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Jackson v. Bank of America N.A.

Supreme Court of New York, Second Department

April 12, 2017

Delores Jackson, et al., respondents,
v.
Bank of America, N.A., appellant. Index No. 15145/11

          Zeichner Ellman & Krause LLP, New York, NY (Benjamin H. Green and David S.S. Hamilton of counsel), for appellant.

          G. Oliver Koppell, New York, NY (Daniel F. Schreck of counsel), and Charles Juntikka & Associates, LLP, New York, NY, for respondents (one brief filed).

          JOHN M. LEVENTHAL, J.P. SHERI S. ROMAN SANDRA L. SGROI FRANCESCA E. CONNOLLY, JJ.

          DECISION & ORDER

         In a putative class action, inter alia, to recover damages for the restraint of bank accounts in violation of the Exempt Income Protection Act of 2008 (L 2008, ch 575) and for injunctive relief, the defendant appeals, as limited by its brief, from (1) so much of an order of the Supreme Court, Kings County (Velasquez, J.), dated May 21, 2013, as denied that branch of its motion which was pursuant to CPLR 3211(a) to dismiss the cause of action alleging violations of the Exempt Income Protection Act of 2008, and (2) so much of an order of the same court dated January 16, 2015, as granted the plaintiffs' motion to convert the cause of action alleging violations of the Exempt Income Protection Act of 2008 into a special proceeding pursuant to CPLR article 52, and denied that branch of its cross motion which was for leave to renew and reargue that branch of its prior motion which was pursuant to CPLR 3211(a) to dismiss the cause of action alleging violations of the Exempt Income Protection Act of 2008.

         ORDERED that the appeal from so much of the order dated January 16, 2015, as denied that branch of the defendant's motion which was for leave to reargue that branch of its prior motion which was pursuant to CPLR 3211(a) to dismiss the cause of action alleging violations of the Exempt Income Protection Act of 2008 is dismissed, as no appeal lies from an order denying reargument; and it is further, ORDERED that the order dated May 21, 2013, is affirmed insofar as appealed from; and it is further, ORDERED that the order dated January 16, 2015, is affirmed insofar as reviewed; and it is further, ORDERED that one bill of costs is awarded to the plaintiffs.

         This putative class action was commenced by the plaintiffs seeking, inter alia, injunctive relief and money damages against their bank, the defendant, Bank of America, N.A. (hereinafter BOA), based on allegations that accounts they held at New York City BOA branches were restrained in violation of the Exempt Income Protection Act of 2008 (L 2008, ch 575) (hereinafter the EIPA). The plaintiffs are judgment debtors whose bank accounts were restrained by judgment creditors in anticipation of enforcement of money judgments pursuant to CPLR article 52. The plaintiffs Delores Jackson and her daughter Shawn Jackson (hereinafter together the Jackson plaintiffs) allege that, when a restraining notice was sent to BOA by a nonparty judgment creditor of Shawn Jackson, BOA aggregated the amounts in their joint savings and joint checking accounts, sent Shawn Jackson a check for the statutorily exempt amount of $1, 740, restrained the remaining funds in their accounts, and charged them related bank fees. The plaintiff Odamis Villa similarly alleges that, when a restraining notice was sent to BOA by a nonparty judgment creditor, BOA aggregated the amounts in his savings and checking accounts, sent him a check for the statutorily exempt amount of $1, 740, restrained the remaining funds in his accounts, and charged him related bank fees.

         The plaintiffs allege that the restraints were invalid because BOA improperly aggregated the total amount of funds on deposit for the purpose of determining the amount that was statutorily exempt from restraint in violation of CPLR 5222(i) rather than apply the exemption to each account, automatically sent them checks for the exempt funds, thereby depriving them of the ability to use those funds in their banks, and improperly assessed them fees associated with the restraint in violation of CPLR 5222(j). As redress for these alleged wrongs, the plaintiffs seek monetary damages, including reimbursement of funds restrained and disbursed in error as well as any consequential damages caused by the lack of access to funds, punitive damages, and injunctive relief. The plaintiffs allege that BOA employed a general practice of noncompliance with the EIPA, and seek class action certification on behalf of themselves and other similarly-situated account holders.

         BOA moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint, contending that it complied with the EIPA and, in any event, the EIPA does not create a private right of action permitting an account holder to bring a plenary action against a depository bank seeking injunctive relief or money damages arising from a violation of the EIPA. The Supreme Court denied the motion in an order dated May 21, 2013.

         Thereafter, the Court of Appeals, answering two questions certified by the United States Court of Appeals for the Second Circuit, held that: (1) a private right to bring a plenary action for injunctive relief and money damages cannot be implied from the EIPA, and (2) the only relief available to a judgment debtor from a bank arising from a violation of the EIPA is that provided in CPLR article 52 (see Cruz v TD Bank, N.A., 22 N.Y.3d 61, 78-79). In light of the Court of Appeals' decision in Cruz, the plaintiffs moved pursuant to CPLR 103(c) to convert the cause of action alleging violations of the EIPA into a special proceeding pursuant to CPLR 5239 and 5240. BOA cross-moved for leave to renew and reargue its prior motion to dismiss the complaint. By order dated January 16, 2015, the Supreme Court granted the plaintiffs' motion, denied that branch of BOA's cross motion which was for leave to renew as academic, and denied that branch of the cross motion which was for leave to reargue on the ground that the court did not misapprehend or overlook either the facts or the law.

