Opinion
Index Nos. 2023-51513 902427-23
10-13-2023
In the Matter of Shacee Huntley, Petitioner and Judgment Creditor, v. Trustco Bank AND FRANKIE PROPERTY SERVICES LLC, Respondents. DONOVAN RHODEN, Respondent and Judgment Debtor.
Law Office of David Welch, PLLC, Albany (David Welch of counsel), for petitioner. O'Connell and Aronowitz, Albany (Peter A. Pastore of counsel), for Trustco Bank.
Unpublished Opinion
Law Office of David Welch, PLLC, Albany (David Welch of counsel), for petitioner.
O'Connell and Aronowitz, Albany (Peter A. Pastore of counsel), for Trustco Bank.
Denise A. Hartman, Acting Justice of the Supreme Court
In this special proceeding pursuant to CPLR 5225 (b), petitioner and judgment creditor Shacee Huntley seeks a judgment compelling respondent Trustco Bank to turn over $46,139.25 from an account it holds that is owned by respondent Frankie Property Services LLC. For the reasons that follow, the petition is dismissed.
Background
Petitioner obtained a $77,324.02 default money judgment, inclusive of costs and disbursements, in a dog bite action against respondent and judgment creditor Donovan Rhoden and nonparty Car Garden LLC. That default judgment was entered by the Albany County Clerk on July 15, 2021. Petitioner served a restraining notice and information subpoena on nonparty Dreams Made to Work LLC, attention to Rhoden, on March 17, 2022, and a restraining notice on David B Rhoden Corporation (DBR Corp.) on April 5, 2022-two entities petitioner believed Rhoden owned or controlled.
Following denial of his motion to vacate the default judgment, Rhoden disclosed by way of information subpoena responses that, in May 2022, DBR Corp. disposed of a 50% interest in residential real property located at 32 Pulaski Street in the City of Amsterdam, Montgomery County (the Amsterdam property). The other 50% interest in the Amsterdam property belonged to Dreams Made to Work, which interest was not disclosed in the subpoena responses but instead was evident in the warranty deed obtained by petitioner. Further, the deed appears to show that DBR Corp. and Dreams Made to Work co-owned the Amsterdam property from January 2022 until they sold it to nonparty Roberto Rivera in June 2022; Rhoden executed the deed as signatory for both DBR Corp. and Dreams Made to Work. Upon review of cancelled checks alleged to be from the Amsterdam property's closing, petitioner claims that Rhoden deposited the proceeds from that sale into a Trustco bank account.
On January 19, 2023, petitioner served Trustco with a subpoena duces tecum with restraining notice and a copy of a $66,379.40 check from the sale of the Amsterdam property payable to DBR Corp. By email dated February 15, 2023, Trustco advised that it had restrained $8,369.25. Documents responsive to petitioner's subpoena were produced the next day, including a copy of a June 22, 2022 deposit slip. According to that slip, $68,843.89 was deposited into a Trustco bank account held by respondent Frankie Property Services, LLC (Frankie Property), which sum appears comprised of proceeds from the Amsterdam property sale-specifically, the $66,379.40 made out to DBR Corp. and a $2,464.49 check made out to Dreams Made to Work.
Petitioner also obtained a January 2023 account statement purporting to show that, five days after service on Trustco of the restraining notice, $35,000 was wired out of Frankie Property's bank account. The statement further reflects that, on February 2, 2023, $2,770.00 was deducted from Frankie Property's account in a transaction labeled "Capital One Phone Pymt Donovan B Rhoden."
By petition brought on by order to show cause signed March 21, 2023, petitioner seeks a turnover against Trustco in the amount of $46,139.25-according to petitioner, the amount in the account at the time Trustco was served with the restraining notice. Alternatively, petitioner prays for a judgment in an equivalent amount constituting the funds Trustco restrained and failed to restrain after being served the restraining notice.
Conspicuously absent from the petition's ad damnum clause is a request for a judgment finding Rhoden has an interest in Frankie Property's account and compelling Trustco to turnover the funds that are actually in that account-as opposed to damages equivalent to funds that allegedly used to be in that account (see CPLR 5222 [b]; 5225 [b]; 5251). In any event, the allegations that Rhoden acted "in his individual capacity" when he endorsed the checks deposited into Frankie Property's account are conclusory and therefore inadequate to summarily find that Rhoden has a direct interest in that account (see Bingham v Zolt, 231 A.D.3d 479, 479 [1st Dept 1996]).
Trustco joined issue on April 28, 2023, and opposes the petition, arguing that the January 19, 2023 restraining notice did not name Frankie Property, and it cannot be expected to search all of the bank accounts in its system to determine whether a particular judgment debtor has a direct interest in an account. In the alternative, Trustco asserts that the petition leaves open questions of fact that are resolvable only at trial. Frankie Property submitted no opposition to the petition.
Petitioner thereafter replied, appending an unsworn May 1, 2023 letter from Rhoden to the Court stating, among other things, that Frankie Property is an LLC owned by DBR Corp. Petitioner also submitted a "Beneficial Ownership and Certification Form" for Frankie Property, apparently executed by Rhoden on January 11, 2019, listing Rhoden as Frankie Property's 90% equitable owner, "Operating Owner," and bank account opener and controller. Another Trustco beneficial account owner form accompanying petitioner's reply lists Rhoden as president of DBR Corp. and the controller of that entity's Trustco bank account. That form was also signed by Rhoden on January 11, 2019-the same day he signed the same form for Frankie Property's Trustco bank account.
