Estate of Leon Tawil v. Sutton

Estate of Leon Tawil v Sutton
2024 NY Slip Op 30575(U)
February 23, 2024
Supreme Court, Kings County
Docket Number: Index No. 527569/2023
Judge: Leon Ruchelsman
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
State and local government sources, including the New
York State Unified Court System's eCourts Service.
This opinion is uncorrected and not selected for official
publication.
 FILED: KINGS COUNTY CLERK 02/23/2024 08:58 AM INDEX NO. 527569/2023
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS : CIVIL TERM: COMMERCIAL 8
- ----------- ------ - --------- ------· -x
ESTATE OF LEON TAWIL,
Plaintiff, Decision and order

- against - Index No. 527569/2023

MEIR SUTTON, ISAAC SUTTON, ABRAHAM
DUSHEY, arid lSS0 EAST 5TH LLC,
De-fendants, February 23, 2024
- -·- - - - . . -.-.. - - - - -· - - - - - - -·-.. _ .. - - -·- - - -·- --------2{
PRESENT: HON. LEON ROCHELSMAN Moti6n Seq. #1 & #2

The defendants have moved and cross-moved seeking to dismiss

the complaint pursuant to CPLR §3211 oh the grounds it fails to

allege any causes of action. The plaintiff opposes the motion.

Papers were submitted by the parties and arguments held. After

reviewing all the arguments this court how makes the following

determination.

On February 9, 2016 Abraham Dushey obtained a judgement

against Isaac Sutton in the amount of $741,287.20. TQ satisfy

the judgement, on September 27, 2017 Isaac sold property loca,ted

at 1580 East 5ti, Street in Kings county to Dushey. The purchase

price was-agreed upon as $1,650,000 arid the prope~ty ~as sold for

$919, 119·. 47 which included a satisfaction of the amount Sutton

owed Dushey satisfying the judgement. Oh May 7, 2020 Dus.hey sold

the property to Isaac's son Meir, the defendant in this action.,
:i:hrou,gh an ent:Lty calied 1580 East 5 th LLC for $'1; 700, doo. .That

amount was based upOn an ~pprai:Sal conducted by Wells Farg'ci Barik

which loaned eighty percent of the purchase price and then

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obtained a mortgage on the property.

The plaintiff has now instituted the within lawsuit. The

plaintiff, the estate of Leon Tawil, obtained a judgement against

Isaac Sutton on June 29, 2022 in the amount of $3,254, 537 .4 0

which remains unsatisfied. That judgement was the result of a

lawsuit Corrimenced in 2015. The complaint alleges that the sale

between Dushey and Meir Sutton was made to he1p Isaac avoid
paying its judgement to the plaintiff. The compl 9 int alleges

three Causes of action pursuant to the Debtor Creditor Law

(§§273, 275, 276 and 278). The defendants, the Suttons and

Dushey have moved seeking to dismiss the law$uit on the grounds

it fails to allege any valid causes of action. As noted, the

motions have been opposed.

Conclusions of Law

It is well settled that upon a motion to dismiss the court

must determine, accepting the allegations of the complaint as

true, whether the party can succeed upon any reasonable view of

those facts (Perez v. Y & M Transportation Corpo.ration, 219 AD3d

14 49; 196 NYS3d 145 [2d Dept., 2023]) . Further, all the

allegations in the complaint are deemed true and all reasoriable

inferences .may .be drawn in favor of the. plaintiff (Archival Inc .. ,·.

