Stanley Supply & Tool, Inc. v Robert Edward Smallwood
Attorneys and Parties
Brief Summary
Post-judgment enforcement and collection, specifically whether a judgment creditor could obtain a turnover order against a nonparty attorney holding alleged funds of the judgment debtor and whether a restraining notice remained effective.
The Supreme Court denied the motion to vacate a re-served restraining notice, denied as academic the motion to quash a re-served information subpoena, and granted the plaintiff's cross-motion under CPLR 5225 [permits a judgment creditor to seek turnover of property; subdivision (a) applies when the property is in the judgment debtor's possession, while subdivision (b) requires a special proceeding when the property is held by a nonparty] directing nonparty attorney Jeff Morgenstern to turn over funds allegedly belonging to Smallwood.
The Appellate Division reversed the portion of the order granting the CPLR 5225 turnover cross-motion against Morgenstern and substituted a denial of that cross-motion. It dismissed as academic the appeal from the denial of vacatur of the restraining notice and otherwise affirmed.
Because the funds were allegedly in the possession of a nonparty, the plaintiff was required to commence a special proceeding under CPLR 5225(b), not seek relief by motion in the existing action. The restraining notice issue was academic because, under CPLR 5222 [restraining notices served on a garnishee are effective for one year from service], the July 2024 re-served notice had expired.
Background
The plaintiff sued Smallwood and others in 2012 for, among other things, conversion. In April 2015, the Supreme Court entered judgment for the plaintiff against Smallwood and others in the amount of $3,402,774.23. In July 2024, the plaintiff re-served on Smallwood's attorney, Jeff Morgenstern, an information subpoena with a restraining notice dated January 2, 2024, concerning funds in Morgenstern's possession that allegedly belonged to Smallwood. Smallwood, jointly with Morgenstern, moved to quash the subpoena and vacate the restraining notice. The plaintiff opposed and cross-moved for a turnover order directing Morgenstern to pay the funds to the plaintiff.
Lower Court Decision
The Supreme Court, Queens County, denied the request to vacate the re-served restraining notice, denied as academic the request to quash the re-served information subpoena, and granted the plaintiff's cross-motion for a turnover order directing Morgenstern to turn over certain monies.
Appellate Division Reversal
The Appellate Division held that the restraining notice challenge was academic because the one-year restraint period had expired. It further held that the turnover order could not be obtained by motion against Morgenstern, a nonparty over whom the court lacked jurisdiction in this action for that purpose. Since the property was not in the judgment debtor's possession, the plaintiff had to bring a special proceeding under CPLR 5225(b). The court therefore deleted the provision granting the turnover cross-motion and denied that relief, while affirming the remainder of the order insofar as reviewed.
Legal Significance
This decision reinforces the procedural distinction in CPLR 5225 between turnover relief against a judgment debtor and turnover relief against a nonparty holder of the debtor's property. It also confirms that a restraining notice against a garnishee expires one year after service under CPLR 5222, making challenges to an expired notice academic.
A judgment creditor seeking funds held by a nonparty, even the debtor's attorney, must start a special proceeding under CPLR 5225(b); a motion in the underlying action is insufficient. Also, a restraining notice served on a garnishee automatically loses effect after one year.