Opinion
Index No. 57464/2023
04-22-2024
Scott Greenberg and ANNA MASSION-GREENBERG, Plaintiff, v. Westchester Country Club, Inc., E. VINCENT IORIO a/k/a VINCENT IORIO, and EASTRIDGE CONSTRUCTION MANAGEMENT CORPORATION, Defendants.
Strassberg & Strassberg - counsel for Plaintiff Harold Salant Strassfield & Rotbard. - counsel for Defts
Unpublished Opinion
Strassberg & Strassberg - counsel for Plaintiff
Harold Salant Strassfield & Rotbard. - counsel for Defts
Robert S. Ondrovic, J.
In an action to set aside various checks from Eastridge Construction Management Corporation (Eastridge) to Westchester Country Club, Inc. (WCC) as fraudulent transfers to avoid satisfaction of a judgment against Eastridge and Vincent Iorio, defendants move for an order (a) granting reargument of the Decision and Order of this Court (Greenwald, J.) dated December 8, 2023 denying defendants' motion to dismiss the complaint on the ground that the applicable statute of limitations has run; and (b) upon reargument, dismissing the action pursuant to CPLR 3211(a)(5) on the ground that the action is barred by the applicable statute of limitations (Motion Seq. 2).
Papers Considered NYSCEF Doc. Nos. 47-69, 75, 78
1. Notice of Motion/Affirmation of Leonard Spielberg, Esq./Exhibit A-R, T-V
2. Affirmation of Todd Strassberg, Esq. in Opposition
3. Affirmation of Leonard Spielberg, Esq. in Reply
Discussion
A fuller overview of this case is provided in the Court's December 8, 2023 Decision and Order from which the instant motion springs, but briefly, in May 2018, plaintiffs obtained a judgment from the Superior Court of the State of Connecticut in favor of plaintiffs and against Eastridge and non-party Meridian Development Corp. (Meridian) for about $188,000.00 related to incomplete home renovations on plaintiffs' property in Greenwich, Connecticut. Plaintiffs domesticated the Connecticut judgment in New York in July 2019. Plaintiffs thereafter commenced this action on March 5, 2023 by filing the summons and complaint alleging that Eastridge issued checks to WCC for charges incurred by Iorio thereby rendering Eastridge insolvent, and that such checks were issued with intent to hinder, delay, or defraud present or future creditors of Eastridge.
An entity owned and/or controlled by defendant E. Vincent Iorio.
The complaint asserts three causes of action: (1) fraudulent transfers in violation of DCL §§ 273, 274, 275, 276, 278 and/or 279; (2) constructive fraud in violation of DCL § 273-a; and (3) actual fraud entitling them to attorney's fees pursuant to DCL § 276-a.
Previously, defendants moved, pre-answer, for an order dismissing the complaint pursuant to CPLR 3211(a)(5) on the ground that the applicable statute of limitations has run and/or dismissing the third cause of action pursuant to CPLR 3211(a)(7) for failing to state a cause of action.
Defendants' application was denied in its entirety, but as relevant here, as to the statute of limitations defense, defendants allegedly made the fraudulent transfers through Sterling National Bank (Sterling Bank) and plaintiffs first became aware of Sterling Bank on August 9, 2022 and filed the instant summons and complaint seven months later.
The Court denied that branch of the application because the action was brought within the timeframe permitted under a prong of the relevant Connecticut statute for fraudulent transfers (see Conn. Gen. Stat. § 52-552j ["A cause of action with respect to a fraudulent transfer or obligation is extinguished unless action is brought within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant" [emphases added]]). Defendants had argued that that prong was inapplicable because plaintiffs were not diligent in their post-judgment discovery preceding the August 2022 revelation of Sterling Bank (see December 8, 2023 Decision and Order at 4 [NYSCEF Doc. 34]).
The Court initially determined that, since plaintiffs are out-of-state, for the action to be timely it must be within the statute of limitations under Connecticut State law (citing National Auditing Servs. & Consulting, LLC v Assa, 217 A.D.3d 503, 503 [1st Dept 2023]; CPLR 202).
Although the Court noted an unexplained 22-month gap in post-judgment discovery from the award of the Connecticut judgment in May 2018 to the March 2020 Covid-19 shutdown, relying on the Appellate Department decision in Felshman v Yamali (106 A.D.3d 948 [2d Dept 2013]), the Court held that "defendants cannot establish when plaintiffs should have first been aware of the fraudulent transfers by pointing to gaps in post-judgment discovery" (December 8, 2023 Decision and Order at 4-5).
In its analysis, the Court considered the 346-day tolling period resulting from Executive Orders enacted by Connecticut Governor Ned Lamont (December 8, 2023 Decision and Order at 3).
