Schmitt v. Morgan
| Decision Date | 29 December 1983 |
| Citation | 471 N.Y.S.2d 365,98 A.D.2d 934 |
| Parties | William A. SCHMITT, as Trustee of Charles L. Tellerday, Bankrupt, Appellant, et al., Plaintiffs, v. George B. MORGAN et al., Respondents. |
| Court | New York Supreme Court — Appellate Division |
Smith, Sovik, Kendrick, Schwarzer & Sugnet, P.C., Syracuse (David T. McCall, Syracuse, of counsel), for appellant.
James D. Wood, Walton, for respondent Morgan.
Konstanty & Harlem, Oneonta (James E. Konstanty, Oneonta, of counsel), for respondents Cyrus B. and Nancy Adler.
Before SWEENEY, J.P., and KANE, MAIN, MIKOLL and YESAWICH, JJ.
Appeal from an order of the Supreme Court at Special Term, entered July 20, 1983 in Delaware County, which denied plaintiff William A. Schmitt's motion for summary judgment.
In 1976, plaintiffs Charles and Mary Tellerday deeded their farm in Delhi, Delaware County, to defendant Nancy Adler, the wife of defendant Cyrus Adler, who owned the adjoining farm. Cyrus Adler was also an attorney who, in the course of representing the Tellerdays in another matter, learned that Charles Tellerday was having severe financial problems. According to Cyrus Adler, he wanted to help the Tellerdays by permitting them to remain in their home despite the imminent foreclosure of the mortgage on their property. Adler stated that he arranged for the Tellerdays to convey their farm to Nancy Adler pursuant to an oral agreement whereby she would assume the $57,000 mortgage on the Tellerdays' property, would make payments on a wood furnace installed in the Tellerdays' house, would pay back taxes on the property, would allow the Tellerdays to live on the property rent free, and would eventually convey 10 acres of the farmland to the Tellerday sons. Charles Tellerday denied that such an agreement was reached and claimed that he signed a blank piece of paper for Cyrus Adler. The deed conveying the Tellerday farm to Nancy Adler cited consideration of $1, noted that the transaction was exempt from transfer tax, and was recorded on August 20, 1976.
Thereafter, Cyrus Alder arranged to sell both his farm and the Tellerday farmland to defendant George B. Morgan. This deal fell through because of a lis pendens filed against the Alders' property by Cyrus Adler's former spouse. Morgan did agree to purchase the Tellerday farm from Nancy Adler for $85,000, with $26,000 down and a $59,000 mortgage. When Morgan learned of the oral agreement between Nancy Adler and the Tellerdays, he insisted that the Tellerdays execute a release, which Adler secured. Charles Tellerday again claimed that he signed only a blank piece of paper. Thereafter, Morgan completed the purchase of the property, paying the down payment by check.
On August 29, 1977, Charles Tellerday was adjudicated a bankrupt and plaintiff William A. Schmitt was elected as the trustee in bankruptcy. This action was commenced alleging that both the transfer from the Tellerdays to Nancy Adler and the subsequent transfer from Nancy Adler to Morgan were fraudulent, that defendants had conspired to defraud the Tellerdays' creditors, and that the release executed by the Tellerdays was void for lack of consideration. Plaintiffs sought to have the Tellerday property turned over to them or, in the alternative, judgment for the fair and reasonable value thereof, a declaration that the release was illegal, and attorney's fees pursuant to section 276-a of the Debtor and Creditor Law. Plaintiff Schmitt moved for summary judgment against all defendants. Special Term denied the motion after finding that issues of fact existed. This appeal followed.
Under section 273 of the Debtor and Creditor Law, any transfer made by an insolvent debtor for less than "fair consideration" is fraud as against his creditors without regard to the actual intent of the transferee (see County of Dutchess v. Dutchess Sanitation Servs., 86 A.D.2d 884, 885, 447 N.Y.S.2d 531, app. dsmd. 56 N.Y.2d 1033). "Fair consideration" is given for property when, as a fair equivalent therefor and in good faith, property...
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