ntly, ·there cah b"e no 

claims against Met.t pursuant to Debtor Creditor Law §278 a.nd the 

motion seeking to dismiss all those claims is likewise. granted. 

T.hus, • the motions ~eek:i.:ng tq qismis-s the entire complaint is 

.fully granted. 

.So ordered. 

DATED: Febr:uary ,?3, 2024 

Brooklyn N.Y. 

ENTER: 

Bon. 

JSC 

1_5 

..; 

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