Opinion
No. 210/2006.
2012-07-9
Christopher John BOOTH, Plaintiff, v. LING–SHAN Li, Defendant.
John Katsandonis, Esq. Katsandonis, P.C., Attorney for the Plaintiff. Ling–Shan Li, Defendant, pro se.
John Katsandonis, Esq. Katsandonis, P.C., Attorney for the Plaintiff. Ling–Shan Li, Defendant, pro se.
OPINION OF THE COURT
SUNSHINE, J.
Introduction
This court is called upon to determine whether, in a post-judgment application in a matrimonial action, upon motion of a judgment creditor (former husband), the court may appoint the judgment creditor as a receiver to sell real property in which the judgment debtor (former wife) has an interest to ensure the satisfaction of the judgment. The judgment debtor, here the defendant, owns a cooperative apartment in New York City. In light of the defendant's previous transfer of assets without consideration despite being served with an order to show cause containing a temporary restraining order, and given the issues regarding her credibility when testifying about her finances in the underlying trial on ancillary issues, the judgment creditor asserts that drastic circumstances exist that warrant the appointment of a receiver to sell the cooperative apartment to satisfy the judgment.
Upon the foregoing papers in this matrimonial action the plaintiff moves by order to show cause, dated January 18, 2012, for the court to grant the following relief: (1) granting plaintiff an order pursuant to CPLR Sections 5106, 5228 and 6401(a) appointing plaintiff Christopher John Booth as receiver of the property located at West 15th Street, New York, New York for the purpose of enforcing and satisfying Special Referee Charmaine E. Henderson's decision after trial related to the issues of equitable distribution, maintenance and child support dated May 8, 2009 and the judgment of ancillary issues dated October 19, 2010. The judgment of ancillary issues awarded plaintiff a distributive award in sum of $173,797.88 for his share of the marital assets together with statutory interest of nine (9%) percent per annum on any unpaid principal; (2) granting plaintiff an award of reasonable counsel fees incurred by plaintiff for the preparation and prosecution of the instant motion in the sum of $5,000.00 payable by the defendant directly to plaintiff's counsel, Katsandonis, P.C.; and (3) granting plaintiff such other and further relief as the court deems just and proper under the circumstances. The order to show cause ordered that pending the determination of the within motion, the defendant Ling–Shan Li was restrained and enjoined from converting, selling, transferring, encumbering and/or hypothecating the property at West 15th Street, New York, New York. The defendant, pro se, opposes the application. The court has on numerous occasions, and in great detail, advised the defendant of her right to retain counsel.
Background
The parties married on January 17, 1989 in Taipei, Taiwan. There is one (1) child of the marriage, born in June 1994; she is now seventeen (17) years old.
The history of this case is quite extensive. This action was commenced by the plaintiff's filing of a summons and complaint on January 4, 2006; he filed an amended verified complaint on January 11, 2006. The defendant filed her verified answer with counterclaims on January 23, 2006, but later withdrew her counterclaims on January 9, 2008, having consented to the plaintiff taking a divorce on the grounds of constructive abandonment under Domestic Relations Law (DRL) Section 170(2). The issue of custody was determined by this court by oral decision on May 4, 2008. Neither party submitted an interlocutory judgment of custody.
This court notes that prior to submission of an interlocutory judgment for custody or thereafter entry of the judgment of divorce, the attorney for the child brought an application on September 29, 2009 requesting, inter alia, to be reappointed attorney for the child and for a change in custody. The application resulted in a hearing and a decision to change custody dated October 27, 2010.
Thereafter, an order of reference dated August 5, 2008, referred on consent the issues of “equitable distribution, child support and maintenance” to Special Referee Charmaine E. Henderson for trial to hear and determine. The trial, which began on August 5, 2008 and concluded on December 4, 2008, resulted in the Decision After Trial On Equitable Distribution, Maintenance and Child Support, dated May 8, 2009, in which Special Referee Henderson directed that the plaintiff receive a distributive award of $173,797.88 for his (1/3) share of the marital assets. In addition, the defendant was to retain possession and ownership of the cooperative apartment she purchased before the marriage and any assets held in her name at the time of the decision, while the plaintiff was to retain possession and ownership of all property held in his name at that time. At the trial, the plaintiff testified on his own behalf and called three (3) witnesses, including the defendant. The defendant testified on her own behalf. Special Referee Henderson's trial decision detailed the defendant's “complete lack of candor or credibility when testifying about her finances, including income and assets.” The decision further states that the defendant transferred money into and out of several bank accounts, despite a temporary restraining order, as well as inconsistencies in her testimony and a lack of evidence supporting her assertions about her finances. The Special Referee's trial decision indicates that the defendant consistently denied that she had made any international funds transfers, even in the face of documentary evidence to the contrary. Furthermore, the defendant claimed to have outstanding debts to her sister, but failed to present any evidence in support of this assertion. A bifurcated judgment of ancillary issues was signed by Referee Henderson on October 19, 2010.
