New York State Court of Claims

New York State Court of Claims

DUNCAN v. THE STATE OF NEW YORK, #2008-015-025, Claim No. 114182, Motion No. M-74343


Summary judgment motion was denied on claim alleging unlawful restraint of bank account.

Case Information

Claimant short name:
Footnote (claimant name) :

Footnote (defendant name) :

Third-party claimant(s):

Third-party defendant(s):

Claim number(s):
Motion number(s):
Cross-motion number(s):

Claimant’s attorney:
Zinker & Herzberg, LLPBy: Jeffrey Herzberg, Esquire
Defendant’s attorney:
Honorable Andrew M. Cuomo, Attorney General
By: Michael W. Friedman, EsquireAssistant Attorney General
Third-party defendant’s attorney:

Signature date:
April 7, 2008
Saratoga Springs

Official citation:

Appellate results:

See also (multicaptioned case)


Claimant’s motion for summary judgment pursuant to CPLR 3212 is denied.

This claim arises out of the alleged unlawful restraint of the claimant’s bank account by the New York State Department of Taxation and Finance (defendant) through the service of a Tax Compliance Levy on JP Morgan Chase Bank on May 21, 2007. Although the restraint was released upon payment of the subject debt, the claimant seeks damages for the costs incurred in bringing a special proceeding in the Supreme Court to vacate the alleged unlawful restraint and filing the instant claim (see claim, claimant’s Exhibit A, ¶ 1). The total damages sought are $575.00.[1]

Claimant filed a petition for bankruptcy pursuant to Chapter 13 of Title 11 of the United States Bankruptcy Code. The law firm of Zinker & Herzberg, LLP was retained as “special counsel” for the claimant for the purpose of commencing an “adversary proceeding” against the State of New York in the bankruptcy case (see claimant’s attorney's affirmation dated December 12, 2007, ¶ 6). The adversary proceeding stemmed from the defendant’s conduct in allegedly “causing a tax warrant to be recorded against the Claimant for unpaid withholding taxes relating to the Fidelity Group, Inc. (“Fidelity”) for tax periods that the Claimant was not a control person of Fidelity” (id.). The adversary proceeding was resolved by Stipulation of Settlement between the parties, which was so ordered by the Bankruptcy Judge on December 22, 2005 (see claimant’s attorney's affirmation in support of the motion, ¶ 7; and so ordered stipulation annexed to claim as Exhibit A). The amount of the settlement was $2,300.00. Claimant’s counsel avers that the debt was fully satisfied by paying $2,300.00 plus accrued interest from the proceeds of the sale of the home formerly owned by the claimant and his wife. Counsel for the claimant states in this regard that he represented the claimant and his wife at the closing and “[u]pon information and belief, the check in the sum of $2,530.57 was delivered to the offices of Bambrick & Ryan, the attorneys for the Respondent, by [F]ederal [E]xpress on February 5, 2007 sent by the title insurance company for the buyer, Unlimited Abstract LLC” (see claimant’s counsel’s affirmation dated December 12, 2007, ¶ 9). The claimant provided a copy of the front of the check as part of the motion papers but no evidence was submitted that the check was mailed or otherwise delivered to the attorneys for the defendant as the claimant contends. Although claimant's counsel references a Federal Express receipt attached to the motion as Exhibit C as proof that a check in the amount of $2,530.57 was delivered to defendant's attorneys, no such Exhibit was included in the motion papers.

Counsel for the claimant avers that notwithstanding the fact that he advised a representative of the tax department both verbally and in writing of the payment of the settlement amount, the defendant improperly placed a restraint on the claimant’s bank account in the amount of $4,473.22. Documentary evidence submitted in support of the motion confirms that on May 21, 2007 a levy was placed on the claimant’s bank account at JP Morgan Chase Bank (see Exhibit C annexed to claim, claimant’s Exhibit A). Thereafter the claimant commenced an action seeking to annul the levy in Supreme Court, Nassau County. According to claimant's counsel:
"Eventually, the Respondent refunded the $4,473.22 and the buyer of the Roslyn Property, upon information and belief, caused a new check to be issued in the sum of $2,530.57 to the Respondent in full satisfaction of the outstanding tax warrant and the delivery of a satisfaction of the tax warrant."
It is undisputed that the full amount seized was refunded to the claimant.

In opposition to the claimant’s motion the defendant submitted an affirmation from David Demeter, Esq., the Director of the Bankruptcy, Estates & Collections Section in the Office of Counsel at the New York State Department of Taxation and Finance. Mr. Demeter states that a notice of levy was served upon claimant's JP Morgan Chase account upon dismissal of the bankruptcy action as the defendant had not received payment pursuant to the terms of the stipulation.[2] The defendant urges therefore that the levy on the claimant’s bank account was proper. Mr. Demeter also indicates that the costs allegedly incurred by the claimant and asserted as damages in the instant action were completely unnecessary because counsel for the claimant was advised that the restraint would be lifted once the check was received. He states the following in this regard:
“I advised Claimant’s counsel that the restraint would be lifted once the Department received the check from the title company. Claimant’s counsel knew that the title company was issuing a check to the Department, but commenced the action anyway. The Department received a check from the title company on June 4, 2007, the same day that Claimant’s counsel commenced the Supreme Court action.” (Demeter Affirmation, defendant’s Exhibit A, ¶ 18).
Review of the order to show cause which commenced the proceeding in the Supreme Court indicates that it was not signed until June 6, 2007 (see claimant’s Exhibit C annexed to Reply Affirmation), the same date that Mr. Demeter notified claimant’s counsel via telefax that a levy release was sent to JP Morgan Chase Bank on June 5, 2007(see letter dated June 6, 2007 from David J. Demeter annexed as part of Exhibit A to the Demeter Affirmation). By letter dated June 8, 2007 claimant’s counsel notified the Supreme Court and the parties that the restraint on the claimant’s bank account had been lifted and that a hearing scheduled pursuant to the order to show cause was therefore unnecessary.

