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LLC v. Burnett

New York District Court, Nassau County

June 24, 2013

LR CREDIT 21, LLC, Petitioner(s),
v.
Elizabeth A. BURNETT; Headley C. Burnett and JPMorgan Chase Bank, N.A., Respondent(s).

Mel S. Harris and Associates, LLC, New York, for Plaintiff.

Elizabeth A. Burnett, Defendant pro se.

MICHAEL A. CIAFFA, J.

Page 855

Petitioner, LR Credit 21, LLC, requests an order compelling respondent JP Morgan Chase Bank to turn over to the offices of Mel S. Harris & Associates, as counsel for petitioner, " the entire proceeds of the [967 N.Y.S.2d 917] joint account in the names of Elizabeth A. Burnett and Headley C. Burnett" or " one half of the proceeds in the account in any event..."

According to petitioner's papers, it obtained a default judgment against respondent Elizabeth A. Burnett upon an assigned debt claim in June, 2010. Two years later, in July, 2012, respondent JP Morgan Chase Bank advised petitioner's counsel in response to an information subpoena that Ms. Burnett and respondent Headley C. Burnett had a joint checking account at the bank, with a negative balance ($-317.38). It further advised petitioner's counsel that the last two direct deposits into the account were a pension check ($349.24) and a check from social security ($1,139.00).

At the same time the information subpoena was served, petitioner claims it also served a restraining notice upon the bank, with appropriate exemption notice and exemption claim forms. However, because the account " contained insufficient funds to levy against," the subject account " was not held" by the bank at that time.

The following year, after the restraining notice had expired, see CPLR 5222(b), petitioner alleges that a " property execution was sent to the Sheriff of Nassau County to restrain the account for an additional ninety (90) days to allow petitioner time to submit this turnover petition." The execution was received by the bank on April 11, 2013. The bank responded by letter to the Sheriff, dated April 11, 2013, acknowledging receipt of the execution, and acknowledging its " hold" on the account. According to the bank's letter, it placed a hold in the amount of $9,202.44 upon the account. However, the letter also states " the present balance may be subject to exemption claims..."

CPLR 5222-a, enacted in 2008 as part of the Exempt Income Protection Act (L. 2008, ch. 575), includes strict procedural rules requiring service of exemption notices and exemption claim forms whenever the sheriff attempts to levy upon the bank account of a natural person. In pertinent part, CPLR 5222-a(b)(2) imposes the following duty upon the sheriff " [w]hen serving an execution" upon a garnishee bank:

Page 856

" [T]he sheriff shall provide the banking institution with an exemption notice and two exemption claim forms, which shall be in the forms set forth in paragraph four of this subdivision. The sheriff shall serve both the exemption notice and the exemption claim forms on the banking institution together with the execution notice ... in accordance with subdivision (a) of section fifty-two hundred thirty-two of this article. Failure to serve the notice and forms renders the execution void, and the banking institution shall not levy upon the account."

CPLR 5232(g) likewise states " where a levy by execution ... is made against a natural person's account at a banking institution, the sheriff ... shall serve the banking institution with the exemption notice and two exemption claim forms prescribed in subdivision (b) of section fifty-two hundred twenty-two-a of this article."

CPLR 5222-a(b)(3), in turn, governs the garnishee bank's duty upon receipt of an execution, exemption notice, and exemption claim forms from the sheriff. " Within two business days after receipt" of such documents, " the banking institution shall serve upon the judgment debtor ... the exemption notice and two exemption claim forms ... by first class mail to the last known address of the judgment debtor."

The above-quoted provisions are very similar to the provisions governing required notices to the judgment debtor in matters involving service of a restraining notice upon a bank. In [967 N.Y.S.2d 918] North Shore Univ. Hosp. v. Citibank, 25 Misc.3d 655, 883 N.Y.S.2d 898 (Dist. Ct. Nassau Co., Hirsh, J.), the Court ruled that the judgment creditor seeking a turnover order in such a matter " must plead and prove compliance with CPLR 5222-a" as part of its prima facie case. This Court concludes that Judge Hirsh's ruling applies equally to turnover proceedings involving Sheriff's executions. The statute, on its face, unambiguously sets forth important new statutory procedures for advising a judgment debtor of his or her right to claim that funds on deposit in a bank account are exempt from both " restraint and execution." North Shore Univ. Hosp. v. Citibank, supra. The Court therefore sees no basis for treating executions differently from restraining notices in connection with a creditor's turnover proceeding.

Moreover, reading CPLR 5222-a in conjunction with provisions of CPLR 5232(g) governing ...


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