Cona Elder Law (“CEL”) a Long Island, New York law firm, was sued for allegedly fabricating claims of fraudulent conveyance to induce debt repayment from Alphonso Franklin, the son of a of a nursing home resident. CEL was accused of fabricating claims in hundreds of debt collection lawsuits on behalf of its nursing home clients to pressure the families and friends of residents into repaying supposed debt obligations and attorney fees. A New York Supreme Court judge dismissed the nursing home’s claims against him, but claims against CEL remain in litigation.
CEL’s lawsuit attempted to hold Franklin liable for nearly $20,000 in debt allegedly accrued during his deceased mother’s 120-day stay at Wartburg Home of the Evangelical Lutheran Church. The debt collection suit, filed by CEL alleged Franklin aided his mother in committing fraudulent conveyance, or the evasion of debt obligations by rendering one’s self insolvent. The lawsuit made such an allegation against Franklin and his mother “upon information and belief” without specific factual support, and despite the fact that Franklin’s mother died while in the care of Wartburg.
Franklin’s complaint:
- Alleged violations of the Fair Debt Collection Practices Act and the New York Judiciary Law against CEL, with an additional count of violating the New York General Business Law against Wartburg.
- Seeks actual damages, punitive damages and attorney fees.
- Stated that by deceptively and unfairly fabricating claims of fraudulent conveyance, CEL and Wartburg can turn a negligible return into a full recovery with attorney’s fees paid for by the other side.
- New York state court records show CEL has filed hundreds of debt collection lawsuits on behalf of nursing home clients against residents and family members, as well as other third parties. Claims of fraudulent conveyance were made without basis in fact in more than 85% of the nursing home collection complaints filed by CEL since 2017.
Franklin emphasized that both CPLR 3016(b) and New York’s Debtor and Creditor Law (“DCL”) require that a cause of action for actual fraudulent conveyance must be pled with sufficient particularity. He contends that Wartburg :
- a) Makes conclusory allegations of actual fraudulent conveyances which are only a recitation of the elements of the cause of action.
- b) Does not include any facts regarding the alleged transfers, when the alleged transfers occurred, the intent behind the transfers, to whom the transfers were made. Suspicions of fraudulent conveyances are not sufficiently pled to support a cause of action for actual fraudulent conveyance.
Relying on County of Monroe v Estate of Patterson to dismiss the actual and constructive fraudulent conveyance causes of action against him, Franklin emphasizes that “plaintiff must allege some facts to support its claim . . . simply track[ing] the statute does not meet the bare minimum requirements of notice pleading” (2019 WL 5851143 [NY Sup. Ct. 2019]). He asserts that a lawsuit cannot be instituted as a discovery tool.
New York State Supreme Court Justice Eddie McShan granted Franklin’s motion to dismiss all claims against Franklin, ruling that:
“The Court finds that the Plaintiff has failed to state a cause of action for actual fraudulent conveyance under DCL § 276 against Defendant Alphonso Franklin. In order to assert a cause of action for actual fraudulent conveyance, the movant must plead actual intent to defraud in compliance with the heightened particularity requirements of CPLR 3016(b) (see Carlyle, LLC v Quik Park 1633 Garage LLC, 160 AD3d 476 [1 Dept 2018]). Moreover, “‘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'” (see Setters v AI Properties and Developments (USA) Corp., 139 AD3d 492 [1 Dept 2016] quoting Marine Midland Bank v Murkoff, 120 AD2d 122 [2d Dept 1986]; Wall Street Associates v Brodsky, 257 AD2d 526 [1 Dept 1999]). Hence, in order to support its claim of fraudulent intent, the claimant is permitted to rely on badges of fraud Wall Street Associates, 257 AD2d 526 (Setters, 139 AD3d 492).
Plaintiff on this record merely suggests that the defendants had a close relationship by virtue of their mother-son relationship, and conclusively alleges that “[u]pon information and belief, the Resident-Defendant wrongfully conveyed her assets and income to the Defendant, ALPHONSO FRANKLIN, without fair consideration.” Plaintiff does not provide any allegations in its Amended Verified Complaint to suggest when the alleged fraudulent transfer took place, particularly since Ms. Franklin may have been suffering from dementia during her stay in the nursing home (see for example Carlyle, LLC, 160 AD3d 476). Plaintiff conclusively alleges in its third cause of action that the alleged fraudulent transfers “were made at a time when the Resident-Defendant intended or believed she would incur debts beyond her ability to pay as they matured.” The Court finds the allegation to be overly broad and vague and insufficient to determine if the alleged fraudulent transfer was made during her residency in the nursing home or years before.
In addition, Plaintiff does not make any suggestion that Ms. Franklin retained control of the subject property after the alleged fraudulent transfer and that either party had knowledge that entry of a money judgment was imminent to convey the badges of fraud as Plaintiff suggests in its opposition papers (Wall Street Associates, 257 AD2d 526). Furthermore, Plaintiff’s key allegations regarding the alleged fraudulent conveyances are based on information and belief, and are inadequate under CPLR 3016(b) because Plaintiff failed to reveal the source of that information (see RTN Networks, LLC v Telco Group, Inc., 126 AD3d 477 [1 Dept 2015]). As such, the Court finds nothing within the four corners of the complaint to indicate that there are badges of fraud to infer the intent to defraud sufficiently to survive the instant motion to dismiss.
The Court similarly finds that Plaintiff conclusory allegations fail to state a cause of action under DCL 275. Constructive fraudulent conveyance pursuant to DCL § 275 provides that “[e]very conveyance made and every obligation incurred without fair consideration when the person making the conveyance or entering into the obligation intends or believes that he will incur debts beyond his ability to pay as they mature, is fraudulent as to both present and future creditors.” Plaintiff failed to sufficiently allege that the fraudulent transfers were made without fair consideration because the relevant allegations were all made “[u]pon information and belief” again without revealing the source of the information (see Carlyle, LLC, 160 AD3d 476). Based upon the foregoing, Plaintiff’s sixth, seventh and eighth causes of action as asserted against Defendant Alphonso Franklin are dismissed for failure to state a cause of action.”
On April 27, 2021, CEL filed a Notice of Appeal on behalf of Wartburg. Defendants’ deadline to perfect their appeal was October 27, 2021. As the appeal was not perfected, the Order dismissing the Amended State Court Complaint is a final decision.
The Nursing Home Reform Act of 1987 prohibits nursing homes from asking for financial guarantees of third parties, such as the friends and families of residents, as a requirement for admission. The Wartburg Home and CEL allegedly evade this public policy by fabricating claims of fraudulent conveyance, allowing them to bring third parties into their debt collection lawsuits and demand attorney fees in addition to any alleged nursing home debt. Nursing homes and debt collectors prefer suing those families because elderly nursing home residents usually have little money and their income is primarily Social Security and other forms of income which are protected from by New York’s garnishment laws.
Contact NY Elder Law Attorney, Robert Friedman, at 716-543-3764 for Nursing Home Debt Collection representation.