Turnover Of Joint Bank Account | Condo Mechanic’s Lien | Teacher Defense

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All Monies Held In A Joint Bank Account Are Subject To Turnover To A Judgment Creditor Of Just One Of The Joint Account Holders

In Matter of JRP Old Riverhead, Ltd. v. Hudson City Sav. Bank, __AD3d__ (2d Dept. 2013), a New York State appellate court reconfirmed the rule that the entirety of monies held in a joint bank account are subject to turnover to a judgment creditor of only one of the joint bank account holders, unless the joint account holders are able to establish an exception to the rule.

In this case the judgment creditor, a client of our firm, obtained a money judgment against an individual, which it thereafter sought to enforce against a joint bank account held by the individual and his wife. The judgment creditor commenced a special proceeding against the bank where the monies were held, and the individual judgment debtor and his wife (because she was the joint holder in the bank account), seeking turnover of all monies in the joint bank account. Both the individual judgment debtor and his wife defaulted in the proceeding. Nonetheless, the lower court declined to order the turnover of the contents of the joint account, holding that the judgment creditor did not establish that the individual judgment debtor was the sole contributor of the funds in the joint account.

The appellate court reversed and directed the bank to turn over all proceeds in the joint bank account to the judgment creditor. The court cited the rule set forth in NYS Banking Law § 675(b) that, “[t]he opening of a joint bank account creates a rebuttable presumption that each named tenant is possessed of the whole of the account so as to make the account vulnerable to levy of a money judgment by the judgment creditor of one of the joint tenants.” Therefore, the Court instructed, “the [judgment creditor] was not required to establish that the judgment debtor was the sole contributor of funds to the account.” It is well-settled that the presumption created by Banking Law § 675 can, however, be rebutted by providing direct proof that no joint tenancy was intended or substantial circumstantial proof that the joint account had been opened for convenience only. Nonetheless, here, where neither of the joint account holders appeared or answered the turnover proceeding, they failed to rebut the presumption, warranting turnover of all monies in the account.

Mechanic’s Lien Against Multiple Condo Units

Recently in Matter of Flushing Acquisition Holdings v. Donative Concrete, 39 Misc.3d 1215(A) (Sup. Ct. Kings Cnty. 2013) a property owner moved to discharge a mechanic’s lien filed by a contractor against its property. The contractor was hired to perform work on the multi-unit condominium buildings. A payment dispute led the contractor to file a mechanic’s lien alleging over $111,000 as the unpaid amount from a total contract of over $1 million. While the property owner acknowledged a good faith dispute over the amount of money owed, it claimed that the mechanic’s lien was needlessly broad as it barred the sale of millions of dollars of condo units. In the lawsuit, the property owner requested the Court to direct the County Clerk to release the lien except as to one unit, claiming the appraised value of one unit was over $460,000. The owner argued that a lien on one unit would be more than enough to cover the disputed amount, and the remaining units could be readily sold.

In denying the relief requested, the Court stated that a “court has no inherent power to vacate or discharge a mechanic’s lien except as authorized under Lien Law § 19(6). Lien Law § 19(6) permits a court to discharge a mechanic’s lien if it is “facially defective” due to the character of labor or materials involved or failure to comply with Lien Law § 9 or if it was improperly filed under Lien Law § 10. In other words, a court may not vacate (even partially) a mechanic’s lien where the notice of lien is facially sufficient (in certain circumstances, a court may vacate a mechanic’s lien due to the lienor’s failure to prosecute).

In New York, only a party who performs labor or furnishes materials for the improvement of real property may file a mechanic’s lien. The notice of lien must state (1) the lienor’s name, residence, corporate information and attorney, (2) the name of the property owner against whom the lien is claimed, (3) the name of the person who employed the lienor, (4) the labor performed or materials furnished and agreed price or value, (5) the amount unpaid, (6) the time of the first and last work performed and (7) a description of the property. The notice of lien must generally be filed within eight months of the completion of the underlying work (four months for single-family dwelling) and feature the block number of the property liened against.

In Matter of Flushing Acquisition Holdings, the petitioner did not assert that the mechanic’s lien was facially defective, but instead argued that equity requires partially discharging the lien as it impacts property of value disproportionate to the amount in dispute. Because this request exceeded the Court’s statutory purview, the application was denied.

