Summary
In Lang, an attorney attempted to execute a judgment against her former client for unpaid legal fees for representation in a criminal case, on funds that her former client transferred to the State of New York to be paid as restitution for his criminal activity, which were being held in escrow pending the outcome of further criminal proceedings.
Summary of this case from Anderson Kill P.C. v. Anderson Kill P.C.Opinion
September 2, 1999
Petitioner appeals from an order of the Supreme Court, New York County (Lorraine Miller, J.).
Steve S. Efron, attorney for petitioner-appellant and defendant-appellant.
Jacqueline B. Berkowitz, of counsel (Elizabeth T. Bogren, on the brief, Eliot Spitzer, Attorney General, attorney) for respondent-respondent and plaintiff respondent.
MILTON L. WILLIAMS, J.P., PETER TOM, RICHARD W. WALLACH, JOHN T. BUCKLEY, JJ.
This appeal involves an attorney's attempts to recover her legal fees from funds paid by her client to the State as restitution for his criminal activity. The question presented is whether these funds, held in escrow post-judgment pending the outcome of further proceedings, were still the client's and available to him to pay the legal fees incurred in connection with his appeal and other proceedings.
These consolidated appeals arise from the 1993 criminal conviction of present defendant-appellant Anthony Consalvo, a podiatrist, upon his plea of guilty of grand larceny in the fourth degree, in connection with his submission of false billings for reimbursement under New York's Medicaid program. Consalvo's plea incorporated restitution of $500,000 to be paid prior to sentencing, and he was promised a sentence of six months incarceration and five years' probation. Prior to sentencing, Consalvo retained new counsel, present petitioner Judy Lang, who immediately moved to vacate his plea. She argued that the restitution was coerced and not subject to imposition prior to an actual assessment of the victim's losses. In the alternative, she sought a restitution hearing to determine the State's actual losses. Nevertheless, at the court's direction (Steven Barrett, J.) the funds were turned over to the Attorney General. Subsequently, that court denied Consalvo's motion. The court relied on a statistician's affidavit extrapolating from Consalvo's six fraudulent claims and losses therefrom, and indicating that the State's losses exceeded $571,000.
By judgment rendered November 4, 1994, Justice Barrett sentenced Consalvo in accordance with the plea agreement, including the restitution. That day, Consalvo took an appeal from than judgment, including the sentence of restitution. By orders also entered November 4, 1994 (Rosenberger, J.), this Court granted bail pending appeal, and, on an interim basis, stayed execution of judgment as to the $500,000 restitution, directing that these funds be held in escrow by the Attorney General pending determination of the appeal.
Subsequently, we unanimously affirmed the judgment of conviction (People v. Consalvo, 222 A.D.2d 302), specifically rejecting any challenge to the voluntariness of all aspects of the plea. We also specifically found that Consalvo had admitted wrongfully taking from the State the amount that was the subject of restitution, that he had agreed to this amount in negotiating his plea, that the People's proof demonstrated that he had wrongfully obtained in excess of this amount, and that the court had properly set restitution in this amount without first conducting a hearing. This Court found the bargained-for sentence to be lenient. The Court of Appeals ( 89 N.Y.2d 140) found the plea to have been voluntary. However, that court concluded that, in the absence of trial evidence establishing the pecuniary loss to which restitution is to be applied the defendant, upon request, was entitled to a hearing under Penal Law § 60.27 to determine the precise amount. The Court of Appeals remitted for a restitution hearing. The practical effect of that order, as was subsequently noted by the hearing court, is that the plea agreement was found to be valid, including Consalvo's agreement that he would pay restitution, and the judgment, as such, was basically affirmed, but a precise amount had to be determined for restitution.
