Can a Judgement Creditor Claim the Whole Bank Joint Account Upon Default of Nondebtor ?
In Household Fin. Corp. v. Rochester Community Sav. Bank (143 Misc 2d 436), the court noted that the procedures set forth in CPLR 5227 (and consequently CPLR 5225), whereby the nondebtor cotenant is put on notice of the claim that the petitioner judgment creditor seeks greater than 50% of the bank account, satisfies the due process requirement of adequate notice.
The court does raise the question of whether the judgment creditor can merely rely upon the default of the nondebtor cotenant to claim the whole bank account (at 439-440):
"Furthermore, 'even where a joint account is vulnerable to the levy of a money judgment against one joint tenant, such a levy is effective only as to the actual interest of that judgment debtor in the account (Olshan v. East N. Y. Sav. Bank, 28 F Supp 727)'. (Viggiano v. Viggiano, supra, at 631.)
The preferred method for determining the actual interests of the cotenants in the jointly held funds is through a proceeding to determine adverse claims pursuant to CPLR 5239, 'rather than have any decision rest upon the presumption alone.' (Denton v. Grumbach, 2 AD2d 420, 422, supra.)
Any method of collecting against a joint bank account which would allow funds to be released solely on the authority of a levy of execution would raise serious due process questions (see generally, Bergdorf Goodman v. Marine Midland Bank, 97 Misc 2d 311; Weinstein v. Gitters, 119 Misc 2d 122; cf., Sitomer v. North Riv. Sav. Bank, 196 Misc 870).
The procedure set forth in CPLR 5227 whereby the interested parties are put on notice and the nondebtor cotenant is allowed to come forward with evidence that his interest in the account is greater than one half adequately protects these due process rights.
Similarly, it appears that any time a creditor seeks to obtain more than one half of the funds in the joint account, the creditor must come forward with evidence to rebut the presumption of one-half ownership. (See, Recommendation of NY Law Rev Commn, 1984 McKinney's Session Laws of NY, at 2990, 3005.)
However, it is unclear whether a judgment creditor can fully meet this burden in a CPLR 5227 proceeding by relying on the failure of a nondebtor cotenant to intervene pursuant to CPLR 5239.
"By requiring a court order the bank has formulated a policy which best protects the interests of the general banking public."
This court answers the question raised by Household Fin. in the affirmative and rules that the default of the nondebtor cotenant in answering the special proceeding commenced pursuant to CPLR 5225 and 5227 adequately rebuts the presumption created by Banking Law 675 and allows the judgment creditor to reach the whole account.
To rule otherwise undermines the purpose of CPLR 5225 and 5227 to determine in an expeditious manner the rights of various parties to a bank account.