Matter of Hu v. Lowbet Realty
Justice Carolyn Demarest
Hu moved to amend his petition to include claims arising from the alleged fraudulent sale of the subject building, the sole asset of Lowbet Realty, a dissolved corporation winding up its affairs. He alleged his estranged wife, Liu, sold the property in violation of a court order not to dissipate assets, and that he never received any portion of the proceeds for his 75 percent share in the corporation. Hu also sought rescission of the sale under Business Corporation Law §1114 predicated on fraud. The court found proposed respondents failed to state sufficient reasons why they would be prejudiced by the amendment. It noted Hu's request for relief from the allegedly fraudulent transfer of Lowbet's sole asset during the pendency of the proceeding fell within the parameters of the instant action. The court found Liu, as a 25 percent shareholder, did not have apparent authority to sell the property and the deed was void due to lack of authority for the transfer even to a good-faith purchaser for value. Thus, as Liu's conveyance was in derogation of the court's order, Hu's claims for rescission of the sale and predicated on Liu's fraud were not devoid of merit. Hu's motion for leave to assert the claims for rescission based on fraud was granted.