Petitioner appeals from a judgment of the Supreme Court, New York County (Anil C. Singh, J.), entered July 20, 2010, which, to the extent appealed from as limited by the briefs, dismissed the petition with prejudice. Gibson, Dunn & Crutcher LLP, New York
The opinion of the court was delivered by: Catterson, J.
Verizon New England Inc. v Transcom Enhanced Servs., Inc.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Angela M. Mazzarelli,J.P. David Friedman James M. Catterson Dianne T. Renwick Rosalyn H. Richter, JJ.
In this CPLR article 52 turnover proceeding, we affirm that a restraining notice is effective only if, at the time of service, the third party on whom the notice is served owes a debt to, or is in possession of property of, the judgment debtor.
In this proceeding, Verizon, the judgment creditor, seeks to enforce a restraining notice against a third party pursuant to article 52 of the CPLR, on monies paid by Transcom Enhanced Services, Inc. (hereinafter referred to as "Transcom") to judgment debtor, Global NAPs, Inc. (hereinafter referred to as "GNAPS"), a telecommunications vendor. Transcom purchased voice-over-internet termination services for its customers from GNAPS.
The following facts are undisputed: In January 29, 2009, the U.S. District Court for the District of Massachusetts entered a $57,716,714 judgment in favor of Verizon and against GNAPS and others. The judgment was affirmed. See Global NAPs, Inc. v. Verizon New England Inc., 603 F.3d 71 (1st Cir. 2010), cert. denied, U.S. , 131 S. Ct. 1044 (2011).
On March 6, 2009, Verizon domesticated the judgment in New York. On March 30, 2009, Verizon served Transcom, a New York corporation, with a restraining notice and information subpoena. The restraining notice directed Transcom not "to make or suffer any sale, assignment or transfer of, or interference with, any property in your possession in which [GNAPS] ... has as interest."
On or about February 11, 2010, Transcom served its response to the information subpoena. In response to Question #2, which directed Transcom to "[i]dentify any and all . . . agreements entered into between you . . . and any of the Judgment Debtors," Transcom identified a telephone switch service agreement dated October 21, 2003.
In response to Question #5, which asked Transcom to identify any receivables and outstanding obligations owed to GNAPS, Transcom stated, "None. All payments are made in advance or contemporaneously with service." In response to Question #11, which asked Transcom to identify payments made to GNAPs, Transcom annexed a Vendor Balance Detail (hereinafter referred to as "VBD"). The VBD reflected that on April 1, 2009, the day before Transcom's acceptance of the restraining notice, Transcom had received a $246,000 bill from GNAPS. The bill was paid by four checks issued for April 1, April 6, April 15 and April 21, each in the amount of $61,500.
On or about March 31, 2010, Verizon commenced a special proceeding seeking, inter alia, a turnover of property and debts of the judgment debtor held by Transcom, a judgment equal to the amount paid by Transcom to the judgment debtors in violation of the restraining notice, and a finding of civil contempt. Verizon asserted that Transcom's agreement with GNAPS created an ongoing contractual relationship which required Transcom to pay GNAPS $281,000 per month.
Transcom asserted that it did not violate the restraining notice because GNAPS' monthly invoices were issued in advance of services being rendered, and Transcom had no obligation to use GNAPS' services. Transcom explained that, because it prepaid for GNAPS' services at the time that the restraining notice was served, Transcom did not owe GNAPS any money.
Transcom submitted the affidavit of Larry Dewey, its Chief Accounting Officer and a CPA whose duties included managing payments to GNAPS. He set forth that, since 2004 GNAPS had invoiced Transcom on or at the beginning of each month for services to be rendered in the following month and Transcom paid in advance for services to be rendered on an approximately weekly basis. Dewey set forth that, as of April 2, 2009, Transcom had a credit balance with GNAPS and no obligation to make future payments. He issued the April 1 check to GNAPS by overnight delivery for services to be rendered the first week in April. Dewey stated that "because Transcom and GNAPS have always operated ... under the assumption that Transcom pays in advance for services, and GNAPS only provides services if it has been paid. Transcom [...] could easily switch to [other] vendors and discontinue using GNAPS simply and quickly by entering a blocking code in the network operations center."
Transcom also submitted the affidavit of Bradford Masuret, GNAPS' Vice President of Sales, who set forth that the parties verbally agreed to allow Transcom to prepay in four installments, rather ...