Case Name: Phyllis Berkowitz, Respondent, v. Howard Berkowitz et al., Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1985-05-02
Citations: 111 A.D.2d 434
Docket Number: 
Parties: Phyllis Berkowitz, Respondent, v Howard Berkowitz et al., Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 111
Pages: 434–437

Head Matter:
Phyllis Berkowitz, Respondent, v Howard Berkowitz et al., Appellants.

Opinion:
Mikoll, J.
Appeal from a judgment of the Supreme Court in favor of plaintiff, entered April 11, 1984 in Otsego County, upon a decision of the court at Trial Term (Harlem, J.), without a jury.
Plaintiff and her former husband, defendant Howard Berkowitz (hereinafter defendant), were divorced in 1978. A separation agreement previously executed by them, which survived the divorce decree, required defendant to pay plaintiff weekly maintenance of $115. In November of 1979, defendant commenced paying plaintiff $60 per week for seven months. Thereafter, he stopped making any payments. On. July 29, 1980, plaintiff commenced an action to recover the arrearages. The judgment entered thereon in January 1981 was eventually satisfied in 1983 by garnishment of defendant's wages. Subsequent judgments against defendant for arrears accruing after the first judgment remain unsatisfied.
The instant action was instituted by plaintiff against defendant and his new wife in 1983 to set aside, as fraudulent, defendant's conveyance of the parties' former marital residence to himself and his new wife as tenants by the entirety by deed dated July 21,1980 and recorded August 11,1980. Plaintiff had previously conveyed her interest in the premises to defendant for $15,000 pursuant to their separation agreement. The deed recited: "This conveyance is between spouses and for nominal consideration. No deed stamps are required."
Plaintiff's complaint sought relief in reliance on Debtor and Creditor Law § 273-a and 276. The trial court found that no violations of these sections had occurred. However, it found, sua sponte, that the transfer was made in contravention of Debtor and Creditor Law §273 and 275 and was, therefore, fraudulent and void as to plaintiff. This appeal by defendants ensued.
There must be a reversal of the judgment and a dismissal of plaintiff's action for failure to make out a prima facie case. The trial court properly found that plaintiff had failed to sustain causes of action under Debtor and Creditor Law § 273-a and 276. Pursuant to CPLR 3025 (c), when a party pleads one action and fails to sustain it, pleadings should not be amended to conform to the proof unless no substantial prejudice will accrue to the opponent. It cannot be said that defendant was not prejudiced by permitting the pleadings to be amended in this case.
Plaintiff did not allege insolvency in her complaint, nor did she at trial allege reliance on insolvency for recovery. Insolvency is, however, an essential element of an action under Debtor and Creditor Law § 273 (Mariner Harbor Natl. Bank v Imperial Beverage Corp., 264 App Div 785; Torr v Torr, 24 Misc 2d 129, 130). That section provides that a conveyance by a person who is or will be rendered insolvent by the conveyance is fraudulent, regardless of any actual intent to defraud creditors. If the conveyance is made with fair consideration, however, it is valid regardless of the grantor's solvency.
Use of a theory relying on defendant's insolvency for recovery would be prejudicial to this defendant since he was not prepared to defend on such premise. The trial court, therefore, improperly denied dismissal of plaintiff's complaint on a theory of conforming the pleadings to the proof at trial. We note, also, that there was ample proof in this record indicating fair consideration for the property transfer. A transfer in consideration of marriage constitutes fair consideration. Defendants testified that the transfer was made in consideration of their marriage and for house remodeling paid for by defendant's new wife. Recovery under Debtor and Creditor Law § 273, therefore, would not be sustainable on this record because there is valid consideration underlying the transfer of title.
Debtor and Creditor Law § 275 provides that a conveyance is fraudulent if it is made without fair consideration when the grantor believes he will incur debts beyond his ability to pay. We have noted that the record amply sustains fair consideration for defendant's transfer of title of his property to himself and his new wife. Thus, a cause of action under Debtor and Creditor Law § 275 is also not sustainable, and the trial court's amendment of the pleadings was in error.
Judgment reversed, on the law, and complaint dismissed, with costs. Mahoney, P. J., Mikoll and Harvey, JJ., concur; Casey and Yesawich, Jr., JJ., dissent and vote to affirm in the following memorandum by Yesawich, Jr., J.