REP Props., Inc. v TD Bank, N.A.
Annotate this CaseDecided on May 26, 2020
Supreme Court, New York County
REP PROPERTIES, INC., Petitioner,
against
TD BANK, N.A., Respondent.
Index No. 151352/2020
Sichenzia Ross Ference LLP, New York, NY (Ralph E. Preite of counsel), for petitioner.
No appearance for respondent.
Gerald Lebovits, J.
This is a post-judgment enforcement proceeding. Petitioner, REP Properties, Inc., the judgment creditor, is seeking to obtain funds that petitioner alleges to be those of the judgment debtor (nonparty Andrew M. Meehan), now held in accounts in the custody of respondent, TD Bank, N.A.
BACKGROUND
According to the allegations of the petition, petitioner previously obtained a money [*2]judgment against Andrew Meehan for approximately $325,000—none of which has been paid.[FN1] Petitioner alleges that Meehan has sought to place his assets beyond the reach of creditors (like petitioner) by depositing (or transferring) hundreds of thousands of dollars into an account at TD Bank. That account nominally belongs to Meehan's daughter. Petitioner alleges, though, that the account is an obsolete custodial account existing under the Uniform Transfers to Minors Act (UTMA)[FN2] and that Meehan controls the account as its custodian.[FN3] As a result, petitioner contends, the funds in the daughter's custodial account are in substance funds of Meehan's that are subject to the judgment that petitioner holds against Meehan.
Petitioner brought this post-judgment enforcement proceeding to recover funds in two specified TD Bank accounts controlled by Meehan (the custodial account and another account in Meehan's own name). Petitioner chose to bring the proceeding against TD Bank alone, rather than also naming Meehan and his daughter as respondents.
Petitioner now brings on two motions by order to show cause. Petitioner moves under CPLR 5225 and 5227 for an order directing TD Bank to turn over the funds in those accounts (motion sequence 002). Petitioner has, in addition, sought and obtained interim relief from the court imposing restraints on those two accounts pending the hearing of the motion before this court. That hearing was canceled due to COVID-19-related disruptions of normal court operations. This court's understanding, though, is that TD Bank has left restraints in place on the two accounts for the time being. Petitioner also moves for an order sealing the record in this proceeding (motion sequence 001); petitioner has sought and obtained an interim sealing order.
Petitioner's motion for turnover is granted only as to the account in Meehan's own name, and is denied as to the custodial account in the name of Meehan's daughter. Petitioner's motion to seal is denied.
DISCUSSION
I. The Motion to Seal
In motion sequence 001, petitioner seeks an order sealing all papers in this matter—including this court's own orders—and limiting access to those papers to the parties, their counsel, and court staff. Given the public's deeply rooted constitutional and common-law "right of access to proceedings as well as to court records," and the "correlating common-law [*3]right to inspect and copy judicial records," such sealing orders are disfavored. (Gryphon Dom. VI, LLC v APP Intl. Fin. Co., B.V., 28 AD3d 322, 324 [1st Dept 2006].) Sealing is authorized only for good cause, and "only in strictly limited circumstances." (Id.) Thus, for example, that a case involves embarrassing allegations—or for that matter accusations of unethical and criminal conduct—is not enough, standing alone, to warrant placing a case under seal. (Id. [citations omitted].)
Here, petitioner gives two justifications for sealing the entire record in this case. Neither is sufficient. Petitioner asserts that absent sealing, the legitimate privacy interests of Meehan and his daughter would require redacting their bank account numbers—but also that providing the full account numbers is necessary to enable the court to understand the circumstances under which petitioner is seeking turnover. This court recognizes both the important interest in keeping bank account information private and the relevance of the account numbers to petitioner's arguments in this proceeding. This court concludes, though, that these concerns can each be satisfied by redacting all but the last four digits of the two account numbers in question and by identifying and referring to the two accounts only by those last four digits. (See e.g. Gallen v Gallen, 2020 NY Slip Op 02732, at *1 [1st Dept May 7, 2020] [identifying brokerage and bank accounts by financial institution and the last four digits of each account's number].)
Petitioner also asserts that requiring this degree of redaction would be unduly burdensome. Petitioner has admittedly filed numerous bank statements in support of its turnover motion, each of which would require redactions; and petitioner also would need to revise its supporting affirmation and memorandum of law to refer only to the last four digits of the two accounts at issue. But these are documents that petitioner has chosen to file. Petitioner's logistical burden in properly redacting sensitive financial information in documents it has filed is not a proper basis to completely deny the public access to court filings, including this court's own orders.
