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MATTER ESTATE SAM LEIKIND (06/14/68)

COURT OF APPEALS OF NEW YORK 1968.NY.42139 <http://www.versuslaw.com>; 239 N.E.2d 550; 22 N.Y.2d 346 decided: June 14, 1968. IN THE MATTER OF THE ESTATE OF SAM LEIKIND, DECEASED. HARRY LAIKIND, AS ADMINISTRATOR OF THE ESTATE OF SAM LEIKIND, DECEASED, APPELLANT-RESPONDENT; ATTORNEY-GENERAL OF THE STATE OF NEW YORK, RESPONDENT-APPELLANT, ET AL., RESPONDENTS Matter of Leikind, 28 A.D.2d 884, reversed. Counsel Edward Pious for appellant-respondent. Louis J. Lefkowitz, Attorney-General (Samuel A. Hirshowitz and Warren M. Goidel of counsel), for respondent-appellant. Judges Burke, Scileppi, Bergan and Jasen concur with Judge Breitel; Chief Judge Fuld dissents and votes to affirm in a separate opinion; Judge Keating dissents and votes to affirm on the opinion at the Appellate Division. Author: Breitel


Matter of Leikind, Judges Burke, Scileppi, Bergan and Jasen concur with Judge Breitel; Chief Judge Fuld dissents and votes to affirm in a separate opinion; Judge Keating dissents and votes to affirm on the opinion at the Appellate Division.

Author: Breitel

 Petitioner appeals, and the Attorney-General cross-appeals, from an order of the Appellate Division, which reversed in a memorandum opinion (one Justice dissenting), a decree of the Surrogate's Court, Kings County, declining to release certain impounded funds. Involved is the effect of former section 269-a of the Surrogate's Court Act (now SCPA 2218), which provided that where the beneficiary of a decedent estate "would not have the benefit or use or control of the money or other property due him," such property is to be paid into court "for the benefit of [such beneficiary] or such person or persons who may thereafter appear to be entitled thereto."

Petitioner applied to the Surrogate's Court for an order directing that a default judgment he had previously obtained in the Supreme Court, Kings County, against Dvaireh (or Davareh as in the title) Kaminsky, a resident of the Soviet Union and a distributee of the decedent estate of one Sam Leikind, be satisfied out of funds deposited with the Director of Finance of the City of New York pursuant to the above statute. The Surrogate denied relief and the Appellate Division reversed, but granted a stay to allow the Attorney-General to seek appropriate relief in the Supreme Court from the default judgment. Petitioner appeals from so much of the Appellate Division order as granted the stay; the Attorney-General appeals from so much of the order as reversed the Surrogate's decree.

Dvaireh Kaminsky's share of the estate of Sam Leikind had been deposited with the Director of Finance pursuant to a decree of the Surrogate's Court dated October 19, 1961. Subsequent to this decree, petitioner, a brother of decedent and Dvaireh, who was also the administrator of the estate, brought an action against Dvaireh in the Supreme Court for moneys owed. His claim was apparently based on a letter he had received from his sister which acknowledged her prior promise to repay money he had previously sent her and suggested that he try to obtain the money out of her inheritance. Jurisdiction over Dvaireh in the action was obtained by attachment of the funds on deposit and service was effected through publication. No answer or appearance was interposed. Judgment on default was entered on May 18, 1964 in the sum of $7,308. Petitioner sought to satisfy the judgment out of the impounded funds but the Director of Finance refused to honor the Sheriff's levy. Petitioner then moved in the Supreme Court for an order requiring the Director of Finance to release the funds. The motion was denied, with leave to petitioner to apply to the Surrogate for such an order. In denying the application to him the Surrogate held that the effort to procure the funds was intentionally evasive of the statute, and that, in any event, since Dvaireh had no power to obtain the funds, she also lacked power to accomplish their reach by another. The Appellate Division held that the impounded funds were subject to attachment and that the Attorney-General, in effect, was mounting a collateral attack on the Supreme Court judgment.

Petitioner argues that in view of the recent Supreme Court decision in Zschernig v. Miller (389 U.S. 429, decided Jan. 15, 1968), holding unconstitutional an Oregon statute somewhat similar to New York's statute, there is no basis for denying the release of the funds. The Attorney-General, on the other hand, contends that (1) the default judgment constituted an evident attempt to evade the statute and was, therefore, a nullity; (2) Zschernig v. Miller is inapplicable to the New York statute; and (3) in any event, the constitutionality of the New York statute is not properly raised for the first time in this court.*fn1

There are two issues: (1) whether the impounding of the funds here violated the Federal Constitution under the ruling of the Zschernig case; and (2) whether the Surrogate's finding that the default judgment could not support a release of the funds was an abuse of discretion. It is concluded that the impounding of the funds was not unconstitutional, but the matter should be remanded to the Surrogate for a hearing and further findings as to the effect to be given the default judgment.

In Zschernig v. Miller (supra) the Supreme Court considered the constitutionality of an Oregon statute similar in some respects to the New York statute. Oregon's statute provided for escheat of property claimed by a nonresident-alien distributee of an estate unless (1) American citizens had a right to take property in the foreign country on the same terms as residents of the foreign country; (2) American citizens had a reciprocal right to receive funds from estates in the foreign country; and (3) the foreign distributee would have the "benefit, use or control" of property from the estate of the American deceased. The Supreme Court found that in applying each of the requirements the Oregon courts had improperly intruded into the field of foreign affairs reserved to the Federal executive and legislature.