The Court of Appeals denied a post-argument request for return of the funds pending the hearing, but referred the matter to the hearing court. The hearing court (Barrett, J.) denied a similar application on December 10, 1996 and ordered that the funds remain in escrow pending a final order of restitution. Counsel moved for an order of attachment, but the court directed "that the check previously delivered . . . to the Attorney General's Office in satisfaction of the plea agreement should remain in the Attorney General's control . . .". Consalvo then commenced an article 78 proceeding before this Court, seeking an order prohibiting Justice Barrett from conducting the restitution hearing. We unanimously dismissed the petition (Matter of Consalvo v. Barrett, 237 A.D.2d 999). After the subsequent restitution hearing, Justice Barrett issued an extensive and detailed decision and order on or about December 10, 1997. He. concluded that Consalvo had overbilled the State in excess of $500,000, and directed that the escrowed funds be released to the State.
During the pendency of the criminal matter, the civil proceedings between the parties were moving along a parallel track. In 1994, the State had commenced the present civil action to recover $610,000 in restitution for monies had and received, overpayment of public funds and unjust enrichment, in addition to seeking treble damages pursuant to Social Services Law § 145-b. In June 1995, the State moved for an order of attachment pursuant to CPLR 6201 (1), although, after numerous adjournments, the matter was marked off the calendar. On December 5, 1996, present petitioner Lang filed with the County Clerk a confession of judgment from Consalvo in the amount of $100,918.09, purportedly reflecting legal services rendered since counsel's entry into the criminal case. This was just prior to the December 10, 1996 criminal proceeding in which Justice Barrett denied counsel's application to release the funds and directed that they remain in the custody of the Attorney General. She then filed an execution with the sheriff, served a restraining notice on the State on December 23, 1996, and obtained and filed a second confession of judgment and execution in the amount of $55,926.97 in March 1997 for additional legal fees. By order entered April 7, 1997, another Justice (Lorraine Miller, J.), granted the State's motion made under CPLR article 62 to attach the funds.
In June 1997, Lang commenced a turnover proceeding pursuant to CPLR 5225, 5227 N.Y.C.P.L.R., 5239 N.Y.C.P.L.R. and 6221 N.Y.C.P.L.R. against the State to establish the priority of her liens against the funds and to compel the State to release sufficient funds to satisfy her judgments, purportedly reflecting her legal fees, against Consalvo. Petitioner Lang claims priority of her liens since the confessions of judgment were filed prior to the issuance of the States order of attachment. In cross-moving to dismiss the petition, the State contended that Lang, as a judgment creditor, could enforce only against property that Consalvo could legally assign or transfer, a capacity Consalvo lacked with respect to the escrowed funds.
By order entered November 28, 1997, presently on appeal, the court dismissed the petition, finding that Consalvo had no Interest in the funds capable of assignment, by virtue of the order directing their payment into escrow for subsequent payment to the State. Moreover, the State's interest in the funds was superior to that of Lang, who was simply another judgment creditor.
In September 1997, Consalvo moved pursuant to CPLR 1312 (4) to modify the April 7, 1997 order of attachment to release funds for reasonable living expenses and attorneys' fees. This motion was denied by order entered December 4, 1997, also presently on appeal. The court concluded that since this was not a civil forfeiture action under CPLR article 13-A, relief under CPLR 1312 (4) was unavailable. Rather, as noted above, the State had been granted attachment under article 62. Although CPLR 6223 allowed for modification of an order of attachment, there was no provision specifically governing applications by the debtor for reasonable living expenses or attorneys' fees, unlike CPLR 1312 (4). Moreover, any modification, under either CPLR 1312 N.Y.C.P.L.R. (4) or 6223, would have been precluded insofar as Consalvo retained no rights to the funds, which had already been awarded to the State by Justice Barrett's restitution order.
We agree with the motion court in both orders under review. CPLR 5225 (b), under which Lang sought to establish the priority of her liens, turns on whether Consalvo has an interest in the property held by the State. A judgment creditor may seek release of "money or other 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".
