Court Opinion

ID: 5877997
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:07:31.188406+00
Date Added: 2024-06-11T08:44:54.991474
License: Public Domain

Yesawich, Jr., J.
(dissenting). We are not persuaded that defendants demonstrated that they were somehow prejudiced by the trial court’s undertaking to disregard the variance between the pleadings, which indicated relief was sought in reliance upon Debtor and Creditor Law §§ 273-a and 276, and the proof, which the court found established that Debtor and Creditor Law §§273 and 275 had been contravened.
Section 273 deems conveyances made by a person who is insolvent or will be rendered insolvent thereby fraudulent; section 275 also treats a conveyance made when the transferor “intends or believes that he will incur debts beyond his ability to pay as they mature” as fraudulent. In each instance, the statute’s focus is on the transferor’s strained financial condition. That defendant Howard Berkowitz’ (hereinafter defendant) financial outlook was indeed bleak at the time of the conveyance on the day after his remarrriage, and that the very purpose of the trial was to explore his financial situation, is eminently clear. At trial, he testified in response to his counsel’s inquiry that “having recently divorced myself of most of my capital in the separation and divorce, I was relatively without funds”, and further, that his cash assets were depleted. Answering the trial court’s specific questions relating to his solvency at the time of the challenged conveyance, defendant reaffirmed that he was in financial difficulty. Under the circumstances, an award by the trial court based on defendant’s insolvency and knowing inability to pay his debts was neither surprising nor prejudicial (see, CPLR 3025 [c]; Dittmar Explosives v A.E. Ottaviana, Inc., 20 NY2d 498, 502-503). Moreover, defendant did not object to such proof but volunteered it, thus reinforcing the trial court’s discretionary decision to conform the pleadings to the proof (see, Averill v Atkins, 32 AD2d 738) and award plaintiff the relief to which she was entitled (see, Farano v Stephanelli, 7 AD2d 420, 427).
Substantively, there is ample evidence that when defendant divested himself of sole ownership of the marital residence, he intended or believed that obligations beyond his ability to pay *437were maturing; therefore, a cause of action under Debtor and Creditor Law § 275 was established. As noted, defendant himself testified that, at about the time of the conveyance, his financial situation was precarious. Although he had some $3,000 in savings, he had just returned to work after a life-threatening illness and owed $7,000 to $8,000 in medical expenses. Defendant also was indebted to plaintiff for over $3,000 in accrued alimony and his obligation to maintain her was continuing to mount at the rate of $115 per week.
More importantly, there was, in our view, less than fair consideration for the conveyance. In the context of Debtor and Creditor Law article 10, fair consideration is not the unencumbered concept of consideration that pervades general contract law, but a statutorily circumscribed one. And pursuant to the statute, “ ‘[f]air condition’ is given for property when, as a fair equivalent therefor and in good faith, property is conveyed or an antecedent debt is satisfied, or when the property is received in good faith to secure a present advance or antecedent debt in an amount not disproportionately small as compared with the value of the property (Debtor and Creditor Law, § 272)” (Schmitt v Morgan, 98 AD2d 934, 935, appeal dismissed 62 NY2d 914; accord, Hickland v Hickland, 100 AD2d 643, 645, appeal dismissed 63 NY2d 951). When none of these conditions is present, the necessary consideration is lacking. In this instance, the deed itself belies the existence of fair consideration for it expressly provided that no real estate transfer tax was payable because the transfer was “between spouses and for nominal consideration” {see, Tax Law § 1405 [b] [4]). Nor does the promise of defendant’s new wife that she would pay for future remodeling of the residence constitute fair consideration for the conveyance (cf. Rush v Rush, 19 AD2d 846; Matter of Oppenheim, 269 App Div 1040).
Although we believe that a cause of action was made out under Debtor and Creditor Law § 275, like the majority we are also unable to find that one was established under Debtor and Creditor Law § 273. We do so, however, because the record is devoid of any evidence fixing the value of defendant’s interest in the tenancy by the entirety, thus precluding a determination of whether he was rendered insolvent by the fact of the conveyance.
Accordingly, we would affirm the judgment.