V. 177 Realty- Corp., 220 AD3d 909,. 198 NYS2d 567 [2d Dept. 1

2023] i ~. Whether the c::ompiaint will late+ svrvive a motion fol:'

surrtmary judgment, or whether the plaintiff wil.l ultimately be

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-able ·to p,rove its. c.la.im:-s, of course·, plays no part in. t:he

cieterm:j.;nation of a pre-tjiscovery C.P-LR -~3.2)1 motion. t.o d.i,smiss

.(see; Lam v. Weiss, 219 AD3d 713, 195 NYS3d 488 [2d Dept.,

20231).
Pursuant to §2.73 cif the Debt.ar Creditor Law every conveyance

made- by a: party which then render-s. the party inscilv.ent i=s

fr·audulent without regard to intetit if the conveyance is made

Without ·tair consideration ( Paragon v. Paragon, 164 AD3d 14 60, 84

NY'S3d 582 [2d Dept., 2018]). Further, .such transfers are
fraudul.ent if the transferor intende.d ._or believed the tr_ansferor

woµ-ld i._ncur debts beyo.r:id his or her ab-ility to pay the:m. whE?n tl;l.ey

ma·t.ured (Dept.or (:,re_d.i,.to"t Law §275.) or ev.en if fair consideration

was present the trans-fer was made with. the intent to defraµd

(Debtor Creditor Law §27.6). Pursuant to Debtor Creditor Law §278

·any c:redi tor may have f ra-udulent conveyances set aside exc·ept

aga:irtst any good. faith, :_purchaser for v_alue, which is. ciefin~q as

,.any- -pe.rson who te:nd_eretj -f ai;r considE?rati..o:n without ·-knowledge of

any fraud (.::,ee, Cornmodi ty Futures T.rading Conimi::,::,ion v .. Walsh, l 7

NY3d 162, 927'~YS2d 821 [2011]}.

The plaintif.f has -only oppos.ed ·the- motion seeking ·to dismiss

·oebto_r _Creditor _Law §_2i.76 and Debto.r Cr.editor Law §2.7H. Thus, the

motion s.eek:irtg- to dismiss any c-1.aims based upo.n Debtor Credi.to.r

Law §2 7 3 and Debtor Crecii tor Law §275 is gr:anted;

The fraudulent transfer law contained -within the Debtor

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Creditor Law is designed to prevent debtors from avoiding the

payment of their debts (Leifer v. Murphy, 149.Misc 455, 267 NYS

701 [Supreme Court Bronx County 19331). Debtor Creditor Law

former §27.6 states that "every conveyance made . . . with actual

intent . . to hinder, delay, or defraud either present or

future creditors; is fraudulent" (id), Thus, a creditor must

demonstrate, by clear and convincing evidence that a defendant

had the actual intent to hinder, delay or defraud creditors (see,

Jensen v. Jensen, 256 AD2d 1162, 682 NYS2d 77 4 [ 2d Dept., 1998 ]) .

Since fraudulent or improper intent is difficult to prove,

courts have developed 'badges of fraud' which can give rise to

intent. Badges of fraud include: ''a close relationship between

the_parties to the alleged fraudulent transaction; a questionable

transfer not in the usual course of business; inadequacy of the

consideration; the transferorls knowledge Of the creditor's claim

and the inability to pay it; and retention of control of the
property by the transferor after the conveyance1' (Goldenberg v.

Friedman, 191 AD3d 641, 141 NYS3d 111 [2d Dept., 2021]).

In this case, as notedi the plaintiff first became a

creditor bf Isaac on June 29; 2022 when a jury awarded the

plaintiff a judgement against Isaac in the amount of

$3254,547.40.

There are three overlapping rec:1sons the plaintiff cannot

maintain any fraudulent conveyance claims against the defendants.

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. .

First, the two transfers, from Isaac to Dushey and then

Dushey to Meir all concluded two years before tll.e plaintiff

obtained ariy judgement. Tn fact, the transfer from Isaac to

Dushey occurred almost five years before the judgement was

obtained. It is true that a fraudulent conveyance can be found

even where the debt was not in existence at the time of the

conveyance. Howeve:r:, all cases that have relied on that

proposition·concern ed events far closer in time. Tn Nonas v.