In plaintiff's affidavit, dated January 3, 2012, in support of his motion seeking to enforce and satisfy the judgment of ancillary issues, plaintiff asserts that defendant's transfer of assets in violation of the judgment of ancillary issues, dated October 19, 2010, coupled with the defendant's failure to pay the award of $173,787.88, is a sufficient basis to believe that the judgment will not be satisfied unless a receiver is appointed to sell the defendant's cooperative apartment (her separate property), located at West 15th Street, New York, New York.
The plaintiff also contends that the defendant should be responsible for paying his legal fees in the amount of $5,000.00 for having to bring the instant order to show cause for enforcement. He asserts that the instant motion would be unnecessary if not for the defendant's wilful refusal to pay the judgment amount and further asserts that there is no reason why she should not be able to pay.
The defendant opposed plaintiff's order to show cause to enforce the equitable distribution judgment by affidavit in opposition, dated April 9, 2012, in which she disputes the calculation of child support on the grounds that her earnings from 2001 to 2010 were some $30,000.00 to $60,000.00 less than the $79,200.00 figure attributed to her by the Special Referee. The defendant contends that her evidence in support of this proposition, consisting mostly of alleged debts to family members, was denied. Furthermore, the defendant asserts that she has been unfairly characterized as an abusive, “bad” mother and a “big spender.” With respect to the appointment of a receiver for the property located at West 15th Street, New York, New York, the defendant asserts that the property is her primary residence with her daughter, who stays there “about 12 days every 2 weeks at present time” and that the property was the child's primary residence growing up. The plaintiff presently has physical custody of the parties' daughter after a post-judgment hearing and application.
Discussion
Appointment of a Receiver
Plaintiff's request for the appointment of a receiver was made pursuant to CPLR Sections 5106, 5228 and 6401(a). In determining whether receivership is an appropriate remedy in a given action, the court must first assess the factual context of a given situation to deduce which section of the CPLR permits the court to grant relief.
Receivership pursuant to CPLR Section 6401 can be distinguished from receivership pursuant to either CPLR Section 5106 or CPLR Section 5228 in that it results in only a temporary receivership, designed to “protect property during the pendency of the action,” as opposed to selling the property to satisfy a judgment ( see Seigel, Practice Commentaries, McKinney's Cons Law of NY, Book 7B, CPLR C5228:4 [1997] ). Furthermore, receivership pursuant to CPLR Section 5228 can be distinguished from receivership pursuant to both CPLR Sections 6401 and 5106 in that the latter two (2) provisions “address specific property that is the subject matter of the lawsuit itself and neither is available, therefore, in an action for money only.” ( Id.). Therefore, only “the CPLR Section 5228 receivership, addressed to the money judgment, is designed to get at any property of the judgment debtor so as to sell it and pay the judgment out of the proceeds.” ( Id.)
Given that plaintiff, in an affidavit dated January 3, 2012, moves to be appointed receiver for the enforcement of a money judgment, the court may not rely on CPLR Sections 6401 or 5106 and may only grant relief pursuant to Section 5228. CPLR Section 5228 states:
(a) Appointment of receiver. Upon motion of a judgment creditor, upon such notice as the court may require, the court may appoint a receiver who may be authorized to administer, collect, improve, lease, repair or sell any real or personal property in which the judgment debtor has an interest or to do any other acts designed to satisfy the judgment. As far as practicable, the court shall require that notice be given to the judgment debtor and to any other judgment creditors of the judgment debtor. The order of appointment shall specify the property to be received, the duties of the receiver and the manner in which they are to be performed. A receiver shall have no power to employ counsel unless expressly so authorized by order of the court. A receiver shall be entitled to necessary expenses and to such commissions, not exceeding five percent of the sums received and disbursed by him, as the court which appointed him allows, but if a judgment creditor is appointed receiver, he shall not be entitled to compensation. If a receiver has been appointed, a court making an order directing payment, or delivery, of property shall direct that payment, or delivery, be made to the receiver rather than to a sheriff. Sections 6402, 6403, 6404 and 6405 are applicable to receivers appointed under this subdivision.
