PALISADES ACQUISITION LLC USA v. HSBC USA

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Civil Court, City of New York,

PALISADES ACQUISITION, LLC Assignee in Interest to Chase Manhattan Bank, USA, N.A., Petitioner, v. Jinan IBRAHIM, Judgment Debtor, Respondent, Abdullah H. Arrar, Joint Bank Account Tenant, Respondent, HSBC, USA Bank, Respondent.

Decided: April 03, 2006

Mahlen & Associates, P.C. (Paul W. Mahler, Esq.), for petitioner.

This post-judgment turnover proceeding highlights that both federal and state law mandate that special care must be taken regarding affidavits of military or non-military status in collection cases, especially in relation to any individual not subject to a judgment and whose military or non-military status has not previously been determined by a court.   It appears that this issue previously has not been addressed by any state or federal court.

 As is well known, federal and state service member Civil Relief Acts require that, prior to issuance of a default judgment, the plaintiff or petitioner must submit to the court affidavits establishing that any individual defendant or respondent is not in active military service (50 U.S.C. Appendix § 501, et seq., Servicemembers Civil Relief Act, Act Oct. 17, 1940, Ch. 888, 54 Stat. 1178, as amended Dec. 19, 2003, Pub.L. 108-189, 117 Stat. 2835;  N.Y. Military Law §§ 303[1], 306;  see generally, Annotation, 35 A.L.R. Fed. 649, Construction and Application of § 200 of Soldiers' and Sailors' Civil Relief Act of 1940, as Amended [50 App. U.S.C.A. § 520], Relating to Default Judgment Against Member of Armed Forces).   These acts were well described in Citibank, N.A. v. McGarvey, 196 Misc.2d 292, 298, 765 N.Y.S.2d 163 (Civ.Ct. Richmond Co., Vitaliano, J.), as “a modern expression of legislative policy dating as far back as the Civil War to protect military service personnel from the entry of judgments against them in civil actions without their knowledge and to insure that those in active military service are able to meet fully the defense needs of America,” and citing, among other cases, Boone v. Lightner, 319 U.S. 561, 562 n. 2, and 569 n. 3, 63 S.Ct. 1223, 87 L.Ed. 1587 (1943), and Andrews v. Gardiner, 185 App.Div. 477, 479, 173 N.Y.S. 1 (2d Dept.1918).   A failure to comply with statutory requirements supports “vacatur of a default judgment only upon a showing that the judgment was entered against a party who was on active duty, or dependent upon someone who was, and who could show a meritorious defense to the underlying claim” (Citibank, N.A. v. McGarvey, supra, 196 Misc.2d at 300, 765 N.Y.S.2d 163, citing cases nationwide;  see also Department of Housing Preservation and Development of City of New York v. West 129th Street Realty Corp., 9 Misc.3d 61, 802 N.Y.S.2d 826 [App. Term 1st Dept.2005], with concurring opinion citing additional cases).

However, additional special requirements apply in the area of the post-judgment processes of execution, attachment and garnishment.   Under both federal and state law, if a court determines that a respondent is a service member and such service status has a material affect upon such post-judgment proceedings, the court is mandated to stay execution or vacate garnishments or attachments upon application of the service member, and even absent such a motion, exercise its discretion and take such actions on its own motion (50 U.S.C.A.App. § 524[a];  N.Y. Military Law § 306).   These specific directives regarding court action are in addition to the normally applicable requirements that the court must appoint counsel for a service member or, if military status cannot be determined, consider imposing a requirement of posting a bond or issuing a protective order (see, respectively, 50 U.S.C.A.App. § 521[b][2], in such case “the court may not enter a judgment until after the court appoints an attorney to represent the defendant” and 50 U.S.C.A.App. § 521[b][3], described in Annotation, 35 A.L.R. Fed. 649, supra).

 As a practical matter, such concerns are particularly appropriate where, as here, the object of the turnover proceeding is a joint bank account.   As is commonly recognized, a joint checking account is subject to a “presumption that the parties ․ are each entitled to an equal share” although each is entitled to advance evidence refuting that presumption (Sicari v. First Fidelity Bank, 246 A.D.2d 877, 668 N.Y.S.2d 406 [3d Dept.1998] ).   However, the law recognizes that some “convenience” accounts may be shown to be not subject to the presumption (see Matter of Friedman, 104 A.D.2d 366, 367, 478 N.Y.S.2d 695 [2d Dept.1984], affd. 64 N.Y.2d 743, 485 N.Y.S.2d 987, 475 N.E.2d 454 [1984], presumption “may be rebutted by evidence showing that the depositor established the account for convenience and not with the intention of conferring a present beneficial interest on the party claiming the half share” as where “money was placed in the joint account merely for convenience in the event of illness or death”).   As can be easily understood, a “convenience” account is precisely the type of device a service member might choose to use to cover family expenses in the event of injury, incapacity or sudden absence, or to cover final expenses in the event of death.   Accordingly, the statutorily required vigilance is particularly called for in relation to this proceeding.

 The court cannot weigh the mandated procedural courses absent the submission of a non-military affidavit.   As has been said, “the non-military' affidavit must establish the following factors:  (1) the respondent is not in the military service of either the United States or an ally;  (2) the investigation was done after the default occurred;  (3) the investigation was performed shortly before it was submitted;  (4) the facts are put forth in a manner sufficient for the court's evaluation” (New York City Housing Authority v. Smithson, 119 Misc.2d 721, 722-723, 464 N.Y.S.2d 672 [Civ.Ct. N.Y. Co.1983];  U.S. Bank v. Coaxum, n.o.r., 2003 WL 22518107, *1, 2003 N.Y. Slip Op. 51384[U] [Sup.Ct. Westchester Co.2003] ).   Because of past patterns of irregularity, such affidavits are inspected closely (Phillipe v. American Exp. Travel Related Services Co., Inc., 174 A.D.2d 470, 571 N.Y.S.2d 711 [1st Dept.1991], class action allegations regarding filing of false affidavits of nonmilitary service sufficient basis for abuse of process claim;  New York City Housing Authority v. Smithson, supra, 119 Misc.2d at 724, 464 N.Y.S.2d 672, “There is no excuse for perjury, prevarication and avoidance of a statute's unmistakable requirements”;  In re Siegel, 47 A.D.2d 461, 367 N.Y.S.2d 294 [1st Dept.1975], attorney censured following conviction of 56 misdemeanor counts of filing false nonmilitary affidavits;  Central Budget Corp. v. Knox, 62 Misc.2d 66, 307 N.Y.S.2d 936 [Civ.Ct. N.Y. Co.1969], issuing caution that filing an affidavit containing false nonmilitary information could be a contempt of court).

Based on the foregoing, the application is denied with leave to renew upon proper papers.

Petitioner must submit a non-military affidavit in relation to the individual who is not subject to the judgment and should review any non-military affidavit as to the judgment debtor for staleness.

This decision constitutes the order of the court.

DIANE A. LEBEDEFF, J.