Romantini, 271 A:D2d 292, 706 NYS2d 109 fl"t Dept., 20001 the

court £01.ihd a fraudulent conveyance could exist because when the

conveyance was made "there were ample indications that such

obligation was being discussed at or about the time of s,uch

transfer'' (id) . In First Keystone Consultants T:hc. ,

v. Schlesinger Electrical Contractors Inc., 871 F. Supp2d 103

[E.D.N.Y. 2012] the court h.eld conveyances could be fraudulent

when they wer·e made within weeks of arbitration appearances and

arbitratio.n rulings against an entity, KFC, that was the subject

6f those arbitratioris. The court concluded that "the timing and

circumstan.:::E:s of :these transactions constitute clear and

convinbing evidence that FKC acted With intent to defraud its

creditors'; (id). Similarly, In Cathay Bank v. Bonilla, 2023 WL

6812274 [E,D.N.Y. 20231 the court found a fraudulent conveyance

existed, when among other factors, a transfer to◊-k place one

month after :the transferor was named in a lawsuit.

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In this case, although Isaac was aware of a lawsuit filed in
2015, the transfers took place in 2017 and 2022. A mere lawsl1it

filed, the merits of which required a jury determination ye.ars

later, cannot support a finding the transfers were fraudulent.

Moreover, this reality, without any other factors is insufficient

tb establish a fraudulent transfer.

In truth, as not'ed, this argument is really one factor when
assessing whether badges of fraud exist. Indeed, Federal courts

include additional factors that can be utilized to evaluate

whether badges of fraud support the intent necessary to establish

a fraudulent conveyance, including "the general chronology of the

events and transactions under inquiry" {see; Kim v. Ji Sung Yoo,
. .

311 F.Supp3d 598 [S.D.N.Y. 2018]). That additipnal factor is not
found in any appellate decision in New Ybrk but is found in lower

court decisions ( ~ , Nixon: v. Jackson, 2009 WL 1574117 [Supreme

Court Nassau County 200.9] and ATSCO LTD. et al v. Haryati

Zainudin Swanson; 2004 WL 5329667 [Supreme Court New York County

2004]). The allusion to this additional factor in Nonas (supra)

and the strength ot weakness of its relevance demands its

consideration along with an examination of all the badges of

fraud.

Second, evaluating the badges of fraud necessary

demonstrates tha1: plaintiff has not adequately pled intent of a

fraudulent conveyance. The plaintiff asserts the two

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transactions must be viewed as one composite transaction. The

court will address that argument, however, to maintain a

fraudulent conveyance action premised on badges of fraud,

requires, first, a close relationship between the parties to the

alleged fraudulent tr:ansaction. The two transactions involve

Isaac and Dushey and oushey and Meir. While. Isaac
. . and Meir
. . I as
...

fathek and son, obviously maintain a close relationship~ there is
no such relationship with Dushey. The complaint states that

Isaac and Dushey were friends .fo.r twenty years (Complaint, 'l4

[NYSCEF Doc. No. 8]}. However, Dushey sued Isaac ahd obtained a

judgement against l:lim in an action in Kings County entitled

Abraham Dushey, et al. v. Isaac Sutton, Index No. 51025/2015 and

secured a judgemen:t against Isaac for $741,287 .DO. Thus, the

sort of "close'; relationship required to maintain a fraudulent

conveyance action premised on badges of fraud does not

exist here.
✓ .

Next, plaintiff does not allege facts sufficient to suggest

that the transactions were questionable transfers not in the

usual course of business. For example, "a corporation does not

usually transfer money to; or for the benefit of, people who

provide ho consideration. Nor does a corporation properly prepare

and file W-2 forms for people who are not employed by the

c::orporation'; ( see, Federal National Mortgage Association v.

Olympia Mortgage Corporation, 792 F.Supp2d 645 IE.D.N, Y. 2011]).

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Moreover, a transaction made with an unusual amount of secrecy or
made with efforts to conceal thi2 transaction from others

inclU9ing debtors principles are further indications the

transaction was not made in the ordinary course of business (Tn

re 45 John Lofts LLC; 650 BR 602 [United States Bankruptcy Court
. .

