Author: LegalEase Solutions
Garnishment of Bank Account in New York
- In order to garnish a defendant’s bank account, is it sufficient for the Sheriff to know the Bank’s name, or should other details such as bank account number be furnished?
- Yes, generally, knowledge of the Bank’s name would be sufficient for the Sheriff to garnish a defendant’s Bank account.
Among the various enforcement devices available to a judgment creditor under N.Y. C.P.L.R., Article 52 is the Restraining Notice. A party served with such a notice is forbidden to make or suffer any sale, assignment, transfer or interference with any of the judgment debtor’s property to any person other than the sheriff, except upon direction of the sheriff or pursuant to an order of the court. [N.Y. C.P.L.R. 5222(b)].
Thus, the restraining notice serves as a type of injunction prohibiting the transfer of the judgment debtor’s property. This notice may be served on either the judgment debtor himself or, upon a third-party garnishee; a person who owes a debt to the judgment debtor or who is in possession of property in which the judgment debtor has an interest. N.Y. C.P.L.R. 105(i).
It is imperative that the garnishment process contain all elements of notice sufficient to warrant an assertion of jurisdiction over the garnishee and garnishable property or indebtedness. [20 A.L.R.5th 229]
A Restraining Notice shall specify all of the parties to the action, the date that the judgment or order was entered, the court in which it was entered, the amount of the judgment or order and the amount then due thereon, the names of all parties in whose favor and against whom the judgment or order was entered, it shall set forth subdivision (b), and shall state that disobedience is punishable as a contempt of court, and it shall contain an original signature or copy of the original signature of the clerk of the court or attorney or the name of the support collection unit which issued it. N.Y. C.P.L.R. 5222(a).
Under N.Y. C.P.L.R. 5222(b), all property in which the judgment debtor or obligor is known or believed to have an interest then and thereafter coming into the possession or custody of such a person, including any specified in the notice, and all debts of such a person, including any specified in the notice, then due and thereafter coming due to the judgment debtor or obligor, shall be subject to the notice.
With respect to garnishee orders issued against Banks, statutory provisions do not specifically stipulate that details such as name of branch or bank account number need be mentioned in the Restraining Notice. A line of decisions by New York courts have considered this issue.
In Digitrex, Inc v. Johnson., 491 F. Supp. 66 (1980), the corporation obtained a judgment against the account holder and obtained a restraining order freezing the account holder’s assets. Upon filing his motion to dissolve the restraining order, the account holder argued that it was ineffective in the first place because it had been served at the bank’s main office and not upon the branch at which his account was maintained and because it failed to specifically identify the account that was to be frozen. The court denied the account holder’s motion, finding that, although the New York courts had previously upheld a rule providing that a restraining notice had to be served upon the branch office at which an account holder’s account was maintained, the rule appeared to no longer stand because of the fact that banks presently used high speed computers with central indexing capabilities to keep track of their depositors’ accounts such that there were no longer problems with communications between banks’ branch offices and the orderly transaction of banking business. The Court further held that “N.Y. C.P.L.R. § 5222(b) did not require the precise number of a bank account to be specified in order for it to be frozen.” Id at 69.
The holding in Digitrex is true as long as the bank in question is within the situs of the bank where the defendant holds an account. That is, the branch should not be in extraterritorial reach of the main bank. Yayasan Sabah Dua Shipping SDN BHB v. Scandinavian Liquid Carriers, Ltd., 335 F. Supp. 2d 441, 448 (D.N.Y. 2004)
In State Tax Com. v. Blanchard Management Corp., 91 A.D.2d 501, the Court stated:
“We note the holding relied on by the commission in Digitrex, Inc. v Johnson (491 F Supp 66 [construing New York law]), that service of a restraining notice which did not specify the number of the account to be frozen was sufficient even though it was served at the main office of the bank rather than the branch where the account was maintained. In that case, Judge Knapp cited the advanced computer technology employed by major New York banks at their main offices to reject the traditional New York rule that attachment of a bank account must be made at the branch where the account is maintained. (See Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C5201:13, p 67.) But in Digitrex, the restraining notice specified the name of the person whose account was to be frozen. Here, the levy only named an attaching creditor of one of Chemical’s account holders. Applying the rationale in Digitrex, we hold that this tax collector’s levy, served on Chemical at its main office a full two weeks after Blanchard had restrained Open City’s account at the branch office, was deficient because it did not adequately describe its object so that the bank could act upon it.”
Id at 502, emphasis added.
Statutory provisions clearly elucidate the details to be included in a Restraining Notice. Though the statute does not specifically state that details like branch name or bank account number are required to garnish a defendant’s bank account, the holdings in the above cited cases show that mentioning of the bank name would be sufficient.
In Meehan v. Nassau Community College, 242 A.D. 2d 155, the Court addressed the issue of award of costs as ancillary relief and stated:
“First, the petition requested an award of costs. We speak here of the costs incurred in the court proceedings relating to the awards, as distinguished from those incurred in the course of the arbitrations themselves. A proceeding to confirm an arbitration award is a special proceeding, and statutory court costs are available (see, CPLR 103 [b]; 105 [b]; 8101, 8201; City of Buffalo v Clement Co., 28 NY2d 241; City of Buffalo v Irish Paper Co., 31 AD2d 470, 477, affd 26 NY2d 869; Matter of McEntee [MVAIC], 29 AD2d 68, affd 28 NY2d 939; Matter of Terenzi [Aetna Cas. & Sur. Co.], 56 Misc 2d 177, 178; Siegel, NY Prac § 414, at 630 [2d ed]; 5 NY Jur 2d, Arbitration and Award, § 223). Of course, the Supreme Court retains the discretion to deny such costs (see, e.g., Matter of Mossman [MVAIC], 19 AD2d 842).
