Category: CPLR § 5225

CPLR § 5225(a)(b)

CPLR § 5225 Payment or delivery of property of judgment debtor
(a) Property in the possession of judgment debtor
(b) Property not in the possession of judgment debtor

Buckeye Retirement Co., LLC, Ltd. v Quattrocchi, 2009 NY Slip Op 08576 (App. Div., 2nd, 2009)

CPLR 5225(a) requires that notice of a motion to compel the turn over of personal property "shall be served on the judgment debtor in the same manner as a summons or by registered or certified mail, return receipt requested" (CPLR 5225[a]). The plaintiff's affidavit of service revealed that the judgment debtor was served by regular mail, rather than by a method set forth in CPLR 5225(a). The failure to properly serve notice upon the defendant of the plaintiff's motion pursuant to CPLR 5225(a) to compel the defendant to turn over to the Sheriff certain personal property in his possession deprived the court of jurisdiction to entertain the motion (see Zaidi v New York Bldg. Contrs., Ltd., 61 AD3d 747, 748; Daulat v Helms Bros., Inc., 32 AD3d 410, 411; Golden v Golden, 128 AD2d 672, 673; see also Banco Popular N. Am. v Philian Designs LLC, 48 AD3d 368, 369; Oil City Petroleum Co. v Fabac Realty Corp., 70 AD2d 859, affd on other grounds 50 NY2d 853). Accordingly, the Supreme Court properly denied the plaintiff's motion pursuant to CPLR 5225(a).

Matter of Signature Bank v HSBC Bank USA, N.A., 2009 NY Slip Op 08626 (App. Div., 2nd, 2009)

Faced with the judgment debtor's continuous default in making payments to satisfy the money judgment, the petitioner commenced the instant proceeding pursuant to CPLR 5225(b) against the judgment debtor, her bank, HSBC Bank USA, N.A. (hereinafter HSBC), and the judgment debtor's daughters, who were named on the subject joint bank accounts, inter alia, to direct HSBC to turn over the funds of the joint bank accounts to the petitioner. Both of the judgment debtor's daughters defaulted in answering the petition. The Supreme Court granted that branch of the petition which was to direct HSBC to turn over the funds of those bank accounts to the petitioner. We affirm.

CPLR 5225(b) provides for an expedited special proceeding by a judgment creditor to recover "money or other personal property" belonging to a judgment debtor "against a person in possession or custody of money or other personal property in which the judgment debtor has an interest" in order to satisfy a judgment (Starbare II Partners v Sloan, 216 AD2d 238, 239). The judgment creditor is required to serve the petition upon the judgment debtor in the same manner as a summons in an action or [*2]by registered or certified mail, return receipt requested (see CPLR 5225[b]). Once a court has personal jurisdiction over the judgment debtor and bank, it can order the turn over of "money or other personal property," even property located out of the state (see Gryphon Dom. VI, LLC v APP Intl. Fin. Co. B.V., 41 AD3d 25, 31; Miller v Doniger, 28 AD3d 405; Starbare II Partners v Sloan, 216 AD2d at 239).

Even jointly owned assets are vulnerable to levy by a judgment creditor pursuant to CPLR 5225. "Generally, the deposit of funds into a joint account constitutes prima facie evidence of an intent to create a joint tenancy" (Matter of Richichi, 38 AD3d 558, 559; see Banking Law § 675[b]; Matter of Dubin, 54 AD3d 947, 949). However, at the same time, "the opening of a joint bank account creates a rebuttable presumption that each named tenant is possessed of the whole of the account so as to make the account vulnerable to levy of a money judgment by the judgment creditor of one of the joint tenants" (Tayar v Tayar, 208 AD2d 609, 610; see Viggiano v Viggiano, 136 AD2d 630, 631; Denton v Grumbach, 2 AD2d 420, 422; Banking Law § 675[b]).

"The presumption created by Banking Law § 675 can be rebutted by providing direct proof that no joint tenancy was intended or substantial circumstantial proof that the joint account had been opened for convenience only'" (Fragetti v Fragetti, 262 AD2d 527, 527, quoting Wacikowski v Wacikowski, 93 AD2d 885, 885; see Matter of Friedman, 104 AD2d 366, 367, affd 64 NY2d 743; Storozynski v Storozynski, 60 AD3d 754). If the presumption is rebutted, the judgment creditor's levy on the jointly owned bank account is effective only up to the actual interest of the judgment debtor in the account (see Viggiano v Viggiano, 136 AD2d at 631).

