Carey v. Crescenzi
| Decision Date | 11 January 1991 |
| Docket Number | No. 377,D,377 |
| Citation | 923 F.2d 18 |
| Parties | Jamice CAREY, Plaintiff-Appellee, v. Hector CRESCENZI, Armando Crescenzi and Harenzy Realty Corp., Defendants-Appellants. ocket 90-7453. |
| Court | U.S. Court of Appeals — Second Circuit |
Paul G. Reilly, Jr., New York City (Reilly & Gatti, of counsel), for defendants-appellants.
Arthur H. Wisehart, New York City (Wisehart & Koch, of counsel), for plaintiff-appellee.
Before CARDAMONE and PRATT, Circuit Judges, and MICHAEL B. MUKASEY, District Judge for the Southern District of New York, sitting by designation.
Defendants Hector Crescenzi, Armando Crescenzi, and Harenzy Realty Corporation appeal from a summary judgment granted by the United States District Court for the Southern District of New York, Kenneth Conboy, Judge. Rejecting the defendants' argument that the complaint was barred by the statute of limitations, the district court determined that, as a matter of law, the two conveyances to the defendants were fraudulent under New York Debtor and Creditor Law Sec. 273-a. It further found that the plaintiff was entitled to attorneys' fees under Sec. 276-a of the same law. Because we agree with the district court that no genuine issue of material fact exists and that the statute of limitations does not bar the complaint, we affirm the district court's summary judgment setting aside the conveyances as to plaintiff Carey. However, because the district court failed to make the findings of actual fraud as required by 276-a to support the award of attorneys' fees against the grantees of the properties, we remand on this issue for further proceedings.
In 1979 Jamice Carey brought an action in the Supreme Court of the State of New York, County of New York, for money damages against her mother, Ona M. Carey, and her mother's attorney, Gene Crescenzi, claiming that they had defrauded her of a trust fund of which she was the beneficiary. After a four-day bench trial, the court found for the plaintiff. As part of its findings and order, the court assigned the case to a special referee to determine the amounts that Ona M. Carey and Gene Crescenzi had misappropriated. Based on the special referee's report, the court, on October 4, 1982, granted a final judgment against Ona M. Carey for $179,569.58 and Gene Crescenzi for $89,784.79. The court also "restrained and enjoined" Ona M. Carey and Gene Crescenzi "from making or suffering any sale, assignment, transfer or interference with any property in which either defendant has an interest" without the court's permission. That judgment was filed on October 13, 1982.
While the state-court action was still pending, Gene Crescenzi conveyed, without monetary consideration, one parcel of real estate to his two sons, Hector and Armando, who are defendants in the present action, and another parcel to their corporation, Harenzy Realty Corporation ("Harenzy On October 25, 1985, Jamice Carey brought this federal diversity action against Gene, Hector, and Armando Crescenzi, and Harenzy Realty in the United States District Court for the Southern District of New York, alleging that the two conveyances were fraudulent under New York Debtor and Creditor Law Sec. 273-a.
Realty"), the third defendant in this action. Crescenzi conveyed one parcel to Harenzy on January 6, 1981, and the other parcel to Hector and Armando on May 26, 1982.
After the district court dismissed Gene Crescenzi as a defendant, the remaining defendants moved for summary judgment and Carey cross-moved for summary judgment. The district court denied defendants' motion, granted Carey's cross-motion, declared the two conveyances fraudulent as to plaintiff Carey, ordered them set aside as to her, and, pursuant to New York Debtor and Creditor Law Sec. 276-a, granted attorneys' fees to the plaintiff. The court later granted defendants' motion for reconsideration pursuant to Fed.R.Civ.P. 52(b) and 59, and upon reconsideration elaborated on, but adhered to, its earlier decision, and determined that the plaintiff was entitled to attorney's fees, costs, and expenses in the sum of $44,194.70. In the final judgment, dated April 9, 1990, the district court found that "there was actual intent to defraud plaintiff, Jamice Carey, in connection with the two fraudulent conveyances" and ordered Hector and Armando Crescenzi and Harenzy Realty, "jointly and severally", to pay the attorney's fees and expenses.
On appeal, Hector Crescenzi, Armando Crescenzi and Harenzy Realty raise four issues: (A) The statute of limitations bars the action. (B) Summary judgment was inappropriate because there were material factual issues concerning Gene Crescenzi's interest in the conveyed property. (C) In awarding attorney's fees, the district court failed to make the specific findings as to actual fraudulent intent of defendants required by Sec. 276-a. (D) The district court should have held an evidentiary hearing as to the amount of attorney's fees.
Defendants' claims on issues (A), (B), and (D) are meritless. However, on issue (C) we conclude that under Sec. 276-a attorney's fees may not be awarded against a defendant, who is a grantee of a fraudulent conveyance, without a specific finding that he was aware of and participated in the actual fraud. Since the district court found generally that there was actual fraud, without connecting any of the defendants specifically to that fraud, we remand for more specific findings, or if necessary, further proceedings.
The district court held that Carey's cause of action to set aside the fraudulent conveyances was subject to a six-year statute of limitations, and that the cause of action "did not accrue until after the judgment was returned unsatisfied." Since that judgment was not filed until October 13, 1982, and since all three defendants were served before October 13, 1988, the district court concluded that service was within the six year limitation period.
Defendants do not dispute the district court's choice of a six-year statute of limitations for this case. See New York State Civil Practice Law & Rules 213(1). They do, however, object to the district court's determination of when the claim accrued and the statute started to run. According to the defendants, the statute started to run "at the time the transfer of real property was made." Gene Crescenzi's conveyance to Harenzy Realty was on January 6, 1981; the one to his sons Hector and Armando was on January 26, 1982. Since Harenzy was served was October 9, 1987, Hector Crescenzi on August 11, 1988, and Armando Crescenzi on September 8, 1988, if the defendants are correct as to the accrual event, then the complaint would have to be dismissed.
But the defendants are not correct. In view of the language of Sec. 273-a that a conveyance is fraudulent if "after final judgment for the plaintiff, the defendant fails to satisfy the judgment" (emphasis
added), "the existence of an unsatisfied judgment is an essential element of [Sec. 273-a]". Frybergh v. Weissman, 145 A.D.2d 531, 536 N.Y.S.2d 465, 466 (2d Dep't 1988). In Frybergh, the court affirmed the dismissal of a cause of action based on Sec. 273-a because the plaintiff had failed to obtain a judgment against any of the defendants. Id. See also Cohan v. Misthopoulos, 118 A.D.2d 530, 499 N.Y.S.2d 157 (2d Dep't 1986) (). Thus, the earliest that plaintiff's claim could have accrued was on October 13, 1982, the date of the judgment. Since all defendants were served within six years of that date, defendants' statute of limitations argument fails.
Defendants next argue that "an issue of fact existed as to whether or not the properties transferred were assets of the transferor." They assert that Gene Crescenzi was not the beneficial owner of the property and ...
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