Cooperatives & Condominiums

Equitable Distribution Rights Prevail Over Rights Of Judgment Creditor Who Had Not Executed Against Co-Op Shares

Darling v. Darling

NYLJ 11/28/08, p. 27, col. 3

Supreme Ct., Kings Cty.

(Battaglia, J.)

In an action by ex-wife against ex-husband and husband's judgment creditor, ex-wife sought an injunction precluding execution against a co-op apartment. The court granted the wife the requested injunction, holding that upon issuance of a divorce judgment awarding the apartment to the wife, the wife became a transferee who enjoyed priority over any judgment creditor who had not yet executed upon the apartment.

Husband and wife married in 1980 and separated in 1985. According to the wife, in 1986, she located the subject co-op apartment, but didn't have the credit to secure a mortgage, so that she asked husband to take joint title to the co-op to meet mortgage requirements. Both the co-op shares and the proprietary lease were issued in the names of husband and wife as joint tenants with right of survivorship. As a result of an alleged attack by husband against defendant Malcolm, husband was prosecuted for attempted murder. Although husband was acquitted, Malcolm, in 1995, obtained a $2 million judgment against him.

In 2002, husband and wife obtained a divorce judgment incorporating an oral stipulation providing that the husband would transfer all right, title, and interest in the apartment to wife within 60 days. The transfer was never made, and in 2005, husband filed for bankruptcy. Although his debts were discharged, Malcolm's judgment remains enforceable. Later, when wife sought to schedule a closing for transfer of the co-op shares from husband to wife, the co-op corporation refused to permit the transfer because of the outstanding Malcolm judgment. Wife then brought this action seeking to prevent Malcolm from enforcing, asserting, or perfecting any lien against the co-op apartment, and sought summary judgment.

In granting the wife's summary judgment motion, the court held that the equitable distribution award made to the wife in the divorce proceeding rendered the wife a transferee rather than a judgment creditor. Because Malcolm had not yet executed against the property at that time, Malcolm was no longer entitled to execute unless she could establish that the transfer to the wife was a fraudulent transfer. The court then held that Malcolm could not prevail on a fraudulent transfer claim because the terms of the equitable distribution settlement, which divided property and required each party to waive claims for support and maintenance against the other, constituted “fair consideration” for the transfer, and precluded any potential claim that the transfer was fraudulent.

Equitable Distribution Rights Prevail Over Rights Of Judgment Creditor Who Had Not Executed Against Co-Op Shares

Darling v. Darling

NYLJ 11/28/08, p. 27, col. 3

Supreme Ct., Kings Cty.

(Battaglia, J.)

In an action by ex-wife against ex-husband and husband's judgment creditor, ex-wife sought an injunction precluding execution against a co-op apartment. The court granted the wife the requested injunction, holding that upon issuance of a divorce judgment awarding the apartment to the wife, the wife became a transferee who enjoyed priority over any judgment creditor who had not yet executed upon the apartment.

Husband and wife married in 1980 and separated in 1985. According to the wife, in 1986, she located the subject co-op apartment, but didn't have the credit to secure a mortgage, so that she asked husband to take joint title to the co-op to meet mortgage requirements. Both the co-op shares and the proprietary lease were issued in the names of husband and wife as joint tenants with right of survivorship. As a result of an alleged attack by husband against defendant Malcolm, husband was prosecuted for attempted murder. Although husband was acquitted, Malcolm, in 1995, obtained a $2 million judgment against him.

In 2002, husband and wife obtained a divorce judgment incorporating an oral stipulation providing that the husband would transfer all right, title, and interest in the apartment to wife within 60 days. The transfer was never made, and in 2005, husband filed for bankruptcy. Although his debts were discharged, Malcolm's judgment remains enforceable. Later, when wife sought to schedule a closing for transfer of the co-op shares from husband to wife, the co-op corporation refused to permit the transfer because of the outstanding Malcolm judgment. Wife then brought this action seeking to prevent Malcolm from enforcing, asserting, or perfecting any lien against the co-op apartment, and sought summary judgment.

In granting the wife's summary judgment motion, the court held that the equitable distribution award made to the wife in the divorce proceeding rendered the wife a transferee rather than a judgment creditor. Because Malcolm had not yet executed against the property at that time, Malcolm was no longer entitled to execute unless she could establish that the transfer to the wife was a fraudulent transfer. The court then held that Malcolm could not prevail on a fraudulent transfer claim because the terms of the equitable distribution settlement, which divided property and required each party to waive claims for support and maintenance against the other, constituted “fair consideration” for the transfer, and precluded any potential claim that the transfer was fraudulent.