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Country Bank v. James Heneghan

Disp __ Dec x Seq. No. __7 Type SJ
To commence the statutory time period for appeals as
of right (CPLR § 5513 [a]), you are advised to serve a
copy of this order, with notice of entry, upon all parties.



Index No. 61545/2016


The following papers numbered 1 to 6 were read on this

Papers Numbered

Notice of Motion, Affidavit, Affirmation and Exhibits 1

Memorandum of Law 2

Affidavits, Affirmation and Exhibits in Opposition 3

Affidavit, Affirmation and Exhibits in Opposition 4

Affirmation and Exhibits in Reply 5

Reply Memorandum of Law 6

The Court has before it plaintiff’s motion for summary
judgment on all of its claims in this long-running fraudulent
conveyance action. It also seeks an inquest on counsel fees.

As this is yet another motion in the continuing saga of
these parties, the Court shall only recount the necessary facts.
There is no dispute that plaintiff has a sizeable judgment
against Heneghan, which it obtained in February 2015; as the
Court has previously held in a related action (Index No.
59438/2014) (the “2014 action”), Heneghan has known of the action
(and resultant judgment) since its inception.1 There is no
dispute that this Court has previously held both Heneghan and his
wife, defendant Soraia D’Alessandro (“D’Alessandro”), in contempt
in the 2014 action for concealing information, making improper
and fraudulent conveyances and taking other steps to avoid paying
plaintiff’s judgment. There is also no dispute – although
defendant Regan claims otherwise – that Heneghan and Regan have a
close personal and business relationship that has lasted for many

There is also no dispute that in December 2014, Regan used a lawyer, Alan C. Pilla, to incorporate defendant 3 & 11 North Terrace Avenue Realty LLC (“Realty”). Mr. Pilla submits to the Court an affidavit stating that the creation of Realty was as a holding company, in the ordinary course. The next day, Heneghan sold two properties that he owned in Mount Vernon to Realty. There is no dispute that no money changed hands at the closing.

Both Regan and Heneghan claim that over the years prior to this transaction, Regan and some of his other companies had loaned money to Heneghan (and his company, nonparty Harbor Island Contracting Inc.). These loans are allegedly memorialized in a series of informal IOUs and other non-professionally drafted documents. Regan states in his affidavit that he believes that he loaned Heneghan over $250,000, but that he only has documentation for $230,000-240,000. (Regan does not explain how, if he has documentation, there can be a range of loan amounts.)

Heneghan and Regan state in their affidavits that these loans, plus other indebtedness that ran with the land (totaling over $269,000), was the consideration for the transfer of the properties. However, in his affidavit, Regan states that “Heneghan remained responsible for the three encumbrances on the property after the sale. . . . Heneghan was responsible for payment of the debt. . . . Should Heneghan fail to make payments on the encumbrances, I would need to satisfy the encumbrances against the land in order to have clean and clear title to the land.” These statements appear to undermine Regan and Heneghan’s statements that the $269,000 in encumbrances was additional consideration for the sale of the properties, since Heneghan still remained liable therefor. Regan personally – not Realty –paid off over $42,000 of this amount to the City of Mount Vernonfor unpaid tax liens in January 2015.

In an unrelated transaction, just days after receiving the
information subpoenas with restraining notices in the 2014
action, Heneghan wired over $36,000 from a bank account in
Ireland (an account that was part of the contempt citation
referenced above) to D’Alessandro. She withdrew the money from
her account the very next day. Although Heneghan maintains that
the money was used for joint living expenses, D’Alessandro
testified otherwise at her deposition. Indeed, a review of her
deposition testimony shows that D’Alessandro entirely undermines
Heneghan’s position. She testified that she sent the money to
her former mother-in-law in Brazil (via her own mother) and the
remainder to her daughter. None of it was used for joint living
expenses with Heneghan.

