IN THE MATTER OF THE APPLICATION OF CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY, PETITIONER-RESPONDENT, PURSUANT TO ARTICLE 4 OF THE EMINENT DOMAIN PROCEDURE LAW, TO ACQUIRE TITLE TO CERTAIN REAL PROPERTY GENERALLY IDENTIFIED AS 100-08 ONONDAGA STREET EAST & WARREN STREET IN THE CITY OF SYRACUSE, NEW YORK AND MORE PARTICULARLY IDENTIFIED AS SBL NO. 101.-09-01.0. AMADEUS DEVELOPMENT, INC., CLAIMANT-RESPONDENT, FINANCITECH, LTD., CLAIMANT-APPELLANT.
MAYNARD O'CONNOR SMITH & CATALINOTTO, LLP, ALBANY
(JUSTIN W. GRAY OF COUNSEL), FOR CLAIMANT-APPELLANT.
ROBINSON BROG LEINWAND GREENE GENOVESE & GLUCK, P.C., NEW
YORK CITY (ROGER A. RAIMOND OF COUNSEL), FOR
BARCLAY DAMON, LLP, BUFFALO (MARK R. MCNAMARA OF COUNSEL),
PRESENT: WHALEN, P.J., CENTRA, DEJOSEPH, NEMOYER, AND
from an order of the Supreme Court, Onondaga County (Donald
A. Greenwood, J.), entered July 25, 2016. The order granted
the motions of claimant Amadeus Development, Inc. and
petitioner for summary judgment, deemed null and void
mortgages from GML Syracuse, LLC, to claimant Financitech,
Ltd., and dismissed the claim of Financitech, Ltd. for just
hereby ORDERED that the order so appealed from is unanimously
modified on the law by vacating from the first and second
ordering paragraphs the language "null and void and
extinguished of record" and substituting therefor the
language "subordinate to the judgment lien of claimant
Amadeus Development, Inc. against GML Syracuse, LLC, "
and denying the motion of petitioner and reinstating the
claim of claimant Financitech, Ltd., and as modified the
order is affirmed without costs.
This case arises out of the redevelopment of the historic
Hotel Syracuse in downtown Syracuse, New York. In August
2008, claimant Financitech, Ltd. (Financitech) obtained two
mortgages on the hotel property from the property's then
owner, GML Syracuse, LLC (GML Syracuse), in the amount of $5,
000, 000 and $165, 000. GML Syracuse conveyed the mortgages
to Financitech and an affiliated company, FNCTC Schiel, LLC
(FNCTC), as security for a guaranty, also made by GML
Syracuse, on certain financial obligations incurred by GML
Syracuse's affiliate, Ameris Holdings, Ltd. (Ameris).
Soon thereafter, Ameris defaulted on its financial
obligations, and GML Syracuse failed to tender payment due as
required by the guaranty.
January 2013, Financitech commenced an action to foreclose
the two subject mortgages. In that action, both GML Syracuse
and claimant Amadeus Development, Inc. (Amadeus), a judgment
creditor of GML Syracuse, were named as defendants.
Financitech moved for summary judgment seeking, inter alia,
foreclosure of the mortgages. As pertinent here, Amadeus
opposed Financitech's motion on the ground that the
mortgages constituted fraudulent conveyances pursuant to the
Debtor and Creditor Law and thus should be considered null
and void. Supreme Court denied Financitech's motion,
determining, inter alia, that there were material issues of
fact whether the mortgages were fraudulent conveyances.
Financitech's appeal in the foreclosure action was
pending, petitioner, City of Syracuse Industrial Development
Agency (SIDA), commenced the instant proceeding to acquire
the hotel property through the exercise of eminent domain.
Because SIDA had acquired the hotel property, we dismissed
Financitech's appeal in the foreclosure action as moot
(Financitech, Ltd. v GML Syracuse LLC, 129 A.D.3d
1552 [4th Dept 2015]).
upon their respective interests in the mortgages and a
judgment lien on the hotel property, Financitech and Amadeus
were named as condemnees in this EDPL proceeding
(see EDPL 103 [C]), and they filed claims for just
compensation pursuant to EDPL 503 (B). Amadeus thereafter
moved for summary judgment voiding Financitech's
mortgages as fraudulent conveyances pursuant to the Debtor
and Creditor Law or, alternatively, subordinating the
mortgages to Amadeus's judgment lien against GML
Syracuse, which was recorded after the subject mortgages.