Because the property located at West 15th Street, New York, New York was not the subject matter of the lawsuit itself, CPLR Sections 6401 and 5106 are not applicable to this proceeding. Moreover, CPLR Section 6401 is also deemed inapplicable because the movant does not seek a temporary “take and hold” receiver to safeguard the property during a pending action. Since the movant seeks to appoint a receiver for the purpose of selling the property to satisfy a money judgment, CPLR Section 5228 is the only applicable statute.
“The appointment of a receiver pursuant to New York's CPLR 5228(a) is wholly a matter of the court's discretion.” (United States v. Zitron, 1990 WL 13278, [S.D.NY Feb. 2, 1990] ). “In exercising that discretion, however, New York courts have considered such factors as: (1) alternative remedies available to the creditor ... (2) the degree to which receivership will increase the likelihood of satisfaction ... and (3) the risk of fraud or insolvency if a receiver is not appointed.” ( Id.). Consideration of these factors bolsters the notion that a motion to appoint a receiver should only be “granted ... when a special reason appears to justify one.” ( see Seigel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5228:1 at 324). In fact, the Appellate Division, Second Department has held that appointment of a receiver is “a drastic remedy, and should be invoked only when the record establishes that this remedy is necessary and appropriate.” Rogers v. Rogers, (190 A.D.2d 720, 593 N.Y.S.2d 299 [2 Dept.1993] ).
With regard to the first factor, whether alternative remedies are available to the creditor, “appointment should not be made unless some greater benefit to the judgment creditor than that which could be secured by other available procedures can be anticipated.” (3 New York Adv.Comm.Rep., 279 at 284 [1959] ). In Manno v. Manno, (224 A.D.2d 395, 401 [2 Dept., 1996] ), the Appellate Division, Second Department vacated an order permitting the sequestering of a defendant's individual retirement account where he failed to pay all of his child support obligations. There, the defendant did make his child support payments despite losing his job, and only failed to pay his child's educational expenses because he was unaware he had to do so. Given that the defendant likely would have paid his obligations had he known about them, the last resort of receivership was not necessary.
However, in Lekutanaj v. Lekutanaj, (234 A.D.2d 429, 431 [2 Dept.,1996] ), the Appellate Division, Second Department found no error in the decision of the lower court to appoint a receiver of a father's real estate properties. There, the defendant-father “demonstrated propensity to remove and dissipate marital assets, to be less than forthcoming regarding his finances, and to disregard provisions of court orders and judgments which he was able to comply with.” ( Id.). Therefore, the court felt it proper that his property be liquidated to satisfy his obligations. Furthermore, appointment has been deemed appropriate where the payor has a history of noncompliance with an obligation to pay temporary maintenance and child support and where there were threats to sell property in which the judgment creditor had an interest. ( see Catrone v. Catrone (92 A.D.2d 559, 459 N.Y.S.2d 306 [2 Dept.1983] ); Peters v. Peters (127 A.D.2d 575, 511 N.Y.S.2d 374 [2 Dept.1987] ).
In the case at bar, the defendant, Ling–Shan Li, has shown a lack of credibility and candor when testifying about her finances and transferred assets in violation of court orders, thus the appointment of receiver to sell the property located at West 15th Street, New York, New York, may very well be a reasonable exercise of the court's discretion. However, at this juncture, given that receivership is a drastic remedy, plaintiff has not sufficiently demonstrated that receivership is the best available remedy for the judgment-creditor plaintiff.
No doubt, the defendant has demonstrated credibility issues throughout this action. She has failed to testify accurately or credibly concerning her finances. The Special Referee's decision indicates that the defendant repeatedly denied that she rented rooms in her condominium apartment, despite testimony from two (2) witnesses who corroborated the plaintiff's testimony that they rented two of the three bedrooms in that condominium. Furthermore, the defendant admitted that she transferred assets held in her name after a temporary restraining order went into effect on January 18, 2006 with the plaintiff's filing of an order to show cause. The record shows that she transferred $100,000.00 from her ING Direct account on January 30, 2006, and closed that account on February 3, 2006. The defendant also denied that she made any international funds transfers, despite the fact that her JPMorgan Chase account shows an international funds transfer of $200,000.00 on February 3, 2006 to her sister. Additionally, the defendant purchased undeveloped land in Colorado in 2006 and in Arizona in 2007 and 2008, but failed to list these properties as assets in her updated affidavit of net worth.
