## Facts

- Esther James obtained a New York libel judgment for $46,500 against Adam Clayton Powell, Jr.; execution was returned wholly unsatisfied.
- Shortly after entry of judgment, Yvette Powell, individually and under a power of attorney for her husband, conveyed Puerto Rico real property owned by the Powells to Gonzalo and Carmen Diago.
- The recorded transaction recited consideration including cash, a purchase-money mortgage, cancellation of an asserted debt, and additional bearer mortgages whose holders were unknown.
- James did not docket the New York judgment in Puerto Rico or attempt execution there; she alleged she could find no property listed in Powell’s name in Puerto Rico.
- James sued in New York seeking substantial compensatory and punitive damages, alleging the conveyance was without fair consideration and intended to hinder collection of her New York judgment.
- The trial court awarded compensatory damages against both Powells and punitive damages; the Appellate Division reduced compensatory and punitive awards and eliminated punitive damages against Yvette.

## Issues

1. Whether Puerto Rico or New York law governs the validity and legal effect of an alleged fraudulent conveyance of Puerto Rico real property.
2. Whether a New York judgment creditor may recover compensatory damages in New York for an allegedly fraudulent conveyance of foreign real property without first pursuing enforcement remedies in the situs jurisdiction.
3. Whether punitive damages may be awarded for the alleged conduct, and whether punitive damages are governed by New York or Puerto Rico law.

## Decision

- The Court of Appeals held that Puerto Rico law (the situs of the land) governs the validity and legal effect of the conveyance and the creditor’s substantive rights tied to that property.
- The Court reversed the New York-law-based damages judgment and remitted for further proceedings to determine the relevant Puerto Rico law on fraudulent conveyances and creditor remedies and to reassess compensatory relief accordingly.
- The Court held that punitive damages are governed by New York law as a penal remedy reflecting forum policy, but concluded punitive damages were not justified on this record.

## Legal Principles

- The validity and legal consequences of a conveyance of real property are ordinarily governed by the law of the jurisdiction where the land is located, including when the conveyance is attacked as fraudulent to a creditor.
- The existence and scope of compensatory remedies premised on interference with a creditor’s ability to reach foreign land depend on the situs jurisdiction’s substantive law governing creditor rights and fraudulent conveyances.
- Punitive damages, as a penalty, are governed by the forum’s law where the forum’s deterrent and penal interests are implicated.
- Under New York law, punitive damages require conduct exceeding a private wrong between individuals; intentional conduct aimed at defeating a single creditor, without more, may be insufficient.

## Conclusion

The court required application of Puerto Rico law to determine whether the transfer of Puerto Rico real property was fraudulent and what compensatory remedies, if any, were available, while applying New York law to reject punitive damages because the conduct did not meet New York’s demanding standard for penal awards.


James v. Powell, 19 N.Y.2d 249, 279 N.Y.S.2d 10, 225 N.E.2d 741 (N.Y. 1967)