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Pursuant to CPLR 5225, a Parent Bank Can Not Be Garnished Because a Judgment Debtor’s Assets Are Held in a Foreign Subsidiary Bank

The question before the Court of Appeals was whether a judgment creditor, pursuant to CPLR 5225, can obtain a turnover order against a bank to garnish the assets held by the bank’s foreign subsidiary. The plaintiff in this case, the Commonwealth of the Northern Mariana Islands, obtained two tax judgments against the tax debtors (the Millards) for over $18,000,000 each. The Millards left the commonwealth before the judgments were issued and settled in the Cayman Islands. The judgments were registered in the Southern District of Florida. The Canadian Imperial Bank of Commerce (CIBC) had a branch in New York. The commonwealth sought to garnish CIBC under the theory that the Millards had accounts in subsidiaries of CIBC, namely First Carribean International Bank Limited (CFIB) or its affiliates in the Cayman Islands. In determining the commonwealth could not get at the Millards assets in the Cayman Islands through the parent Canadian bank, the Court of Appeals, in a full-fledged opinion by Judge Rivera, wrote:

Under CPLR article 52, a special proceeding for a turnover order is the procedural mechanism devised by the Legislature to enforce a judgment against an asset of a judgment debtor, held in the “possession or custody” of a third-party.* * * … [W]e interpret the omission of “control” from section 5225 (b) as an indication that “possession or custody” requires actual possession. Commonwealth of the Northern Mariana Islands v Canadian Imperial Bank of Commerce …, No 58, CtApp, 4-30-13

 

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Bank’s Duty With Respect to Negligent Dishonoring of a Cashier’s Check 

The plaintiff’s sued in negligence based on the defendants’ dishonoring of a cashier’s check.  The Second Department affirmed the dismissal of the negligence counts:

The plaintiff’s first three causes of action were premised upon the theory that it suffered damages as a result of the defendants’ negligence. “To establish a cause of action sounding in negligence, a plaintiff must establish the existence of a duty on defendant’s part to plaintiff, breach of the duty and damages” (. As relevant here, “[t]he duty of a payor bank . . . to a noncustomer depositor of a check is derived solely from UCC 4-301 and 4-302” … . In this case, where the defendants were together alleged to be the payor bank (see UCC 4-105[b]) that was not also the depository bank (see UCC 4-105[a]), they were accountable for paying the amount of the cashier’s check, whether properly payable or not, if they “retain[ed] the item beyond midnight of the banking day of receipt without settling for it” (UCC 4-302[a]), or, if after authorizing a timely provisional settlement, they failed to revoke such settlement prior to making final payment and before the “[m]idnight deadline” (UCC 4-104[1][h]), by either returning the check, or sending written notice of dishonor or nonpayment (see UCC 4-301, 4-302). Thus, the only duty which the defendants owed to the plaintiff was to pay the check, return the check, or send notice of dishonor … . As the complaint failed to allege that, upon the defendants’ failure to pay the check, they breached their duty to either return the check or send notice of dishonor, the Supreme Court properly granted those branches of the defendants’ motion which were to dismiss the first three causes of action, all of which sounded in negligence.  Kenin Kerveng Tung, PC v JP Morgan Chase & Co, 2013 NY Slip Op 02223, 2011-11371, 2012-040089, Index No 11885/11, 2nd Dept, 4-3-13

 

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Signing Checks Pursuant to a Power of Attorney Cannot Amount to Forgery 

The Court of Appeals, in a full-fledged opinion by Judge Read, affirmed the appellate division’s reversal of 40 “criminal possession of a forged instrument” convictions that were based upon the defendant’s [Ippolito’s]  signing checks using only the principal’s name without indicating he was signing pursuant to a power of attorney [POA]:

Here, the POA (until revoked) vested Ippolito with unlimited power to sign Katherine M. L.’s name on written instruments. As a result, the checks cannot have been forgeries … .[“[A] person does not ‘falsely make’ an instrument when he is authorized to execute it”]). Put another way, where the ostensible maker or drawer of a written instrument is a real person, a signature is not forged unless unauthorized (see Penal Law § 170.00 [4]). Since Ippolito was empowered to sign Katherine M. L.’s name at the times when he drew or endorsed the 40 checks at issue on this appeal, the People’s proof was legally insufficient to convict him of [criminal possession of a forged instrument]. People v Ippolito, 32, CtApp, 4-2-13

 

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