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BANK LEUMI TRUST CO. v. ISTIM

March 24, 1995

BANK LEUMI TRUST COMPANY OF NEW YORK, Plaintiff, against ISTIM, INC., OPAL FINANCE CORPORATION LTD., and OPAL TRADE CORP., Defendants. OPAL FINANCE CORPORATION LTD., Cross-Claimant, - against - ISTIM, INC., Cross-Claim Defendant. ISTIM, INC., Cross-Claimant, -against - OPAL FINANCE CORPORATION LTD. and OPAL TRADE CORP., Cross-Claim Defendants.


The opinion of the court was delivered by: SHIRA A. SCHEINDLIN

 SHIRA A. SCHEINDLIN, U.S.D.J.

 Cross-claimant Opal Finance Corporation Ltd. ("Opal") requests confirmation of an ex parte Order of Attachment on the monies previously held on account at Bank Leumi Trust Company of New York ("Bank Leumi") *fn1" totalling approximately $ 261,139.43 in the name of the cross-claim defendant Istim, Inc. ("Istim"). The parties agree that Opal must first show that a cause of action exists on which Opal will most likely prevail and that the amount of Istim's counterclaim is just and, second, that Istim, with intent to defraud Opal or to frustrate the enforcement of a judgment that might be rendered in Opal's favor, has attempted to or is about to remove such funds from this jurisdiction. N.Y. Civ. Prac. L. & R. ("CPLR") 6201(3) and 6212(a) (McKinney 1994). Because Opal has sustained its burden of demonstrating these requirements, the motion to confirm the ex parte attachment order is granted.

 I. FACTS

 Opal, a corporation organized and existing under the laws of Guersney, Channel Islands, is a finance company. Istim, a New York corporation, is a trading company that exports machinery, raw materials and other goods to factories in Israel and imports industrial and other manufactured goods from Israel to the United States. Interpleader Complaint ("Compl.") at PP 3-5; Affidavit of Tsvi Katsir, President of Opal Trade Corp., in Support of Attachment ("Katsir Aff.") at P 5; Affidavit of Hendrik J. Keilman, Managing Director of Phoenix Beheer N.V., in Opposition to Motion to Confirm Ex Parte Order of Attachment ("Keilman Aff.") at P 5.

 During 1993, Opal loaned Istim approximately $ 2,000,000. As collateral and security for the loan, Istim tendered to Opal certain drafts, executed a security agreement in favor of Opal, and allegedly assigned the bank account at Bank Leumi, which contained the funds presently at issue, to Opal. Opal asserts that, as of October 31, 1994, Istim defaulted on its loan. Opal claims that not less than $ 447,415.31 remains due and owing on the loan. Katsir Aff. at P 7.

 On or about November 15, 1994, Istim closed its only office in the United States, located in New York City, and claims to be conducting business out of its attorney's offices. Declaration of William J. Ferlanti, attorney for Istim, in Opposition to Motion to Confirm Ex Parte Order of Attachment, dated January 6, 1995 ("Ferlanti Decl.") at P 13. The only asset Istim appears to have remaining in the United States is the bank account formerly at Bank Leumi. Katsir Aff. at P 1; see Notice of Motion to Confirm Ex Parte Attachment ("Mot. to Confirm") at P 8. Both Istim and Opal contacted Bank Leumi on numerous occasions to attempt to take possession of these funds. See Compl. at PP 8-24.

 Bank Leumi, as plaintiff-stakeholder, commenced an interpleader action in November, 1994 to resolve the competing claims to the funds it held on account. Although the account was in the name of Istim, Opal lays claim to the funds on the grounds that it has a valid security interest in the account; Istim, however, disputes Opal's assertion, claiming ownership of the funds. After commencement of the interpleader suit, Opal obtained an ex parte order of attachment. See supra n. 1.

 Opal seeks confirmation since these funds appear to be Istim's only substantial asset remaining in the United States, now known by Opal to be amenable to attachment. *fn2" Katsir Aff. at P 1.

 II. DISCUSSION

 New York law governs orders of attachment issued by this Court. Fed. R. Civ. P. 64. Under New York law, a party is entitled to an ex parte order of attachment upon demonstrating that (1) it has stated a claim for a money judgment; (2) it has a probability of success on the merits; (3) the defendant "with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts;" and (4) the amount demanded from the defendant is greater than the amount of all counterclaims known to the party seeking attachment. CPLR §§ 6212(a) and 6201(3). Once the ex parte order of attachment is issued, the party obtaining the attachment, on a motion to confirm made on notice to the party whose property is subject to the attachment, must once again demonstrate that the foregoing requirements are met, and also demonstrate a need for continuing the levy. CPLR §§ 6211(b) and 6223(b).

