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The New York State Commissioner v. TD Bank, N.A.

Supreme Court, Albany County

April 7, 2016

The New York State Commissioner, of Taxation and Finance, Judgement Creditor-Petitioner,
v.
TD Bank, N.A., Garnishee-Respondent, and PATRICIA A. PRINCEPREJS, Judgment Debtor and PAUL BURNS, Joint Tenant.

          Department of Taxation and Finance Office of Counsel Kileen C. Davies, of counsel Attorney for Plaintiff W.A. Harriman Campus

          Denise A. Hartman, J.

         In this turnover proceeding, petitioner the State Commissioner of Taxation and Finance seeks to seize funds from defendant TD Bank, N.A. The funds are in an account jointly held by judgment debtor Patricia A. Princeprejs and Paul Burns. By letter dated February 9, 2016, petitioner requests that the Court grant default judgment in its favor. Because petitioner has not complied with the service requirements of CPLR 5225 (b) and has failed to join a necessary party, petitioner's request for a default judgment is denied.

         Petitioner has submitted proof of personal service on defendant and affidavits of service demonstrating that the notice of petition and verified petition were sent by certified mail, return receipt requested, and first class mail to the judgment debtor and account joint tenant. The return receipts were returned marked "unclaimed."

         The Need for Return Receipt Showing Delivery to JudgmentDebtor's Last Known Address

         As this Court recently held, certified mailing, return receipt requested, does not satisfy the service requirement of CPLR 5225 (b) unless the completed and signed return receipt or other evidence shows actual delivery to a suitable person at the debtor's last-known address (Commr. of Taxation and Fin. v Apple Bank for Sav., Sup Ct, Albany County, March 16, 2016, Hartman, J., Index No. 3121-15). That the Legislature intended CPLR 5225 (b) to require delivery, not just mailing, is evidenced by the statute's requirement that notice be served by certified or registered mail, return receipt requested, or in the same manner as a summons, and by its provision permitting the judgment debtor to seek to intervene in the turnover proceeding.

         The statutory requirement for a return receipt must serve a purpose. That purpose is to demonstrate actual delivery-i.e. that the notice was actually given to and received by a person of suitable age at the delivery address. [1] But if service were deemed successfully completed by the mere mailing of notice with a request for return receipt, regardless of whether the return receipt shows that the notice was delivered, the requirement for a return receipt would serve no purpose, and notice could as effectively be served by first class mail (see Matter of Progressive Ins. Co. v Stoddard, 235 A.D.2d 704, 704 [3d Dept 1997]; Bergdorf Goodman, Inc. v Mar. Midland Bank, 97 Misc.2d 311, 313 [Civ Ct, Bronx County 1978]; see e.g. CPLR 3215 [g] [3] [i]). CPLR 5225 (b) contemplates that the judgment debtor may intervene. Compliance with the return receipt requirement is necessary to ensure that the judgment debtor has reasonable notice and the opportunity to seek intervention in the turnover proceeding. Due process requires as much (see Bergdorf, 97 Misc.2d at 312-313). In sum, to comply with both the statutory language and purpose, petitioner must provide a return receipt showing actual delivery to the judgment debtor's last known address, or demonstrate that it has diligently attempted to give notice through the usual service provisions of CPLR 308 (cf. Gryphon Dom. VI, LLC v APP Intl. Fin. Co., B.V., 41 A.D.3d 25, 32 [1st Dept 2007] [lack of receipt showing delivery of registered mail excused where evidence showed defendant avoided service]).

         This conclusion is consistent with judicial decisions construing analogous provisions in the CPLR. For example, CPLR 5236 provides that notice of postponement of a sheriff's sale must be served upon the property owner "by personal delivery or by registered or certified mail, return receipt requested." Where the certified mail receipt indicated that it was returned "unclaimed, " the Appellate Division held such service to be ineffectual and that plaintiff was required to serve personally (Gersten-Hillman Agency Inc. v Lichtenstein & Friedman Realty Corp., 182 A.D.2d 1041');">182 A.D.2d 1041 [3d Dept 1992]).

