Mr. Lattuga’s lawsuit against his wife is next scheduled for trial on Wednesday, November 19, 2008.  Mr. Lattuga claimed in it, that he had given his wife $784,822 because she had agreed to buy her father’s car dealerships for the two of them.  Mr. Lattuga specifically alleged that his wife had given the $784,822 to her father toward her $1.5 million purchase of C.D. Autos, Inc.  As part of the purchase, her father had even transferred all of C.D. Autos’ outstanding stock shares to her on January 2, 2001.

Mr. Lattuga’s lawsuit further alleged that his wife had intentionally defaulted / failed to pay her father the outstanding balance owed on C.D. Auto’s $1.5 million purchase price.  Mr. Lattuga also claimed that on June 29, 2004, his wife had transferred all of C. D. Autos’ stock shares back to her father because of her default.  On January 5, 2005, Mr. Lattuga’s wife finally filed for divorce.  She then argued during their divorce proceeding, that C.D. Autos, (and her father’s other car dealerships), were exempt from equitable distribution because she did not own them. 

Suspecting that his wife had fraudulently conveyed her stock in C.D. Autos, Inc. back to her father on June 29, 2004, Mr. Lattuga filed his above-mentioned lawsuit.  Based on Mr. Lattuga’s version of the facts, his wife’s June 29, 2004 stock conveyance had occurred without any consideration.  Furthermore, said stock may have been marital property subject to equitable distribution in the divorce.

While the Court dismissed part of Mr. Lattuga’s lawsuit in a February 26, 2008 decision, it still permitted him to proceed with some of his claims against his wife.  The Court found that Mr. Lattuga had pleaded a legally sufficient claim for both a constructive trust and a fraudulent conveyance under N.Y. Debtor and Creditor Law §276.  The Court reasoned that the wife’s alleged share transfer of June 29, 2004, could have "badges of fraud".  This was particularly true if Mr. Lattuga ultimately demonstrated that the share transfer was: without consideration; made in anticipation of the divorce; etc.

In its discussion of "badges of fraud", the Court relied on Wall Street Associates v. Brodsky, 257 A.D.2d 526, 529 (1st Dept 1999) and AMP Servs. Ltd. v. Walanpatrias Found., 2006 slip op. 7985 ; 34 A.D.3d 231; 824 N.Y.S.2d 37 (1st Dept, 2006).  These are the very same cases more fully described at my post "Badges Of Fraud In Debt Collection, Divorce & Bankruptcy".  As that post explained, the "badges of fraud" can sometimes be used to demonstrate that assets have been transferred with actual intent to defraud.

Copyright 2008 Fred L. Abrams