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FDIC v. KOFFMAN

April 26, 1994

FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff,
v.
BURTON I. KOFFMAN and RICHARD E. KOFFMAN, Defendants.



The opinion of the court was delivered by: THOMAS J. MCAVOY

 MEMORANDUM-DECISION and ORDER

 Plaintiff Federal Deposit Insurance Corporation ("FDIC") has served restraining notices upon the Binghamton Savings Bank ("BSB") and also upon Smith Barney Shearson, Inc. ("Smith Barney") to satisfy a money judgment rendered against defendants Burton I. Koffman and Richard E. Koffman. Presently before the court is a motion made by the defendants to vacate or modify these restraining notices.

 I.

 On July 27, 1993, the FDIC obtained a money judgment against the defendants for $ 6,842,982.00 in a contested proceeding in the United States District Court for the Northern District of Illinois. On December 2, 1993, the FDIC domesticated this judgment by registering and docketing the said judgment with this court and thereafter, in the Offices' of the County Clerk of Broome County, New York County and Onondaga County.

 To this date the money judgment has remained wholly unsatisfied. The instant motion arises out of restraining notices served by the FDIC upon various institutions in order to satisfy the outstanding money judgment. The FDIC alleges that the defendants possess an actual interest in these assets.

 The defendants have moved to vacate or modify the restraining notices on several grounds. These grounds are: (1) the funds held in BSB account number 360735302 do not belong to the defendants; (2) the FDIC is entitled to only one-half of the funds deposited in the joint checking accounts held at BSB; and (3) individual retirement accounts and charitable organization accounts held at Smith Barney are exempt from seizure pursuant to N.Y. Civ. Prac. L. & R. § 5205 (McKinney 1993) ("CPLR").

 A. BSB Account Number 360735302

 Defendants initially assert that the restraining notice directed at BSB account number 360735302 should be vacated because defendants do not have actual or direct interest in the account.

 In New York, restraining notices may be served on one who is not a judgment-debtor 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 or support collection unit 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). If the judgment creditor satisfies these requirements, the restraining notices are valid and the property may be levied upon unless the judgment debtor can demonstrate that the property in question is exempt from such levies pursuant to CPLR § 5205.

 The BSB account in question is a checking account held in the name of defendant Richard E. Koffman and in his name alone. With this fact, there can be no doubt that the FDIC has satisfied the requirements of CPLR § 5222(b). Therefore, defendants may not exempt the account in question from judgment creditors unless defendants can demonstrate that the account falls under a recognized personal property exemption under CPLR § 5205. Defendants have failed to do so. Thus, the restraining notice on BSB account number 360735302 is not vacated nor modified, and defendants' motion is denied as to this account.

 Defendants' argument that the account should be exempt from levy because they have no direct or actual control over the account is footless. Defendants rely on two New York cases which do not support their contention. For example, defendants cite to Claymont v. Levitt, 140 A.D.2d 578, 528 N.Y.S.2d 644 (2d Dep't 1988) for the proposition that the defendants must have an actual interest in a property before the plaintiff can levy on such a property. Furthermore, defendants cite to H.J. O'Connell Assocs., Ltd. v. Insurance Pension and Welfare Fund of Roofers Local No. 241, 86 Misc. 2d 259, 381 ...


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