Relates to payment or delivery of property of judgment debtor.
TITLE OF BILL: An act to amend the civil practice law and rules, in relation to payment or delivery of property of judgment debtor
This is one in a series of measures being introduced at the request of the Chief Administrative Judge upon the recommendation of her Advisory Committee on Civil Practice.
CPLR 5225(a) provides that a judgment creditor can seek satisfaction of a judgment by moving against the judgment debtor for an order requiring him or her to deliver to the sheriff any money or personal property in which he or she has an interest if he or she is "in possession or custody" of that property. Similarly, CPLR 5225(b) allows the judgment creditor to commence a special proceeding against another person "in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such property or that the judgment creditor's rights to the property are superior to those of the transferee." CPLR 5225(b) (italics supplied).
This measure would amend CPLR 5225(a) and (b) to facilitate the ability of a judgment creditor to seek the delivery of property in the possession of a person outside the court's jurisdiction by exercising jurisdiction over the judgment debtor or another person within the court's jurisdiction who may "control" the person with possession. The issue can arise in a number of contexts, including a situation where a garnishee's agent, such as an attorney, holds the property. The property is under the garnishee-client's "control," but arguably not in that client's "possession or custody."
This amendment also may come into play in a parent/subsidiary situation, as it did in the recent decision of the Court of Appeals in Commonwealth of the N. Mariana Islands v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55 (2013) ("Mariana"). In Mariana, the Court addressed whether a judgment creditor can obtain an Article 52 turnover order against a bank to garnish assets held by the bank's foreign subsidiary. Mariana, 21 N.Y.3d at 57. The plaintiff Commonwealth of the Northern Mariana Islands had obtained two separate tax judgments against two individuals, the Millards, who resided in the Commonwealth. Id. at 58. The Commonwealth registered the tax judgments in the United States District Court for the Southern District of New York and commenced proceedings as a judgment creditor pursuant to Fed. R. Civ. P. 69(a) and CPLR 5225(b), seeking a turnover order against the Millards. Id. The Commonwealth named a bank, CIBC, as a garnishee on the basis that the Millards maintained accounts in 92%-owned foreign subsidiaries of CIBC. Id.
In Mariana, the Court of Appeals observed that, "... legislative use of the phrase 'possession or custody' contemplates actual possession. Notably, sections of the CPLR pertaining to the disposition of property utilize the narrower 'possession or custody' standard." Id. at 63 (emphasis added). The Court contrasted this with the "possession, custody or control" standard which "has been construed to encompass constructive possession." Id. As a result, the Court held
that, "... for a court to issue a postjudgment turnover order pursuant to CPLR 5225(b) against a banking entity, that entity itself must have actual, not merely constructive, possession or custody of the assets sought ... (I)t is not enough that the banking entity's subsidiary might have possession or custody of a judgment debtor's assets." Id. at 57-58.
CPLR 5225(b), when enacted, represented a change from the predecessor provision in the Civil Practice Act. As discussed in Mariana, Civil Practice Act § 796 provided for turnover of property in the "possession" or "control" of another person. Id. at 61. CPLR 5225(b), on the other hand, employs the "possession or custody" language, and omits the word "control." Id. In interpreting the statute, the Court reasoned that the omission was intentional, because "(w)hen the legislature has sought to encompass the concept of 'control' it has done so explicitly ...." Id. at 62.
By way of contrast, in other sections of the CPLR, such as disclosure provisions, the concept of "control" is included. See CPLR 3111 (requiring production at deposition of books, papers, and other items in "the possession, custody or control" of the person to be examined); see also CPLR 3120(1)(i) (requiring discovery or inspection of documents "in the possession, custody or control" of the party served with a subpoena). Although the issue has not been resolved at the appellate level, "control" has been interpreted by one trial court to mean that discovery can be obtained from a wholly-owned subsidiary, wherever located, of a parent that is a party to the case, because the parent has control over the wholly-owned subsidiary. See Bank of Tokyo-Mitsubishi, Ltd. v. Kvaerner, 175 Misc. 2d 408 (Sup. Ct. N.Y. Co., 1998). We express no view as to whether, in the context of a parent/subsidiary or other relationship, the requisite "control" should be found; that is a matter for judicial development and determination in particular cases, nor are we expressing any view as to whether the word "control" as used in the context of CPLR 5225 necessarily should be construed in the same manner as it may be construed in the context of CPLR Article 31.
This measure would add "control" to CPLR 5225(a) and (b), thus restoring the standard reflected in the prior Civil Practice Act and the Code of Civil Procedure before it (§ 2447). It would facilitate the efforts of judgment creditors to satisfy judgments by reaching assets held by persons or entities under the control of garnishees. Our Committee considered whether to add the "control" language to other garnishment and attachment provisions but declined to do so. The Civil Practice Act appropriately limited the control standard to the context of judicially supervised adversarial hearings.
This measure, which would have no fiscal impact on the public treasury, would take effect on January first following the date on which it becomes law.
None. New Proposal.
STATE OF NEW YORK ________________________________________________________________________ 7141 IN SENATE April 30, 2014 ___________Introduced by Sen. BONACIC -- (at request of the Office of Court Admin- istration) -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary AN ACT to amend the civil practice law and rules, in relation to payment or delivery of property of judgment debtor THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivisions (a) and (b) of section 5225 of the civil prac- tice law and rules, subdivision (b) as amended by chapter 388 of the laws of 1964 and such section as renumbered by chapter 315 of the laws of 1962, are amended to read as follows: (a) Property in the possession of judgment debtor. Upon motion of the judgment creditor, upon notice to the judgment debtor, where it is shown that the judgment debtor is in possession
[or], custody OR CONTROL of money or other personal property in which he OR SHE has an interest, the court shall order that the judgment debtor pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judg- ment, to deliver any other personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff. Notice of the motion shall be served on the judgment debtor in the same manner as a summons or by registered or certified mail, return receipt requested. (b) Property not in the possession of judgment debtor. Upon a special proceeding commenced by the judgment creditor, against a person in possession [or], custody OR CONTROL of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such property or that the judgment creditor's rights to the property are superior to those of the transferee, 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 and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any otherEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD13637-01-4 S. 7141 2
personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff. Costs of the proceeding shall not be awarded against a person who did not dispute the judgment debtor's interest or right to possession. Notice of the proceeding shall also be served upon the judgment debtor in the same manner as a summons or by registered or certified mail, return receipt requested. The court may permit the judgment debtor to intervene in the proceeding. The court may permit any adverse claimant to intervene in the proceeding and may determine his OR HER rights in accordance with section 5239 OF THIS ARTICLE. S 2. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law.