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Current Developments in the Commercial Divisions of the
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Posted: March 22, 2016

Court Should Have Allowed Estranged Wife to Intervene in Turn-Over Action Against Husband

On March 15, 2016, the First Department issued a decision in Pensmore Investments, LLC v. Gruppo, Levey & Co., 2016 NY Slip Op. 01789, ordering that a defendant’s estranged wife be allowed to intervene in a turn-over action.

In Pensmore Investments, the plaintiff brought an action to enforce a judgment it had obtained against an entity owned by the defendant based on a personal guarantee by the defendant. The defendant’s estranged wife sought to intervene, claiming that the property the plaintiff sought to seize was her separate property. The trial court denied her motion for intervention. The First Department reversed, explaining:

[B]ecause [the defendant] was not in physical possession of the property which is the subject of the turnover order, the enforcement proceeding should have been brought as a special proceeding pursuant to CPLR 5225(b). [His estranged wife] was required to have been named as a party and separately served with the petition, because she is the one in actual possession of the disputed property. Although [the plaintiff] did not properly name [her], the error could have been cured by permitting [her] to intervene, so long as the burden of proof remained on the judgment creditor ([the plaintiff]) to establish that the judgment debtor ([the defendant]) has an interest in the property that is superior to the person in actual possession ([his wife]).

The trial court was required to hold a hearing to determine whether the personal property in [the defendant’s wife’s] possession is her sole separate property or marital property. . . . .

(Internal quotations and citations omitted).

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