AREL CAPITAL PARTNERS II LLC v. HFZ LLC (2024)

Order, Supreme Court, New York County (Andrew S. Borrok, J.), entered July 12, 2023, which granted defendants JPMorgan Chase Bank, N.A. and JP Morgan Chase Commercial Mortgage Securities Corp.’s (collectively JPM) motion to dismiss the complaint, unanimously affirmed, with costs.

Even if plaintiff Arel Capital Partners II LLC's contractual ties to defendant HFZ Res Portfolio Holdings LLC could somehow make it a creditor of the borrower, HFZ 235 West 75th Street Owner, LLC, Arel's conclusory allegations that the conveyance to JPM was made at a time when HFZ RES was insolvent were insufficient to support its claim under Debtor and Creditor Law § 273 (see Eagle Eye Collection Corp. v. Shariff, 190 A.D.3d 600, 602, 141 N.Y.S.3d 27 [1st Dept. 2021]).  Further, because the transfer of the refinancing surplus proceeds at issue was made to satisfy a true antecedent debt, it constituted fair consideration (see Matter of CIT Group/Commercial Servs., Inc. v. 160–09 Jamaica Ave. Ltd. Partnership, 25 A.D.3d 301, 302–303, 808 N.Y.S.2d 187 [1st Dept. 2006];  Ultramar Energy v. Chase Manhattan Bank, 191 A.D.2d 86, 90–91, 599 N.Y.S.2d 816 [1st Dept. 1993]).  Nor do Arel's allegations, based on “newly discovered evidence” consisting of an organizational chart and an email from a JPM employee that directed the transfer of the refinancing surplus proceeds, sufficiently allege constructive fraud, based on the absence of specific circumstances giving rise to the duty to inquire into the scope of JPM's claimed authority to effect such transfer (see Decana Inc. v. Contogouris, 55 A.D.3d 325, 326, 865 N.Y.S.2d 72 [1st Dept. 2008], lv dismissed 11 N.Y.3d 920, 874 N.Y.S.2d 2, 902 N.E.2d 436 [2009]).

To sufficiently allege a claim under Debtor and Creditor Law § 276, a plaintiff must allege that the conveyance was made with actual intent to hinder, delay, or defraud either present or future creditors (see Wall St. Assoc. v. Brodsky, 257 A.D.2d 526, 528–529, 684 N.Y.S.2d 244 [1st Dept. 1999]).  Although “badges of fraud” may establish the requisite intent with respect to not just the debtor but also the transferee (see Brennan v. 3250 Rawlins Ave. Partners, LLC, 171 A.D.3d 603, 605, 99 N.Y.S.3d 5 [1st Dept. 2019]), JPM's purported knowledge of Arel's asserted right to the refinancing surplus proceeds based on the organizational chart in which Arel was five entities removed from the actual borrower was insufficient to establish an indicia of fraud that could support a claim of a fraudulent transfer.

We have considered the remaining arguments and find them unavailing.