SIDA moved for summary judgment dismissing Financitech's
claim for just compensation inasmuch as Financitech lacked
standing in the EDPL proceeding because its mortgage
interests were null and void. Financitech now appeals from an
order that granted the motions, deemed Financitech's
mortgages null and void, and dismissed Financitech's
claim for just compensation.
outset, we reject Financitech's contention that
Amadeus's motion for summary judgment is barred by the
doctrine of res judicata. Although Amadeus raised the issue
whether the mortgages constituted fraudulent conveyances
pursuant to Debtor and Creditor Law §§ 273, 274,
and 275 when it opposed Financitech's motion for summary
judgment in the foreclosure action, there was not a final
determination on the merits with respect to that issue
(see Landau, P.C. v LaRossa, Mitchell & Ross, 11
N.Y.3d 8, 13 ; Matter of Hunter, 4 N.Y.3d 260,
269 ). The doctrine of res judicata is therefore
to Financitech's further contention, claims for
fraudulent conveyances under Debtor and Creditor Law
§§ 273, 274, and 275 "are not subject to the
particularity requirement of CPLR 3016, because they are
based on constructive fraud" (Ridinger v West
Chelsea Dev. Partners LLC, 150 A.D.3d 559, 560 [1st Dept
2017]; see Gateway I Group, Inc. v Park Ave. Physicians,
P.C., 62 A.D.3d 141, 149-150 [2d Dept 2009]). Also
contrary to Financitech's contention, Amadeus's
notice of appearance and demand for just compensation is
sufficient inasmuch as it complies with EDPL 504 (see
Matter of Village of Haverstraw v Ray Riv. Co., Inc.,
137 A.D.3d 800, 801 [2d Dept 2016]).
agree with Financitech that Supreme Court erred in
determining that the mortgages constituted fraudulent
conveyances pursuant to Debtor and Creditor Law § 275.
We conclude that there are material issues of fact whether
GML Syracuse "intended or believed that [it] would incur
debts beyond [its] ability to pay" as the debts mature,
which is a necessary element of a fraudulent conveyance under
section 275 (Taylor-Outten v Taylor, 248 A.D.2d 934,
935 [4th Dept 1998]).
further conclude, however, that the court properly determined
that the mortgages constituted fraudulent conveyances
pursuant to Debtor and Creditor Law §§ 273 and 274.
As required by each of those sections, Amadeus established as
a matter of law that the mortgages were given without fair
consideration (see §§ 273, 274; Board
of Mgrs. of Loft Space Condominium v SDS Leonard, LLC,
142 A.D.3d 881, 883 [1st Dept 2016]; Joslin v Lopez,
309 A.D.2d 837, 838-839 [2d Dept 2003]). "Fair
consideration is given for property, or obligation, a. [w]hen
in exchange for such property or obligation, as a fair
equivalent therefor, and in good faith, property is conveyed
or an antecedent debt is satisfied, or b. [w]hen such
property, or obligation is received in good faith to secure a
present advance or antecedent debt in amount not
disproportionately small as compared with the value of the
property, or obligation obtained" (§ 272). The
underlying purpose of New York's fraudulent conveyance
statutes "is to enable a creditor to obtain his [or her]
due despite efforts on the part of a debtor to elude
payment" (Hearn 45 St. Corp. v Jano, 283 NY
139, 142 ). Thus, when determining whether
consideration given by a debtor to a third party or affiliate
constitutes fair consideration, courts look to whether
"the debtor's net worth has been preserved"
(Rubin v Manufacturers Hanover Trust Co., 661 F.2d
979, 991 [2d Cir 1981]). Here, in exchange for the mortgages
conveyed by GML Syracuse in the combined amount of $5.165
million, Financitech loaned GML Syracuse's affiliate,
Ameris, $165, 000, and FNCTC extended the maturity date of a
$1.5 million loan to Ameris from August 28, 2008 to October
31, 2008. Although GML Syracuse may have received some
indirect benefit ...