Consalvo had no interest in any portion of the property at the time Lang perfected her interest. Lang contends that she has a superior interest to that of the State insofar as she sought attachment first. However, this ignores the fact of the extant criminal judgment. It is not a judgment of civil attachment, to be sure; but by virtue of the criminal judgment, which incorporated the restitution, the State was entitled to the funds (Hanrahan v. Albany County Probation Dept., 119 A.D.2d 334, affg 128 Misc.2d 604). This fact belies Lang's contention that the funds were seized without lawful process (compare, McClendon v. Rosetti, 460 F.2d 111; Matter of Caggiano v. Frank, 44 A.D.2d 828 affg 78 Misc.2d 187; City of New York v. Cosme, 67 A.D.2d 852 [cases addressing summary seizures of property at time of arrest]). The Court of Appeals basically affirmed the judgment, but remanded only for purposes of documenting the calculation by which the amount was determined. Hence, the fact of the State's entitlement to significant restitution was established by judgment. Notably, the funds were not paid into escrow to await a determination of entitlement; the State's entitlement to restitution was already established. Justice Barrett ordered that the funds be paid to the Attorney General as restitution, and only later was an escrow status created to await the formality of calculating an exact amount due the State. These funds were not merely "earmarked"; the State owned them, subject to a potential refund of whatever portion exceeded its losses. When the actual amount of restitution was determined, the State, as escrowee, was ordered to transfer the funds, as per the prior judgment of the court, for formal application to Consalvo's Medicaid thefts. Contrary to Lang's argument, there was nothing procedurally amiss about this. She simply was left without a means to attach the State's own money to satisfy her legal bill.
Further, while the first part of CPLR 5225 N.Y.C.P.L.R. (b) indicates that the right to seek a release is triggered when the judgment debtor — here Consalvo — has "an interest" in the property, this is qualified later by the further requirement that the judgment debtor be entitled to possession of "such property" or that the judgment creditors s rights to that property be superior to those of a transferee. The statute treats the property in a unified and complete manner — it pointedly does not allow release when the interest is in "any portion" of the property, or some similar device for segregating parts of the property. Manifestly, it has never been seriously disputed that Consalvo has no interest in "the" property — i.e. "the" $500,000. At best, at some point between the Court of Appeals remand for a hearing to determine the exact amount of restitution and the conclusion of that hearing, he had a theoretical interest, which was really a contingent rather than a present or actual interest, in that portion of the property that, hypothetically, might not be part of the restitution should the hearing court determine that the State's actual losses were less than $500,000. Whether or not Lang might have sought release of that portion of the property is not before us and, in any event, is entirely moot, insofar as it was determined that the State's losses far exceeded $500,000. That determination by the hearing court extinguished any potential future or contingent interest of the judgment debtor's and, necessarily, Lang's ability to attach the escrowed funds.
Nor is it dispositive for Lang's purposes that the funds were held in escrow. The Attorney General was escrowee, but the State was also a judgment creditor, and the escrow was solely for this purpose of satisfying that judgment. Again, the fact that Consalvo retained no interest in the escrowed funds is fatal to Lang's argument that escrow accounts are attachable (compare, Gala Enters. v. Hewlett Packard Co., 970 F. Supp. 212; Koroleski v. Badler, 32 A.D.2d 810; U.R.C. v. Applied Images, 106 Misc.2d 1034)
Finally, this was not a civil forfeiture proceeding commenced pursuant to CPLR article 13-A, so that its provisions do not govern a modification of the order issued under article 62.
Accordingly, the order of the Supreme Court, New York County (Lorraine Miller, J.). entered November 28, 1997, denying and dismissing the petition for a judgment pursuant to CPLR 6221 and 5239 N.Y.C.P.L.R. declaring petitioner Lang's rights to funds paid into escrow by non-party Anthony Consalvo pursuant to the order of the same court and Justice entered April 7, 1997 in State of New York v. Anthony Consalvo, and the order of the same court and Justice entered December 4, 1997, denying defendant Consalvo's motion for a modification of the April 7, 1997 order so as to release funds for expenses and attorneys' fees, should be affirmed, without costs.
All concur.
THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.