Unlike in Manno, where the father was unaware of his child support obligations, defendant Ling–Shan Li has had knowledge of her obligations for almost two (2) years, since entry of the judgment of divorce and judgment of ancillary issues entered on October 22, 2010. The facts of the case at bar are more similar to Lekutanaj, where the defendant-father transferred assets to undermine court orders and lacked credibility regarding his finances. The defendant in this case has done the same by transferring $100,000 from her ING account after the court issued a temporary restraining order, denying that she rented rooms in her cooperative apartment and denying that she made an international transfer to her sister. Furthermore, defendant Ling–Shan Li's failure to pay the equitable distribution award is similar to the husbands' failure to meet child support obligations in Catrone and Rogers, both cases in which a receiver was deemed appropriate.
The defendant has failed to acknowledge the trial decision and the judgment of ancillary issues of Referee Henderson. It has not been appealed and it is Law of the Case, and thus “... binding not only on the parties, but on the court as well.” ( seeSiegel, N.Y. Practice, 4th Ed., Section 448, at 756; People v. Evans (94 N.Y.2d 499, 706 N.Y.S.2d 678 [NY 2000] )). She has not made any payments in an attempt to satisfy the judgement. Rather, defendant simply argues that the judgement of ancillary issues and the underlying decision are incorrect in the calculation of her income. It must be noted that the referee held that “[t]he mother's testimony about her finances was evasive, contradictory and completely unreliable.” The referee also indicated that the decision regarding equitable distribution of the marital assets was influenced by “the wife's transfer of assets without consideration when served with the order to show cause containing a temporary restraining order, her complete lack of candor or credibility when testifying about her finances ... and the arguable wasteful dissipation of marital assets through her “day trading” in the stock market.”
While it is apparent that it would be reasonable and within the court's discretion to appoint a receiver in this case, plaintiff has at this time presented no evidence, other than conclusory statements, indicating that any other adequate remedies have been explored. There is no record that plaintiff has attempted to attach a bank account of the defendant's to satisfy the equitable distribution award. Without evidence in support of the assertion that there is no adequate remedy other than receivership that would result in satisfaction of the judgment, the court cannot employ such drastic measures.
Even assuming that there is no other adequate remedy which would result in the satisfaction of plaintiff's judgment, plaintiff also at this juncture has failed to meet the burden of proof regarding the issue of whether receivership will increase the likelihood of satisfaction of the judgment. With regard to that issue, the homestead exemption plays a significant role. CPLR Section 5206(a) provides that specified “property ... not exceeding one hundred fifty thousand dollars for the counties of Kings, Queens [and] New York ... in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment.”
CPLR Section 5206(a) was derived from the Homestead Act of 1850, which “provided that a lot of land with one or more buildings thereon not exceeding $1000 in value owned and occupied as a residence by a householder having a family' could be exempted from an execution.” In re Feiss, (15 B.R. 825, 826 [Bkrtcy.NY, 1981] ). “There appears to have been little need for judicial definition of the term [homestead].” In re Galcia's Estate, (299 N.Y.S.2d 723, 725 [N.Y.Sur., 1969] ). The main point illustrated by the courts has been that “... the exemption of the land from sale, upon execution, depends not only upon the exemption notice filed and recorded, but upon the fact that the plaintiff, at the time of sale was a householder, having a family in the actual occupation of the premises.” Cook v. Newman, (8 How. Pr. 523, 523 [N.Y.Sup., 1853] ).
“Included in the list of the types of property that qualify for the homestead exemption is “shares of stock in a cooperative apartment” (CPLR 5206(a)).
The defendant is entitled to a homestead exemption based on the fact that she owns the cooperative apartment located at West 15th Street, New York, New York, and the fact that she uses the property as her principle residence. Furthermore, given that the only evidence in the record with regard to the value of the property is the plaintiff's testimony that the defendant purchased the cooperative apartment for $110,000.00 in 1985, it is unknown whether the sale of the property will result in proceeds in excess of the $150,000 homestead exemption sufficient to satisfy the award to the judgment creditor. Without knowledge of the equity in the property, the court cannot make a decision as to whether a receiver is appropriate.
Accordingly, the plaintiff's motion is denied with leave to renew. An appraisal of the property and lien search must be undertaken before it can be determined that appointment of a receiver to sell the property will likely result in the satisfaction of the judgment, thus making receivership an appropriate remedy. Given that the burden of proof is on the plaintiff, the plaintiff shall be responsible for the costs and scheduling of the appraisal. The temporary restraining order previously in effect, signed by this court on January 18, 2012, preventing the defendant from converting, selling, transferring, encumbering and/or hypothecating the apartment, is continued provided plaintiff moves for further relief consistent with this decision within ninety (90) days from today's date.
Counsel Fees
The issue of counsel fees will be held in abeyance until further action is taken in this matter, pursuant to this decision.
This constitutes the decision and order of this Court.