## Facts

- A government securities trader held a large, unsatisfied federal money judgment against an attorney.
- The judgment arose from a prior jury verdict; after amendment, the total judgment exceeded $1.5 million, with most of it unpaid.
- The judgment debtor and his sister (also an attorney and his law partner) jointly owned a 68-acre Putnam County, New York property as tenants in common, with the debtor holding a three-fifths interest and the sister holding a two-fifths interest.
- The property (with a house built around 1981–1982) was appraised in May 1983 at approximately $325,000.
- One day before the earlier judgment was signed (and shortly after the adverse verdict), the debtor and his sister executed a deed transferring the entire property to the sister alone.
- The deed recited nominal consideration (“$1.00 and other good consideration”).
- The judgment creditor brought a post-judgment, non-jury action to set aside the transfer as a fraudulent conveyance.
- The defendants argued the transfer satisfied an antecedent debt owed by the debtor to the sister, was supported by fair consideration, did not render him insolvent, and lacked fraudulent intent.

## Issues

1. Whether the transfer of the debtor’s interest in the real property to his sister, made immediately before entry of a substantial judgment, was a fraudulent conveyance under New York Debtor and Creditor Law.
2. Whether the defendants proved fair consideration based on a bona fide antecedent debt sufficient to defeat the fraudulent conveyance claim.
3. What relief a judgment creditor may obtain to reach the transferred property (or the debtor’s interest) to satisfy an outstanding judgment.

## Decision

- After a three-day bench trial, the court found the conveyance fraudulent as to the judgment creditor.
- The court rejected the defendants’ claim that the transfer was a legitimate satisfaction of an antecedent debt, finding the record insufficient to establish fair consideration or a bona fide debt motivating the transfer.
- The court treated the timing (on the eve of judgment), the insider nature of the transaction (siblings and law partners), and the nominal consideration as strong indicators of fraud.
- The court granted judgment for the creditor and set aside or disregarded the conveyance to the extent necessary to permit enforcement against the debtor’s interest in the property.

## Legal Principles

- Under New York Debtor and Creditor Law, a conveyance may be voided for actual fraud (intent to hinder, delay, or defraud creditors) or constructive fraud (transfer without fair consideration when the debtor is insolvent or rendered insolvent).
- “Badges of fraud”—including insider transfers, secrecy or non-disclosure in the face of disclosure obligations, nominal or inadequate consideration, and transfers made in close proximity to a known and impending creditor claim—may support an inference of fraudulent intent.
- Satisfaction of an antecedent debt can constitute fair consideration, but the transferee must show the debt is genuine and the transfer is supported by fair consideration in substance, not merely in form.
- A judgment creditor may obtain relief that renders a fraudulent transfer ineffective against the creditor, allowing execution against the transferred asset or the debtor’s interest as if the transfer had not occurred.

## Conclusion

The court held that an insider transfer of valuable real property made one day before entry of a large judgment, for nominal stated consideration and without persuasive proof of a bona fide antecedent debt, was a fraudulent conveyance under New York law and could be disregarded so the judgment creditor could reach the debtor’s property interest.


ACLI Gov’t Sec. Inc. v. Rhoades, 653 F. Supp. 1388 (S.D.N.Y. 1987)