Beginning with plaintiff’s causes of action to set aside the conveyance to D’Alessandro, the standard is well-settled. As the Second Department has explained, “The burden of proof to establish actual fraud under Debtor and Creditor Law § 276 is upon the creditor who seeks to have the conveyance set aside, and the standard for such proof is clear and convincing evidence. Fraudulent intent, by its very nature, is rarely susceptible to direct proof and must be established by inference from the circumstances surrounding the allegedly fraudulent act. Kreisler Borg Florman Gen. Const. Co. v. Tower 56, LLC, 58 A.D.3d 694, 696, 872 N.Y.S.2d 469, 471 (2d Dept. 2009). In that case,

the Court held that “The circumstances warrant the conclusion
that the transfer of the property evinced actual intent to
defraud. In particular, the transfer was made without any
consideration whatsoever only days before the plaintiff entered
its default judgment for money damages. Moreover, the
defendants’ cryptic and conclusory explanation for the transfer
did not dispel its fraudulent nature. Therefore, there was
sufficient evidence to establish the existence of a fraudulent
intent on the part of the defendants at the time of the
conveyance of the subject property. Consequently, as no triable
issue of fact was raised by the defendants, the plaintiff is
entitled to summary judgment pursuant to Debtor and Creditor Law
§ 276.” Since the plaintiff had established its right to summary
judgment under Debtor and Creditor Law § 276, it was also
entitled to counsel fees. Id. (“Since the plaintiff established
an actual intent to defraud, it is also entitled to recover a
reasonable attorney’s fee.”).

In this case, there is no dispute that Heneghan transferred over $36,000 to his wife just a few days after they received information subpoenas and restraining notices. They could not even get their stories straight about the purpose of this transfer; it plainly was not used for any exempt purposes, according to D’Alessandro. Plaintiff thus has established itsright to summary judgment on this claim. See 5706 Fifth Ave., LLC v. Louzieh, 108 A.D.3d 589, 590, 969 N.Y.S.2d 141, 142 (2d Dept. 2013). It is also entitled to counsel fees pursuant to Debtor and Creditor Law § 276-a. See Shifer v. Shifer, 165 A.D.3d 721, 724, 85 N.Y.S.3d 92, 95 (2d Dept. 2018), lv. to app. dis. in part, den. in part, 34 N.Y.3d 1144 (2020) (having found actual intent to defraud, “the court properly awarded her an attorney’s fee.”). The amount of this fee shall await the ultimate outcome of this action.

Turning to the remainder of the motion, concerning the transfer of the properties to Realty, the Court recognizes certain things as troubling, as set forth by plaintiff: the range of loans by Regan to Heneghan as partial consideration, instead of proof of a sum certain; the close personal friendship, albeit denied by Regan; Heneghan’s level of debt and/or insolvency at the time of the transfer; Heneghan’s previous track record of contemptible behavior regarding plaintiff’s judgment, among other things. But in opposition, Regan has established that (1) he had a lawyer create Realty as a holding company; (2) the lawyer stated in his affidavit that the transaction was “to his involvement”2 legitimate; and (3) there may have been certain consideration for the transfer.

Given that plaintiff has the burden of proving that the conveyance to Realty was fraudulent, the Court cannot find on these papers that that is the case. See Murin v. Estate of Schwalen, 31 A.D.3d 1031, 1032, 819 N.Y.S.2d 341, 343 (3d Dept. 2006) (“both insolvency and lack of fair consideration are prerequisites to a finding of constructive fraud under the
statute, and the burden of proving these elements is upon the
party challenging the conveyance.”). A trier of fact, who can
observe the parties, is better suited to the task. Grumman
Aerospace Corp. v. Rice, 199 A.D.2d 365, 366, 605 N.Y.S.2d 305,
306 (2d Dept. 1993). Accordingly, the remainder of the motion
for summary judgment is denied.

The parties are directed to appear for a Settlement
Conference in the Settlement Conference Part, Courtroom 1600, on
a date to be set by the Court.
The foregoing constitutes the decision and order of the

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