BILL NUMBER:S7141

TITLE OF BILL:  An act to amend the civil practice law and rules, in
relation to payment or delivery of property of judgment debtor

This is one in a series of measures being introduced at the request of
the Chief Administrative Judge upon the recommendation of her Advisory
Committee on Civil Practice.

CPLR 5225(a) provides that a judgment creditor can seek satisfaction
of a judgment by moving against the judgment debtor for an order
requiring him or her to deliver to the sheriff any money or personal
property in which he or she has an interest if he or she is "in
possession or custody" of that property. Similarly, CPLR 5225(b)
allows the judgment creditor to commence a special proceeding against
another person "in possession or custody of money or other personal
property in which the judgment debtor has an interest, or against a
person who is a transferee of money or other personal property from
the judgment debtor, where it is shown that the judgment debtor is
entitled to the possession of such property or that the judgment
creditor's rights to the property are superior to those of the
transferee." CPLR 5225(b) (italics supplied).

This measure would amend CPLR 5225(a) and (b) to facilitate the
ability of a judgment creditor to seek the delivery of property in the
possession of a person outside the court's jurisdiction by exercising
              

jurisdiction over the judgment debtor or another person within the
court's jurisdiction who may "control" the person with possession. The
issue can arise in a number of contexts, including a situation where a
garnishee's agent, such as an attorney, holds the property. The
property is under the garnishee-client's "control," but arguably not
in that client's "possession or custody."

This amendment also may come into play in a parent/subsidiary
situation, as it did in the recent decision of the Court of Appeals in
Commonwealth of the N. Mariana Islands v. Canadian Imperial Bank of
Commerce, 21 N.Y.3d 55 (2013) ("Mariana"). In Mariana, the Court
addressed whether a judgment creditor can obtain an Article 52
turnover order against a bank to garnish assets held by the bank's
foreign subsidiary. Mariana, 21 N.Y.3d at 57. The plaintiff
Commonwealth of the Northern Mariana Islands had obtained two separate
tax judgments against two individuals, the Millards, who resided in
the Commonwealth. Id. at 58. The Commonwealth registered the tax
judgments in the United States District Court for the Southern
District of New York and commenced proceedings as a judgment creditor
pursuant to Fed. R. Civ. P. 69(a) and CPLR 5225(b), seeking a turnover
order against the Millards. Id. The Commonwealth named a bank, CIBC,
as a garnishee on the basis that the Millards maintained accounts in
92%-owned foreign subsidiaries of CIBC. Id.

In Mariana, the Court of Appeals observed that, "... legislative use
of the phrase 'possession or custody' contemplates actual possession.
Notably, sections of the CPLR pertaining to the disposition of
property utilize the narrower 'possession or custody' standard." Id.
at 63 (emphasis added). The Court contrasted this with the
"possession, custody or control" standard which "has been construed to
encompass constructive possession." Id. As a result, the Court held


that, "... for a court to issue a postjudgment turnover order pursuant
to CPLR 5225(b) against a banking entity, that entity itself must have
actual, not merely constructive, possession or custody of the assets
sought ... (I)t is not enough that the banking entity's subsidiary
might have possession or custody of a judgment debtor's assets." Id.
at 57-58.

CPLR 5225(b), when enacted, represented a change from the predecessor
provision in the Civil Practice Act. As discussed in Mariana, Civil
Practice Act § 796 provided for turnover of property in the
"possession" or "control" of another person. Id. at 61. CPLR 5225(b),
on the other hand, employs the "possession or custody" language, and
omits the word "control." Id. In interpreting the statute, the Court
reasoned that the omission was intentional, because "(w)hen the
legislature has sought to encompass the concept of 'control' it has
done so explicitly ...." Id. at 62.

By way of contrast, in other sections of the CPLR, such as disclosure
provisions, the concept of "control" is included. See CPLR 3111
(requiring production at deposition of books, papers, and other items
in "the possession, custody or control" of the person to be examined);
see also CPLR 3120(1)(i) (requiring discovery or inspection of
documents "in the possession, custody or control" of the party served
with a subpoena). Although the issue has not been resolved at the
appellate level, "control" has been interpreted by one trial court to
mean that discovery can be obtained from a wholly-owned subsidiary,
wherever located, of a parent that is a party to the case, because the
parent has control over the wholly-owned subsidiary. See Bank of
Tokyo-Mitsubishi, Ltd. v.  Kvaerner, 175 Misc. 2d 408 (Sup. Ct. N.Y.
Co., 1998). We express no view as to whether, in the context of a
parent/subsidiary or other relationship, the requisite "control"
should be found; that is a matter for judicial development and
determination in particular cases, nor are we expressing any view as
to whether the word "control" as used in the context of CPLR 5225
necessarily should be construed in the same manner as it may be
construed in the context of CPLR Article 31.

This measure would add "control" to CPLR 5225(a) and (b), thus
restoring the standard reflected in the prior Civil Practice Act and
the Code of Civil Procedure before it (§ 2447). It would facilitate
the efforts of judgment creditors to satisfy judgments by reaching
assets held by persons or entities under the control of garnishees.
Our Committee considered whether to add the "control" language to
other garnishment and attachment provisions but declined to do so.
The Civil Practice Act appropriately limited the control standard to
the context of judicially supervised adversarial hearings.

This measure, which would have no fiscal impact on the public
treasury, would take effect on January first following the date on
which it becomes law.

Legislative History:

None. New Proposal.