“Retention-of-Use” as a Badge of Fraud:
Appellate Division Reinforces Summary Judgment Standards in Schiffman v. Affordable Shoes, Ltd. (2025)

1. Introduction

Matter of Schiffman v. Affordable Shoes, Ltd., 238 A.D.3d 770 (2d Dep’t 2025), arose out of a judgment creditor’s effort to collect a $338,778.72 judgment obtained after a commercial tenant and its guarantor defaulted. Deborah Schiffman, trustee of the Mildred Feld Revocable Trust (the “Petitioner”), pursued a CPLR article 52 turnover proceeding against:

• Affordable Shoes, Ltd. (“Tenant/Judgment Debtor”)
• Zakhar Brener (personal guarantor)
• Ninel Krepkina (Brener’s long-time partner)
• B and K Trust (title holder of Brener’s residence)
• JP Morgan Chase Bank, N.A. (custodian of a safe-deposit box)

The Petitioner alleged that Brener fraudulently conveyed his residence to B and K Trust and secretly stored non-exempt assets in a shared safe deposit box to evade collection. The Supreme Court (Kings County) denied summary judgment, prompting the appeal. The Appellate Division reversed, establishing an important precedent on how “retention of use” of an asset—particularly real property—functions as a dispositive “badge of fraud” sufficient to warrant summary judgment under the former Debtor & Creditor Law (“DCL”) §§ 273 (constructive fraud) and 276 (actual fraud), as well as clarifying banks’ turnover obligations under CPLR 5225(b).

2. Summary of the Judgment

The Second Department held:

1. Schiffman made a prima facie showing that the transfer of Brener’s home in 2014 was constructively fraudulent under former DCL § 273, because the conveyance (i) was for no fair consideration and (ii) left Brener insolvent.
2. Schiffman also demonstrated actual intent to defraud under former DCL § 276, chiefly through Brener’s post-transfer continued occupancy—a “retention-of-use” badge of fraud deemed so compelling that it supported summary judgment.
3. Having established that the residence transfer was voidable, and that Brener and Krepkina jointly maintained a safe-deposit box, the Petitioner was entitled to a CPLR 5225(b) turnover order directing Chase to release the box’s contents up to the judgment amount.
4. Accordingly, the lower court’s denial of summary judgment was reversed; judgment was granted for Schiffman on all three contested causes of action, with costs.

3. Analysis

3.1 Precedents Cited

The court leaned heavily on recent and older authorities:

• Matter of Argyle Funds SPC, Inc. v. Barrick, 226 A.D.3d 673 (2024) and Matter of Rockefeller v. Statement Servs. Corp., 204 A.D.3d 920 (2022) – Defined the scope of CPLR 5225(b) turnover proceedings, confirming that a creditor may sue transferees and third-party custodians.
• Louis Monteleone Fibres, Ltd. v. Hudson Baylor Brookhaven, LLC, 228 A.D.3d 641 (2024) – Clarified constructive and actual fraudulent transfer tests under the pre-2020 DCL and catalogued “badges of fraud.”
• Palmerone v. Staples, 195 A.D.3d 736 (2021) & Cheek v. Brooks, 188 A.D.3d 785 (2020) – Addressed insolvency definitions and “fair consideration.”
• Corning Fed. Credit Union v. Georgilis, 217 A.D.3d 828 (2023) and Goldenberg v. Friedman, 191 A.D.3d 641 (2021) – Enumerated badges of fraud used to infer intent under former § 276.
• Southern Indus. v. Jeremias, 66 A.D.2d 178 (2d Dep’t 1978) – Recognized that a debtor’s continued enjoyment of conveyed property is “a prime example” of fraud.

Collectively, these cases underscored two themes: (1) the burden-shifting mechanics for constructive fraud and (2) the evidentiary power of “badges of fraud.” The Second Department synthesized them into a bright-line rule that mere retention-of-use can be outcome-determinative at the summary judgment stage.

