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When Are The Contents Of A Jointly Owned Safe Deposit Box Safe From Judgment Creditors Of One Joint Owner?

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  • Posted on: Jan 30 2019

The desired result of litigation is a judgment fully and finally resolving the matter.   In many instances, the resolution of a lawsuit involves a money judgment.  Article 52 of the CPLR governs the enforcement of money judgments.  There are several mechanisms by which a judgment creditor can enforce a money judgment against a judgment debtor.

For example, CPLR 5018 permits a judgment to be docketed against real property of the judgment creditor.  Once a judgment is docketed, it becomes a lien against the judgment debtor’s interest in real property.  See CPLR 5203.

One of the many perks of being a judgment creditor with a docketed judgment against the judgment debtor’s interest in real property is that, with some exceptions, the judgment would have to be satisfied from the proceeds of the sale of the real property to a third-party.  This is because “CPLR 5203(a) gives priority to a judgment creditor over subsequent transferees with regard to the debtor’s real property in a county where the judgment has been docketed with the clerk of that county.”  Matter of Accounts Retrievable System, LLC v. Conway, 83 A.D.3d 1052, 1053 (2nd Dep’t 2011) (citations omitted).  The value of a judgment docketed against real property should not be underestimated.

The petitioner in Retrievable, was the assignee of a judgment creditor’s interest in a judgment docketed against real property owned by Conway.  Subsequent to the docketing of the judgment, Conway sold the real property, but when the “title search was performed in connection with [the] transaction, the judgment docketed … was not discovered and was not satisfied at closing.”  Retrievable, 83 A.D.3d at 1052.  Notwithstanding the sale to a third-party, the Second Department reversed Supreme Court’s denial of the judgment creditor’s petition and “the matter [was] remitted to Supreme Court … for the entry of a judgment directing the Sheriff of Dutchess County to sell the subject real property to enforce the money judgment.”  Retrievable, 83 A.D.3d at 1052.

Another mechanism for the enforcement of money judgments is the restraining notice.  CPLR 5222.  A restraining notice “serves as an injunction prohibiting the transfer of the judgment debtor’s property.”  Distressed Holdings, LLC v. Ehrler, 113 A.D.3d 111 (2nd Dep’t 2013) (citation omitted).  Thus, pursuant to CPLR 5222(b), “[a] judgment debtor or obligor served with a restraining notice is forbidden to make or suffer any sale, assignment, transfer or interference with any property in which he or she has an interest … except upon direction of the sheriff or pursuant to an order of the court, until the judgment or order is satisfied or vacated.”

To enforce money judgments, by attempting to locate assets, a judgment creditor “may compel disclosure of all matter relevant to the satisfaction of the judgment, by serving upon any person a subpoena….”  CPLR 5223.  The procedures for the service of “information subpoenas,” which may be served on a judgment debtor or “an individual or entity other than the judgment debtor” in an effort to locate assets of the judgment debtor that may be available to satisfy the judgment, is set forth in CPLR 5224.

To fully or partially satisfy a money judgment, a judgment creditor may bring a special proceeding against a judgment creditor or, inter alia, “a person in possession or custody of money or other personal property in which the judgment debtor has an interest.”  CPLR 5225.

In re New York Community Bank v. Bank of America, decided on January 24, 2019, by the New York Supreme Court, Appellate Division, First Department, involves a judgment creditor that brought a “turnover proceeding” to compel a bank to turnover the contents of a jointly owned safe deposit box. The petitioner in Community previously obtained an $11 million judgment against Ari Chitrik (“Chitrik”).  Bank of America (“BoA”), in response to an information subpoena, advised petitioner of a safe deposit box jointly owned by Chitrik and his wife (“Wife”).  Supreme Court granted the petition and directed “the Sheriff and/or BoA to break open the safety deposit box and turn its contents over to satisfy NYCB’s judgment against [Chitrik].”  Chitrik appealed and the First Department affirmed.

In deciding the appeal, the Community Court was required to consider “whether a presumption of joint tenancy with rights of survivorship in a safety deposit box also extends to its contents where only one of the persons who rented the box is a judgment debtor.” In Community, the Court concluded that “NYCB’s establishment of a joint tenancy in the safe deposit box account is evidence that [Chitrik] and [Wife] also ‘possess’ its contents, making the whole of the account subject to NYCB’s levy.” (Citation omitted.)

In reaching its conclusion, the Court explained, inter alia, that both Chitrik and Wife signed the rental agreement and agreed to be bound by the rental agreement rules, which defined “’Renter’” to include “’each Renter or Co-renter identified in the Rental Agreement.’” (Brackets omitted.)  The rental agreement provided, inter alia, that “access to a Box rented in the names of two or more persons … shall be under the control of each of them individually … as fully as though the Box was rented in his or her name alone … and each may have access to the Box and the right to surrender the Box….”

“When two or more persons open a bank account, making a deposit of cash, securities, or other property, a presumption of joint tenancy with right of survivorship arises (Banking Law § 675(b).”  Community (some citations omitted).  The Court also noted that such presumption “extends to safe deposit boxes held jointly.”  Community (citation omitted).  Quoting Viggiano v. Viggiano, 136 A.D.2d 630, 630 (2nd Dep’t 1988), the Community Court noted that “[i]f the presumption is applied, each named tenant ‘is possessed of the whole of the account so as to make the account vulnerable to the levy of a money judgment by the judgment creditor of one of the joint tenants.”  The Court found that the box rental agreement made plain that Chitrik and Wife were joint tenants with rights of survivorship with respect to the safe deposit box and, accordingly, by relying on the language of the agreement, petitioner met its burden.

However, the Community Court noted that the statutory presumption of joint ownership “may be rebutted by showing that the true situation as to ownership is different and that the account was established in joint names solely as a matter of convenience, not with the intention of conferring any beneficial property interest on the other individual.”  Community (citation omitted).  The presumption may only be rebutted where there is “direct proof that no joint tenancy was intended.” Community (citation omitted).  Here, the only “evidence” submitted to rebut the presumption was an affirmation of counsel, which was deemed to be insufficient.

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