Opinion
No. 22057/2013.
03-20-2015
AISH HATORAH NEW YORK, INC., Petitioner, v. Jacob FETMAN, Respondent.
Evan R. Shusterman, Esq. Goldberg & Rimberg PLLC New York, Attorneys for Petitioner. Jon A. Lefkowitz, Esq., Brooklyn, Attorney for Responent.
Evan R. Shusterman, Esq. Goldberg & Rimberg PLLC New York, Attorneys for Petitioner.
Jon A. Lefkowitz, Esq., Brooklyn, Attorney for Responent.
Opinion
CAROLYN E. DEMAREST, J.
The following papers read on this motion:Papers Numbered
Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits(Affirmations)Annexed 146–150
Opposing Affidavits (Affirmations) 151–160
Reply Affidavits(Affirmations) 178
Affidavits(Affirmations)
Other Papers (Memoranda of Law)
Tammy Fetman (“Mrs.Fetman”), wife of the respondent and judgment debtor, Jacob Fetman (“Mr.Fetman”), moves for an Order (1) pursuant to CPLR §§ 5222–a(g) and 5239, ordering Aish Hatorah New York, Inc. (“Aish” or “judgment creditor”) to pay Mrs. Fetman awarded costs, reasonable attorney's fees, actual damages, and one thousand dollars, and (2) pursuant to CPLR §§ 5239 and 5240, protecting the assets of Mrs. Fetman and barring judgment creditor from any enforcement of a judgment against any assets other than those of the judgment debtor, Mr. Fetman.
BACKGROUND
On or about October 7, 2014, a judgment was entered against respondent, Mr. Fetman, in the amount of $21,430,641.99. On October 23, 2014, Citibank was served with a subpoena and restraining notice, pursuant to CPLR § 5222(b), which caused the joint bank account of Mr. and Mrs. Fetman to be restrained. Mrs. Fetman states in her affidavit that on November 7, 2014, she mailed an exemption claim form, pursuant to CPLR § 5222–a(c), directly to petitioner's attorney, Evan R. Shusterman, Esq., and hand delivered a copy to Citibank on the same date. Mrs. Fetman annexes a U.S. Postal Service certificate of mailing, postmarked on November 7, 2014, as Exhibit C to her affidavit. Mr. Shusterman states in his affirmation, dated January 30, 2015, that he never received the claim exemption form directly from Mr. Fetman but that he only received a letter from Citibank on November 24, 2014, which attached the claim exemption form and stated that judgment creditor had until that same date, November 24, 2014, to object in writing to the judgment debtor's claim or the funds would be released. Mr. Shusterman states that he faxed a letter to Citibank on that same date objecting to the exemption claim form.
The exemption claim form, signed by Mr. Fetman, claimed that the Fetmans' joint account was exempt because it contained income earned in the last 60 days, ninety percent of which is exempt, and because all funds in the account belonged to Mrs. Fetman, who is not a judgment debtor. Mrs. Fetman claims in her affidavit that all of the funds in the account, which she states amounted to $4,393.21 at the time of the restraint, belong to her and constitute income earned by her during the 60 days before the restraint. As proof of the exemption, Mrs. Fetman attached an employee pay history report from her employer, Merkaz the Center, Inc. (“Merkaz”), showing payments made to her from August 15, 2014 through October 30, 2014, as well as her bank account statement for the period October 22 to November 2, 2014 showing two electronic payments into the Fetmans' joint savings account from Merkaz, totaling $2,542.46.
Aish's grounds for objection to the exemption claim form include the observation of an alleged inconsistency between the employee pay history report and the Fetmans' bank account statement, particularly, that while the bank statement shows an ACH electronic payment from Merkaz to Mrs. Fetman, the employee pay history shows a check number for the same dates as the ACH electronic payments. Judgment creditor also objected that pay stubs were required to confirm the veracity of the Fetmans' claim because Aish's underlying claim is that Mr. Fetman is an alter ego of Merkaz, the entity which is purportedly paying Mrs. Fetman's salary.
CPLR § 5222–a(d) requires the judgment creditor to serve the banking institution and the judgment debtor with its motion papers objecting to the exemption claim within eight days after the date postmarked on the envelope containing the executed exemption claim form. Petitioner claims that, because the exemption claim form was postmarked November 7, 2014 and it did not receive notice of it until November 24, 2014, it could not have had enough time to file and serve a motion. Judgment creditor further states that because of the relatively small sum in the Fetmans' account, it made the strategic decision not to file any motion. Mr. Shusterman states in his affidavit that, in response to his fax, he received a call from Citibank and was informed that if no motion papers were received by December 15, 2014, Citibank would release the restrained funds (see CPLR 5222–a[e] ). No representation has been made by either party regarding whether the funds have since been released.