The motion to seal is denied. Petitioner must refile its motion papers that refer to the two bank accounts only by their last four digits, and must refile redacted versions of all supporting documents (such as bank statements) that include the full numbers of the two accounts.
II. The Turnover Motion
Petitioner also moves under CPLR 5225 and 5227 for an order directing TD Bank to turn over the funds in the two accounts at issue.
CPLR 5225 provides that where a judgment creditor brings a special proceeding "against a person in possession or custody of money or other personal property in which the judgment debtor has an interest," the court "shall require such person to pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor." (CPLR 5225 [b].) Here, petitioner, as judgment creditor, has brought a special proceeding against TD Bank, as custodian. Petitioner contends that nonparty Meehan, as judgment debtor, has an interest in the money in his daughter's UTMA custodial account at TD Bank, and therefore that this court should order [*4]TD Bank to turn over that money.[FN4]
This court concludes that petitioner has failed to demonstrate sufficiently that the money in the custodial account is money "in which the judgment debtor has an interest." Under the UTMA (and its predecessor the Uniform Gifts to Minors Act (UGMA)), where a gift of money or property is made to a custodial account established for a minor, that gift "is irrevocable, and the custodial property is indefeasibly vested in the minor." (EPTL § 7-6.11; see also now-repealed EPTL § 7-4.2 [same, under UGMA].) To be sure, the custodian retains power, as set forth in the UTMA, to carry out tasks such as managing or investing that money on behalf of the minor; but "the donor retains no rights, legal or equitable, to the conveyed property." (Gordon v Gordon, 70 AD2d 86, 90 [2d Dept 1979] [interpreting EPTL § 7-4.2].)
Petitioner supplies no authority standing for the proposition that this court can simply disregard the custodial nature of the account in which the funds at issue are being held. Petitioner misplaces its reliance on the decision of the New York City Civil Court in Friedman v Mayerhoff (156 Misc 2d 295 [Civ Ct, Kings County, 1992] [interpreting EPTL § 7-4.2]). Friedman emphasizes that under the UGMA "title to . . . custodial funds is vested in the child for whose benefit it was established," and therefore that those "funds may not be seized in order to satisfy a judgment against the defendants." (156 Misc 2d at 299; see also Bruce & Iris, Inc. v LNM Imports, Inc., 2007 NY Slip Op 31336 [U], at *7 [Sup Ct, Suffolk County] [reading Friedman as holding that "funds in custodial accounts created on behalf of the children of a judgment debtor may not be seized in order to satisfy a judgment against said debtor"].)
To be sure, Friedman also cautions that if a creditor were to demonstrate "that the account was established by the custodian for a fraudulent purpose and with the aim of shielding his assets from application to a judgment," it would be "possible to have the transfer evidenced by the account set aside" under Debtor and Creditor Law §§ 278 and 279.[FN5] (156 Misc 2d at 299; see also Cadles of Grassy Meadows II, L.L.C. v Katz, 2008 NY Slip Op 32674 [U], at *13 [Sup Ct, NY County 2008] [noting in dicta that "[f]unds held in [UTMA] accounts cannot be executed upon in order to satisfy a judgment against the defendant, unless it is shown that the account was created for a fraudulent purpose"].) And petitioner argues here—with considerable documentary support—that the various deposits and transfers made by Meehan to the custodial account over the past three years have been for the improper purpose of evading his creditors rather than for the genuine benefit of his (adult) daughter.
But petitioner has not sought in this proceeding to set aside the various transfers from Meehan to the custodial account as fraudulent conveyances.[FN6] Nor could it—Meehan and his daughter would each be a necessary party to any request by petitioner to set aside the transfers, and petitioner deliberately chose to name neither of them as respondents here. (See Riback v Margulis, 43 AD3d 1023, 1023 [2d Dept 2007] [holding debtor to be a necessary party in action by creditor to set aside conveyances as fraudulent]; Henry v Soto-Henry, 89 AD3d 617, 619 [1st Dept 2011] [holding transferees to be necessary parties in action to set aside conveyances as fraudulent].)