Analysis
"A restraining notice served upon a person other than the judgment debtor or obligor is effective only if, at the time of service, he or she owes a debt to the judgment debtor or obligor or he or she is in the possession or custody of property in which he or she knows or has reason to believe the judgment debtor or obligor has an interest, or if the judgment creditor... has stated in the notice that a specified debt is owed by the person served to the judgment debtor or obligor or that the judgment debtor or obligor has an interest in specified property in the possession or custody of the person served" (CPLR 5222 [b]). As relevant here, "[r]efusal or willful neglect of any person to obey a subpoena or restraining notice... shall be punishable as a contempt of court" (CPLR 5251). Sanctions include damages in the amount the person should have but failed to restrain (see Matter of Bravado Intl. Group Merchandising Servs., Inc. v United States Tennis Assn. Inc., 179 A.D.3d 914, 916 [2d Dept 2020]; see also Matter of Wimbledon Fin. Master Fund, Ltd. v Bergstein, 173 A.D.3d 401, 402 [1st Dept 2019] [limiting award to attorneys' fees], lv dismissed 34 N.Y.3d 1152 [2020]).
To recover damages, petitioner must first demonstrate that, at the time the restraining notice was served, Trustco knew or had reason to believe Rhoden had an interest in Frankie Property's account (see CPLR 5222 [b]). "The fact that a judgment debtor will directly benefit from the payment of [a sum of money] is sufficient to require the party served with the restraining notice to comply with the provisions or be subject to the appropriate legal sanctions" (Ray v Jama Prods., 74 A.D.2d 845, 846 [2d Dept 1980], lv denied 49 N.Y.2d 709 [1980]; accord MacArthur I, Inc. v Fields, 188 A.D.3d 493, 495 [1st Dept 2020]).
The other qualifiers under CPLR 5222 (b) do not apply. Petitioner's proof does not show that Trustco owed a debt to Rhoden personally. And as to a "specified" debt or an interest in "specified" property, the restraining notice identifies only accounts held by DBR Corp. and variations on that name; the notice is silent as to Frankie Property.
Petitioner's proof is inadequate in this regard. Even if Trustco knew or should have known of Rhoden's 90% equitable ownership of Frankie Property, that ownership does not establish as a matter of law that Rhoden had a personal interest in Frankie Property's bank account within the meaning of CPLR article 52 (see Limited Liability Law §§ 601, 607 [b]; Preferred Display, Inc. v CVS Pharm., Inc., 923 F.Supp.2d 505, 509 [SD NY 2013]). Petitioner seems to suggest that, because in June 2022 Rhoden deposited funds from the sale of DBR Corp.'s interest in the Amsterdam property into Frankie Property's account, that account should have been subject to the January 2023 notice to Trustco restraining DBR Corp.'s accounts. But petitioner points to no obligation under CPLR 5222 (b) compelling a bank to comb through the prior transactions of a business entity associated with a judgment debtor but not identified in the restraining notice. Indeed, that job is reserved for the judgment creditor in the course of postjudgment disclosure (see CPLR 5223). Thus, absent specification of Frankie Property in the restraining notice, Trustco had no knowledge or reason to believe that Rhoden had an interest in that entity's account (see CPLR 5222 [b]; compare AXGINC Corp. v Plaza Automall Ltd., 2018 WL 4771886, *6, 2018 U.S. Dist LEXIS 170424, *16-17 [ED NY, Oct. 2, 2018, No. 14-cv-4648 (ARR) (VMS)] [no obligation to restrain property of third party in anticipation of a judicial finding that such party is the judgment debtor's alter ego]; cf. Matter of Arben Corp. v Durastone, LLC, 186 A.D.3d 599, 600-601 [2d Dept 2020] [conclusory assertions of a corporation's alter ego status insufficient to pierce the corporate veil in a CPLR article 52 proceeding]).
Finally, petitioner in her reply papers seeks a default judgment against Frankie Property. Petitioner's application is denied. Petitioner relies on her verified petition to state "the facts constituting [her] claim," which facts are deemed admitted by the defaulting party (see CPLR 3215 [f]; Woodson v Mendon Leasing Corp., 100 N.Y.2d 62, 71 [2003]). Further, the petition on its face seeks relief against Trustco only; Frankie Property's liability goes unaddressed. And nothing in the petition or supporting proof can be read to allege that Frankie Property-as opposed to Trustco Bank-has "actual possession" of Rhoden's assets (Commonwealth of the N. Mariana Is. v Canadian Imperial Bank of Commerce, 21 N.Y.3d 55, 61 [2013] [interpreting CPLR 5225 (b)]). As such, the verified petition and petitioner's documentary proof do not demonstrate her entitlement to relief against Frankie Property (see CPLR 3215 [f]).
Petitioner's remaining arguments have been reviewed and deemed meritless. Trustco's other contentions, to the extent not addressed above, are academic.
Accordingly, it is
Ordered that the petition is dismissed.
This constitutes the Decision and Order of the Court, the original of which is being uploaded to NYSCEF for electronic entry by the Albany County Clerk. Upon such entry, counsel for Trustco shall promptly serve notice of entry on all other parties entitled to such notice.