Court Opinion

ID: 5702470
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:42:32.102667+00
Date Added: 2024-06-11T08:40:21.811207
License: Public Domain

Andrias, J., dissents in a memorandum as follows:
Because the court properly found sufficient circumstantial evidence to indicate that plaintiffs principal was aware or should have been aware of defendant’s intent to frustrate any recovery by his former wife, I dissent and would affirm the order granting nonparty respondent’s motion pursuant to Debtor and Creditor Law § 276 to vacate a judgment by confession entered against defendant, respondent’s former husband, and in favor of plaintiff, a company controlled by the mother of defendant’s child.
Nonparty respondent, defendant’s former wife, moved to vacate an undated judgment by confession in favor of plaintiff and against defendant in the amount of $1,390,664.35, which was entered on October 22, 2003, two weeks after the court in defendant’s divorce action ordered entry of judgment against him for $449,904 in maintenance and child support arrears, on the grounds that such judgment was entered with actual intent to “hinder, delay, or defraud” either present or future creditors, in this case his former wife.
In her affidavit in opposition to respondent’s motion, plaintiffs principal, Eva Blazek, the mother of defendant’s son who was pregnant with a second child at the time, stated that the confession of judgment was based upon a demand revolving *344promissory note signed by defendant on February 20, 2003 and advances made to defendant from February 24, 2003 through September 22, 2003 totaling $1,389,952.93, that the loans were made to defendant in good faith, and that the confession of judgment was not collusive. Plaintiff also relied upon this Court’s decision in Ultramar Energy v Chase Manhattan Bank (191 AD2d 86, 90-91 [1993]) for the proposition that a conveyance which satisfies an antecedent debt made while the debtor is insolvent is neither fraudulent nor otherwise improper, even if its effect is to prefer one creditor over another. However, as found by the motion court, Ultramar Energy is clearly inapposite since it involved Debtor and Creditor Law § 273, which governs conveyance by an insolvent and provides that any conveyance made without a fair consideration is fraudulent without regard to the transferor’s actual intent. All Ultramar held was that it is not fraudulent for an insolvent acting in good faith to satisfy an antecedent debt even if its effect is to prefer one creditor over another (191 AD2d at 90-91). Debtor and Creditor Law § 276, unlike section 273, addresses actual fraud, as opposed to constructive fraud, and does not require proof of unfair consideration or insolvency (Wall St. Assoc. v Brodsky, 257 AD2d 526, 529 [1999]). The issue, thus, is not whether Ms. Blazek acted in good faith, but whether defendant entered the judgment by confession in favor of plaintiff corporation with actual intent to “hinder, delay, or defraud” either present or future creditors.
The motion court correctly rejected plaintiff’s contentions that defendant’s motivation is irrelevant and that the only relevant inquiry is whether a loan was in fact made. The court, which had presided over defendant’s divorce action and was fully familiar with the background of this action, properly found that a hearing was not necessary to summarily dispose of respondent’s motion in light of defendant’s failure to appear and Ms. Blazek’s failure to raise an issue of fact about defendant’s intent. Moreover, direct proof of a debtor’s state of mind is rarely available; intent to hinder, delay or defraud is inferred from the circumstances surrounding the transaction (Wall St. Assoc., supra at 529). Here, the court properly found such intent from the following: Ms. Blazek’s close relationship to defendant; the timing of the consent judgment; defendant’s contradictory explanations, as articulated by Ms. Blazek, of the making of the loan (he denied in the divorce action that he had received any loans in 2003, then subsequently stated that he had no recollection of any loans in that year); Ms. Blazek’s admission regarding intimate knowledge of the bitter and lengthy divorce proceedings; and the fact that plaintiff waited *345eight months after the loan was made to file a UCC-1 financing statement, which was done only after the court signed the sequestration order to show cause.