Court Opinion

ID: 9782826
Source: CourtListenerOpinion
Date Created: 2023-08-30 19:21:08.522041+00
Date Added: 2024-06-11T07:35:13.664666
License: Public Domain

*178Pigott, J.
(dissenting in part). I agree with the majority’s analysis and conclusion relative to the first certified question. I also agree with much of what the majority says in its discussion of the second question, but find its reformulation of that question unnecessary. The Second Circuit posed a narrowly tailored question that is relatively simple to answer, namely, “Does a spouse pay ‘fair consideration’ according to the terms of New York Debtor and Creditor Law § 272 when she relinquishes in good faith a claim to the proceeds of fraud?” (Commodity Futures Trading Commn. v Walsh, 618 F3d 218, 231-232 [2d Cir 2010].) I would answer that question in the negative.
Debtor and Creditor Law § 278 states that a creditor with a matured claim may have a conveyance set aside against anyone “except a purchaser for fair consideration without knowledge of the fraud at the time of the purchase” (Debtor and Creditor Law § 278 [1] [a]). “Fair consideration is given for property, or obligation, . . . [w]hen in exchange for such property, or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied” (Debtor and Creditor Law § 272 [a]).
The second certified question posed by the Second Circuit assumes that almost all of the proceeds in the marital estate consisted of the proceeds of fraud, the position taken by the Commodity Futures Trading Commission and the Securities and Exchange Commission (see 618 F3d at 230 [noting that “in her separation from Walsh, Schaberg relinquished future claims to an equitable distribution of marital property that — it is alleged — consisted almost entirely of the proceeds of fraud”]). The Second Circuit also notes that “there is no reason to question Schaberg’s good faith in relinquishing her claim to what she believed was a legitimate interest in a substantial fortune” (id. at 230). Taking these facts into account, the question is, assuming that the marital estate consists almost entirely of the proceeds of fraud, does an “innocent spouse” like Schaberg, by virtue of relinquishing future claims to those proceeds, pay fair consideration? The answer is, of course, “no,” as the majority essentially acknowledges: “consideration cannot be predicated on a spouse’s relinquishment of a claim to a greater share of the proceeds of fraud” (majority op at 175).
Schaberg’s forbearance from “ ‘seek[ing] through court proceedings or otherwise a distributive award or an award of equitable distribution with respect to’ any other property acquired by [Walsh] over the course of their marriage” (Walsh, *179618 F3d at 229) does not constitute “fair consideration” where, as the Second Circuit has asked us to assume here, the Walsh proceeds were obtained as the result of fraud. One cannot reasonably argue that a spouse — even an innocent one with no knowledge of her husband’s fraud — could be said to have given “fair equivalent” value by giving up future claims to the equitable distribution of proceeds in which she has no legitimate interest. In such a case, the innocent spouse “has not given value for the misappropriated property, but rather has gained an interest in the property simply by virtue of being married to the person who misappropriated” it (see generally In re Marriage of Allen, 724 P2d 651, 659 [Colo 1986] [citing cases]). Accordingly, I would answer the second certified question in the negative.
Chief Judge Lippman and Judges Ciparick, Read and Jones concur with Judge Graffeo; Judge Pigott dissents in part in a separate opinion in which Judge Smith concurs.
Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of the Rules of the Court of Appeals (22 NYCRR 500.27), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in accordance with the opinion herein.