Southern District of New York 2023]),

The first transfer was made to satisfy a debt and cart hardly

be classified as improper in any way. There is also no indicia

that Isaac preferred certain creditors to the detriment of the

plaintiff and that such preference constitutes fraud (see,

Priestly v. Partmedix Inc., 18 F. Supp3d 4 86 [S. D. N. Y. 2014] ) . At

the time of the conveyance, Dushey had a judgement against Isaac

and plaintiff did riot. There can be no fraudulent preference-s

paying the debt owed to D11shey thereby frustrating the

plaintiff's claim that would not ripen for five years. The

unpredictability of that claim, in 2017, negates any assertions

the transfer to Dushey .somehow consisted of any improper

pre£erence (see, In re Sharp International Corp., 4.03 F3d 43 [2d

Cir. 2005 J l The second transfer did hot involve Isaac the

debtor and in isolation was not done in any unusual manner to

raise any badge of fraud at alJ. The transfer was for full

cohs-ideratioh, was made with a publicly recognized bank as

mortgagee and was not done secretly or hastily. The fact the

property may not have been publicly available to other potential

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purchas·ers does not me-an the· conveyance·- was fraudulent in ·any

-manner.

Next, inadequacy of the consip.eration is. considered a

·\\.particularly · impottan_t,,. badge- establishing a: fraudulent

conveyance (Axginc Corporation v. Plaza Automall Ltd., 2022 WL

21354 74 [E. ·i:). N. Y. ·2022'] ") . While the plaintif·f acknowledges that

inadequacy o"f consider:atio n is a badge o:f fraud nec.e-ssary to

establish intent (see, Memorandum of Law in Oppositipn, page 7

[ NYSC~)F Doc. · No . 6·5] ) the: pJ_ai"n ti f·f argu(;!·s that inadequacy· 6 f

consid~rati.on is not rieces-sary to· establish a: claim .purSµq.nt t,o
Debtor Creditor Law former §276. It is true that where actual

iptent to defraud· -has been proven then th.e adequa~y _of

consideration is not relevant to: set as.ide the conveyance {.filffi.,

In re Sharp Internation·a l Corp., supra). However, where there 1-s

no indi_c,ic1 _of actual i·ntent ·-1;1.no instead the pl-aintiff seeks to

establi§h fr~ud by reliance upon badges 0£ fraud tben surely the

inadequacy .of corrs.iqerat-,io n _i~ i3. £-actor that -m,tist be considered

(see,. Wall Street Associates v. Brodsky_, 257 :AD.2:d 5_2_Q, 6$ 4 NYS2d

244 [lst Dept., 19:99]) In Wall street, the court explained that

"DCL "§ -276, unlike.· sect.i:Ons' 27.3 and 275, addres.ses actual -fraud,

as opposed to constructive fraµd, and does not require proof of

unfair c·on·sicteratio n or i.ns·bl ven-cy ... Due to the difficulty of·

proving actual intent t,o hincter·, cielay, or def r~ud creditqrs, the

ple.ader is allowed to re1y on "badges of fraud" to support his

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case, i.e., circumstance s so. c·ommo.nly as.soc::ii;l_ted with fprndµlent
trans.rers "that t_heir presence gives. rise to an inference of

interit" ... Among such c"ircu:mstaitce s are: a clos·e. rel·ationship

t.,etwe.en- the parties to the a.lJeged. fraudulent transactiqn;· a

questionable. tri::l.nsfer not in the usual course bf business;

inadequacy .of the ·cons·iderati-o n; the tra-risferor' s knowledg.e of

the er.editor's c-laim and the inability to pay it; a.nd re.tention

of control of the property by the transferor after the
<;::-9nveyance" (id) .

