Rappaport, Steele & Co., P.C. v JPMorgan Chase Bank, N.A.

[*1] Rappaport, Steele & Co., P.C. v JPMorgan Chase Bank, N.A. 2006 NY Slip Op 51657(U) [13 Misc 3d 1203(A)] Decided on August 31, 2006 District Court Of Nassau County, First District Fairgrieve, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 31, 2006
District Court of Nassau County, First District

Rappaport, Steele & Company, P.C., Petitioner(s)

against

JPMorgan Chase Bank, N.A., Susan Chung, Deborah Shen, Respondents(s)



12316/06



Kirschenbaum & Phillips, P.C., attorneys for Petitioner,106 East Jericho Turnpike, Mineola, New York 11501; JPMorgan Chase Bank, N.A., respondent, 32 Jericho Turnpike, Mineola, New York 11501, (516) 574-6001; Susan Chung, respondent, 143-50 Barclay Avenue, Apt. 6B, Flushing, New York 11355; Deborah Shen, judgment debtor, 23 Rosehill Drive, Manhasset, New York 11030.

Scott Fairgrieve, J.

Petitioner in this matter applies for a judgment in favor of the petitioner and against the respondent, JP MORGAN CHASE BANK, N.A. (Bank), in the sum of $2,072.44, plus accrued interest thereon, plus costs and disbursement of this proceeding. This turnover application is brought pursuant to Sections 5225 and 5227 of the CPLR, on account of the judgment entered in the First District Court of Nassau County on September 22, 2005, in the sum of $16,739.65, in favor of the petitioner and against the judgment debtor, DEBORAH SHEN, on the grounds that the respondent, Bank, is indebted to the judgment debtor in the sum of 2,072.44.

Petitioner's application for a turn over order is hereby granted and respondent Bank is directed to deliver to the petitioner the full amount of 2,072.44 from the judgment debtor's joint bank account. The facts demonstrate that Petitioner obtained a judgment against the Judgment Debtor in the sum of $16,739.65 on September 22 of 2005. An information subpoena and questionnaire were served upon the respondent Bank. The Bank responded that the judgment debtor and respondent, SUSAN CHUNG, owned a joint bank account in the approximate sum of $2,072.44.

The turnover petition is unopposed. A review of the file demonstrates that the proceeding was properly commenced by including all necessary parties: the bank, JP Morgan Chase, the judgment debtor, and the non-judgment debtor, SUSAN CHUNG. (See, Bergdorf Goodman, Inc. v. Marine Midland Bank, 97 Misc 2d 311, 411 NYS2d 490 [NYC Civ Ct, 1978]). The Court notes that respondents were properly served with the petition, in accordance with the CPLR.

Petitioner contends that it is entitled to the full proceeds of the account to help satisfy the judgment. This Court agrees with the petitioner that it is entitled to the full amount of the JP Morgan Chase Bank account to satisfy that judgment. Since both the respondent judgment debtor and the respondent non-judgment co-tenant were properly served with the turnover application, their default is deemed an admission and/ or concession that the bank account proceeds belong to the judgment debtor. [*2]

A default in answering under New York Law establishes for liability purposes the allegations of the pleading (complaint or petition). (See, McClelland v. Climax Hosiery Mills, 252 NY 347 [1930]). The purpose of CPLR §§ 5225 and 5227 is to resolve in a special proceeding the respective rights and interests of parties to their respective interests in bank accounts. (See, Ruvolo v. Long Island R. Co., 45 Misc 2d 136, 256 NYS2d 279 [NY Sup, 1965]).

This Court has held, in Ford Motor Company v. Astoria Federal, 189 Misc 2d 475, 733 NYS2d 583 [Nassau Dist, 2001], that the default by the non-judgment debtor account holder establishes the right of the petitioner/judgment creditor to the entire amount deposited in the bank account. A case to the contrary is Mendel v. Chervanyou, 147 Misc 2d 1056, 559 NYS2d 616 [NYC Civ Ct, 1990]. In Mendel, the petitioner judgment creditor claimed that it was entitled to the full proceeds of the joint account, which was in the name of the judgment debtor and another person. The court there held that a rebuttable presumption exists that each joint tenant owns half of the account. That court also stated that the petitioner judgment creditor had the burden to prove that the presumption should be rebutted to allow the judgment creditor to levy upon more than half of the account. Most importantly however, the judge in the Mendel case held that the judgment creditor failed to rebut the presumption even though the non-judgment debtor tenant defaulted.

The Mendel court's reasoning for the holding was that while the non-appearance of the non-judgment debtor tenant diminished the amount of proof needed, that does not by itself constitute a rebuttal of the presumption.

In Ford Motor Credit Company v. Astoria Federal, supra, this Court held that the default of the non-judgment debtor establishes that he/she has no ownership interest; this is especially true when the non-judgment tenant is personally served and defaults in answering the allegations of the petition which seeks the full amount of the bank account. Id 477.

In Direct Merchants Credit Card Bank v. Greenpoint Bank, 2003 WL 2004163 (NY Dist Ct), the court disagreed with the Ford rationale by arguing that the Ford case would place the burden upon the non-judgment debtor in direct contravention of the legislative mandate of the presumption.

The Ford rationale represents better policy because of its equitable and logical merit. A strong argument in support was written by David J. Montag (court attorney to Judge Loren Bailey-Schiffman in Civil, Kings County, and the secretary of the Civil Court Committee of the Association of the City of New York) in the New York Law Journal, which states as follows: Consider the 50 percent rule. Debtors knowing this rule may be put in a better position if they do not respond to the turnover petition. If the judgment debtor owns the entire restrained account and the non-debtor is merely an additionally named holder, by defaulting in the turnover proceeding, the debtor will be put in a better position than if a hearing was held and determined that the [*3]account was owned by the debtor wholly. In such a case the creditor will be limited to 50 percent when it may have been entitled to reach much more. Who does such a rule benefit? Surely not the judgment creditor. In fact, such a rule may actually encourage account holders not to respond to the petition, in effect hiding assets from creditors.Now consider the opposite. It is true that if the judgment creditor is automatically entitled to 100 percent of the restrained account, innocent parties may be prejudiced. However, considering that the creditor had to overcome a due process burden and serve the non-debtor co-tenant, there has been ample notice.If the respondents chose not to join the suit, it may be an admission of account ownership, and no one is prejudiced. This is consistent with the law of default judgments and the procedures established by Article 52 of the CPLR. (See Montag, Joint Tenancy and Turnover Petitions, NY Law Journal, November 25, 2002, at 4, col 4).

This Court agrees with Law Assistant Montag's argument, and based upon the foregoing, this Court grants judgment to the petitioner for the amount necessary to satisfy the outstanding judgment and directs respondent bank JP Morgan Chase Bank to pay over the amount in the account to petitioner's counsel, Kirschenbaum & Phillips, P.C. (106 East Jericho Turnpike, Mineola, New York 11501), to satisfy the outstanding balance of the judgment owed.

SO ORDERED:

DISTRICT COURT JUDGE

Dated:August 31, 2006

CC:Kirschenbaum & Phillips, P.C.

JPMorgan Chase Bank, N.A.

Susan Chung

Deborah Shen

SF/mp