Before the court are motions for summary judgment by plaintiff First American Title Insurance Company of New York (the Title Company) and by defendants Susan Ankari (Ankari) and Joan Waldman (Waldman).

In this action, the Title Company seeks to recover damages for the alleged fraudulent conveyance of real property located in Suffolk County at 563 Dune Road, Westhampton Beach (the Property), which was sold in January 2000 by non-party Nancy Porush (Porush) to Ankari and her mother, Waldman, for $850,000. Prior to this conveyance, Porush's ex-husband, Daniel Porush (Mr. Porush), had been brought up on several federal criminal charges of money laundering and fraud, and he had transferred to his wife, without consideration, title to a property jointly owned with her located in Nassau County at 100 Rodeo Drive, Oyster Bay Cove (the Other Property).

In June 1998, non-party Thomas Roth (Roth), an investor allegedly defrauded by Mr. Porush's company, sued Mr. & Mrs. Porush to set aside the aforesaid conveyance (the Roth Action). The Other Property was later sold to non-parties David and Esther Schwartz (Mr. and Mrs. Schwartz), who purchased a policy of title insurance from the Title Company. In July 1999, they were joined in the Roth Action. In March 2001, the Appellate Division, Second Department, granted Roth summary judgment against Porush and Mr. and Mrs. Schwartz (281 AD2d 612). As the insurer of Mr. and Mrs. Schwartz, the Title Company then paid Roth $700,000 and was substituted in place of them as their subrogee and as a party defendant in the Roth Action. The Title Company had asserted a cross-claim against Porush and on January 8, 2002, the Supreme Court, County of Nassau, entered a judgment in the Roth Action in favor of the Title Company against Porush in the amount of $700,000.

The Title Company then commenced the instant action, alleging that the conveyance of the Property from Porush to Ankari and Waldman was fraudulent pursuant to New York's Debtor and Creditor Law §§ 273, 273-a, and 276.

"The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." (Winegrad v New York University Medical Center, 64 NY2d 851, 853 [1985]). Once a prima facie showing has been made, the burden then shifts to the opposing party, [*2]who must proffer evidence in admissible form establishing that an issue of fact exists warranting a trial of the action (Alvarez v Prospect Hospital, 68 NY2d 320 [1986]).

In support of its motion, the Title Company submits, inter alia, a retrospective "exterior-only inspection residential appraisal report" conducted by John H. M. Findlay in January 2007, which opines the market value of the Property as of December 31, 1999 to be $1,050,000. Relying on this appraisal, plaintiff argues that the price of $850,000 paid by defendants was not fair consideration or equivalent value. It further claims that, even if equivalent value had been tendered, the conveyance was not made, sold or purchased in good faith because, inter alia, Porush sold the Property to her close friend Ankari without maximizing the sale price of the Property on behalf of her creditors. Additionally, it maintains that the other elements for finding a fraudulent conveyance under Debtor and Creditor Law §§ 273-a, 273 and 276 are satisfied by the record because: Porush was a defendant in an action for money damages at the time of the conveyance and has failed to satisfy the judgment against her; Porush was insolvent at the time of the conveyance; and the conveyance was made with fraudulent intent.

In opposition, defendants maintain, inter alia, that fair consideration was paid by them in that the purchase price of $850,000 was the same price that had been previously accepted by Porush in her prior contract of sale with non-party Ivan Leist ("Leist") approximately one year prior to defendants' closing, and that it was only after Leist backed out of his contract (the "Leist Contract") that Porush approached Ankari about purchasing the Property for the same price. Defendants also note that the Federal Government had a lis pendens on the Property at the time of their contract; that the entire proceeds of the sale of the Property were received by the Federal Government towards payment of its lien; and that Porush did not receive any benefit from the sale. They further submit an appraisal from Mohring Appraisal Associates (the Mohring Appraisal) dated August 9, 1999, which was prepared for the U.S. Marshal Service after the Leist Contract and before their contract, that lists the market value of the Property as $925,000.00. Additionally, they argue that they were not close friends of Porush, as contended by the plaintiff, and that there was no fraudulent intent regarding the conveyance.

Debtor and Creditor Law §§ 273 and 273-a are based on constructive fraud. Section 273 provides that "[e]very conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration." Both insolvency and lack of fair consideration are prerequisites to a finding of constructive fraud under this section, without the need to show actual motive or intent to defraud on the part of the transferor (see American Panel Tec v Hyrise, Inc., 31 AD3d 586 [2d Dept 2006]). The burden of proving these elements is upon the party challenging the conveyance (Joslin v Lopez, 309 AD2d 837 [2d Dept 2003]).

To prevail on a fraudulent conveyance claim pursuant to Debtor and Creditor Law § 273-a, the movant must prove: that the conveyance was made without fair consideration; that at the time of the transfer the transferor was a defendant in an action for money damages or a judgment in such action had been docketed against him/her; and that the defendant failed to satisfy the judgment (see Fischer v Sadov Realty Corporation, 34 AD3d 632, 633 [2d Dept 2006]). "The element of fair consideration exists when, in exchange for property or an obligation, as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt is satisfied'" [*3](American Panel Tec v Hyrise, Inc., 31 AD3d at 587, quoting Debtor and Creditor Law § 272 [a]).

