Stillwater Liquidating LLC v Partner Reins. Co., Ltd.

Stillwater Liquidating LLC v Partner Reins. Co., Ltd. 2017 NY Slip Op 05034 Decided on June 20, 2017 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on June 20, 2017
Acosta, P.J., Richter, Feinman, Webber, Kahn, JJ.
4339 652451/15

[*1]Stillwater Liquidating LLC, Plaintiff-Respondent-Appellant,

v

Partner Reinsurance Company, Ltd., et al., Defendants-Appellants-Respondents.

Mayer Brown LLP, Washington, DC (Michael B. Kimberly of the bar of the State of Maryland and District of Columbia, admitted pro hac vice, of counsel), for appellants-respondents.

Wallison & Wallison LLP, New York (Jeremy L. Wallison of counsel), for respondent-appellant.

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered on or about January 23, 2017, which to the extent appealed from as limited by the briefs, upon defendants' CPLR 3211(a) motion to dismiss the amended complaint, denied dismissal of the first and second causes of action except for the portion of the first cause of action alleging that the initial loan and pledge transaction between defendant Partner Reinsurance Company, Ltd. (Partner Re) and nonparty debtor Stillwater Funding LLC (the Partner Re loan) was a fraudulent conveyance, unanimously affirmed, without costs.

The motion court correctly determined that the Partner Re loan was not a fraudulent conveyance, since a loan advance, regardless of the size of the collateral pledged, is "fair consideration" for the pledge (Debtor and Creditor Law §§ 274, 275; see Chemtex, LLC v St. Anthony Enterprises, Inc. , 490 F Supp 2d 536 [SD NY 2007]). However, the allegations that Stillwater Funding transferred its interests in the collateral, allegedly worth over $200 million, to defendants to satisfy a debt worth less than $40 million, thereby leaving Stillwater Funding unable to pay other creditors, states a cause of action for fraudulent conveyance (see Debtor and Creditor Law §§ 274, 275, 278; In re Norstan Apparel Shops, Inc. , 367 BR 68, 80 [Bankr ED NY 2007]).

The motion court correctly found that discovery was warranted as to whether the [*2]foreclosure and sale agreement between Stillwater Funding, defendants, and others constituted a valid strict foreclosure under the New York Uniform Commercial Code (see NY UCC 9-620), and whether the agreement was made in "good faith" (Comment 11 to NY UCC 9-620).

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JUNE 20, 2017

CLERK