Bulletin: NY000097

Date:
August 11, 1995
To:
New York State Counsel, Managers and Agents
RE:
Underwriting Alert! 50-39 192nd Street, Flushing NY (Drakoupoulos) Judgment creditors of grantor may have right to set aside conveyance

Dear Associates:

We have been advised by Alan Lahti of Masterpiece Abstract Corp. that there is a potential title issue involving the captioned property, which may be shopped. The facts are as follows:

A conveyance for no consideration was made by Spyridon Drakoupoulos to Ekaterini Drakoupoulos, dated 2/25/91, recorded 3/14/91 in Reel 3129 p 748. A judgment appears of record against a Spyridon Drakoupoulos at the captioned address. The judgment, in the amount of $77,538.77 was docketed and perfected on March 20, 1995. A review of the court file indicates that the cause of action for which the judgment was rendered was based on notes executed by the judgment debtor in 1989 and 1990.

While the judgment is not a lien against the real estate (and should not be raised as a judgment lien), our concern is that there is a possibility that the no-consideration conveyance could be set aside as a transfer in fraud of creditors, pursuant to the provisions of Article 10 of the Debtor and Creditor Law (§§270-281). Under this statute, a conveyance can be set aside under this article if it is made, without fair consideration, by an insolvent (§273), a defendant in an action for money damages (§273-a), a person in business with unreasonably small capital (§274), or a person about to incur debts (§275). Conveyances made with fraudulent intent (§276) can also be set aside. Section 278 creates a safe harbor for purchasers for fair consideration without knowledge of the fraud, or subsequent persons in title.

The statute of limitations is six years from discovery of the fraudulent conveyance (or from the time that the plaintiff could have discovered it with reasonable diligence). Since a party could reasonably discover a recorded title transfer by making a search of the public records, we will normally raise an issue where a deed for no consideration or consideration which appears to be obviously inadequate made within six years of our search, and we find a judgment against the grantor, docketed after the conveyance.

The following exception would be appropriate:

F-70 The conveyance from _______n.________ to _____n.________ dated ___/___/___, recorded ___/___/___ in (L.,R.,RL) __________(C)p __________, appears to have been made for no (or inadequate) consideration. The following judgment appears against the grantor. The judgment must be disposed of or the circumstances explained to the satisfaction of the Company, because of the possibility that the conveyance may be set aside as a transfer in fraud of creditors pursuant to the provisions of Article 10 of the Debtor and Creditor Law (§§270-281).

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None