Commonwealth of the Northern Mariana Islands v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55 (2013)
To issue a post-judgment turnover order under CPLR 5225(b) against a banking entity, that entity must have actual possession or custody of the assets sought, not merely constructive possession through a subsidiary.
Summary
The Commonwealth sought a turnover order against CIBC, a Canadian bank with a New York branch, arguing it controlled assets held by its subsidiary, CFIB, in the Cayman Islands. The Commonwealth asserted CIBC’s 92% ownership and governance structure gave it the practical ability to order CFIB to turn over the Millards’ funds. CIBC argued CFIB was a separate entity and it lacked access to CFIB’s account information. The Second Circuit certified to the New York Court of Appeals the question of whether a turnover order can be issued to an entity without actual possession, but whose subsidiary might have possession. The Court of Appeals held that CPLR 5225(b) requires actual possession or custody by the entity against whom the order is sought.
Facts
The Commonwealth obtained tax judgments against the Millards in the Northern Mariana Islands in 1994.
The Millards moved from the Commonwealth before the judgments could be enforced.
In 2011, the Commonwealth registered the judgments in the Southern District of New York and sought a turnover order against CIBC, claiming the Millards had accounts in CIBC’s subsidiaries, CFIB, in the Cayman Islands.
The Commonwealth argued CIBC’s control over CFIB allowed it to compel the turnover of the Millards’ assets.
CIBC countered that CFIB was an independent entity and CIBC lacked access to its account information.
Procedural History
The District Court denied the Commonwealth’s motion for a turnover order, but maintained a restraining order on CIBC related to the Millards’ accounts.
The Second Circuit appealed to the New York Court of Appeals the question of whether a turnover order can be issued to an entity without actual possession.
The New York Court of Appeals accepted the certified questions.
Issue(s)
Whether a court may issue a turnover order under N.Y. C.P.L.R. § 5225(b) to an entity that does not have actual possession or custody of a debtor’s assets, but whose subsidiary might have possession or custody of such assets?
Holding
No, because CPLR 5225(b) requires the entity against whom the turnover order is sought to have actual possession or custody of the assets; constructive possession through a subsidiary is insufficient.
Court’s Reasoning
The Court’s reasoning hinged on the plain language of CPLR 5225(b), which refers only to “possession or custody,” and not “control.” The Court stated, “The plain language of section 5225 (b) refers only to ‘possession or custody,’ excluding any reference to ‘control.’ The absence of this word is meaningful and intentional.” The court emphasized the legislative intent to exclude the concept of “control,” noting that prior statutes included “control,” but the legislature intentionally removed it when enacting CPLR 5225(b). The Court reasoned that if the legislature intended to include “control,” it would have explicitly done so, as it has in other CPLR provisions (e.g., CPLR 3111 regarding discovery). The court distinguished the standard for documentary discovery, where “possession, custody, or control” has been interpreted to include constructive possession, from the narrower “possession or custody” standard applicable to the disposition of property, such as in CPLR 5225(b). The court reasoned that the legislature has applied a higher standard to ensure the proper disposition of property. The Court also clarified that its prior decision in Koehler v. Bank of Bermuda Ltd. did not alter the meaning of “possession or custody,” but only emphasized that personal jurisdiction over the garnishee is essential for a turnover order. The court stated, “Koehler does not interpret the meaning of the phrase ‘possession or custody,’ and is only significant in holding that personal jurisdiction is the linchpin of authority under section 5225 (b).” The court concluded that compelling a garnishee to direct an entity not subject to the state’s jurisdiction to deliver assets held in a foreign jurisdiction would be an unwarranted expansion of CPLR 5225(b).