NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9356
SPONSOR: Simotas (MS) 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 custo-
dy" of that property. Similarly, CPLR 5225(b) allows the judgment credi-
tor 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, custo-
dy or control" standard which "has been construed to encompass construc-
tive 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 ... It 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 "when 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 (requir-
ing 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 relation-
ship, 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 maybe construed in the context of CPLR Article 31.
This measure would add "control" to CPLR 5225 (a) and (b), thus restor-
ing 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.
