Ardent Harmony Fund, Inc. v Fuschetto Home Improvements, LLC
Attorneys and Parties
Brief Summary
Fraudulent transfer and creditor-remedy dispute involving payments made by judgment debtors to a home-improvement contractor.
The Supreme Court, Nassau County, granted Fuschetto Home Improvements, LLC summary judgment dismissing the complaint against it.
The Appellate Division reversed the order insofar as appealed from and denied the contractor's motion for summary judgment on the claims under Debtor and Creditor Law former §§ 273, 274, and 278 [former provisions requiring lack of fair consideration and insolvency or unreasonably small capital, and permitting a matured creditor to set aside a fraudulent conveyance except against a purchaser for fair consideration], as well as unjust enrichment.
The contractor failed to make a prima facie showing with admissible evidence that the transfers it received were for fair consideration for work performed, and it also failed to show prima facie that it was not unjustly enriched at the plaintiffs' expense.
Background
The plaintiffs sued to set aside transfers made by Donald Barrick and Nancy Barrick, alleged judgment debtors, to Fuschetto Home Improvements, LLC under Debtor and Creditor Law former article 10 [New York's former fraudulent conveyance provisions]. The plaintiffs alleged that the Barricks transferred large sums to the contractor without fair consideration in order to avoid paying the plaintiffs' judgments. The complaint asserted causes of action under Debtor and Creditor Law former §§ 273 and 274 [requiring proof that a conveyance was made without fair consideration and left the transferor insolvent or with unreasonably small capital], former § 278(1) [allowing a creditor whose claim has matured to set aside a fraudulent conveyance except as against a purchaser for fair consideration], and unjust enrichment.
Lower Court Decision
The Supreme Court, Nassau County, granted Fuschetto Home Improvements, LLC summary judgment dismissing the complaint insofar as asserted against it, accepting the contractor's position that the transfers were supported by fair consideration for work it purportedly performed for the Barricks.
Appellate Division Reversal
The Appellate Division held that the contractor's motion should have been denied. The contractor did not submit sufficient evidentiary proof in admissible form to establish that the funds it received from the Barricks were fair consideration for its work. Because the contractor did not dispute that the transfers rendered the Barricks insolvent or left them with unreasonably small capital, its failure to prove fair consideration defeated its prima facie showing on the Debtor and Creditor Law claims. The court also held that the contractor failed to establish prima facie that it was not enriched at the plaintiffs' expense or that equity and good conscience permitted it to retain the sums for purposes of the unjust-enrichment claim.
Legal Significance
This decision reinforces that a transferee seeking summary judgment in a fraudulent conveyance action under Debtor and Creditor Law former article 10 must affirmatively prove fair consideration with admissible evidence. Merely asserting that payments were for services is not enough. The case also shows that a defendant moving against an unjust-enrichment claim must negate the claim's elements on a prima facie basis before the burden shifts to the plaintiff.
In a fraudulent transfer case, a recipient of a debtor's payments cannot win summary judgment without concrete admissible proof that it gave fair value for the transfer; absent that showing, statutory fraudulent conveyance and unjust-enrichment claims will survive.