DISCUSSION
CPLR § 5222–a(c)(4) provides that “[w]here the executed exemption claim form sent to the judgment creditor is accompanied by information demonstrating that all funds in the account are exempt, the judgment creditor shall, within seven days of the postmark on the envelope containing the exemption claim form and accompanying information, instruct the banking institution to release the account”. “Information demonstrating that funds are exempt includes, but is not limited to, originals or copies of benefit award letters, checks, check stubs or any other document that discloses the source of the judgment debtor's income, and bank records showing the last two months of account activity ” (CPLR § 5222–a[c][4] [emphasis added] ). CPLR § 5222–a(c)(4) further provides that “[i]f the judgment creditor fails to act in accordance with this subdivision, the judgment creditor shall be deemed to have acted in bad faith and the judgment debtor may seek a court award of damages, costs, fees and penalties provided for in subdivision (g) of this section. CPLR § 5222–a(g) provides that where “the court finds that the judgment creditor disputed the claim of exemption in bad faith ... the judgment debtor shall be awarded costs, reasonable attorneys fees, actual damages and an amount not to exceed one thousand dollars.”
Mrs. Fetman claims that Aish acted in bad faith because it did not instruct Citibank to release the funds within seven days of November 7, 2014, which is the date that the claim exemption form was postmarked, and seeks an order awarding her costs, reasonable attorneys fees, actual damages, and one thousand dollars. Aish argues that as a non-party to the underlying action, Mrs. Fetman does not have standing to make this motion pursuant to CPLR § 5239. Aish argues that CPLR § 5239 requires that Mrs. Fetman commence a special proceeding against the judgment creditor. Although judgment creditor is correct in that Mrs. Fetman should have begun a special proceeding under CPLR § 5239 and has no standing in this action, both the judgment creditor and judgment debtor have been given notice and are before this Court. Since the merits have been argued, the Court will treat this motion as a CPLR § 5239 proceeding (see Bank of New York v. Triangle Meat & Provisions Corp., 83 A.D.2d 873 [2d Dept 1981] ; Cornell v. T.V. Development Corp., 50 Misc.2d 422 [Sup Ct Nassau County, 1966] ; see also CPLR § 103[c] ).
Judgment creditor argues that it did not act in bad faith by failing to instruct Citibank to release the funds because Mrs. Fetman did not provide adequate proof demonstrating that all of the funds in the account were exempt. CPLR § 5222–a(c)(4) provides that the judgment creditor is required to instruct the bank to release the restrained funds only when the exemption claim form is accompanied by information demonstrating that all of the funds are exempt. Judgment creditor points out that Mrs. Fetman only provided bank statements covering the period of October 22, 2014 through November 2, 2014. CPLR § 5222–a(c)(4) states:
Information demonstrating that funds are exempt includes, but is not limited to, originals or copies of benefit award letters, checks, check stubs or any other document that discloses the source of the judgment debtor's income, and bank records showing the last two months of account activity (emphasis added).
The use of the conjunctive “and” in the statute, preceded by a comma separating the list of alternative forms of documents establishing the source of exempt funds from bank records, clearly indicates that, in addition to some form of proof as to the source of funds alleged to be exempt, bank records of account activity for the prior two months must be provided in order to satisfy the statutory prerequisites for recovery of damages and the penalty for bad faith in failing to instruct the bank to release funds that are demonstrated to be exempt. Such interpretation is logical, and consistent with the statutory purpose to place upon the judgment creditor the obligation to affirmatively act to release its restraint of exempt funds, in that, without such bank records, the judgment creditor would not be able to determine that the funds in the account were actually exempt funds (cf. Midland Funding LLC v. Singleton, 34 Misc.3d 798, 802 [Nassau Dist Ct, 2011] ; see also, LR Credit 22, LLC v. Eggleston, 37 Misc.3d 653, 660 [Jamestown City Ct 2012] ) . As Mrs. Fetman failed to provide bank records showing account activity for the two months prior to the restraint, her submission was insufficient under the plain language of the statute. The bank statement provided by Mrs. Fetman show only two transfers made by Merkaz into the Fetmans' Citibank savings account, on October 22, 2014 and November 2, 2014 . No proof was furnished with the claim exemption form showing that the remaining funds in the account were exempt . Under these circumstances, the judgment creditor was entitled to challenge the judgment debtor's claim of exemption because the documentary proof was insufficient to establish the exemption (see Midland Funding LLC v.. Singleton, 34 Misc.3d at 802 ). Although judgment creditor did not make a motion to dispute the exemption, it was entitled to object to the claim of exemption in writing, as it did on November 24, 2014. Its failure to make a motion, as required by CPLR § 5222–a(d), should have resulted in automatic release of the funds by the bank. There is no indication that this has not happened. Mrs. Fetman is, therefore, not entitled to recover damages, attorney's fees, or the statutory penalty under CPLR § 5222–a(d).
