A wise colleague once told me that obtaining a judgment only gets you about 60% of the way home. Collecting on judgments is a sometimes overlooked, but almost always tedious and expensive process that makes me think my colleague was optimistic with his 60% projection. The Appellate Division's decision in Banc of America Leasing and Capital, LLC v. Flethcer-Thompson Inc., offers just one example of the many nuances of collection work that make it a minefield for the unwary.
In Banc of America, plaintiff obtained a judgment against several defendants in Michigan. It domesticated the judgment in New Jersey and obtained a bank levy against a joint account held by both defendant, Kurt Baur, and his wife, who was not a party to the lawsuit. After the sheriff served the writ and froze the assets in the account, plaintiff filed a turnover motion to have the funds turned over to satisfy a portion of the judgment. Baur and his wife opposed the motion, arguing that the funds in the account were the wife's personal property and derived from her pension, earnings, and tax refunds.
Before the trial court ruled on the motion, the parties entered into a consent order, under which defendants agreed to replace the "levied funds" with "replacement funds" in an equal amount. Once the "replacement funds" were deposited, plaintiff's counsel would release the "levied funds" back to defendants. In addition, defendants agreed to pay plaintiff $25,000 per quarter and $6,000 per month until the judgment was satisfied. Unfortunately, defendants defaulted on their obligations under the consent order, and plaintiff filed a new motion to turnover the "levied funds." Baur and his wife opposed the new motion on the same grounds as they had opposed the original motion. The trial court granted plaintiff's motion. In a three-sentence opinion, the court concluded that there was an agreement reached by the parties to avoid turnover, but defendants breached that agreement, therefore turnover was justified. Defendants appealed.
The Appellate Division reversed. It held that "when seeking a turnover from a joint account," the creditor -- i.e., the party seeking the turnover -- "unquestionably" has the burden of proving that the money in the account is the "individual property of the judgment debtor, and therefore applicable to the satisfaction of the judgment." To be clear, the fact that an account is a joint account does not automatically mean that the funds in it are jointly held. In fact, the Appellate Division noted that it held "many decades ago, that it could not be presumed that one depositing his or her own funds in a joint account in the names of himself or herself and another has thereby created a joint tenancy in the account." But, the party seeking turnover has the burden of showing that the funds are neither jointly held nor the personal property of a non-party who is not subject to the judgment.
In Banc of America, Baur's wife "certifie[d] with supporting documentation that the funds on the joint account derive[d] solely from her earnings, teacher's pension and reimbursements for funds paid out for [her husband's] business expenses." As a result, she argued, they were not only her funds, but were also exempt from seizure as pension payments. The trial court did not address either of these arguments. Accordingly, the Appellate Division remanded the case to the trial court, with instructions to have plaintiff demonstrate that the funds in the joint account were defendant's funds, not his wife's funds, and that they were not exempt from seizure.
The Appellate Division also rejected plaintiff's argument that the consent order contained a waiver of defendant's and his wife's right to dispute the bank levy. The consent order contained a provision in which defendants consented to plaintiff's "commencement of any and all actions [deemed] by plaintiff necessary to collect upon plaintiff's judgment." But the Appellate Division held that Baur's wife was not bound by this because she did not sign the consent order, was not a party to the underlying litigation, and therefore "did not forfeit her right to her sole funds deposited in the joint account."