SR Holding I, LLC v. Cannavo
| Decision Date | 24 September 2021 |
| Docket Number | Index 54202/2016 |
| Court | New York Supreme Court |
| Parties | SR HOLDING I, LLC, Plaintiff v. JOSEPH CANNAVO, LEONARD CANNAVO, CARMELA CANNAVO, IRVING PLACE PROPERTIES LLC, ONE WAS PROPERTIES LLC, PUTNAM PARK PROPERTIES LLC, REGENT STREET PROPERTIES LLC, WASHINGTON PARK PROPERTIES LLC, BLUE MOUNTAIN PARTNERS LLC, CROWN ROYAL LLC, HASECO PROPERTIES LLC, WHITETAIL REALTY GROUP LLC, CAPITAL REALTY PARTNERS LLC, ALL NY HOLDING LLC, M&T BANK, PROVIDENT BANK n/k/a STERLING NATIONAL BANK, RED SOX FUNDING, LLC, BRANCA REALTY, LLC, CASTLE TITLE INSURANCE AGENCY, INC., BLACK DIAMOND GROUP LLC, RANDOM PROPERTY GROUP LLC, 82-84 HAMILTON MANOR LLC, DEREK WASHINGTON, BRANCA CONSULTING SERVICES, LLC, CREATIVE SCAPES MANAGEMEN,, LLC, SINGER ENERGY GROUP, LLC, SHANA SIMMONS, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE and JOHN DOE #1 through JOHN DOE # 15 inclusive, Defendants. |
DECISION & ORDER
The Court conducted a bench trial between December 5, 2019 and December 17, 2019. At the Court's direction, the parties submitted Post-Trial Memoranda in support of their respective positions. Upon consideration of all of the testimony evidence and the parties' submissions, the Court rendered a Decision After Trial dated February 10, 2021 and entered February 11, 2021. In substance, the Court found that the evidence at trial satisfied the statutory elements of Debtor and Creditors Law § 273 & 276 with respect to the Initial Transfer of the properties from the Transferor Defendants to the Transferee Defendants, warranting a judgment in Plaintiff's favor setting aside the transfers.
The Transferor and Transferee Defendants now move by Order to Show Cause and Notice of Motion to set aside the Court's Decision After Trial dated February 10, 2021, and to make new findings of fact and conclusions of law, render a new decision and direct entry of judgment based on the new decision pursuant to CPLR § 4404(b) and for a stay pursuant to CPLR § 2201, as the Decision After Trial is against the weight of the evidence and there is insufficient evidence to establish Transferor Defendants fraudulently conveyed the real properties at issue herein..
Pursuant to CPLR 4404(b), after a non-jury trial, a court may, on the motion of a party or its own motion, set aside its decision and make new findings of fact or conclusions of law (see Trimarco v. Data Treasury Corp., 146 A.D.3d 1008, 1009 46 N.Y.S.3d 640; Paterno v: Strimling, 107 A.D.3d 1233, 1234, 968 N.Y.S.2d 643).
Defendants argue that the Court's Decision was not supported by a fair or reasonable interpretation of the evidence. However, the Court, in rendering it's Decision, assessed the credibility of the witnesses and the evidence offered. The Court discussed the issues at length, assessed the evidence presented and made a determination based on the evidence and testimony offered. The Court will again review its Decision After Trial in view of the testimony and evidence offered at trial.
As the Court opined in its Decision after Trial, the deeds were executed but not delivered to the Transferee Defendants until the date of the refinance. Ronald Rauschenbach, President of Castle Title, testified that the Deeds were held and that he did not deliver them to the Transferee Defendants until the time of the M&T Bank and Provident Bank refinance. This occurred months after the deeds were executed. Although it is not necessary that such conveyance be recorded (see Cayea v. Lake Placid Granite Co., 245 A.D.2d 659, 661, 665 N.Y.S.2d 127 [1997]), it is a well-established rule that delivery of the deed with intent to transfer title is required and the absence thereof will render the attempted transfer of ownership ineffective (see 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506, 511, 414 N.Y.S.2d 889, 387 N.E.2d 1205 [1979]; Cayea v. Lake Placid Granite Co., 245 A.D.2d at 660, 665 N.Y.S.2d 127). While there is a strong presumption that a deed purporting to transfer ownership in real property has been delivered and accepted, this presumption may be overcome by evidence of the parties' actual intent (see Manhattan Life Ins. Co. v. Continental Ins. Cos., 33 N.Y.2d 370, 372, 353 N.Y.S.2d 161, 308 N.E.2d 682 [1974]; Janian v. Barnes, 284 A.D.2d 717, 7187 727 N.Y.S.2d 182 [2001]; see also Diamond v. Wasserman, 8 A.D.2d 623, 185 N.Y.S.2d 411 [1959]).
