The significant factual issue at trial concerned the existence of fair consideration to support the transaction, which if established, would validate the transfer despite insolvency.įair consideration is defined by state statute: "Fair consideration is given for property, or obligation, (a) When 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) When 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." by a person who is or will be thereby rendered insolvent is fraudulent as to the creditors without regard to his actual intent if the conveyance is made or the obligation is incurred without a fair consideration."įrom the evidence presented at trial, the conclusion is inescapable and the Court finds that the conveyance involved herein did render the bankrupt insolvent under the state law. Section 273 of that Article provides: "Every conveyance made. Plaintiff claims that the transfer was in violation of Article 10 of the Debtor and Creditor Law of the State of New York. The elements of the cause of action to which a trustee becomes subrogated under § 70 are determined not by the Bankruptcy Act, but by state law or federal law other than the Act. The trustee shall reclaim and recover such property or collect its value from and avoid such transfer or obligation against whoever may hold or have received it, except a person as to whom the transfer or obligation specified in paragraph (1) of this subdivision is valid under applicable Federal or State laws." (2) All property of the debtor affected by any such transfer shall be and remain a part of his assets and estate, discharged and released from such transfer and shall pass to, and every such transfer or obligation shall be avoided by, the trustee for the benefit of the estate. which, under any Federal or State law applicable thereto, is fraudulent as *119 against or voidable for any other reason by any creditor of the debtor having a claim provable under this title, shall be null and void as against the trustee of such debtor. § 110(e), which provides in pertinent part: "(e) (1) A transfer made. The Trustee's claim is predicated upon § 70(e) of the Bankruptcy Act, 11 U.S.C. The discussion that follows constitutes our findings of fact and conclusions of law pursuant to F.R.Civ.P. Consequently, the Trustee is limited to the relief available to a creditor against a debtor's interest in property held by the entirety. However, the Court rejects the Trustee's claim that the attempted transfer transforms the ownership of said property from a tenancy by the entirety to a tenancy in common or joint tenancy. The Court finds that the conveyance at issue herein was fraudulent, and that the transfer was thus null and void as against the Trustee in Bankruptcy. Plaintiff also seeks to have this Court declare that the alleged fraudulent conveyance terminated the tenancy by the entirety and converted the Pappas' interest in said property to a tenancy in common, or joint tenancy. Pappa, to set aside as fraudulent a conveyance by the bankrupt to his wife, the defendant, of their residence which was originally held as a tenancy by the entirety. This is an action by the Trustee in Bankruptcy of Paul D. Governali, O'Rourke & LoCascio, Andrew O'Rourke, White Plains, N.Y., for defendant.
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