As recognized by the Court, in situations like this the property owner may discharge the lien by executing a bond for 110% of the lien amount and delivering such bond to the lienor and the County Clerk, or by depositing the lien amount with interest with the County Clerk. In this case, given the value of the property, the property owner should not have any problem in obtaining a bond for the appropriate amount, thereby freeing up all of its condominium units for sale.

City Must Defend Assistants Who Slapped Students

The Court of Appeals, the highest court of the State of New York, recently ruled in two related actions that the teaching assistants who were sued in civil suits brought by students who alleged that the teaching assistants hit them, are entitled to a defense and indemnification by the New York City Department of Education, even though each of them used corporal punishment which is barred under State regulation. These recent decisions overturned two 3-2 rulings by the Appellate Division denying them a defense and indemnification. Sagel-Cotler v. Bd. of Educ. of City Sch. Dist. of City of N.Y., and Thomas v. Bd. of Educ. of City Sch. Dist. of City of N.Y., 20 N.Y.3d 671 (2013).

Both teacher assistants are employed in the New York City schools. One admitted that she slapped a student in the face after he refused three times to go with her to the cafeteria. The other hit a student on the head when the child did not do his work properly; she denied the allegation, but her principal found the charge to be substantiated, and that finding was not challenged in the lawsuit. Neither teacher assistant disputed that the actions they were found to have committed violated a rule of the State Board of Regents which prohibits corporal punishment.

The Appellate Division had denied these assistants’ claim that the New York City Department of Education must defend and indemnify them because General Municipal Law § 50-k, applicable to employees of the New York City Department of Education, entitles such employees to a defense only where their actions were “not in violation of any rule or regulation of [their] agency.” The Court of Appeals agreed that the teacher assistants have no rights under Section 50-k, which was enacted in 1979, but also recognized this same law specifically states that it “shall not be construed in any way to impair, alter, limit, modify or abrogate or restrict… any rights to defense…in accordance with, or by reason of, any other provision of state…law.” The Court of Appeals stated that Education Law § 3028, enacted in 1960, controls. That law states:

Notwithstanding any inconsistent provision of any general, special or local law, or the limitations contained in the provisions of any city charter, each board of education, trustee or trustees in this state shall provide an attorney or attorneys for, and pay such attorney’s fees and expenses necessarily incurred in the defense of the teacher, member of the supervisory or administrative staff or employee…in any civil or criminal action or proceeding arising out of disciplinary action taken against any pupil of the district while in the discharge of his duties within the scope of his employment….

The Court explained that the “decisive issue is whether the actions that resulted in the students’ lawsuits against petitioners were taken ‘while in the discharge of [their] duties within the scope of [their] employment,’ as Section 3028 requires.” The City argued that the statutory words “discharge of…duties” have a more restrictive meaning than “within the scope of employment,” and that an employee who is violating her employer’s regulations cannot be acting in the “discharge of [her] duties.” The City had pointed out that, when Section 3028 was enacted in 1960, corporal punishment was permissible in much of the State (though it had already been prohibited in New York City), and argued that the statute was intended to benefit only employees whose conduct was within the rules.

The Court rejected the City’s argument holding: “‘Scope of employment,’ ‘discharge of duties,’ and similar phrases have long been regarded as interchangeable.” Recognizing an earlier opinion where it had observed that “an employee acts within the scope of his employment when he is doing something in furtherance of the duties he owes to his employer, and where the employer is, or could be, exercising some control over the employee’s activities,” the Court concluded that it did “not read the statutory words ‘discharge of…duties’ to restrict the right to a defense to cases where an employee acted in the proper and lawful discharge of his or her duties.” Rather, the Court concluded that:

the authors of Education Law § 3028 intended to provide a defense even where employee’s use of corporal punishment violated regulations. Section 3028 requires the City to provide an attorney not just in civil, but also in criminal cases–suggesting that the Legislature wanted even employees who engaged in highly questionable conduct to be defended at public expense. If the 1960 Legislature meant to exclude cases in which corporal punishment was forbidden by regulation–as it was in New York City when section 3028 was enacted–it could have done so explicitly. Indeed, it could have said what the 1979 Legislature said in General Municipal Law § 50-k(2): that there is no duty to provide a defense to an employee who has acted ‘in violation of any rule or regulation of his agency.’ Section 3028 contains no such language.”

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