Case Study

Adam Leitman Bailey, P.C. Wins Summary Judgment Clawing Back Fraudulent Conveyances from Insolvent Judgment Debtor

Adam Leitman Bailey, P.C. recently secured summary judgment with the rare addition of attorneys fees related to a judgment debtor’s fraudulent conveyance made to avoid collection of an outstanding judgment. Adam Leitman Bailey, P.C. represents the creditor bank to collect a substantial 2015 judgment against a contracting company and its principal, the debt guarantor – for defaulting on several lines of credit. As soon as judgment was entered, Adam Leitman Bailey, P.C. launched aggressive post-judgment collection efforts, issuing subpoenas and restraining notices to parties, witnesses, and financial institutions. Adam Leitman Bailey, P.C. deposed the judgment debtors, friends, and family members and conducted an intensive investigation into the debtors’ money, property, and expatriated assets.

After the judgment debtors refused to comply with subpoenas, Adam Leitman Bailey, P.C. moved to hold them in contempt of Court, with a risk of fines or imprisonment if they continued to stymie our judgment collection activity. The debtors capitulated and Adam Leitman Bailey, P.C.’s investigation uncovered that: (i) just prior to the judgment being entered against the judgment debtors the guarantor transferred large amounts of cash from bank accounts in Ireland to his wife, who then withdrew the cash the next day for personal use; (ii) disposed of three properties in Ireland in an attempt to keep them out of the Bank’s grasp; and (iii) conveyed two Westchester County properties to a close business friend and business associate.

Adam Leitman Bailey, P.C. caught the judgment debtor lying under oath about the existence of the Irish properties and their illicit transfer and moved for their immediate turnover to partially satisfy the judgment debt and for sanctions. Adam Leitman Bailey, P.C. worked with Irish local counsel to prove the value of the Irish properties and to show the mechanism of the transfer. Faced with overwhelming evidence gathered in the course of Adam Leitman Bailey, P.C.’s investigation, the Court granted the motion in its entirety and ordered the judgment debtor to immediately turn over the properties or face imprisonment.

Further increasing the pressure on judgement debtors, Adam Leitman Bailey, P.C. commenced a second action to reverse the transfers of cash and the Westchester County properties. Adam Leitman Bailey, P.C. moved for summary judgment using the defendant’s own contradictory deposition and affidavit testimony to prove that the transfers were a sham and made to avoid his financial responsibilities towards the Bank.

In a strongly worded ten-page decision the Court repeatedly castigated the Defendants for their contradictory testimony and questionable actions. The Court held that the cash transfer should be unwound as fraudulent and subject to seizure by the Bank to satisfy its outstanding judgment. Furthermore, despite the high bar to do so, and convinced by the evidence of improper conduct presented, the Court ordered that Defendants must reimburse our client all attorneys fees incurred in pursuing the fraudulent cash transfer. The decision highlighted the difficult path for Defendants if the real property issues move to trial.

Adam Leitman Bailey, P.C. Supreme Court Litigation Group Attorneys Colin E. Kaufman, Eric S. Askanase and Israel A. Katz secured the victory for and continue to represent the Bank in this matter.