Defendants now move for an order (a) granting reargument of that portion of the December 8, 2023 Decision and Order denying defendants' motion to dismiss the complaint on the ground that the applicable statute of limitations has run; and (b) upon reargument, dismissing the action pursuant to CPLR 3211(a)(5) on the ground that the action is barred by the applicable statute of limitations.
In support, defendants first contend that the Court misapplied New York law instead of Connecticut law when it analyzed the applicable Connecticut statute. Defendants also argue that the Court misapprehended the distinction between voidable transfers alleged to be constructively fraudulent and those alleged to be made with actual fraudulent intent and failed to recognize that Connecticut's one-year extension from discovery applied only to the latter type of transfers. Defendants further contend that the Court erroneously found that the complaint adequately alleged fraudulent intent.
In opposition, plaintiffs argue in effect that they engaged in post-judgment discovery in September 2018 after the May 2018 judgment and that Eastridge's failure to appropriately respond to that discovery precipitated this action.
A motion for leave to reargue "shall be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include any matters of fact not offered on the prior motion" (CPLR 2221[d][2]). "Motions for reargument are addressed to the sound discretion of the court which decided the prior motion and may be granted upon a showing that the court overlooked or misapprehended the facts or law or for some other reason mistakenly arrived at its earlier decision" (Weiss v Bretton Woods Condominium II, 151 A.D.3d 905, 905 [2d Dept 2017] [internal quotation marks, brackets, and citation omitted]).
As to defendants' first contention, in their initial application, defendants "urge[d]" the Court to find that a "reasonably diligent plaintiff" should have discovered the allegedly fraudulent transfers within the 22-month period between entry of the Connecticut judgment and the enactment of Covid-related tolling provisions (Spielberg affirmation in reply (Motion Seq. 1) at 4 [NYSCEF Doc. 31]. However, other than the passage of time, defendants provided no factual thread leading to any presumption that plaintiffs should have discovered the allegedly fraudulent transfers sooner than they did.
Now, defendants again contend that plaintiffs failed to use reasonable diligence to discover theallegedly fraudulent transfers but cite no case law, from Connecticut or elsewhere, contradicting Felshman, wherein the Second Department found it "unclear when the plaintiff should have first been aware of the alleged fraud" (106 A.D.3d at 949) despite the lower court finding that the plaintiff "never sought enforcement of [an information subpoena] until two years thereafter" (2011 NY Slip Op 33110[U] at *2-3). To the extent defendants present new facts (see, e.g., Spielberg affirmation [Motion Seq. 2] at 12-13 [NYSCEF Doc. 48]), those facts are not appropriate on a motion to reargue (see CPLR 2221[d][2]) nor, in the context of a renewal application, are they accompanied by any reasonable justification for defendants' failure to present such facts on the prior motion (see CPLR 2221[e][3]). That said, the arguments are nonetheless speculative and unpersuasive as to establishing when plaintiffs should have first been aware of the allegedly fraudulent transfers.
Lastly on this point, defendants complain that the Court's analysis failed to begin the one-year extension from "imputed discovery," or in other words, the Court failed to consider "when did the duty to begin using reasonable diligence begin[?]" (Spielberg affirmation [Motion Seq. 2] at 11). Defendants do not provide any caselaw to chaperone this argument nor do they provide any rationale for the Court to consider the language in Felshman -"should have first been aware"-as meaning something other than constructive or "imputed" discovery (cf. Yong Wen Mo v Gee Ming Chan, 17 A.D.3d 356, 359 [2d Dept 2005] [evaluating time of actual or imputed discovery as when "plaintiff knew or should have known"]). Thus, finding no basis to grant reargument on this point either on misapprehended facts or law, reargument on this point is DENIED.
As to the second contention regarding applicability of the one-year extension to constructively fraudulent transfers and transfers with fraudulent intent, the Court notes that defendants did not make this distinction in their initial application. Be that as it may, given a potential misapprehension of a sister state's statute, the Court grants reargument on this point.
The Connecticut statute at issue provides in full:
A cause of action with respect to a fraudulent transfer or obligation under sections 52-552a to 52-552l, inclusive, is extinguished unless action is brought: (1) Under subdivision (1) of subsection (a) of section 52-552e, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant; (2) under subdivision (2) of subsection (a) of section 52-552e or subsection (a) of section 52-552f, within four years after the transfer was made or the obligation was incurred; or (3) under subsection (b) of section 52-552f, within one year after the transfer was made or the obligation was incurred (Conn. Gen. Stat. § 52-552j [emphases and underlining added]).