 As to the first and second requirements, i.e., that a claim for a money judgment exists and that the movant is likely to succeed on the merits, "the court must give the plaintiff the benefit of all the legitimate inferences that can be drawn from the facts." National Bank & Trust Co. v. J.L.M. International, Inc., 421 F. Supp. 1269, 1272 (S.D.N.Y. 1976) (quoting Marklin v. Drew Properties Corp., 280 F. Supp. 176, 179 (S.D.N.Y. 1967)).

 Opal has presented sufficient evidence by affidavits and other written evidence that it loaned Istim approximately $ 2 million which has not been fully repaid. Opal has also supplied a computer print-out from Istim's former office, which indicates an unpaid balance on the Opal loan. See Reply Affidavit of Tsvi Katsir in Support of Motion to Confirm Attachment ("Reply Aff.") at PP 3-10; Katsir Aff. at P 7. In addition, Opal is in possession of the drafts tendered from Istim in exchange for the loan. Finally, Istim has failed to offer any proof that it has repaid this loan, such as cancelled checks or any other form of payment. Thus, Opal has fulfilled the first two requirements of CPLR § 6212(a).

 In determining whether the fourth requirement, that "the amount demanded from the defendant exceeds all counterclaims known to the plaintiff" is met, courts are to examine only the amount of the counterclaims that the plaintiff concedes are just. See City of New York v. Citisource, Inc., 679 F. Supp. 393 (S.D.N.Y. 1988); Mishkin v. Kenney & Branisel, Inc., 609 F. Supp. 1254, 1256 n. 5 (S.D.N.Y. 1985), aff'd 779 F.2d 35 (2d Cir. 1985); Shearson Hayden Stone, Inc. v. Scrivener, 480 F. Supp. 256 (S.D.N.Y. 1979), rev'd on other grounds. See also American Jerex Co. v. Universal Aluminum Extrusions, Inc., 340 F. Supp. 524 (E.D.N.Y. 1972) (requirement of CPLR § 6212(a) that papers on a motion for an order of attachment must show "the amount demanded from defendant above all counterclaims known to plaintiff is construed to mean only those counterclaims that a plaintiff is willing to concede as just;" existence of a pending counterclaim which is contested does not defeat an attachment). Because Opal contends that Istim's counterclaims are entirely without merit, this requirement is satisfied. Reply Aff. at P 11.

 Thus, the motion to confirm turns on whether Opal has satisfied the third requirement. To fulfill this requirement, CPLR § 6201(3) requires proof of two elements: (i) that the defendant either is about to or has assigned, disposed of, encumbered or secreted property, or removed it from the state, and (ii) that the defendant has acted or will act with the intent to defraud his or her creditors, or to frustrate the enforcement of a judgment that might be rendered in plaintiff's favor.

 A. Disposal of Assets

 The first element need not be demonstrated by actual proof of disposition or secretion of property. 7A Weinstein-Korn-Miller, New York Civil Practice P 6201.12 (1994 ed.) ("CPLR"). The transfer or disappearance of an abnormal amount of property will suffice. Tannenbaum v. Gottlieb, 14 A.D. 105, 43 N.Y.S. 469 (1st Dept. 1897). The burden is on the plaintiff to demonstrate that the defendant has begun the process of removing its assets. Dickey v. Findeisen & Kropf Mfg. Co., 177 A.D. 861, 164 N.Y.S. 989 (1st Dept. 1917).

 Opal has satisfied this prong of the test. Opal claims, and Istim does not dispute, that Istim has no substantial assets in the United States other than the funds at issue previously in the bank account. In two letters dated August 29, 1994 and another dated September 7, 1994, Istim requested Bank Leumi to transfer the balance of its funds to a bank in the Netherlands. See Compl. Ex. "B." Thus, Opal has made a prima facie showing of Istim's preparation to remove its remaining assets from this jurisdiction.

 The second requirement under CPLR § 6201(3) is that the plaintiff show that the defendant is about to assign, encumber, secrete or remove property from the ...


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