USA Auto Funding, LLC v Washington Mut., Inc.
Annotate this CaseDecided on March 30, 2006
Supreme Court, Nassau County
USA AUTO FUNDING, LLC d/b/a USA AUTO LEASING, now known as USA FINANCIAL SERVICES, LLC, Petitioner(s),
against
WASHINGTON MUTUAL, INC., Respondent(s).
16440/05
Moritt, Hock, Hamroff & Horowick
Attorney for Plaintiff
400 Garden City Plaza, Suite 202
Garden City, NY 11530
(516) 873-2000
Washington Mutual, Inc.
975 Franklin Ave.
Garden City, NY 11530
(516) 873-5290
Hon. Geoffrey J. O'Connell
(mailing address)
100 Supreme Court Drive
Mineola, NY 11501
Geoffrey J. O'Connell, J.
Respondent applies to the Court for an order pursuant to CPLR 404 and 3211(7) dismissing the Petition for failure to state a cause of action. Petitioner opposes.
Petitioner USA Funding is a judgment creditor on a judgment entered on Oct. 21, 2003 by the Nassau County Clerk against Giovan G. Arcamone and Salvatore Auto Services & Towing in the amount of $65,412.53. On or about Jan. 14, 2004, Petitioner served a Restraining Notice to Garnishee upon Respondent Washington Mutual together with an Information Subpoena. In response Respondent Washington Mutual informed Petitioner that Giovan Arcamone had an interest in one of its safety deposit boxes, but denied the existence of any bank accounts in which he had an interest. The Petition alleges that on Sept. 14, 2004 USA Funding commenced a turnover proceeding in Supreme Court, Kings County, to obtain possession of the contents of the safe deposit box.
On Sept. 15, 2004 Giovan Arcamone applied, pro se, for an Order to Show Cause vacating the default judgment obtained by USA Funding alleging improper service of the summons and complaint. The proposed Order to Show Cause included the following: "Pending the hearing of this motion it is ORDERED that the restraining notice issued against Defendant Arcamone to enforce judgment is vacated." The supporting affidavit explained; "I request that the Court issue an order temporarily restraining the plaintiff from continuing the restraining notice against me." The reason for the request was; "I am prevented from access to my assets [*2]required to pay my daily living expenses."
The Order to Show Cause was granted, but the word "vacated" was stricken out and the word "stayed" was written in. USA Funding alleges that its attorney notified Washington Mutual of the Order to Show Cause and that; "there was now a TRO in place which prohibited USA and/or [the New York City Marshall] from, inter alia, levying upon the Safety Deposit Box . . . ." No writing purporting to convey this notice has been presented to the Court. On October 25, 2004, Washington Mutual allowed Giovan Arcamone access to the safety deposit box. The motion to vacate the default was ultimately denied and when the safety deposit box was opened it was empty.
In its Petition USA Funding seeks a money judgment against Washington Mutual as well as a finding of contempt and punitive damages. Respondent Washington Mutual applies for summary judgment dismissing the Complaint.
Discussion
As a matter of routine, orders to show cause seeking to vacate default judgments are granted with temporary restraining orders that stay the enforcement of the underlying judgment. Such a general stay of enforcement does not "serve to suspend the effectiveness" of a restraining notice. (Nardone v Long Island Trust Co., 40 AD2d 697 [2d Dept, 1972]). Similarly, a general bankruptcy stay has no effect upon a restraining notice. (Broome v Citibank, 166 Misc 2d 283 [Civ.Ct Qns., 1995]). The rationale for this rule is that the restraining notice confers upon the creditor no lien upon or interest in the property nor any priority as against other creditors. To achieve these objectives further enforcement procedures are required. (See, Aspen Industries v Marine Midland Bank, 52 NY2d 575, 579-580 (1981); Siegel, Practice Commentary, McKinney's Cons Laws of NY Book 7B (1997), §5222, § 5222.8). "A restraining notice operates as an injunction. It merely restrains a party upon which it is served from making any transfer . . . ." (Medi-Physics v Community Hospital, 105 Misc 2d 574, 575 [Cty. Ct. Rockland, 1980]).
Washington Mutual argues, however, that Giovan Arcamone did not apply for a temporary restraining order staying enforcement of the judgment, but instead sought the specific relief of vacatur of the restraining notice. While the motion court did not vacate the restraining notice, it did alter the proposed order to read; "the restraining notice issued against Defendant to enforce judgment is stayed."
"A stay is defined as a direction of the court, usually embodied in an order, freezing' an action or proceeding before it at whatever point it has reached and precluding it from going any further' (Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 2201:1, at 7)." 1544-48 Properties v Maitre, 184 Misc 2d 984, 985 [App.Term, 2d Dept, 2000]).
Reading the temporary restraining order literally, it merely granted a stay or "freezing" of any further efforts to enforce the judgment, without in any way weakening the effect of the restraining notice.
CPLR 5222(a) provides that disobedience of a restraining notice may be punishable by contempt, but it contemplates a refusal to comply or willful neglect. (Security Trust Co. v. Magar Homes, 92 AD2d 714, 715 [AD4th Dept, 1983]; see, Mazzukav Bank of North America, 53 Misc 2d 1053, 1056 [Civ.Ct. Queens, 1967]). Generally, to hold a party in civil contempt [*3]requires proof that there was a violation of a clear and unequivocal court order which prejudiced the rights of another party. (Rupp-Elmasri v Elmasri, 305 AD2d 394 [2d Dept, 2003]). Further, to support a finding of contempt, the proof must be clear and convincing. (Vujovic v Vugovic, 16 AD3d 490 [2d Dept, 2005]). Here the ambiguity of the temporary restraining order precludes any finding of contempt on the part of Washington Mutual.
An alternative remedy to contempt available to a party aggrieved by the failure to honor a restraining notice is a plenary action or special proceeding seeking damages. (Mazzukav Bank of North America, 53 Misc 2d 1053, 1056 [Civ.Ct. Queens, 1967]; Matter of Sumitomo Shoji v Chemical Bank New York Trust Co., 47 Misc 2d 741 (Sup.Ct. NYCty, 1965); Seigel, New York Practice (4th Ed.) 863). To recover the claimant must show negligence in failing to comply with the restraining notice. (Security Trust Co. v. Magar Homes, 92 AD2d 714, 715 [AD4th Dept, 1983]). Here there has been a formal admission by Washington Mutual in an affidavit submitted in the Kings County turnover proceeding that the restraint was "inadvertently removed" and the Bank subsequently realized that "the restraint should not have been removed . . . ." (Affidavit of Elena Paz, sworn to on Feb. 25, 2005). Whether the inadvertence referred to in that affidavit was a misunderstanding of the temporary restraining order or some clerical oversight, it is sufficient to raise an issue of fact.
In its action for damages Plaintiff will be required to prove that the failure to honor the restraining notice caused it to sustain damages. (Aspen Industries v Marine Midland Bank, 52 AD2d 575, 581 (1981)). Although the contents of a safety deposit box may unquestionably be attached or restrained (Carples v Cumberland Coal & Iron Co., 212 A.D. 150 [1st Dept, 1925]), the damages flowing from the failure to honor a restraint are not as apparent as they might be in the case of an account with a stated balance. Nevertheless the fact that it may be difficult to calculate damages does not alone preclude any award. (Tobin v Union News Co., 18 AD2d 243, aff'd 13 NY2d 1155 (1964)).
The motion to dismiss the petition insofar as it seeks to punish Respondent for contempt is granted and in all other respects is denied.
It is, SO ORDERED.
Dated: _________________________________
HON. GEOFFREY J. O'CONNELL, J.S.C.
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