T.he ,adequacy .of co.nsidera_tio.ri .. conc$.rning .the tr~nsfE;ixs in

this case i$ apparent. Indeed,
. the
. plaintiff
. _does not even

question their a_dequacy ·other than tci no.te the second transaction

was not arms..:..alength because the price wcis virtually the same as
the 2017 transfer and the property was riot listed fo-r sale on the

open m,a:rket.- However, those facto:.ts do not impugn adequate

consideration at a.11. In any event, those objections are equally

_u_navailing and .fail to :raise- any question of fraud. While the

two transfers, thre$ years apart, were for almost identici:ll
prices,. tha_t does nc:it evince any questi.on of fraud. This .is

:particulariy· tru·e where. :ther~- is no quest.ion fair -c.or;isideratio n

was ex-changed and Well.a Fargq Bank provided an appraisal arid

,obta:·ined a mortgage in the second trap-$~ctipn. Any qµestio.n in

thi-s reg~rd is_ sheer speculation. Moreover:,- the -fact the

property may not have beeri offered to sale to others does not

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undermine. the adequacy of consideration. That is an irrelevant

fact that has no bearing upon this litigation.

The next badge of fraud is the transferor's knowledge of the

creditor's claim and the inability to pay it. This badge is

entirely absent in these transactions and to be sure the badge

makes little sense considering the specifics facts. DUshey as

one of the transferors was never a debtor and whether Dushey knew
of Isaac's debts is entirely irrelevant. As the court observed

in In re Tribune Co. Fraudulent Conveyance Litigation, 2017 WL

8-2391 [S. D. N. Y. 2017] "when considering whether a debtor had an

actual intent to hinder, delay, or defraud its crE'!ditors, courts

focus on the intent of the transferor not on the intent of the

transferee" (id). Thus, the intent of Dushey or Meir as

transferees is entirely irrelevant.

The last badge of fraud demonstrating intent recited by New

York cases is whether there is any retention of control of the

property by the transferor after the conveyance. Th this case

that badge. Of fraud is not even asserted. There is no dispute

that after Isaac transferred the property to Dushey he did not

ma.in ta in any retention Cir control ov_er the property. Likewise,

upon Dushey's sale of· the property to Meir, again, Isaac retained

no control over the property.

As noted, the Federal courts include further badges of

fraud, namely, the financial condition of the party sought to be

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charged both before and after the transaction in question, the

existence or cumulative effect of a pattern or series of

transactions or course of conduct after the incurring of debt,

onset of financial difficulties, or pendency or threat of suits

by creditors c:rnd the general chronology of the events and

trarisactioris under inquiry (see, Emerson Electric Company v.

Asset Management Associates of New York, 2023 WL 4850528

[E. n. N. Y. 2023]) . These badges of fraud are also absent in this

case.

The financial cortdi tion of the party sought 1:o be charged,
Isaac in this case, is similar to the transferor's knowledge of

the creditor's claim and the inability to pay it. That badge has

adequately been discus·sed. The next bad.ge, a series of

transactions will be dealt with presently regarding the

collapsing doctrine. The last badge, the chronology of events

surely provides no indicia that any intent existed to

frauciulently convey the property. As already explained, a

lawsuit was comrri.enced against Is.a:ac .in 2015. In 2016 Dushey

obtained a judgement against Isaac. As a result of that

judgement Isaac sold his property to Du.Shey to satisfy the debt

that arose from the 2016 lawsuit. The further transaction from

Dushey to Meir in 2020 did not involve Ts.aac at all and the

c:hronology of these events does not serve to indicate any fraud ..

The mere fact the 2015 lawsuit was concluded with a judgement

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against Isaac in 2022, a full two years after the property was

sold to Meir fails to allege any fraudulent conveyances in any

manner. Thus, considering all the badges of fraud, the. only one

that could possibly be utilized to infer fraudulent intent is the

fact Isaac and Meir are related to each other. However, that one

possible badge is entirely inadequate. As the court Observed in

In re Tops Holding II Corporation, 646 BR 617 [United States

Bankruptcy Court Southern District of New York 2022] ''the

presence or absence of any single badge of fraud is not

conclusive; The proper inquiry is whether the badges of fraud

are present, not wh?ther some facts are absent. Although the

presence of a single facto'r, i.e. a badge of f:r-aud, may cast

suspicion .Oh the transferor's intent, the confluence of several

in one transaction generally provides conclusive evidence of an
actual intent to defraud" (id). Thus, when no badges of fraud

are found no such intent to engage in any fraudµlent conveyance

has been presented.

