Micalden Investments S.A. v. Guerrand-Hermes

Order, Supreme Court, New York County (Emily Jane Goodman, J.), entered April 2, 2004, which granted the motion of nonparty respondent pursuant to Debtor and Creditor Law § 276 to vacate a judgment by confession entered against defendant in favor of plaintiff, Micalden Investments, reversed, on the law, without costs, and the matter remanded for a hearing.

Plaintiff-appellant Micalden Investments S.A. (Micalden) is a corporation wholly owned by Eva Blazek, wife of defendant Olaf Guerrand-Hermes, and mother of his two children. At the time that defendant made the judgment by confession in 2003, Eva *342Blazek was defendant’s fiancée, and defendant was in the final stages of a divorce from his first wife, nonparty respondent Rostropovich, in this action.

The divorce action was decided on October 3, 2003, and Rostropovich obtained a judgment, entered October 31, 2003, consisting of an award for $449,904 in maintenance and child support arrears.*

In the meantime, on October 2, 2003, defendant executed an affidavit of confession of judgment in favor of Micalden purportedly to repay a loan of approximately $1.4 million. In December 2003, Rostropovich moved to vacate the judgment by confession on the ground that she was a creditor of her husband, and that the judgment was a fraudulent conveyance entered with “actual intent to hinder, delay, or defraud” either present or future creditors. The court granted the motion. Now, for the reasons set forth below, this Court reverses and remands the matter for a hearing.

The record demonstrates that between February and September 2003, defendant arranged to borrow almost $1.4 million from Micalden. There is documentary evidence in the form of wire transfer confirmations that show these transactions. In March 2003, defendant arranged for Micalden to pay his father, Patrick Guerrand-Hermes (Patrick) $1 million to fund a certain agreement regarding defendant’s apartment at the Hotel des Artistes. The record demonstrates that most of the other advances by Micalden related to that apartment as well, including an initial payment of $125,000 sent to Patrick in February 2003 to pay arrears in maintenance and a special assessment on the apartment, a payment of $12,132.17 to defendant in May 2003 to pay charges on the apartment, a $33,500 transfer to Merle & Brown, PC. (defendant’s New York lawyers) in June 2003 to make three monthly mortgage payments on the apartment, a further $31,762.33 transfer to Merle & Brown in September 2003, also to service the mortgage and a $50,000 payment directly to the Hotel des Artistes in September 2003 to pay charges on the apartment. The remainder of the funds were allegedly advanced to pay defendant’s other expenses between February and May of 2003.

It has been hornbook law for more than a century that, “in the absence of statutory restrictions an insolvent debtor has the right to sell and transfer the whole or any portion of his property to one or more of his creditors in payment of or to secure *343his debts, when that is his honest purpose, although the effect of the sale or transfer is to place his property beyond the reach of his other creditors and render their debts uncollectible” (Dodge v McKechnie, 156 NY 514, 520 [1898], citing Tompkins v Hunter, 149 NY 117 [1896]; see Ultramar Energy v Chase Manhattan Bank, 191 AD2d 86 [1993]). In the instant case, the question of defendant’s “honest purpose” is clearly one of fact. More significantly, the standard of proof as to a showing of fraudulent intent under the statute is that of clear and convincing evidence (see Symbax, Inc. v Bingaman, 219 AD2d 552, 553 [1995], citing Marine Midland Bank v Murkoff, 120 AD2d 122, 126 [1986], appeal dismissed 69 NY2d 875 [1987]). Contrary to the suggestion of the dissent, that standard is simply not met by the motion court’s “full[ ] familiarity] with the background of this action.”

Because the dates of and the documentation in support of the various transfers made by Micalden at the very least create the issue of fact, the respondent failed to show defendant’s fraudulent intent by the requisite clear and convincing evidence. Accordingly, we remand the case for a hearing under section 276 of the Debtor and Creditor Law. Concur—Buckley, P.J., Catterson and Malone, JJ.

This Court modified the award finding that wife’s efforts were not a factor in the appreciation of husband’s New York City cooperative apartment (Rostropovich v Guerrand-Hermes, 18 AD3d 211 [2005]).