With respect to the amount of the levy, Mr. Demeter posits that although the defendant accepted a check in the amount of $2,530.57 in full satisfaction of the debt, it could have insisted upon the payment of the entire debt with interest in that upon dismissal of the bankruptcy case, the property rights of the parties were restored to the position they were found at the commencement of the case (citing 11 USC § 349 [b]; In re Kent Funding Corp., 290 B.R. 471, 475 [E.D.N.Y. 2003]). In this regard the defendant takes the position that the so ordered stipulation was automatically vacated upon dismissal of the bankruptcy action pursuant to 11 USC § 349 (b) (2). Thus, the defendant argues that the levy was entirely proper both because the debt had not been satisfied when the levy was issued and because the so ordered stipulation was automatically vacated and the parties returned to their pre-bankruptcy positions upon dismissal of the bankruptcy case.

It is well established that " 'summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue' " ( Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223, 231 [1978][citation omitted]) "The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case" (Winegrad v New York Univ. Med. Center, 64 NY2d 851, 853 [1985]). Once the movant has made this showing, the burden shifts to the party opposing the motion "to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986] citing Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

Here, claimant failed to establish his prima facie entitlement to summary judgment as a matter of law. Although claimant’s counsel contends that Bambrick & Ryan as counsel for the defendant in the bankruptcy proceeding had at least the apparent authority to settle the debt and receive the settlement check on the defendant’s behalf, assuming arguendo this to be the case, the claimant nonetheless failed to establish that the check was delivered to the firm. Claimant’s counsel’s affirmation that “upon information and belief” the title company delivered the check to Bambrick & Ryan in February of 2007 is insufficient to establish that the debt was paid and the date of payment. According to the defendant, when the account was levied on May 21, 2007 the debt had not been paid. As a result, there remains a question of fact as to whether or not the levy was proper on May 21, 2007, the date it was served.

Additionally, claimant’s reliance on CPLR 6212 (e) in support of his motion for summary judgment is misplaced (see claimant’s Reply Affirmation, p. 5). This section applies to the provisional remedy of attachment, a device not utilized in this case. Rather, the bank was served with a Tax Compliance Levy pursuant to CPLR 5232 (a) (see Exhibit C attached to the claim). Pursuant to CPLR 5232 [a] damages are recoverable as follows:
“A judgment creditor who, or support collection unit which, has specified personal property or debt to be levied upon in a notice served with an execution shall be liable to the owner of the property or the person to whom the debt is owed, if other than the judgment debtor or obligor, for any damages sustained by reason of the levy.”
It has been observed that CPLR 5222 (b), which governs the issuance of a restraining notice, parallels CPLR 5232 (a) with respect to the damages provision contained therein (see Stathopoulos v Seaways Shipping Corp., 66 Misc 2d 607 [1971]). Liability for a wrongful restraint under CPLR 5222 is predicated upon a finding that the judgment creditor acted irresponsibly or in bad faith in restraining property (id. at 609; cf. Schaeffer v Chemical Bank, 107 Misc 2d 548 [1980]; Walter v Doe, 93 Misc 2d 286 [1978]). Applying this standard here, the defendant raised questions of fact as to whether or not the defendant acted irresponsibly or in bad faith in issuing the levy at issue in this case.

For the foregoing reasons, the claimant’s motion for summary judgment is denied.

April 7, 2008
Saratoga Springs, New York

Judge of the Court of Claims

The Court considered the following papers:
  1. Notice of motion dated December 12, 2007;
  2. Affirmation of Jeffrey Herzberg dated December 12, 2007 with exhibits;
  3. Affirmation of Michael W. Friedman dated January 29, 2008 with exhibit;
  4. Reply affirmation of Jeffrey Herzberg dated February 4, 2008 with exhibits.

[1]. Although the claim seeks damages for attorneys fees, counsel for the claimant has waived this request with respect to the relief requested in the motion, stating in his affirmation in support of the motion (at p.14) that “the only reason that the Claimant is not seeking the reimbursement of attorneys’ fees and costs is that the provisions of Section 27 of the Court of Claims Act prohibits the reimbursement of the same.”
[2]. Mr. Demeter avers that the automatic stay imposed by Section 362 of the United States Bankruptcy Code prevented the Department from taking any action to collect the debt until the earlier of the time the case was closed or the time the case was dismissed. He states that the case was dismissed on October 27, 2006 (see Demeter Affirmation, par. 9).