Lastly, the plaintiff asserts the collapsing doctrine can

enable both transactions to be viewed as one overall transaction

wherein Isaac really transferred the property to his son

establishing a fraudulent conveyance.

This doctrine permits mµltiple trarisactions to be viewed as

steps in a single transaction when analyzing a fraudulent

conveyance allegation (HBE Leasing Corporation v. Frank, 48 F.3d

B

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623. [-2d Cir. 1995]) -. Fo-r example in HBE the court explain'ed the

doctrin.e would apply wh·ere ~'one tran.s-f~J:"_ee gives fair v-~l_µe to

the debtor in exchange for the debtors properiy, and the debtor

then gratuitously trans.fers the proceeds of the first exchange tc.i

a s~c:c.ind transferee. The first transferee thereby receives the

d.e-bt.or:s prope.rty, and the se.cond trar:i.sfer~e
. rece!ive.fi· the
..

··¢.ons.-idf,!ra-i:ion, wh11'3, th_e debtor retains -nothiri.g" (id:) .• Thus, for

this doctrine to apply the party seeking .its applicability must

demonstrate t!J.at the qoqsideration the debtor gave the first
transferee was th:e:n ;:r~convey~d by the debtor for less.. than fair

,c.oris-ideration or with· art actual intent to defraud cred-i.to,r~ .

.Howeve.r,. if the df.!btor ,does not transf.e_r the conside,ra-:t,io.n. but

rather keeps it then the first transfer is not fraudulent.

Furthe.r, "the initial transferee must have a,ctual or construct:Lve

_lcn-owle<;i_ge of the entire .scheme that re_nders the exchange- with the

·.tjep.tor f:raudulent" ("se'e, In re M. -Fabrikant &. Sons Inc., ·.3-94 BR
721 [United States Ba·nkruptcy Court s:o.:uthern bistri.ct o_f" N.ew York

2>ooa J ) •
In this case none. of the elements o.f the collapsing doctrine

.are present. Firs·t, the debtor di"d ·not. gratuitously tran.s.f er the

·p_r-oc.eeq_s to any t.hird pa-rty. Rather_, s·ome of the proc~~ds were

used to s:ati-sf.y a debt ow·ea to Dushey and the remainder of the

proceeds were :retained by Isaac. Second, th.ere is. no allegation

that Dusheyi tbci initial ttansferee, had any tnbwledge of any

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.scheme· ·to defraud. the plaintiff. t:-3'-or could Dus.hey possibly have

.a_ny sue}} kJ:"l.Qwledge of a!l.y int_ent t:o defx;a_ud Isa_ac s_ince .nq

j\idge::inent had even been obtained arid thus. there was ho fraudulent

.a.ctlvi.ty. Es·sentia1ly, the plaintiff argues that in 2017 Isaa.c

thought that perh,aps he may owe the plaintiff money ciue to a
iawsui t commenced. two years ea·rlier and embarked upon a ~rnheine-.

Pursuant t.o. this -scl:1.eme Isaac wo.uld sell prope·rty to Dushey (to

satisfy a debt) then wait three years and allow Dushey to sell

the property to h:i,.-s son Meil;' for full v-alue be.lievin:9 that at

some future point he rnay los-e the-. lawsuit to .the plainti!f.. Even

if all those facts are true that do.e-s not atiege any frauciulent

conveyance f9.r the rea·9:ons e_xplain.ed. Therefo--r.et the motion

seeking_ to dismiss all causes of action :pursuant to Debtor_

Credi tor Law ·§27 6 is granted, Conseque·ntly , ·there cah b"e no

claims against Met.t pursuant to Debtor Creditor Law §278 a.nd the

motion seeking to dismiss all those claims is likewise. granted.

T.hus, • the motions ~eek:i.:ng tq qismis-s the entire complaint is

.fully granted.
..;
.So ordered.

ENTER:

DATED: Febr:uary ,?3, 2024
Brooklyn N.Y. Bon.
JSC

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