         Likewise, CPLR 7503 (c) provides that notice of an application to stay arbitration "shall be served in the same manner as a summons or by registered or certified mail, return receipt requested" (see generally Matter of Yak Taxi, Inc. v Teke, 41 N.Y.2d 1020');">41 N.Y.2d 1020 [1977]). The Appellate Division held in that context that the failure to obtain a return receipt "rendered the service to be by ordinary mail" and non-compliant with the strictures of the statute (Matter of Progressive Ins. Co., 235 A.D.2d at 704; see also Matter of Allstate Ins. Co. v Padilla, 2012 NY Slip Op 32406 [U], at *3 [Sup Ct, Suffolk County 2012] [non-compliance found where "it does not appear from either of the 'Track and Confirm' printouts, nor from the attorney's personal knowledge, nor from evidence of signed postal receipts, that delivery was by certified mail, return receipt requested"]).

         Here, petitioner has submitted a return receipt that has been marked "unclaimed" by the United States Postal Service. Thus, notice has not been delivered to the judgment debtor's last known address, and the service requirement of CPLR 5225 (b) has not been satisfied. Petitioner's attempted service was not reasonably calculated to give the judgment debtor notice of the proceeding and an opportunity to seek intervention. Petitioner must either successfully complete service by certified or registered mail or serve the judgment debtor according to CPLR 308.

         Account Joint Tenants Are Necessary Parties

         This Court has recently held that an account joint tenant is a necessary party over whom a petitioner in a turnover proceeding must acquire jurisdiction (Commr. of Taxation and Fin. v Apple Bank for Sav., Sup Ct, Albany County, March 16, 2016, Hartman, J., Index No. 3121-15). The only other decisions the Court has discovered that directly address whether non-debtor account joint tenants are necessary parties have held that they are. In Bergdorf Goodman, Inc. v Marine Midland Bank, the court held that disposition of the turnover proceeding would require adjudication of the rights of the co-tenants in the account and that the account joint tenant was thus a necessary party (97 Misc.2d at 313; see CPLR 1001 [a], [b]; accord New York v Chem. Bank, 122 Misc.2d 104, 109 [Sup Ct, NY County 1983] ["The city properly recognized that the joint tenancy in the account, which presumptively accords each party present and contingent future interests (see Banking Law, § 675; EPTL 6-2.2)[, ] mandated that [a joint tenant] be joined as a necessary party."]; Mendel v Chervanyou, 147 Misc.2d 1056, 1059 [Civ Ct, Bronx County 1990]).

          Swezey v Merrill Lynch provides further support for the proposition that account joint tenants must be joined as necessary parties in turnover proceedings (87 A.D.3d 119');">87 A.D.3d 119 [1st Dept 2011], affd 19 N.Y.3d 543');">19 N.Y.3d 543 [2012]). In Swezey, the Appellate Division, First Department, considered whether the Republic of the Philippines was a necessary party to a turnover proceeding. The proceeding was commenced by a class of people whose human rights had been violated by the Marcos regime. The class sought to seize funds held by Merrill Lynch in the account of a "Panamanian entity formerly owned by Marcos" (id. at 123) Two intervening parties asserted that the Republic of the Philippines was a necessary party because a Philippine court had ruled in a separate proceeding that the Republic was the true owner of the funds in the Merrill Lynch account. The court held that "the Republic is a person that... 'possesses an actual, current interest in the property in question, '" and that the Republic was a necessary party to the proceeding because the Republic "'might be inequitably affected by a judgment disposing of [the] assets in its absence'" (id. at 126 [quoting Bergdorf, 97 Misc.2d at 314], 128-129 [quoting CPLR 1001 (a)]). Here, as in Swezey, the account joint tenant "possesses an actual, current interest" in the TD Bank account that "might be inequitably affected by a judgment" in favor of petitioner.

         Matter of Signature Bank v HSBC Bank USA, N.A. (67 A.D.3d 917');">67 A.D.3d 917 [2d Dept 2009]) and Matter of JRP Old Riverhead, Ltd. v Hudson City Savings Bank (106 A.D.3d 914');">106 A.D.3d 914 [2d Dept 2013]) are inapposite. Neither case addresses the propriety of service of notice upon account joint tenants by certified mail or whether account joint tenants are necessary parties. Each recognizes that "the opening of a joint bank account creates a rebuttable presumption that each named tenant is possessed of the whole of the account" (Matter of Signature Bank, 67 A.D.3d at 918 [internal quotation marks omitted]; see Matter of JRP Old Riverhead, Ltd., 106 A.D.3d at 914). [2] The rebuttable presumption asserted by petitioner does not support its argument that an account joint tenant is not a necessary party. Rather, it implies that an account joint tenant's rights could be inequitably affected by a turnover ...


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