The majority opinion deliberately refrained from re-examining its decision in Clark v. Allen (331 U.S. 503), which had held that a California statute, containing a reciprocity requirement similar to that in Oregon, was not unconstitutional on its face. Of Clark v. Allen (supra) it said, "The case seemed to involve no more than a routine reading of foreign laws" (389 U.S., supra, p. 433). It observed, however, that under the Oregon statute the courts had in fact "launched inquiries into the type of governments that obtain in a particular foreign nation" and had conducted "minute inquiries concerning the actual administration of foreign law" (id., pp. 434, 435). It concluded, therefore, that the application of the Oregon statute resulted in an unconstitutional involvement by the State in foreign affairs. There was no explicit condemnation of the statute on its face.

Despite some similarities, the Oregon and New York statutes are different. The New York statute, unlike the one in Oregon, contains no provision for reciprocity or escheat. The acceptance of a reciprocity provision in Clark v. Allen (supra), evidently reaffirmed in the Zschernig case, is, therefore, of little help in resolving the issues in this case. On the other hand, the absence of an escheat provision in the New York statute, even though the Oregon escheat provision was not discussed or made a ground of decision by the Supreme Court, may be of critical importance in sustaining the validity of New York's statute, at least on its face.

Moreover, the majority opinion in the Zschernig case, in accepting the constitutionality of "reciprocity," arguably accepted "benefit, use or control" provisions as valid, provided State courts did no more than "routinely read" foreign laws and provided there was no palpable interference with foreign relations in their application.*fn2 Thus, if the courts of this State, in applying the "benefit or use or control" requirements, simply determine, without animadversions, whether or not a foreign country, by statute or otherwise, prevents its residents from actually sharing in the estates of New York decedents, the statute would not be unconstitutional under the explicit rationale of the Zschernig case. Indeed, petitioner has made no showing that the lower courts in this case have currently engaged in the conduct criticized, and additionally illustrated in the footnotes of the Zschernig case, as interference with foreign relations. Consequently, there is no present warrant to reconsider the earlier rulings of this court sustaining the constitutionality of the statutes which preceded the present one (Matter of Marek, 11 N.Y.2d 740, app. dsmd. sub nom. Ioannou v. New York, 371 U.S. 30 [for want of a substantial Federal question];*fn3 Matter of Braier, 305 N. Y. 148, 156, app. dsmd. sub nom. Kalmane v. Green, 346 U.S. 802).

Thus, the impounding of Dvaireh's share in the estate was not proscribed under the principles thus far made explicit in the Zschernig and Clark cases. Nevertheless, the applicable New York statute does not necessarily require that the funds be restricted until it is determined that the beneficiary himself will have "benefit or use or control" of them. The funds are also impounded "for the benefit of * * * such person or persons who may thereafter appear to be entitled thereto." Hence, it must be determined whether petitioner, by virtue of his status as judgment creditor of Dvaireh, is a person entitled to the funds.

Funds which are in custodia legis, and in which the owner has a present interest, may be attached or garnished for purposes of obtaining jurisdiction (Dunlop v. Patterson Fire Ins. Co., 74 N. Y. 145, 148 [funds deposited in court by defendant as an undertaking on appeal could be attached by a claimant of defendant]; cf. Commission for Polish Relief v. Banca Nationala a Rumaniei, 288 N. Y. 332, 338, affg. 262 App. Div. 543, 546 [citing the Dunlop case and holding that funds of defendant Rumanian bank deposited in New York banks, which could not be transferred or withdrawn under the terms of an Executive Order, could be attached by a resident claimant of the Rumanian bank]; see Ann. -- Funds in Court -- Garnishment, 1 ALR 3d 936, 944, 945; but see 7 C. J. S. Attachment, ยง 88, p. 260). In the Dunlop and Polish Relief cases it was held that the owner of the funds, although not now entitled to receive them, had a sufficient right and interest in the property to enable a claimant to obtain jurisdiction quasi in rem through attachment. Thus, in this matter the Supreme Court had acquired such jurisdiction, and, upon the defendant's default, had the power to enter judgment in favor of petitioner.

Further, although the judgment did not automatically entitle petitioner to satisfaction out of the impounded funds, such satisfaction could be obtained when the purposes of the restraint had been achieved or upon a determination that such satisfaction would no longer interfere with the purposes of the restraint (First Nat. Bank of Oswego v. Dunn, 97 N. Y. 149, 158-159; Wehle v. Conner, 83 N. Y. 231, 236-237; Hardon v. Dixon, 91 App. Div. 109, 113-114; cf. Commission for Polish Relief v. Banca Nationala a Rumaniei, 288 N. Y. 332, 338, supra).

It is concluded, therefore, that, on the present record and with the present parties, petitioner's judgment is both legally effective and valid, albeit not without restriction as to enforcement out of the impounded funds. The Surrogate might yet order satisfaction from the impounded funds if he first determined that such ...


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