On this record, petitioner has failed to establish that the sole respondent here, TD Bank, is "in possession or custody of money . . . in which the judgment debtor has an interest," at least with respect to the funds in the custodial account of Meehan's daughter. Petitioner's request under CPLR 5225 for an order directing TD Bank to turn over funds in the two accounts at issue is granted only with respect to the account held in Meehan's own name, and otherwise denied.
Petitioner also seeks turnover under CPLR 5227. This rule provides that where a judgment creditor brings a special proceeding "against any person who it is shown is or will become indebted to the judgment debtor, the court may require such person to pay to the judgment creditor the debt upon maturity, or so much of it as is sufficient to satisfy the judgment."
Petitioner correctly notes that a bank is indebted to its depositors, since "the bank holds the fund subject to its being paid out or withdrawn upon the direction of the creditor according to the terms and conditions imposed by him." (Matter of New York State Assn. of Life Underwriters v Superintendent of Ins. of State of NY, 37 AD2d 304, 307 [3d Dept 1971].) But it does not follow that for purposes of CPLR 5227 TD Bank is indebted to Meehan with respect to the money in his daughter's custodial account. As discussed above, legal and equitable title to the funds on deposit in a UTMA custodial account is held by the minor donee for whose benefit the account was established—not the donor or account custodian. Thus, formally speaking, TD Bank is indebted to Meehan's daughter, not Meehan himself. Petitioner's argument for disregarding this legal formality rests on the same cases that petitioner relied upon in support of its CPLR 5225 claim, and fails for similar reasons.
Accordingly, it is hereby
ORDERED that petitioner REP Properties, Inc.'s motion to seal the court records of this proceeding permanently (motion sequence 001) is denied; and it is further
ORDERED that this court's interim sealing order, contained in the order to show cause signed by this court on February 7, 2020, and appearing at NYSCEF No. 22, shall continue in effect for 30 days from entry of this decision and order; and it is further
ORDERED that within this 30-day period, petitioner shall refile the petition, orders to show cause, and all supporting papers with proper revisions and redactions as discussed above, and shall remove the present, unredacted versions of those documents; and it is further
ORDERED that the branch of petitioner's turnover motion (motion sequence 002) seeking turnover of funds in the account held by nonparty Andrew Meehan at respondent TD Bank with the last four digits 1822 is granted; and TD Bank shall within 14 days turn over those funds to petitioner; and it is further
ORDERED that the branch of petitioner's turnover motion (motion sequence 002) seeking turnover of funds in the UTMA account established at TD Bank for the benefit of nonparty Hannah Meehan with the last four digits 9140 is denied; and it is further
ORDERED that the restraints imposed on TD Bank with respect to this account contained in the order to show cause signed by this court on February 7, 2020, and appearing at NYSCEF No. 23, shall be in effect for 30 days from entry of this decision and order; and it is further
ORDERED that petitioner shall serve a copy of this order with notice of its entry, and copies of the two orders to show cause signed by this court on February 7, 2020, on TD Bank and on Andrew Meehan.
Date: 5/26/20 Footnotes
Footnote 1:Petitioner previously brought a motion for summary judgment in lieu of complaint against Meehan under CPLR 3213, seeking to recover on a defaulted promissory note. This court granted that motion on default and without opposition. (See Index No. 650260/2019, NYSCEF Nos. 11, 16.)
Footnote 2:See Estates Powers & Trusts Law (EPTL) art. 7 pt. 6.
Footnote 3:The petition alleges that the account is obsolete because Meehan's daughter reached the age of majority several years ago—and that the account was essentially moribund before Meehan began putting in his own money.
Footnote 4:As noted above, petitioner also seeks turnover under CPLR 5225 (b) of the money in the TD Bank account that Meehan holds under his own name. The record indicates that as of the end of 2019, Meehan had less than $1500 in that account—a tiny fraction of the amount in his daughter's custodial account.
Footnote 5:A court might similarly set aside a custodial transfer, and restore the funds to the donor, "if the donor establishes that there was a lack of donative intent when the account was opened." (Friedman, 156 Misc 2d at 299 n **; see also Matter of Estate of Ajamian, 270 AD2d 724, 727-728 [3d Dept 2000] [discussing this issue].)
Footnote 6:That request could be made here by motion, without need to commence a separate plenary action. (See Siemens & Halske GmbH. v Gres, 32 AD2d 624, 624 [1st Dept 1969].)
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