The Supreme Court properly directed HSBC to turn over the entirety of the subject joint bank accounts to the petitioner (see LR Credit 10, LLC v Welsh, 17 Misc 3d 1129[A]; Rappaport, Steele & Co., P.C. v JPMorgan Chase Bank, N.A., 13 Misc 3d 1203[A]; Velocity Invs., LLC/Citibank v Astoria Fed. Sav. & Loan, 12 Misc 3d 1184[A]; Ford Motor Credit Co. v Astoria Fed., 189 Misc 2d 475, 477). It is undisputed that neither of the judgment debtor's daughters appeared or answered the proceedings, or in any manner challenged the petition's allegations to claim any portion of the joint bank accounts (see Rokina Opt. Co. v Camera King, 63 NY2d 728, 730; McClelland v Climax Hosiery Mills, 252 NY 347, 351; Otto v Otto, 150 AD2d 57, 65; Ford Motor Credit Co. v Astoria Fed., 189 Misc 2d at 476). The judgment debtor's mere conclusory assertions are patently insufficient to rebut her ownership of the funds in the bank accounts for purposes of the turnover proceedings (see Tayar v Tayar, 208 AD2d at 610). Under these circumstances, the Supreme Court properly determined that the petitioner was entitled to the turnover of the funds contained in the two joint bank accounts.

To the extent the judgment debtor raises an issue concerning that branch of the petition which was to direct HSBC to turn over the contents of a safe deposit box in the name of the judgment debtor, that issue remains pending and undecided, and, therefore, is not properly before this Court (see Katz v Katz, 68 AD2d 536, 542-543).

The bold is mine.

(Art. 52)CPLR 5225/(Art. 62)CPLR 6201; Jurisdiction Ct. App.

CPLR § 5225 Payment or delivery of property of judgment debtor

CPLR § 6201 Grounds for attachment

Koehler v Bank of Bermuda Ltd., 2009 NY Slip Op 04297 (Ct. App., 2009)

The United States Court of Appeals for the Second Circuit, by
certified question, asks us to decide whether a court sitting in New
York may order a bank over which it has personal jurisdiction to
deliver stock certificates owned by a judgment debtor (or cash equal to
their value) to a judgment creditor, pursuant to CPLR article 52, when
those stock certificates are located outside New York. We answer the
certified question in the affirmative.
[*2]

I.

Sixteen
years ago, on June 4, 1993, the United States District Court for the
District of Maryland awarded Lee N. Koehler, a citizen of Pennsylvania,
a default judgment in the sum of $2,096,343 against his former business
partner, A. David Dodwell. Koehler duly registered the Maryland
judgment in the United States District Court for the Southern District
of New York. At that time, Dodwell, a resident of Bermuda, owned stock
in a Bermuda corporation, of which he and Koehler had been
shareholders, and certificates representing Dodwell's shares were in
the possession of the Bank of Bermuda Limited ("BBL"), and located in
that country. Dodwell had pledged the shares to BBL as collateral for a
loan.

On October 27, 1993, Koehler filed a petition against BBL in
the United States District Court for the Southern District of New York,
seeking "payment or delivery of property of judgment debtor," and
citing CPLR article 52. Koehler served the petition upon an officer of
the Bank of Bermuda (New York) Ltd., which it claimed to be a New York
subsidiary and agent of BBL. On October 29, 1993, the District Court
ordered BBL to deliver the stock certificates, or monies sufficient to
pay the judgment, to Koehler. It is this turnover order that is the
subject of the certified question before us.

BBL argued before the District Court that service upon the New
York bank did not subject BBL to the personal jurisdiction of the
court. Although this jurisdictional issue was the subject of litigation
in federal court for some ten years, BBL eventually consented, by
letter dated October 9, 2003, to the personal jurisdiction of the court
as of the time that Koehler had commenced the proceeding.

In 2004, BBL revealed that the stock certificates were no
longer in its possession. The obligations for which BBL had held the
certificates as collateral had been satisfied and BBL — despite the
District Court's turnover order — had transferred the stock to a
Bermudan company existing for Dodwell's benefit in July 1994. On March
9, 2005, the District Court dismissed Koehler's petition, on several
grounds, including that the federal court had no in rem
jurisdiction over Dodwell's shares. In doing so, the District Court
relied on the principle that a New York court cannot attach property
that is not within the state.

BBL appealed to the Second Circuit, which observed that New
York law does not make clear whether a court sitting in New York has
the authority under CPLR 5225 (b) to order a defendant, other than the
judgment debtor himself, to deliver assets into New York, when the
court has personal jurisdiction over the defendant but the assets are
not located in New York. The Second Circuit, finding no controlling
precedent from our Court, certified this dispositive jurisdictional
question to us.

II.

CPLR article 52 governs the enforcement of money judgments and
orders directing the payment of money. By contrast, pre-judgment
attachment is governed by article 62. [*3]Enforcement
proceedings and attachment proceedings, while similar in many ways,
differ fundamentally in respect to a court's jurisdiction. While
pre-judgment attachment is typically based on jurisdiction over
property, post-judgment enforcement requires only jurisdiction over
persons.