Furthermore, New York does not recognize conditional conveyances (see In re Ellison Assoc, 63 BR. 756, 761 [S.D.N.Y.1983;; Herrmann v. Jorgenson, 263 N.Y. 348, 353, 189 N.E. 449 [1934]; Hamlin v. Hamlin, 192 N.Y. 164, 167-168, 84 N.E. 805 [1908]).
Thus, if the intention in transferring possession of a deed is merely to have it transmitted to a third person, such as an escrow agent, there is no legal delivery that will pass title to the property (see Rapp v. Cansdale, 29 Misc.2d 236, 244-245, 214 N.Y.S.2d 522 [1960], affd. 12 A.D.2d 884, 211 N.Y.S.2d 1002 [1961]). The Cannavos offered no evidence as to the role of Castle Title and on whose behalf, they were acting. The testimony offered at trial points to Castle Title being an agent of the Transferor Defendants. Leonard Cannavo testified that Castle Title's involvement went as far as having prepared some of the deeds transferring the property for several of the transactions making Castle Title more an agent of the Transferor Defendants than an independent third-party or a mere title company. What is clear from the testimony is that the Cannavos remained in control of the properties by managing and collecting rent after the deeds were executed, transferring the properties, and continued even after the transfers were completed and the deeds offered for filing.
In fact, not only did Rauschenbach testify that the deeds were held, and not delivered but the sworn statements contained in the Transferor Defendants' Federal Tax Returns, Form 4797 and the Transferee Defendants" Federal Tax Returns, Form 4562, either confirm the transfers occurred at the times of the mortgage transactions or at least contradict that the deeds were delivered on the dates they were executed.
The trial evidence clearly contradicts the Cannavos' version of events and demonstrates that the deeds at issue were never "delivered" until the dates of the closing of the mortgage refinance which is consistent with the sworn statements in the Cannavo tax returns. The lack of credible evidence corroborating the date (11/1/11) appearing on the deeds is consistent with the documentary and non-party witness testimonial evidence supporting the Plaintiffs contention that the deeds were delivered at the time of the closing of the refinance of the mortgages.
Debtor and Creditor Law § 273 provides that "[e]very conveyance made and every obligation incurred by a person who is or will be rendered insolvent, is fraudulent as to creditors without regard to his actual intent, if the conveyance is made or the obligation is incurred without fair consideration." Accordingly, "both insolvency and lack of fair consideration are prerequisites to a finding of constructive fraud under [the statute], and the burden of proving these elements is upon the party challenging the conveyance" (Joslin v. Lopez, 309 A.D.2d 837 838, 765 N.Y.S.2d 895 [2003] .. An antecedent debt can constitute fair consideration (Matter of American Inv. Bank v. Marine Midland Bank, 191 A.D.2d 690, 692, 595 N.Y.S.2d 537 [1993] .. A person is deemed insolvent when "the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured" (Debtor and Creditor Law § 271[1]; see Ede v. Ede, 193 A.D.2d 940, 941, 598 N.Y.S.2d 90 [1993]), and "fair consideration requires that the exchange not only be for equivalent value, but also that the conveyance be made in good faith" (Ede v. Ede, supra at 941-942, 598 N.Y.S.2d 90; see Debtor and Creditor Law § 272). The determination of what constitutes "fair consideration" is generally a question of fact to be determined under the circumstances of the particular case (see Serota v. Power House Realty Corp., 274 A.D.2d 427, 711 N.Y.S.2d 778 [2000]; Epstein v. Nieves, 258 A.D.2d 436, 682 N.Y.S.2d 917 [1999]).
Here, there is no dispute as to the value of the properties at the time of the transfer. The question is whether the pay-oft of the debts encumbering the properties at the time of the transfer, were fair equivalents to the value of the properties. This Court found and the record supported the contrary. Properties that were claimed to be under water one day, miraculously gained millions of dollars in value the next, after a simple refinance. This confirms that the total amounts of the pay-ofts, including first and second mortgages and outstanding taxes were far from a fair equivalent value of the properties transferred.
As the Court opined in its Decision After Trial, "the deeds transferring the properties to Carmela CannavO LLCs were not delivered for recording until the closing of the M&T and Providence refinancing of the properties." At this point there was already a written agreement in place between the Transferor Defendants and existing creditors for a discounted pay-oft of the balance due on their debt. In the end, the properties turned out not to be worthless and under-water but of significant value, with Carmela's LLCs realizing a quick $15 million in equity. The Court is still of the opinion that based upon the evidence presented at trial, the total amount of the pay-ofts., including first and second mortgages and outstanding taxes, were not...
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