         The plaintiffs withdrew their common-law causes of action at the time they moved to convert the cause of action alleging violations of the EIPA into a special proceeding pursuant to CPLR article 52. With respect to the remaining cause of action, which alleges that BOA violated the EIPA, the Court of Appeals has held that the exclusive remedy for a judgment debtor alleging that his or her bank has violated the EIPA is a special proceeding pursuant to CPLR article 52 (see Cruz v TD Bank, N.A., 22 N.Y.3d at 78-79). Although we agree with BOA's contention that the plaintiffs herein seek certain relief- including punitive damages and a permanent injunction-that is not available in a proceeding pursuant to CPLR article 52, we reject its contention that, as a result, the action must be dismissed in its entirety. An action should not be dismissed because it was not brought in the proper form or because the plaintiff requested relief to which he or she was not entitled (see CPLR 103[c]; Matter of Phalen v Theatrical Protective Union No. 1, 22 N.Y.2d 34, 41; Wander v St. John's Univ., 99 A.D.3d 891, 893-894; Tae Hwa Yoon v New York Hahn Wolee Church, Inc., 56 A.D.3d 752; Matter of Maggi v Maggi, 187 A.D.2d 722).

         Although the plaintiffs did not commence this action as a special proceeding pursuant to CPLR article 52, " [g]enerally, where an action or proceeding is brought in the wrong form or under an inappropriate statute, the court, in its discretion, may deem it brought in a proper fashion, thus avoiding a dismissal'" (Tae Hwa Yoon v New York Hahn Wolee Church, Inc., 56 A.D.3d at 755, quoting Matter of Schmidt [Magnetic Head Corp.], 97 A.D.2d 244, 250). Consequently, the Supreme Court properly exercised its discretion in granting the plaintiffs' motion to convert the cause of action alleging violations of the EIPA into a special proceeding pursuant to CPLR article 52 (see CPLR 103[c]; Port Chester Elec. Constr. Corp. v Atlas, 40 N.Y.2d 652, 653; Matter of First Nat. City Bank v City of N.Y. Fin. Admin., 36 N.Y.2d 87, 94; Tae Hwa Yoon v New York Hahn Wolee Church, Inc., 56 A.D.3d at 755; Melvin v Union Coll., 195 A.D.2d 447).

         CPLR article 52 sets forth procedures for the enforcement of money judgments in New York, which may include the imposition of a restraining notice against a judgment debtor's bank account to secure funds for later transfer to the judgment creditor through a sheriff's execution or turnover proceeding (see generally Cruz v TD Bank, N.A., 22 N.Y.3d 61; Distressed Holdings, LLC v Ehrler, 113 A.D.3d 111). Under both federal and state law, certain types of funds are exempt from restraint or execution, including Social Security benefits, public assistance, unemployment insurance, pension payments and the like (see generally CPLR 5205). Although the clear legislative intent is that funds of this nature are not to be subject to debt collection (and therefore excluded from any pre-execution restraint), prior to 2008, banks served with restraining notices often inadvertently froze accounts containing income from these sources, leaving judgment debtors without access to much-needed exempt funds (see Cruz v TD Bank, N.A., 22 N.Y.3d at 66-67; Distressed Holdings, LLC v Ehrler, 113 A.D.3d at 114-116).

         The EIPA was intended to ameliorate this problem, amending certain existing statutes in CPLR article 52 and adding a new CPLR 5222-a (see L 2008, ch 575). The amendments restricted the scope of the restraint that can be implemented against the bank account of a natural person and created a new procedure aimed at ensuring that this class of judgment debtors is able to retain access to exempt funds (see generally Cruz v TD Bank, N.A., 22 N.Y.3d at 66). In substance, subject to limited exceptions consistent with federal law, the EIPA precludes a bank from restraining baseline minimum balances in a "natural person's" account absent a court order. Specifically, $2, 500 is free from restraint "if direct deposit or electronic payments reasonably identifiable as statutorily exempt payments... were made to the judgment debtor's account during the [45] day period preceding" the restraint (CPLR 5222[h]). Otherwise, the statute excludes from restraint an amount that corresponds to 240 times the hourly minimum wage under the federal or state minimum wage laws, whichever is greater, to be periodically adjusted-$1, 740 as of July 2009, and as of the service of the subject restraining notices (see CPLR 5222[i]). In addition to limiting the scope of a restraint, the EIPA added new notification and claim procedures in CPLR 5222-a intended to educate judgment debtors concerning the types of funds that are exempt from restraint or execution in order to facilitate the filing of exemption claims.

         Insofar as is relevant here, CPLR 5222(i), which is entitled, "Effect of restraint on judgment debtor's banking institution account, " provides that a restraining notice "shall not apply to an amount equal to or less than [$1, 740 at the time the subject accounts were restrained] except such part thereof as a court determines to be unnecessary for the reasonable requirements of the judgment debtor and his or her dependents" (CPLR 5222[i]). It further provides that if an "account contains an amount equal to or less than [90%] of [$1, 740 at the time the subject accounts were restrained], the account shall not be restrained and the restraining notice shall be deemed void, except as ...


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