Neptune Issue Inc. Profit Sharing Plan v. Mary Ellen Eliopoulos, Individually and as Executor of the Estate of Thomas Eliopoulos, Deceased, et al.; Glenburnie Estates LLC (Appellant)
Attorneys and Parties
Brief Summary
Creditor rights and real estate: alleged voidable transfer (fraudulent conveyance) of properties to an insider to avoid deficiency judgments under New York's Uniform Voidable Transactions Act (UVTA).
Supreme Court (Washington County) denied Glenburnie Estates LLC's pre-answer motion to dismiss under CPLR 3211(a)(1) and (a)(7) [rule allowing dismissal based on documentary evidence and for failure to state a cause of action], despite issuing no written or oral findings.
The Appellate Division modified by granting dismissal of the complaint's third and fourth causes of action, which plaintiff abandoned; otherwise, it affirmed the denial of the motion to dismiss the first and second causes of action.
Plaintiff adequately pleaded actual-intent and constructive voidable transfer under Debtor and Creditor Law § 273(a)(1) and (a)(2) [voidable transfer based on actual intent to hinder, delay, or defraud, or lack of reasonably equivalent value plus unreasonably small assets or intent to incur debts beyond ability to pay], satisfying CPLR 3016(b) [heightened particularity for actual-intent fraud] through detailed facts and badges of fraud in § 273(b) [codified factors indicating fraud, including insider transfer, pending suits, inadequate consideration, and insolvency]. The later sale price ($1.25M vs. $529k) plausibly supported lack of reasonably equivalent value; defendants’ affidavit was not documentary evidence for CPLR 3211(a)(1) purposes; insolvency could be presumed under DCL § 271(b) [insolvency presumed when debtor generally not paying debts as they become due]. Plaintiff expressly declined to pursue the third and fourth causes, warranting their dismissal.
Background
In 2016, plaintiff filed two mortgage foreclosure actions against Mary Ellen Eliopoulos and her company, Estates of Glenburnie LLC, on properties in Essex and Washington Counties. While those cases were pending, defendants placed the Putnam parcels (Washington County) under multiple mortgages with Mako International, LLC. In 2018, plaintiff obtained foreclosure judgments and sought deficiency judgments. In June 2020—before any deficiency judgment issued—Eliopoulos and Estates of Glenburnie LLC transferred the Putnam parcels and two Lake George Way parcels to Glenburnie Estates LLC (GEL), owned by Eliopoulos' son, for $529,000. Plaintiff then sued to set aside the transfer as a voidable transaction under Debtor and Creditor Law (DCL) §§ 273, 274, and 275. GEL moved pre-answer to dismiss under CPLR 3211(a)(1) and (a)(7), arguing the complaint relied on information-and-belief allegations and lacked particularity under CPLR 3016(b), and that documentary evidence showed reasonably equivalent value. Supreme Court denied the motion without findings.
Lower Court Decision
Supreme Court denied GEL’s CPLR 3211 motion to dismiss in its entirety, issuing an order without written or oral findings (the Appellate Division noted this practice is disfavored under CPLR 2219(a) [order must state the determination in such detail as the judge deems proper], but it did not warrant reversal here).
Appellate Division Reversal
Modified, on the law: the motion was granted only to dismiss the third and fourth causes of action (plaintiff abandoned them); otherwise affirmed. The court held the complaint sufficiently alleged actual-intent voidable transfer under DCL § 273(a)(1) and constructive voidable transfer under § 273(a)(2), relying on specific facts and badges of fraud per § 273(b) (insider transfer to the debtor’s son’s entity; pendency of deficiency actions; alleged inadequate consideration evidenced by a later $1.25M sale; and alleged insolvency, which may be presumed under § 271(b)). Information-and-belief allegations were permissible because material facts were within defendants’ exclusive knowledge, and the son’s affidavit could not serve as documentary evidence on a CPLR 3211(a)(1) motion.
Legal Significance
Clarifies that after New York’s adoption of the UVTA, claims alleging actual intent under DCL § 273(a)(1) must meet CPLR 3016(b)’s heightened particularity, but information-and-belief pleading is acceptable when key facts are in defendants’ control if accompanied by facts permitting a reasonable inference of fraud. It confirms the codified badges of fraud in DCL § 273(b) can support actual-intent claims at the pleading stage, that a later resale price can support allegations of lack of reasonably equivalent value under § 273(a)(2), that affidavits are not ‘documentary evidence’ for CPLR 3211(a)(1), and that insolvency may be presumed under DCL § 271(b) when the debtor is generally not paying debts. It also cautions trial courts that orders without stated reasons are disfavored, though not per se reversible.
At the pleading stage, a transfer of real property to an insider amid pending deficiency actions for substantially less than a later resale price can survive a CPLR 3211 motion under the UVTA; plaintiffs may rely on information-and-belief allegations with supporting facts and badges of fraud, and defendants cannot defeat the claim with self-serving affidavits. Abandoned causes of action will be dismissed on appeal.