Cadle Co. v. Avrohom Newhouse,
2003.C02.0001006 (2d Cir. 09/12/2003)
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
September 12, 2003
THE CADLE COMPANY, PLAINTIFF-APPELLEE,
AVROHOM NEWHOUSE, DEFENDANT-APPELLANT, MIRIAM NEWHOUSE, DEFENDANT.
Appeal from a judgment of the United States District Court for the Southern District of New York
(Denny Chin, Judge).
Appearing For Appellant: Edward Rubin, New York, Ny.
Appearing For Appellee: Stephen Vlock, Vlock & Associates, New York, Ny.
Present: Ellsworth Van Graafeiland, Jose A. Cabranes, Barrington D. Parker, Jr., Circuit Judges
THIS SUMMARY ORDER WILL NOT BE PUBLISHED IN THE FEDERAL REPORTER AND MAY
NOT BE CITED AS PRECEDENTIAL AUTHORITY TO THIS OR ANY OTHER COURT, BUT MAY
BE CALLED TO THE ATTENTION OF THIS OR ANY OTHER COURT IN A SUBSEQUENT
STAGE OF THIS CASE, IN A RELATED CASE, OR IN ANY CASE FOR PURPOSES OF
COLLATERAL ESTOPPEL OR RES JUDICATA.
At a stated term of the UNITED STATES COURT OF APPEALS for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, Foley Square, in the City of New York, Ny.
ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
that the judgment of the District Court be and it hereby is AFFIRMED.
The defendant-appellant challenges the District Court's grant of summary judgment holding him
liable under two provisions of the New York Debtor-Creditor Law that prohibit fraudulent
conveyances, D.C.L. §§ 273, 276 (McKinney 2002).
Section 276 prohibits "actual fraud," providing that "[e]very conveyance made and every
obligation incurred with actual intent... to hinder, delay, or defraud either present or future
creditors... is fraudulent as to both present and future creditors." D.C.L. § 276.
The facts of this case establish that there was a conveyance of $1,008,631.14 from defendant Mrs.
Miriam Newhouse to her son, defendant-appellant Avrohom Newhouse. Although "actual intent" to
defraud is rarely sufficiently proven to warrant summary judgment, Cadle Company v. Newhouse,
2002 WL 1888716, at *7 (S.D.N.Y. Aug. 16, 2002) (citing Golden Budha Corp v. Canadian Land Co. of
America, N.V., 931 F.2d 196, 201–02 (2d Cir. 1991), in this case no genuine issue of fact
exists as to whether the conveyance was made with "actual intent" to "hinder, delay, or defraud"
creditors within the meaning of section 276.
Case law under section 276 identifies five circumstantial indicators of "actual intent" to
defraud, termed "badges of fraud," see RTC Mortgage Trust 1995-S/N1 v. Sopher, 171 F. Supp. 2d
192, 201 (S.D.N.Y. 2001), all of which exist in the instant case: First, no consideration was
offered by Avrohom Newhouse for the transfer of funds, and the funds came from his mother, a
close relative who was indisputably insolvent. Moreover, as the District Court observed, there is
no dispute that the "circumstances of the transfer were highly unusual," Cadle Company, 2002 WL
1888716, at *7, involving a one-day trip from New York to Chicago and a wire transfer into a
newly created bank account in the defendant's name. Finally, Mrs. Newhouse retained control over
the funds after conveying them to her son by means of a power of attorney to withdraw funds from
the bank account. See id. at *5, *7 (applying RTC Mortgage Trust, 171 F. Supp. 2d at 201). Given
these strong indicators of fraudulent intent, the District Court correctly concluded that a
reasonable jury could only find that this conveyance was made with"actual intent" to "hinder,
delay or defraud" creditors for the purposes of section 276.
Section 273 prohibits constructively fraudulent conveyances, which include "[e]very conveyance
made... by a person who is... insolvent... without regard to his actual intent if the conveyance
made... without a fair consideration." D.C.L. § 273. The District Court correctly concluded that
no genuine issue of fact exists as to the existence of the conveyance, the transferor's
insolvency, or the lack of consideration paid by the defendant-appellant.
"Under New York law, a creditor may recover money damages against parties who participate in the
fraudulent transfer and are either transferees of the assets or beneficiaries of the conveyance."
RTC Mortgage Trust, 171 F. Supp. 2d at 201-02. The District Court rightly recognized that
defendant-appellant's argument that he was a "mere conduit" for the transferred funds, rather
than a transferee, relies on case law that is factually and legally inapposite. Cadle Company,
2002 WL 1888716, at *6 & n.6. Therefore, the defendant-appellant, as transferee of a conveyance
that was both actually and constructively fraudulent under New York law, is liable under D.C.L.
§§ 273, 276.
For the foregoing reasons, the judgment of the District Court is AFFIRMED.