3.2 Legal Reasoning

1. Constructive Fraud (former § 273)
   The Petitioner’s evidence of no consideration plus Brener’s insolvency triggered the statutory presumption of fraudulent transfer. Under Battlefield Freedom Wash and Palmerone, the burden shifted to the transferee (the Trust and Krepkina) to show solvency or fair consideration. They produced no such evidence; hence no triable issue existed.
2. Actual Fraud (former § 276)
   The Court emphasized five badges of fraud, of which three were undisputed:
   • Intimate relationship between transferor (Brener) and transferee (his partner and a trust they controlled)
   • No consideration for the transfer
   • Retention of possession and use
   While badges ordinarily create issues of fact, the Court relied on Southern Indus. to elevate “retention-of-use” to an almost conclusive inference of intent. Because the Brener respondents admitted continued occupancy, the Court found actual intent as a matter of law.
3. Turnover of Safe-Deposit Box (CPLR 5225[b])
   Once fraudulent transfer was established, the Petitioner’s “rights … are superior” to the transferees’ rights. The existence of the safe-deposit box—confirmed by Chase’s letter—sufficed; identification of specific contents could await the turnover inspection. The decision aligns with Wells Fargo Vendor Fin. Servs., LLC v. JPMorgan Chase Bank, 229 A.D.3d 794 (2024).

3.3 Impact of the Judgment

This decision is poised to influence New York collection practice in several ways:

• Elevated Status of “Retention-of-Use” – The Second Department effectively made continued occupancy post-transfer a dispositive badge of fraud, allowing creditors to win summary judgment without discovery if the fact is undisputed.
• Streamlined Turnover Orders – By allowing a turnover of an entire safe-deposit box based solely on proof of joint ownership, the Court lowers evidentiary hurdles and signals stricter scrutiny of hidden personalty.
• Retroactivity & Transitional Cases – Though New York adopted the UVTA in 2019 (eff. 2020), Schiffman confirms that pre-2020 conveyances remain governed by former DCL §§ 270-281, and that courts will apply a creditor-friendly reading.
• Guidance to Financial Institutions – Banks are reminded that a properly issued CPLR 5225(b) order overrides customer privacy concerns and compels delivery of box contents.
• Encouragement of Article 52 Practice – Judgment creditors gain a roadmap: target trusts, intimate partners, and safe-deposit boxes; employ admissions of continued use to shortcut protracted litigation.

4. Complex Concepts Simplified

• CPLR 5225(b) Turnover Proceeding – A fast-track lawsuit where a creditor sues someone holding the debtor’s property (including banks or transferees) to force delivery toward satisfying the judgment.
• Former DCL § 273 (Constructive Fraud) – Even without bad intent, a gift or bargain-sale by an insolvent debtor is voidable if no roughly equivalent value is exchanged.
• Former DCL § 276 (Actual Fraud) – Voidable transfer made “with actual intent to hinder, delay, or defraud” creditors. Because direct proof of intent is rare, courts rely on “badges of fraud.”
• Badges of Fraud – Circumstantial factors (e.g., close relationship, secret or unusual transfer, no consideration, insolvency, retention of control) that collectively imply fraudulent intent.
• Retention-of-Use Doctrine – When a debtor supposedly parts with ownership yet continues to live in or use the asset, courts treat it as a red flag for fraud.
• Insolvency Test – A debtor is insolvent if asset value < liabilities due or coming due (former DCL § 271).
• Burden-Shifting – Once a creditor proves transfer without fair consideration, the law presumes insolvency and fraud; the transferee must disprove.

5. Conclusion

Matter of Schiffman v. Affordable Shoes, Ltd. crystallizes a creditor-friendly standard in New York: Where a debtor conveys property without consideration yet keeps using it, courts may—at the summary-judgment stage—presume both constructive and actual fraud. Coupled with an expansive view of CPLR 5225(b), the decision strengthens judgment enforcement, curtails sham asset-shielding trusts, and clarifies banks’ obligations to surrender safe-deposit box contents. Practitioners should advise clients that cosmetic title transfers coupled with continued personal use are unlikely to survive judicial scrutiny, and that swift turnover orders are increasingly attainable for diligent creditors.