Morgenthau v. Avion Resources Ltd.

49 A.D.3d 50, 849 N.Y.2d 223
CourtAppellate Division of the Supreme Court of the State of New York
DecidedDecember 28, 2007
StatusPublished
Cited by5 cases

This text of 49 A.D.3d 50 (Morgenthau v. Avion Resources Ltd.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morgenthau v. Avion Resources Ltd., 49 A.D.3d 50, 849 N.Y.2d 223 (N.Y. Ct. App. 2007).

Opinion

OPINION OF THE COURT

Friedman, J.P.

In 2002, the United States seized millions of dollars from defendants’ accounts at a New York County bank (then known as Merchant’s Bank, subsequently renamed Valley National Bank) and transferred the funds out of state in connection with a prosecution in the District of New Jersey. Although there was no federal indictment of any of these defendants (each an individual of Brazilian nationality or an off-shore corporate entity), the Government held defendants’ money in anticipation of showing that the one person who was indicted—Carolina Nolasco, a bank employee who pleaded guilty to using defendants’ accounts to operate an illegal money transmittal business— possessed some forfeitable interest in the bank accounts. Four years after the money was seized, and more than a year and a half after Nolasco’s guilty plea, the federal court issued an opinion and an order, each dated June 6, 2006, and entered June 7, 2006, granting defendants summary judgment on their petitions to recover their money.1

When the federal court handed down its ruling that defendants were entitled to the return of their money, the United States Attorney, instead of appealing or returning the funds to defendants, asked plaintiff, the New York County District Attorney, if his office had any interest in commencing proceedings relating to the funds. About two weeks later, on June 20, 2006, plaintiff obtained from Supreme Court, New York County, an ex parte order of attachment pursuant to CPLR 1317 (the June attachment order), purporting to attach all funds of defendants [53]*53constituting the proceeds or instrumentalities of their alleged operation of illegal money transmittal businesses in violation of the Banking Law, in aid of plaintiffs soon-to-be-commenced action seeking civil forfeiture of such funds under CPLR article 13-A.2

At the time the June attachment order was issued, the funds it sought to attach were not in a New York bank; as previously stated, the federal government, upon seizing defendants’ accounts at the New York bank in 2002, transferred the money to an out-of-state bank. Supreme Court granted the June attachment order based upon an affirmation by an assistant district attorney representing that the money sought to be forfeited “is currently held by the United States government by and through its agent located in New York County, counsel for the Customs and Border Patrol Service, a governmental sub-division of the Department of Homeland Security, Immigration and Customs Enforcement.” Pursuant to the June attachment order’s authorization of levy upon any garnishee “having possession or custody of property in which any of the defendants has an ownership interest,” plaintiff served the order upon the Customs and Border Patrol Service on June 20, 2006. Thereafter, the federal government transferred approximately $17,744,000—monies belonging to defendants that had already been withheld from them since 2002—to a New York County bank account under plaintiffs control.

The June attachment order was ultimately vacated by Supreme Court on the ground that plaintiff failed to serve his motion to confirm the order within five days after the levy, as required by CPLR 1317 (2).3 Before the vacatur of the June attachment order, however, plaintiff obtained a second ex parte order of attachment, dated August 2, 2006 (the August attachment order). Although plaintiff served the motion to confirm the August attachment order within the required five-day period, Supreme Court subsequently vacated that order as well. The August attachment order was vacated on the ground that the attached funds had been brought back into New York as the [54]*54result of the issuance of the June attachment order, which, the court believed, it had lacked jurisdiction to issue because the funds were at that time deposited in a bank outside of New York. On plaintiffs appeal, we affirm.

Plaintiff concedes that he could not levy directly upon the out-of-state bank accounts in which the federal government held the funds at issue when the June attachment order was signed, because those bank accounts, being outside New York, were beyond the jurisdiction of the New York courts (see Matter of National Union Fire Ins. Co. of Pittsburgh, Pa. v Advanced Empl. Concepts, 269 AD2d 101 [2000]). Accordingly, plaintiff presents two alternative arguments to support the validity of the federal government’s transfer of the funds to him in New York.

First, plaintiff points out that his office did not levy directly upon the out-of-state banks where the money was held, but instead levied upon a New York garnishee that controlled those bank accounts, namely, the New York County office of the Customs and Border Patrol Service of the United States Department of Homeland Security (Homeland Security). In support of this contention, plaintiff correctly notes that the New York courts have the power to command a garnishee present in the state to bring out-of-state assets under the garnishee’s control into the state (see Gryphon Dom. VI, LLC v APP Intl. Fin. Co., B.V., 41 AD3d 25, 31 [2007]; Miller v Doniger, 28 AD3d 405 [2006]; Starbare II Partners v Sloan, 216 AD2d 238, 239 [1995]).

Secondly, plaintiff makes the alternative argument that no levy was executed pursuant to the June attachment order because, “in reality, the federal government . . . voluntarily agree[d] to transfer [defendants’] monies to [plaintiff].” Plaintiff elaborates in his reply brief:

“After all, under general supremacy principles, federal law enforcement agencies are not bound to honor state court orders demanding the delivery of property within their custody. Thus, absent an agreement to do so, the federal authorities in this case would have had no obligation to honor Supreme Court’s June 20th attachment. . . . [I]t is clear that the federal authorities’ decision to transfer defendants’ monies to [plaintiff] was indeed a voluntary one, as it derived from the United States Attorney’s equally voluntary decision to forgo further proceedings [in New Jersey federal court] in view of ‘the [55]*55decision of the New York County District Attorney’s Office to pursue a prosecution’ of defendants.” (Record citation omitted.)4

Notwithstanding the United States Attorney’s statement to the federal court that Homeland Security was “obligated” to comply with the June attachment order {see footnote 4 hereof), we are persuaded by plaintiff’s supremacy argument that Homeland Security’s transfer of the funds to his control was voluntary. The conclusion we draw from this, however, is that, under the circumstances that existed at the time, the transfer was executed: (1) without valid judicial sanction by Supreme Court; (2) in contravention (even if inadvertent, as we assume it was) of the order of the New Jersey federal court ruling that defendants were entitled to the return of their money; and (3) so far as plaintiff has shown, without statutory authorization. Accordingly, we hold that Supreme Court properly declined to afford the June 2006 transfer retroactive validation on the basis of the subsequent August attachment order.

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Cite This Page — Counsel Stack

Bluebook (online)
49 A.D.3d 50, 849 N.Y.2d 223, Counsel Stack Legal Research, https://law.counselstack.com/opinion/morgenthau-v-avion-resources-ltd-nyappdiv-2007.