The provision provides three categories of timeframes on causes of action for different types of fraudulent transfers. Only one category includes a one-year period from when the transfer "was or could reasonably have been discovered." That timeframe applies only to transfers described in subdivision (1) of subsection (a) of section 52-552e, which are transfers that require fraudulent intent:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if the creditor's claim arose before the transfer was made or the obligation was incurred and if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay or defraud any creditor of the debtor (Conn. Gen. Stat. § 52-552e(a)(1) [emphasis added]).
This type of transfer tracks with CDL 273, which is alleged in the instant complaint:
A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay or defraud any creditor of the debtor (CDL 273[a][1] [emphasis added]).
To the extent the instant complaint alleges transfers that are constructively fraudulent, those track the remaining transfers identified in section 52-552j and are not afforded the one-year period from when the transfer "was or could reasonably have been discovered."
For example, subdivision (2) of subsection (a) of section 52-552e and subsection (a) of section 52-552f provide, respectively:
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if the creditor's claim arose before the transfer was made or the obligation was incurred and if the debtor made the transfer or incurred the obligation: (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor (A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or (B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due (Conn. Gen. Stat. § 52-552e[a][2] [emphasis added]).
A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation (Conn. Gen. Stat. § 52-552f[a]).
Those types of transfers track those described in CDL 274(a):
A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation (CDL 274[a] [emphasis added]).
Also, subsection (b) of section 52-552f provides:
A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent (Conn. Gen. Stat. § 52-552f[b] [emphasis added]).
This type of transfer tracks the type described in CDL 274(b):
A transfer made by a debtor is voidable as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent (CDL 274[b] [emphasis added]).
Given that the one-year extension from when the transfer "was or could reasonably have been discovered" provided in Conn. Gen. Stat. § 52-552j applies only to transfers with fraudulent intent, any causes of action alleged to merely be constructively fraudulent are time-barred.
It is undisputed that the alleged transfers occurred more than four years prior to the commencement of this action.
Lastly, defendants' contentions regarding insufficient allegations of fraudulent intent are without merit.
In finding that the complaint adequately pled fraudulent intent, the Court considered alleged "badges of fraud" (see December 8, 2023 Decision and Order at 5 [citing Pen Pak Corp. v LaSalle Nat'l Bank, 240 A.D.2d 384, 386 [2d Dept 1997]). The Court noted that the alleged transfers were without consideration, especially because Eastridge was not a member of WCC when it paid membership dues/expenses to WCC, and that all but one of the alleged transfers occurred after defendants were on notice of plaintiffs' claims. Although the Court utilized New York precedent in finding that the complaint adequately pled fraudulent intent, Conn. Gen. Stat. § 52-552e, relied upon by defendants, does not command a different result. Section 52-552e lists eleven factors that a court may consider among other factors when determining fraudulent intent:
In determining actual intent under subdivision (1) of subsection (a) of this section, consideration may be given, among other factors, to whether: (1) The transfer or obligation was to an insider, (2) the debtor retained possession or control of the property transferred after the transfer, (3) the transfer or obligation was disclosed or concealed, (4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit, (5) the transfer was of substantially all the debtor's assets, (6) the debtor absconded, (7) the debtor removed or concealed assets, (8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred, (9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred, (10) the transfer occurred shortly before or shortly after a substantial debt was incurred, and (11) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor (Conn. Gen. Stat. § 52-552e[b] [emphases added]).
The statute itself states that the eleven recited factors are not mandatory nor exclusive for determining fraudulent intent. Nonetheless, the Court assessed "badges of fraud" akin to factors (8) and (10), and the Court further considered that the complaint alleged that the transfers rendered Eastridge insolvent and unable to pay its debts when they came due, which implicates factor (9). Thus, the complaint adequately alleges fraudulent intent under either New York law or Connecticut law.
Accordingly, defendants' application for leave to reargue is GRANTED on the point of applicability of the one-year extension provided in Conn. Gen. Stat. § 52-552j, and upon reargument the application is further GRANTED to the limited extent that any causes of action premised on transfers merely alleged to be constructively fraudulent are dismissed as time-barred pursuant to CPLR 3211(a)(5), and the application is DENIED in all other respects.
All other remaining contentions have been considered and are either without merit or rendered moot by the above determination.
Based on the foregoing, it is hereby
ORDERED that defendants' motion (Motion Seq. 2) is GRANTED to the limited extent that leave to reargue on the point of applicability of the one-year extension provided in Conn. Gen. Stat. § 52-552j is GRANTED, and upon reargument the application is further GRANTED to the limited extent that any causes of action premised on transfers merely alleged to be constructively fraudulent are dismissed as time-barred pursuant to CPLR 3211(a)(5), and the application is DENIED in all other respects; and it is further
ORDERED that the matter is referred to the Preliminary Conference Part.