Corbin v. Litke

• Decision Date: 08 September 1980
• Citation: 431 N.Y.S.2d 800,105 Misc.2d 94
• Parties: Benjamin CORBIN, Plaintiff, v. Paul LITKE and Concetta Litke, Defendants.
• Court: New York Supreme Court

Page 800

431 N.Y.S.2d 800

105 Misc.2d 94

Benjamin CORBIN, Plaintiff, v. Paul LITKE and Concetta Litke, Defendants.

Supreme Court, Special Term, Suffolk County, Part I.

Sept. 8, 1980.

Graham & Simon, New York City, for plaintiff.

William J. Breuer, Ridgewood, for defendants.

JOSEPH JASPAN, Judge.

In this action plaintiff seeks to set aside an alleged fraudulent conveyance by defendant Paul Litke to his wife of his interest in real property owned by them as tenants by the entirety.

Pursuant to a contract dated December, 1974 (as modified in 1975) the plaintiff sold to the defendant Paul Litke his Income Tax Preparation Practice for the sum of $16,000.

On May 16, 1977, the plaintiff commenced an action in the Supreme Court, Queens County, to recover the unpaid contract price. On October 4, 1977, a Stipulation of Settlement was entered into between Corbin and Paul Litke in which Litke agreed to pay plaintiff the sum of $18,000 in settlement of plaintiff's claim.

Upon the defendant's failure to make periodic payments as required by the settlement agreement, the plaintiff obtained a default judgment in the amount of $19,180 which was docketed on March 10, 1978.

In March, 1974, Paul and Concetta Litke purchased, as tenants by the entirety, real property located at 138 Geery Avenue, Holbrook, New York. That property was and continues to be the defendants' residence.

On August 16, 1977, approximately three weeks before Paul Litke entered into the settlement agreement, he conveyed his undivided interest in the Geery Avenue property to his wife Concetta. The only consideration for the transfer of title was "Concetta Litke's consent to attempt to resolve the marital dispute (which was pending at the time) and for the purpose to continue (sic) to reside together as husband and wife."

To date, defendant Paul Litke has failed to make any payments in settlement or reduction of the judgment against him.

By verified complaint dated March 21, 1979 the plaintiff demanded judgment:

1. Against the defendant Paul Litke for the further sum of $6,393.33 with interest for attorney fees.

2. That the said sale and transfer of the (Geery Avenue) property to Concetta Litke be set aside and declared utterly null and void.

3. That the defendants be restrained from selling or disposing of, or in any way encumbering, the said property.

4. For punitive damages in an amount to be determined by the court.

Section 273-a of the Debtor Creditor Law provides that

"Every conveyance made without fair consideration when the person making it is a defendant in an action for money damages or a judgment in such an action has been docketed against him, is fraudulent as to the plaintiff in that action without regard to the actual intent of the defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment."

The court initially notes that the provisions of Section 273-a are applicable in the instant case since an action was pending against Paul Litke at the time the conveyance was made and that the plaintiff subsequently obtained a final judgment against him.

The plaintiff now moves for summary judgment directing Concetta Litke to reconvey the property previously transferred to her by her husband.

Pursuant to Section 272 of the Debtor Creditor Law, fair consideration is given for property when "(a) in exchange for such property, or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied, or (b) when such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared with the value of the property or obligation obtained."

A conveyance by a husband to a wife upon her promise that she would seek to reconcile their differences and continue to live with him is not fair consideration within the meaning of that section (See Rush v. Rush, 19 A.D.2d 846, 244 N.Y.S.2d 673; See also Bennett v. Bennett, 62 A.D.2d 1154, 404 N.Y.S.2d 171).

Nor can the transfer be justified by Section 3-309 of the General Obligations Law.

That section provides that a "husband and wife may convey or transfer real or personal property directly, the one to the other, without the intervention of a third person . . . ."

This enactment was merely intended to abrogate the common law rule that a conveyance between a husband and wife would not be sustained by a court of equity unless it was made upon valuable or meritorious consideration (Winans v. Peebles, 32 N.Y. 423; Dean v. Metropolitan Elevated R. Co., 119 N.Y. 540, 23 N.E. 1054; cf. Lacks v. Lacks, 39 A.D.2d 485, 336 N.Y.S.2d 874, app. dismissed 32 N.Y.2d 781, 345 N.Y.S.2d 541, 298 N.E.2d 680 and 32 N.Y.2d 939, 347 N.Y.S.2d 201, 300 N.E.2d 733). But it was not intended to abrogate the common law rule that a voluntary conveyance from a husband to a wife may not be made to defraud his creditors (Savage v. Murphy, 34 N.Y. 508; Neuberger v. Keim, 134 N.Y. 35, 31 N.E. 268).

The defendants, however, further contend that the fair consideration requirement of Section 273-a is inapplicable to the instant conveyance since the property was exempt under the homestead exemption (C.P.L.R. 5206).

In their opposing affidavit, the defendants state "Specifically the Plaintiff offers no proof in this application or in his complaint that Paul Litke's interest in the homestead property was valued in excess of ten thousand dollars above liens and encumbrances." (Citing C.P.L.R. 5201(b).)

In relevant part, C.P.L.R. 5201(b) provides that a "money judgment may be enforced against any property which could be assigned or transferred, whether it consists of a present or future right or interest and whether or not it is vested, unless it is exempt from application to the satisfaction of the judgment."

Exempt property is defined in C.P.L.R. 5205 (personal property) and C.P.L.R. 5206 (real property).

C.P.L.R. 5206, eff. 8/22/77 (L.1977, ch. 181) provides a homestead exemption for a residence "not exceeding ten thousand dollars in value above liens and encumbrances."

It provides, however, that:

"This act shall take effect ninety days after it shall have become law (i. e., on August 22, 1977), but shall not affect the application of property to the satisfaction of a money judgment for a debt contracted before it takes effect."

Thus, if the judgment against the homestead owner is based on a debt contracted prior to August 22, 1977, reference must be made to the provisions of C.P.L.R. 5206 as they read prior to the 1977 amendments. (6 Weinstein-Korn-Miller, Section 5206.27, pp. 52-195.)

At the time the debt in the instant case was contracted in December, 1974, Section 5206, subd. (a) provided for a monetary exemption of only two thousand dollars without any provision that said amount was to be above liens and encumbrances.

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