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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 3, 2018

Court Appoints Receiver Over Judgment Debtor’s Property

On October 15, 2018, Justice Schecter of the New York County Commercial Division issued a decision in Herman v. Herman, 2018 NY Slip Op. 32652(U), appointing a receiver over a judgment debtor’s property, explaining:

CPLR 5228(a) provides that upon motion of a judgment creditor the court may appoint a receiver who may be authorized to administer, collect, improve, lease. repair or sell any real or personal property in which the judgment debtor has an interest or to do any other acts designed to satisfy the judgment. The appointment of a receiver pursuant to section 5228(a) is a matter within the court’s discretion. In deciding whether the appointment of a receiver is justified, courts have considered the (I) alternative remedies available to the creditor; (2) the degree to which receivership will increase the likelihood of satisfaction; and (3) the risk of fraud or insolvency if a receiver is not appointed. The court may appoint a receiver to sell real property to satisfy a judgment where, as here, the judgment-debtor owns the property as a tenant in common.

Maurice has taken various steps to frustrate plaintiffs’ ability to enforce the judgment, including encumbering his real property and filing a frivolous bankruptcy action. A receivership will indisputably increase the likelihood of satisfaction; nearly a quarter of the judgment will be satisfied by the transfer of Maurice’s interest in the Property. Aside from Maurice having tens of millions of dollars in liquid assets, the transfer is the only conceivable way to make a meaningful dent in the judgment. Indeed, Maurice’s counsel allegedly stated to one of Plaintiffs’ attorneys that Maurice has hidden his assets and Plaintiffs will never find them, and that Maurice also has a history of avoiding judgment enforcement. Finally, there is real risk of fraud absent appointment of a receiver as Maurice has already permitted the property to accrue substantial tax liabilities and caused Windsor to enter into a 99-year lease for a duplex apartment for no rent. The appointment of a receiver is necessary to stop Maurice’s improper frustration of collection of the judgment.

Maurice’s arguments in opposition are unpersuasive. That plaintiffs have alternative judgment enforcement remedies is not dispositive. Given the size of the judgment, such remedies will be cumulative, and not in the alternative to, the transfer of Maurice’s interest in the Property. Unless Maurice has more than $100 million of liquid assess, it is apparent that his interest in the Property will necessarily be a significant means of satisfying the judgment. It is illogical to force plaintiffs to wait years until some portion of the judgment is satisfied before seeking transfer of the Property. Indeed. if Maurice really has the means of satisfying the judgment and does not wish to part with the Property, he can, and has always been able to, simply voluntarily satisfy the judgment. He has chosen to avoid doing so, requiring the appointment of a receiver here. Maurice’s contention that the Property should be sold is once again rejected. Maurice, moreover, has already agreed that the property is worth $47.5 million– approximately $6 million more than his own appraiser said it is worth–and he is bound by his stipulation as to the Property’s value.

(Internal quotations and citations omitted).

We have substantial experience in helping judgment creditors collect on judgments and search for and attach assets worldwide. This decision discusses one rarely-ordered tool to help a judgment creditor collect on a judgment. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client need help collecting on a judgment.

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