BSL Development Corp. v. Aquabogue Cove Partners, Inc.
Court: Appellate Division of the Supreme Court of the State of New York; February 20, 1995; New York; State Appellate Court
Aquabogue Cove Partners, Inc. appeals a judgment from the Supreme Court, Suffolk County, which declared a mortgage dated May 6, 1988, from Broad Cove, Inc. fraudulent and set it aside until a money judgment of $982,363.84 in favor of BSL Development Corp. against Broad Cove is fully satisfied. BSL had entered into a contract in March 1981 to purchase land from Broad Cove, but after a failed closing, BSL sued for breach of contract, initially losing but later having the judgment reversed in 1987, leading to a retrial on damages. In 1988, while that retrial was pending, Broad Cove transferred a significant mortgage to Aquabogue, which later attempted to foreclose on it. BSL claimed the mortgage was a fraudulent conveyance under Debtor and Creditor Law § 273-a, which deems transfers made without fair consideration fraudulent if the transferor is a defendant in a damages action and fails to satisfy a judgment. The court found Broad Cove was indeed a defendant during the mortgage conveyance and had failed to satisfy BSL's judgment. The court concluded that the mortgage conveyance did not involve fair consideration, affirming the judgment that voided the mortgage as to BSL.
Aquabogue claimed that $8,000,000 of the mortgage's face amount was for an antecedent debt owed by Broad Cove to the Weisz Plan. Aquabogue, established specifically for the Broad Cove mortgage transaction, saw Stanley Weisz acquire a 50% stake in April 1990. The Supreme Court found insufficient documentary evidence to support Aquabogue's assertion of an $8,000,000 antecedent debt, noting that Aquabogue's actual advances to Broad Cove under the mortgage totaled approximately $1,000,000. Consequently, the court determined that the conveyance lacked fair consideration and was fraudulent as to BSL under Debtor and Creditor Law § 273-a. It directed the Clerk of Suffolk County to set aside the conveyance until BSL's money judgment against Broad Cove was satisfied, in accordance with Debtor and Creditor Law § 278 [1] [a]. All other arguments presented by Aquabogue were deemed meritless. Justices Bracken, Rosenblatt, O’Brien, and Altman concurred.