Here, the record sufficiently reflects that the conveyance of the Property to defendants was made for fair consideration. In February 1999, a few months prior to her contract of sale with defendants, Porush had executed the Leist Contract. The contract between Porush and defendants (the "Contract") entered into approximately nine months after the transaction with Leist fell through, was for the same price of $850,000 as in the Leist Contract, and there is no indication that the Leist Contract was not the result of an arm's-length negotiation.

Moreover, the Mohring Appraisal of a value of $925,000 was less than 10% higher than the sales price, not a significant difference when considering appraisal opinions, and was based only on an exterior examination of the Property. It has been indicated that the poor condition of the interior was a reason that the sale to Leist was not consummated. Also, the 2007 appraisal by Findlay, of course, did not consider the condition of the interior of the house as it existed in 1999.

The Contract reflects an acknowledgment of the lis pendens filed against the Property by the Federal Government, and it was subject to Porush "obtaining approval from the Federal Government for this sale of the Property and the removal of the lis pendens." The closing statement in connection with the sale of the Property discloses that United States attorneys were present at the closing and they, not Porush, received the net proceeds of the sale. It is clear from such presence and the acceptance of the net proceeds towards the lis pendens that the Federal Government implicitly approved the sale, as required by the Contract.

Alternatively, the Title Company argues that, even if the purchase price was fair consideration, the Property was not sold or purchased in good faith. " Good faith is required of both the transferor and the transferee, and it is lacking when there is a failure to deal honestly, fairly and openly'" (Matter of CIT Group/Commercial Services, Inc. v 160-09 Jamaica Avenue Limited Partnership, 25 AD3d 301, 303 [1st Dept 2006], quoting Berner Trucking v Brown, 281 AD2d 924, 925 [4th Dept 2001]).The Title Company attempts to demonstrate with excerpts of Ankari's deposition that she was aware of Porush's unfavorable financial situation, and upon learning that the house was available, she was, inter alia, "looking to take advantage of a sweetheart deal to purchase a significantly underpriced home" (The Title Company's Memorandum of Law at p. 13). However, a review of the excerpts relied on by the Title Company fails to indicate that Ankari did not act in good faith in the conveyance of the Property. In these excerpts, she testified that she first learned that the Federal Government was involved in the sale when she spoke to Porush's counsel, and that this conversation occurred after Porush's conversation with her regarding the purchase of the Property. Further, contrary to the Title Company's argument, the mere fact that Ankari was aware that Mr. Porush was in jail by reading the newspapers and hearing the "gossip going around" where she lived is insufficient to demonstrate that she was aware of Porush's "unfavorable financial condition" prior to execution of the Contract. Additionally, she testified that she never had any conversations with Porush regarding Mr. Porush's time in jail or his criminal convictions.

Plaintiff further suggests that Ankari would have learned from Porush about Mr. Porush's legal troubles and the resulting financial troubles due to their close friendship. In support of this argument, the Title Company relies on an excerpt from Porush's deposition, wherein she was asked whether she confided in Ankari "the troubles that [her] husband was undergoing in his business" and she replied "possibly." This excerpt is insufficient to demonstrate any specific awareness of Porush's financial troubles prior to the execution of the Contract. While Porush [*4]testified that she expected, as she and Ankari were friends, to hang out with them at the Property, she also testified that she did not "expect anything from them." Therefore, Porush's testimony does not indicate a retention of benefit in the Property that would demonstrate that she acted in bad faith. Thus, the Title Company has failed to meet its burden of raising a triable issue on its contention that the Property was not sold or purchased in good faith.

With respect to Debtor and Creditor Law § 276, plaintiff claims that the circumstances surrounding the transfer of the Property from Porush to defendants are replete with badges of fraud, thus satisfying the intent to defraud prong. Under said section, a conveyance made with actual intent to defraud is fraudulent as to both present and future creditors. "Direct evidence of fraudulent intent is often elusive" (Pen Pak Corp. v LaSalle National Bank of Chicago, 240 AD2d 384, 386 [2d Dept 1997]). Therefore, the requisite intent "may be inferred from the circumstances surrounding the allegedly fraudulent transfer" (Steinberg v Levine, 6 AD3d 620, 621 [2d Dept 2004]). "In determining whether a conveyance was fraudulent, the court will consider badges of fraud,' which are circumstances that accompany fraudulent transfers so commonly that their presence gives rise to an inference of intent" (id. at 621). Badges of fraud include a close relationship between the parties to the alleged fraudulent transaction, the inadequacy of consideration, the transferor's knowledge of creditors' claims and its inability to pay them, and the timing of the transfer (see Matter of CIT Group/Commercial Services, Inc. v 160-09 Jamaica Avenue Limited Partnership, supra at p. 303; Wall Street Associates v Brodsky, 257 AD2d 526 [1st Dept 1999]).

Here,in light of the Title Company's failure to demonstrate an inadequacy of consideration in the conveyance of the Property, and Ankari's lack of knowledge of claims against Porush and of her financial condition, the court finds that plaintiff has failed to raise a triable issue for its claim based on actual fraud under § 276.

In light of the foregoing, the Title Company's motion for summary judgment is denied, and defendants' cross-motion for summary judgment dismissing the complaint is granted, and the Clerk shall enter judgment accordingly.

Dated: May 30, 2008_________________J. S. C.