The Court recognizes that this conclusion diverges from the opinion of Justice Meddaugh in Midland Funding LLC v. Roberts, 37 Misc.3d 617, 619 [Sup Ct, Sullivan Co 2012] in which the court stated “CPLR 5222–a does not require judgment debtors to supply any supporting documents with their exemption claim form”. Although I agree that such documentation is not necessary to validate the claim form, or relieve the judgment creditor of its burden to challenge the claimed exemption by initiating a proceeding pursuant to CPLR § 5240, (see CPLR § 5222–a [d] ), this Court finds that submission of documentation supporting the claim of exemption, together with bank records of account activity for the preceding two months, is a precondition to the statutory presumption of bad faith and the right to recover damages for the judgment creditor's failure to direct release of the funds within seven days. It is further noted that this Court disagrees with the statement in Midland (at 618) that “[j]udgment creditors must notify a judgment debtor that the judgment debtor's bank account has been restrained, advise the judgment debtor that certain income is exempt from execution, list the sources of income that are exempt, and provide the judgment debtor with an exemption claim form ...”. The statute actually places this responsibility upon the bank. The obligation of the judgment creditor is to provide the necessary claim forms to the bank when serving the restraining notice. It is the bank that must notify the judgment debtor (see Cruz v. TD Bank, N.A., 22 NY3d 61, 67, 76 [2013] ).
In any event, the sum of these two deposits, $2,542, would be substantially covered by the statutory $2500 exemption (CPLR § 5222 [h] ), to be honored by the bank irrespective of the judgment creditor's objection.
Judgment creditor received additional bank records on or about December 12, 2014, pursuant to a subpoena to Citibank, that do show that the earlier payments from Merkaz to Mrs. Fetman were deposited into the Fetmans' joint savings account. However, these bank records were obtained by judgment creditor after it made its written objection to Citibank on November 24, 2014.
Mrs. Fetman also seeks an order, pursuant to CPLR § 5240, protecting her assets and barring the judgment creditor from enforcing any judgment against assets that belong to her as opposed to her husband, the judgment debtor. “CPLR § 5240 is an omnibus section empowering the court to exercise broad powers over the use of enforcement procedures” (Paz v. Long Island R.R., 241 A.D.2d 486, 587 [2d Dept 1997] ). “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 the levy of a money judgment by the judgment creditor of one of the joint tenants” (see Viggiano v. Viggiano, 136 A.D.2d 630, 630 [2d Dept 1988] ). The levy is effective only with regard to the actual interest of the judgment debtor in the account, and, unless rebutted, the legal presumption that a non-debtor, co-tenant retains one half interest in the joint account remains (see Velocity Investments, LLC v. Astoria Federal Savings & Loan, 12 Misc.3d 1184[A], *4 [Nassau Dist Ct, 2006] ). Mrs. Fetman's assets in the Fetmans' joint account are protected to the extent of her actual interest in the account. However, in light of the fact that judgment creditor has not exercised its right to object to the claimed exemption, there is currently no restraint on the joint bank account. To the extent that judgment creditor makes any future attempts to collect its judgment from the Fetmans' joint accounts, a hearing will have to be held to determine the actual interest of the judgment debtor in the account, as opposed to Mrs. Fetman's interest, as she is not a judgment debtor (see Velocity Investments, LLC, 12 Misc.3d at *5). It is noted that this Court has directed both Tammy and Jacob Fetman to appear for deposition on March 26, 2014 at 2 PM at the office of petitioner's counsel in response to subpoenas duces tecum served by judgment creditor.
CONCLUSION
Mrs. Fetman's motion, pursuant to CPLR §§ 5222–a(g) and 5239, ordering Aish Hatorah New York, Inc. to pay Mrs. Fetman costs, reasonable attorney's fees, actual damages, and one thousand dollars, is denied. The motion pursuant to CPLR § 5240 is denied, without prejudice, as moot at this time, subject to a hearing regarding any subsequent effort by petitioner to levy against assets alleged to belong exclusively to Tammy Fetman.
The foregoing constitutes the decision and order of the Court.