Article 52 authorizes a judgment creditor to file a motion
against a judgment debtor to compel turnover of assets or, when the
property sought is not in the possession of the judgment debtor
himself, to commence a special proceeding against a garnishee who holds
the assets. CPLR 5225, the provision applicable here, supplies judgment
creditors with a device known as a "delivery order" or "turnover
order." With respect to garnishees, 5225 (b) allows a New York court to
issue a judgment ordering a party to deliver the property in which the
judgment debtor has an interest, or to convert it to money for payment
of the debt. "[W]here it is shown that the judgment debtor is entitled
to the possession of such property . . ., the court shall require such
person to pay the money, or so much of it as is sufficient to satisfy
the judgment, to the judgment creditor" (CPLR 5225 [b]). Disobedience
of a turnover order is contempt of court and punishable as such.

The requirement that the judgment creditor proceed against the
garnishee, rather than by a device operating on the property alone,
recognizes the possibility that the garnishee, or a fourth party, may
assert its own interests in the property. "If there are any other
claimants to the property or money involved, they can be allowed to
intervene, if, indeed the judgment creditor has not already joined them
in the first place, or the garnishee interpleaded them. . . . The
special proceeding, in short, can be converted into a full-fledged test
of precisely whom the disputed property or debt belongs to . . ."
(Siegel, NY Prac § 510, at 868 [4th ed].)

By contrast, an article 62 attachment proceeding operates only against property,
not any person. By means of attachment, a creditor effects the
pre-judgment seizure of a debtor's property, to be held by the sheriff,
so as to apply the property to the creditor's judgment if the creditor
should prevail in court. Attachment simply keeps the debtor away from
his property or, at least, the free use thereof; it does not transfer
the property to the creditor. It is frequently used when the creditor
suspects that the debtor is secreting property or removing it from New
York and/or when the creditor is unable to serve the debtor, despite
diligent efforts, even though the debtor would be within the personal
jurisdiction of a New York court (see CPLR 6201). Attachment has also been used to confer
jurisdiction. When a debtor is neither a domiciliary nor a resident of
New York — so that the creditor cannot obtain personal jurisdiction of
the debtor — but owns assets in New York, courts have exercised
jurisdiction over the debtor. This quasi in rem jurisdiction is subject to the due process restrictions outlined by the United States Supreme Court in Shaffer v Heitner (433 US 186 [1977]). (See generally Siegel, NY Prac §§ 104, 313, 314 [4th ed].)

In short, article 52 post-judgment enforcement involves a proceeding against a [*4]person
— its purpose is to demand that a person convert property to money for
payment to a creditor — whereas article 62 attachment operates solely
on property, keeping it out of a debtor's hands for a time. We approach
the certified question with these differences in mind.

III.

It is well established that, where
personal jurisdiction is lacking, a New York court cannot attach
property not within its jurisdiction. "[I]t is a fundamental rule that
in attachment proceedings the res must be within the jurisdiction of the court issuing the process, in order to confer jurisdiction" (National Broadway Bank v Sampson, 179 NY 213, 223 [1904], quoting Douglass v Phenix Ins. Co., 138 NY 209, 219 [1893]; accord Hotel 71 Mezz Lender LLC v Falor, 58 AD3d 270, 273 [1st Dept 2008]; National Union Fire Ins. Co. v Advanced Employment Concepts, Inc. (269 AD2d 101 [1st Dept 2000]). Significantly, "attachment suits partake of the nature of suits in rem,
and are distinctly such when they proceed without jurisdiction having
been acquired of the person of the debtor in the attachment" (Douglass,
138 NY at 218). But it is equally well established that "[h]aving
acquired jurisdiction of the person, the courts can compel observance
of its decrees by proceedings in personam against the owner within the jurisdiction" (id. at 219). The certified question concerns the latter process.

CPLR article 52 contains no express territorial limitation
barring the entry of a turnover order that requires a garnishee to
transfer money or property into New York from another state or country.
It would have been an easy matter for the Legislature to have added
such a restriction to the reach of article 52 and there is no basis for
us to infer it from the broad language presently in the statute.
Moreover, we note that the Legislature has recently amended CPLR 5224
so as to facilitate disclosure of materials that would assist judgment
creditors in collecting judgments, when those materials are located
outside New York. The 2006 amendment adds a subdivision that expressly
allows the securing of out-of-state materials by in-state service of a
subpoena on the party in control of the materials [FN1]. Recent legislation thus supports our conclusion that the Legislature intended CPLR article 52 to have extraterritorial reach.

The bold is mine.

Make sure to read Pigott's long dissent.