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Court Dismisses Special Proceeding Because Petitioner Failed to Comply With Statutory Requirements

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  • Posted on: Sep 2 2020

Last week, this Blog wrote about the ramifications of failing to meet a deadline or otherwise act in a timely manner (here). In today’s post, we examine the ramifications of failing to meet the procedural requirements set forth in a statute.

In Lincoln Sq. Synagogue, Inc. v. Lexington Strategies, LLC, 2020 N.Y. Slip Op. 32793(U) (Sup. Ct., N.Y. County Aug. 26, 2020) (here), the Court dismissed a turnover proceeding against a garnishee because the judgment creditor failed to follow the notice provisions set forth in CPLR §§ 5222 (d) and (e). 

Article 52 of the Civil Practice Law and Rules provides the enforcement mechanisms that judgment creditors, such as the petitioner in Lincoln Square, use to collect on a money judgment. Jackson v. Bank of Am., N.A., 149 A.D.3d 815, 818 (2d Dept. 2017). These mechanisms include, among other things, the imposition of a restraining notice against a judgment debtor or a third-party garnishee. Id. 

CPLR § 5225 allows a judgment creditor to initiate a special proceeding directing a person in possession of money or property in which the judgment debtor has an interest to turn the money or property over to the judgment creditor. CPLR § 5227 allows a judgment creditor to commence a special proceeding “against any person who it is shown is or will become indebted to the judgment debtor.” 

CPLR § 5222 provides the procedures for serving a restraining notice on the judgment debtor and a third-party garnishee. That statute requires the service of a copy of the restraining notice and a Notice to Judgment Debtor within four days of the service of the restraining notice if not already served within one year prior to the service of the restraining notice. CPLR §§ 5222 (d) and (e). See also Weinstein v. Gitters, 119 Misc. 2d 122, 123 (Sup. Ct., Suffolk County 1983). The Notice to Judgment Debtor is “designed to inform the judgment debtor, if he be a natural person, that certain monies are exempt from application to the satisfaction of the judgment” (Chemical Bank v. Flaherty, 121 Misc. 2d 509, 510 (Civ. Ct., Queens County 1983)), and sets forth the availability of procedures for asserting exemptions (CPLR § 5222). The judgment creditor has the burden of proving compliance with the statute. Chemical Bank, 121 Misc. 2d at 510.

When a restraining notice is served on a third-party garnishee, as in Lincoln Square, the turnover proceeding may not be maintained if the judgment creditor fails to comply with CPLR §§ 5222 (d) and (e) (i.e., the provisions requiring notice to the judgment debtor about that restraining notice). Matter of Kitson & Kitson v. City of Yonkers, 40 A.D.3d 758 (2d Dept. 2007) (failure to serve a notice as required by CPLR  5222 § (d) on the judgment debtor rendered execution ineffective); Friedman v. Mayerhoff, 156 Misc. 2d 295, 296 (Civ. Ct., Kings County 1992) (failure to comply with CPLR § 5222 notice to debtor resulted in vacatur of the restraining notice); Weinstein, 119 Misc. 2d at 123-124 (restraining notice dismissed without prejudice for failure to serve judgment debtor in accordance with CPLR § 5222); Chemical Bank, 121 Misc. 2d at 511; Lincoln Fin. Servs., Inc. v. Miceli, 17 Misc. 3d 1109 (A), 2007 N.Y. Slip Op. 51893 (U) (Dist. Ct., Nassau County 2007) (vacating restraining order).

In Lincoln Square, the Court found “no proof” in the Restraining Notice and the amended petition, or any assertion that petitioner complied with CPLR §§ 5222 (d) or (e) with respect to providing notice to the judgment debtor. Slip Op. at *2-*3. Instead of such proof, said the Court, petitioner merely submitted a copy of the Restraining Notice it served on Lexington Strategies, LLC, the third-party garnishee. Id. at *3.

Accordingly, the Court dismissed the petition for failure to comply with the notice requirement of CPLR 5222 §§ (d) and (e).

Takeaway

As noted in our article about the ramifications of failing to meet a deadline or otherwise act in a timely manner, there are ramifications for failing to comply with deadlines and other requirements. Lincoln Square highlights the ramifications of failing to comply with statutory requirements.

“The restraining notice is designed to prevent a garnishee or other person from disposing of the judgment debtor’s property pending a levy by the Sheriff or court order.” Chemical Bank, 121 Misc. 2d at 510. When a judgment creditor serves a restraining notice on a third-party garnishee, a proceeding to enforce the judgment under § CPLR 5227 against the third-party garnishee may not be maintained if the judgment creditor does not comply with CPLR § 5222 (d). When that happens, as in Lincoln Square, the proceeding must be dismissed. 

As one would expect, the burden is on the judgment creditor to plead and prove compliance with CPLR §§ 5222 (d) and (e). “To hold otherwise would serve to emasculate the protection afforded to judgment debtors by the CPLR 5222 (subd [e]) notice.” Id. at 510-511.

One other point needs to be made about Lincoln Square and CPLR §§ 5222 (d) and (e). The notice requirement reflects “a legislative attempt to comply with constitutional due process requirements vis-à-vis the enforcement of judgments.” Friedman, 156 Misc. 2d at 298 (citations omitted). “Thus the failure to meet these notice requirements, that is to advise a judgment debtor that his property may be exempt from application to a judgment, involves a fundamental due process right to which the presence or absence of prejudice would seem to be irrelevant.” Id. For this reason, “the failure to comply with CPLR 5222 and 5232 necessitates vacating [a] restraining notice and/or execution” upon a third-party garnishee possessing assets or property of a judgment debtor. Id.

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