Opinion
2011-0133.
Decided June 29, 2011.
THE CROSSMORE LAW OFFICE, By: Edward Y. Crossmore, Esq., Attorneys for Petitioner, Ithaca, New York.
THE LAMA LAW FIRM, By: Luciano Lama, Esq., Attorneys for Respondents, Ithaca, New York.
DECISION, ORDER JUDGMENT
The petitioner, Tricycle Enterprises, Inc., has brought this special proceeding for an order or judgment directing the respondents to pay the balance of a 401(k) retirement account to the petitioner's special counsel for application against an outstanding judgment held by the petitioner against the respondents, Jack Roscoe and Cayuga Millwork, Inc. The respondent, Jack Roscoe, has submitted an answer to the petition and a cross-motion seeking dismissal of the petition. The petitioner has submitted reply papers in opposition to said cross-motion.
The petitioner has alleged, and the respondent, Jack Roscoe, has admitted through his answer, that it obtained a judgment against the respondents, Jack Roscoe and Cayuga Millwork, Inc., on or about September 30, 2006. The unpaid principal balance on said judgment is at least $188,470.02. The record reflects that the petitioner's counsel, Edward Crossmore, has been appointed special counsel by the bankruptcy court having jurisdiction over the petitioner's Chapter 11 bankruptcy case to enforce said judgment on behalf of the petitioner/debtor in possession.
The petitioner has alleged, through its counsel, that on or after January 1, 2002, Jack Roscoe transferred various sums into a 401(k) account that his employer, respondent Cayuga Millwork, Inc., had established. Jack Roscoe was the president, sole shareholder and sole director of said corporation that established said 401(k) account. The 401(k) account which is the subject of this proceeding is administered and held by the respondent, Paychex, Inc., doing business as Paychex Retirement Services. The petitioner has also alleged that the amount currently held in said 401(k) account is in excess of $44,761.16. The petitioner has attached to its supplemental affidavit as Exhibit C a copy of the account statement for Mr. Roscoe's 401(k) account for the period ending January 27, 2011.
The petitioner now seeks relief pursuant to the provisions of CPLR 5225, 5227 and 5239 contending that said 401(k) account is subject to CPLR Article 52 judgment enforcement procedures and requests an order or judgment directing turnover or payment of the balance in said account to petitioner's counsel to apply against the petitioner's unsatisfied judgment. The petitioner argues that, to the extent the 401(k) account is considered a trust under CPLR 5205 [c] [2], said account is not exempt property pursuant to CPLR 5201 [c] [5] because 1) the respondents, Jack Roscoe and Cayuga Millwork, Inc., transferred the funds to said 401(k) account after a date that is 90 days before the commencement of the action that resulted in the underlying judgment that the petitioner seeks to enforce, and/or 2) the transfers into the account are fraudulent under Article 10 of the Debtor Creditor Law. Petitioner further alleges that the transfers into the 401(k) account by the respondents are fraudulent under Article 10 of the Debtor and Creditor Law because they were made after the commencement of the action that resulted in the judgment which the petitioner seeks to enforce and the transferors did not receive fair consideration for the transfers as the term fair consideration is defined under New York Debtor and Creditor Law Section 272.
The Court notes that subsequent to the return date that was set for submissions by the parties, the petitioner filed a stipulation signed by the parties and/or their counsel indicating that the petitioner has agreed to discontinue the proceeding as against the respondent, Paychex, Inc., and that Paychex, Inc. has agreed that it will process any distribution request from Jack Roscoe as may be directed pursuant to any order issued by this Court in this special proceeding.
The respondent, Jack Roscoe, opposes the relief requested by the petitioner and has cross-moved seeking dismissal of the petition asserting that Mr. Roscoe's 401(k) account is a qualified account under the Employee Retirement Income Security Act of 1974 (ERISA) and that, pursuant to federal law, said account is exempt from attachment. Mr. Roscoe also argues that said account is exempt from attachment under the provisions of CPLR 5205 [c] [2] and that the exception for fraudulent transfers does not apply in this instance.
In support of his cross-motion, Mr. Roscoe has alleged that the 401(k) plan was created in 2001 and that, upon information and belief, it was a qualified plan under ERISA and it contained a "non-alienation clause." He has further alleged that the only contributions made to the account were regular payments of approximately $400.00 per week from his pay, with a 25% employer match. No single or large contributions were made by Mr. Roscoe or his employer to the account and the last contribution was made in July of 2006. Mr. Roscoe has also alleged that there was no fraudulent intent in forming the 401(k).
Further, the Court notes that the affidavit submitted by Jack Roscoe alleges that the respondent, Cayuga Millwork, Inc., closed for business in December of 2006.
In opposition to the respondent's cross-motion to dismiss, the petitioner has submitted reply papers which alternatively argue that the respondent has failed to demonstrate that the 401(k) plan in issue is a qualified plan/trust and is exempt from application to the satisfaction of the petitioner's judgment. Further, the petitioner points out that there is evidence in the record which indicates that the 401(k) plan was terminated in 2007, and the petitioner contends that the 401(k) plan should be treated as a self-settled trust created by the judgment debtor.
Upon review and consideration of the papers submitted by the parties, the Court has determined that the petition herein should be granted and that the respondent's cross-motion seeking dismissal of the petition should be denied.
It appears that the respondent's cross-motion seeking dismissal relies upon allegations that are based upon his information and belief that the 401(k) plan at issue is a qualified plan under ERISA and/or that it qualifies as an exempt trust under the provisions of CPLR 5205 [c]. However, the burden is on the respondent in this instance to prove that the 401(k) account is exempt. (see, Gilewicz v. Goldberg, 69 A.D. 438; Zadar Construction and Woodworking v. Charter Woodworking Corp., 158 AD2d 454; Frasca v. General Motors Corporation, 228 AD2d 474). Upon the record presented, the Court finds that the respondent Roscoe has not adequately demonstrated through evidence in admissible form that said 401(k) plan is either a qualified plan under ERISA or a qualifying trust under the provisions of CPLR 5205 [c]. The respondent has not provided a copy of the plan and has not pointed to any specific "non-alienation clause" that may have been contained therein. Nor has the respondent submitted any competent proof that said 401(k) plan met the criteria for a qualified plan.
The record also contains documentary evidence from a representative of the plan administrator which indicates that the plan terminated on January 17, 2007 (Petitioner's Supplemental Affidavit — Exhibit D). Such evidence has not been disputed by the respondent.
Under the circumstances presented, the Court finds that the entire remaining balance in the 401(k) plan at issue should be treated as a self-settled trust created by the judgment debtor which is subject to enforcement proceedings under CPLR Article 52 and is available for application to the satisfaction of the petitioner's judgment against the respondents, Jack Roscoe and Cayuga Millwork, Inc.
Accordingly, for the reasons set forth above, it is
ORDERED and ADJUDGED that the relief requested by the petitioner is hereby granted, and it is further
ORDERED and ADJUDGED that the respondent, Jack Roscoe, is hereby directed to make a request, within twenty (20) days of the date of this Decision, Order and Judgment, that Paychex, Inc. distribute the entire remaining balance in his 401(k) account to Edward Crossmore, Esq., as special counsel for the petitioner herein, to be applied toward the satisfaction of the petitioner's judgment against the respondents, Jack Roscoe and Cayuga Millwork, Inc., and it is further
ORDERED and ADJUDGED that the cross-motion brought by the respondent, Jack Roscoe, seeking dismissal of the petition is hereby denied in its entirety.
This shall constitute the Decision, Order and Judgment of the Court. No costs are awarded.