Their use to put third parties at a financial disadvantage is properly subjected to careful scrutiny. See Orbach v. Pappa, 482 F. Supp. 117, 119 (S.D.N.Y. 1979). Without such scrutiny, it would be all too easy for one in debt or sued for racketeering, to transfer assets to an intended or newlywed spouse as a means of protecting such funds from claims of creditors or victims of unlawful, conduct. See United States v. Klaynan, 736 F. Supp. 647, 649 (E.D. Pa. 1989); United States v. Purcell, 798 F. Supp. 1102 (E.D. Pa. 1991). Moreover, promises of future benefits cannot be a substitute for present "property" under § 272(a). See Cole v. Loma Plastics, 112 F. Supp. 138 (N.D. Tex. 1953). Nor is there any prior obligation in this case to be secured under § 272(b).
The contemporary approach to intra-family and similar transfers contributing to insolvency is exemplified by 28 USC § 3301, 3304, contained in the Federal Debt Collection Procedures Act of 1990, which calls for closer scrutiny than otherwise of transfers to "insiders," which include relatives of a debtor. In sharp contrast, defendants rely on decisions such as American Surety Co. v. Conner, 251 N.Y. 1, 166 N.E. 783 (1929), issued during the period when breach of promise suits were permitted in the New York Courts.
We do not understand that Mrs. Frank disclaims contemporary knowledge of the existence of the pending lawsuits, but were she to do so, this would be of no relevance.
The Transfers to Attorneys
The transfers to Kevin Gleason and to Goldstein & Stoloff were made after Judge Goettel's order of November 9, 1992 and hence in violation of that order unless determined to be reasonable attorney's fees and authorized by the Court.
Defendants contend that the transfers were for fair consideration in the form of an agreement to render future legal services and hence not fraudulent as against creditors. This runs counter to the text of New York Debtor and Creditor Law § 272, quoted above, which requires that property be exchanged for fair consideration which is present.
Conveyance of property for future legal fees carries the necessary characteristic of expectation of irrevocability. Irrevocable transfers of funds for future legal services are impermissible under Formal Opinion 1991-3, Association of the Bar of the City of New York Committee on Professional and Judicial Ethics, and are contrary to In the Matter of Cooperman, 187 A.D.2d 56, 591 N.Y.S.2d 855, (2d Dept. Jan. 25, 1993), affirmed by the New York State Court of Appeals, which has received an amicus brief from The Association of the Bar supporting the opinion below In the Matter of Clooperman, - NY 2d, 1994 WESTLAW 84413 (3/17/94) (Doc. No. 25). See also, Clarkson Co. v. Shaheen, 525 F. Supp. 625 (S.D.N.Y. 1981); Hay v. Duskin, 9 Ariz. App. 599, 455 P.2d 281 (1969)
Deposits to pay for future services are not entirely irrevocably parted with even where the future services are defined, because of the uncertainty of factors requiring the recipient of the funds to mitigate cost. See, e.g., Judo, Inc. v. Delaney, 42 Misc. 2d 504, 248 N.Y.S.2d 386 (Civ. Ct. 1964); N.Y. personal Property Law § 412-a.
While ability to pay legal expenses is often essential to protection of a citizen's rights, a blanket authorization for transfers at the expense of creditors for unevaluated future legal services would put the Bar in a position of being subject to frequent suspicion of unjust involvement in schemes of the very kind shown at trial in the prior case. This would tend to undermine public confidence in the administration of justice. See Stone, Public Influence of the Bar, 48 Harv. L. Rev. 1 (1934).
Transfers to Clemence Frank
Defendant Clemence Frank, the mother of H.J. Frank, has moved for summary judgment in her favor holding that the various assets transferred to her by H.J. Frank were not fraudulent and seeks modification of current restrictions on transfers. While plaintiffs filed no motions with respect to property received by Clemence Frank from H.J. Frank, her motion required plaintiffs to come forward with sufficient evidence to establish existence of a genuine issue of material fact with respect to their claims against her. Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). They have not done so, and accordingly this action as against Clemence Frank is dismissed in its entirety and the restrictions against her are vacated.
Applications have also been made for relief concerning discovery. Adequate discovery to bring out the essential facts has already occurred, and further delay would be contrary to Fed.R.Civ.P. 1. The parties have presented what amounts to plenary submissions with regard to their claims as now known. While further information may come to light for seeking to void transfers other than those ruled upon specifically in this decision, it is not necessary to prolong this satellite lawsuit in the anticipation of future applications with respect to other assets not known.
Accordingly all relief is denied except to the extent of the relief granted above. The dismissal is with prejudice as to Clemence Frank, but is without prejudice with respect to claims against other defendants that were not specifically ruled upon in this order.
Settle a judgment on notice.
Dated: White Plains, New York
May 4, 1994
Charles L. Brieant, U.S.D.J.