Id at: 159.
CPLR § 103, Form of Civil Judicial Proceedings reads in relevant part:
(b): Action or special proceeding. All civil judicial proceedings shall be prosecuted in the form of an action, except where prosecution in the form of a special proceeding is authorized. Except where otherwise prescribed by law, procedure in special proceedings shall be the same as in actions and the provisions of the civil practice law and rules applicable to actions shall be applicable to special proceedings. And as per CPLR § 105 (b), the word “action” includes a special proceeding. Id.
Moreover, it has been specifically provided in CPLR 8101 that the party in whose favor a judgment is entered is entitled to costs in the action, unless otherwise provided by statute or unless the court determines that to so allow costs would not be equitable, under all of the circumstances.
In the case at hand, the Plaintiff is the successful party in a special proceeding and is entitled to statutory costs.
(ii) Attorney Fees.
N.Y.C.P.L.R. 7513 provides that:
“Unless otherwise provided in the agreement to arbitrate, the arbitrators’ expenses and fees, together with other expenses, not including attorney’s fees, incurred in the conduct of the arbitration, shall be paid as provided in the award. The court, on application, may reduce or disallow any fee or expense it finds excessive or allocate it as justice requires.”
In Meehan the petitioner’s request for an award of attorney fee was denied, as it was not stipulated in the arbitration agreement. The Court held “the petition requests an award of attorney’s fees. The parties’ agreement contains no provision allowing for such an award (citing Hooper Assocs. v AGS Computers, 74 NY2d 487, 491), and it is therefore unwarranted.” Id at 160.
A line of decisions of New York Courts have held that under the general rule, attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized either by agreement between the parties, or by statute or court rule. Hooper at 491.
(See also , Matter of A. G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 5; Mighty Midgets v. Centennial Ins. Co., 47 NY2d 12, 21-22; City of Buffalo v Clement Co., 28 NY2d 241, 262-263).
The decision in Hooper unequivocally laid down the general rule that unless the award is sanctioned by agreement between the parties, by statute or by court rule, a claim for attorney fees cannot be raised subsequently.
In Kidder, Peabody & Co. v Mc Artor, 223 A.D.2d 502, the Court held: “Attorney fees may not be recovered in arbitration under New York law unless they are expressly provided for in arbitration agreement.” Id at 503. (See also Matter of MKC Dev. Corp v. Weiss, 203 A.D.2d 573).
In, Matter of the Estate of Becky Aaron, 30 N.Y.2d 718 (1978), the lower appellate court modified the decision of the trial court and held that compensation to the estate attorneys was excessive and the trial court had no power to award interest for the time between the petition for compensation and the decree. On appeal, the court modified and remitted for a determination of whether pre-decision interest should have been awarded. The court held that there was no basis for a holding that the trial court did not have power to award pre-decision interest and stated that statutory law, common law, and treatises only indicated the fixation of fees and the addition of interest were discretionary and provided no further analysis. The Court held:
“The fixing of attorneys’ fees resting in the court’s discretion, the method of computation likewise rested in discretion. The court could consider delay in receipt of the payment of fees in determining the reasonable fees or it could fix the fees and compensate for delay by computing interest on the fees found to be appropriate. The Appellate Division had a similar power.”
Id at 719-720.
Under New York law the threshold requirement is that a clause with respect to recovery of attorney fees should be stated in the arbitration agreement in order to be enforceable. Therefore, going by the decision in Meehan, supra, attorney fees may not be recovered in a proceeding for confirmation of an arbitration award, unless they are expressly provided for in arbitration agreement. In the case at hand, attorney fees are sought to be recovered in the proceedings initiated for confirmation of an arbitration award. If the arbitration agreement stipulates that the prevailing party would be entitled to attorney fees, it could be claimed as a matter of right.
The arbitration agreement can also put a cap on the attorney fees and it is in the Court’s discretion to decide the attorney’s fees.
Attorneys’ fees may be rewarded either by motion or as an indemnification provision in a pre-existing contract between the parties. The latter situation is applicable as long as the language of the agreement is unmistakably clear regarding whether the parties to the agreement intend provisions of attorneys’ fees to apply to disputes among themselves.” Kingdom 5-KR-41, Ltd. v. Star Cruises PLC, 2005 U.S. Dist. LEXIS 15981 (D.N.Y. 2005) citing Coastal Power Int’l v. Transcont’l Capital Corp., 182 F.3d 163, 165 (2d Cir. 1999).
Statutory provisions clearly stipulate the details to be furnished in a Restraining Notice, served on a garnishee. Though the statute does not specifically state that details like branch name or bank account number are required to garnish a defendant’s bank account, going by the line of New York Court decisions it can be generally concluded apart from the statutory requirements of a Restraining Notice, the Bank’s name alone would be sufficient to garnish a defendant’s bank account. However in case of several banks that are not centrally computerized, mention of the name of the branch is required. In any case, more specific details such as bank account number etc. are not required because the plaintiff cannot be presumed to have knowledge of such details.
Under Meehan atorney fees may not be recovered in a proceeding for confirmation of an arbitration award, unless they are expressly provided for in arbitration agreement.