Summary
In Ford Motor Credit Company v. Astoria Federal et al., 189 Misc. 2d 475, 733 NYS2d 583 (2001), Judge Fairgrieve held that the judgment creditor was entitled to all of the funds in the account.
Summary of this case from Amalgamated Bank of N.Y. v. GermainOpinion
October 24, 2001.
Rubin Rothman, L. L. C., for petitioner.
Astoria Federal and another respondents, pro se.
Janet Briante, judgment debtor, pro se.
This Court recalls its prior decision of October 5, 2001 and issue the following corrected decision. Petitioner's application for a turnover order, pursuant to CPLR § 5225 or § 5227, is granted. Respondent bank is directed to turn over to petitioner monies from the account of the judgment debtor at issue, up to the full amount of the outstanding balance of the judgment owed by respondent to petitioner.
The facts demonstrate that plaintiff obtained a judgment against the respondent in the sum of $3,950.23 on January 29, 2001. An information subpoena and questionnaire were served upon respondent bank Astoria Federal. Astoria Federal responded that the judgment debtor and respondent, Fred Anusiak, owned a joint bank account in the approximate sum of $5,639.68.
Plaintiff petitioner's application is unopposed. A review of the file demonstrates that the proceeding was properly commenced including all necessary parties: the bank, Astoria Federal, and the non-judgment tenant, Fred Anusiak. See Mendel v. Chervanyou, 147 Misc.2d 1056, 559 N.Y.S.2d 616. The Court notes that the respondent Fred Anusiak was served personally with the petition on June 12, 2001.
Petitioner contends that it is entitled to the proceeds of the account to satisfy the judgment. This Court agrees with the petitioner that it is entitled to the amount of the Astoria Bank account to satisfy the judgment. Since both the respondent judgment debtor and the respondent non-judgment co-tenant were properly served with the turnover application, their default is deemed an admission and/or concession that the bank account proceeds belong to the judgment debtor.
A default in answering under New York Law establishes for liability purposes the allegations of the pleading (complaint or petition). See McCellelard v. Climax Hoisery Mills, 252 N.Y. 347. The purpose of CPLR §§ 5225 and 5227 is to resolve in a plenary proceeding the respective rights and interests of parties to their respective interests in bank accounts. See Ruvolo v. Long Island R. Co., 45 Misc.2d 136, 256 N.Y.S.2d 279.
A case directly on point on this subject is Mendel v. Chervanyou, 147 Misc.2d 1056, 559 N.Y.S.2d 616. In Mendel, the petitioner judgment creditor claimed that it was entitled to the full proceeds of the joint account which was in the name of the judgment debtor and another person. The court held that a rebuttable presumption exists that each joint tenant owns half of the account.
In Mendel, the court stated that the petitioner judgment creditor had the burden to prove that the presumption should be rebutted to allow the judgment creditor to levy upon more than half of the account. In Mendel, the court held that the judgment creditor failed to rebut the presumption even though the non-judgment debtor tenant defaulted:
"[3] There is thus a need to balance the rebuttable presumption that each joint tenant owns half with the lack of opposition to an attempt to take more than half the account. In overcoming the presumption the burden of proof lies on the one seeking to set aside the presumption, i.e., the judgment creditor ( Household Fin. Corp. v. Rochester Community Sav. Bank, supra., 143 Misc.2d p. 440, 541 N.Y.S.2d 160) . JTJL, Inc. has presented no proof showing that the presumption should be set aside. Moreover, the non-appearance of the non-judgment debtor tenant while obviously diminishing the amount of proof needed does not by itself constitute rebuttal of the presumption. Accordingly, I conclude that based on the unrebutted presumption of equality JTJL, Inc. may collect from the account up to one-half of its proceeds."
This Court disagrees with the Mendel rationale that the judgment creditor must present further proof of the ownership interest of the defaulting non-debtor tenant. The default of the non-debtor tenant establishes that he/she has no ownership interest; this is especially true when the non-judgment tenant is personally served and defaults in answering the allegations of the petition which seeks the full amount of the bank account.
In Household Finance Corporation v. Rochester Community Savings Bank, 143 Misc.2d 436, 541 N.Y.S.2d 160, the Court noted that the procedures set forth in CPLR § 5227 (and consequently CPLR § 5225), whereby the non-debtor co-tenant is put on notice of the claim that the petitioner judgment creditor seeks greater than fifty (50%) percent of the bank account, satisfies the due process requirement of adequate notice. The Court does raise the question of whether the judgment creditor can merely rely upon the default of the non-debtor co-tenant to claim the whole bank account:
"[5] Furthermore, "[e]ven where a joint account is vulnerable to the levy of a money judgment against one joint tenant, such a levy is effective only as to the actual interest of that judgment debtor in the account. ( Olshan v. East N.Y. Sav. Bank, 28 Fsupp 727)." ( Viggiano v. Viggiano, supra, 136 A.D.2d p. 631, 523 N.Y.S.2d 874). The preferred method for determining the actual interests of the co-tenants in the jointly held funds is through a proceeding to determine adverse claims pursuant to CPLR 5239, "rather than have any decision rest upon the presumption alone." ( Denton v. Grumbach, 2 A.D.2d 420, 422, 157 N.Y.S.2d 91, supra). Any method of collecting against a joint bank account which would allow funds to be released solely on the authority of a levy of execution would raise serious due process questions (see generally, Bergdorf Goodman v. Marine Midland Bank, 97 Misc.2d 311, 411 N.Y.S.2d 490; Weinstein v. Gitters, 119 Misc.2d 122, 462 N.Y.S.2d 553; ct. Sitomer v. North River Savings Bank, 196 Misc. 870, 95 N.Y.S.2d 402). The procedure set forth in 5227 whereby the interested parties are put on notice and the non-debtor co-tenant is allowed to come forward with evidence that his interest in the account is greater than one-half adequately protects these due process rights. Similarly, it appears that any time a creditor seeks to obtain more than one-half of the funds in a joint account, the creditor must come forward with evidence to rebut the presumption of one-half ownership. (See Recommendation of the Law Revision Commission to the 1984 Legislature, McKinney's 1984 Session Laws of New York 2990, 3005). However, it is unclear whether a judgment creditor can fully meet this burden in a 5227 proceeding by relying on the failure of a non-debtor co-tenant to intervene pursuant to CPLR 5239.
By requiring a court order the bank has formulated a policy which best protects the interests of the general banking public."
This court answers the question raised by Household Finance in the affirmative and rules that the default of the non-debtor co-tenant in answering the special proceeding commenced pursuant to CPLR §§ 5225 and 5227 adequately rebuts the presumption created by Banking Law § 675 and allows the judgment creditor to reach the whole account. To rule otherwise undermines the purpose of CPLR §§ 5225 and 5227 to determine in an expeditious manner, the rights of various parties to a bank account.
Based upon the foregoing, the Court grants judgment to the petitioner for the amount of the account necessary to satisfy the outstanding judgment and directs the respondent bank Astoria Federal to pay over the amount in the account to petitioner, to satisfy the outstanding balance of the judgment owed.