Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (2009)
A New York court with personal jurisdiction over a garnishee can order the garnishee to produce assets located outside of New York to satisfy a judgment, regardless of whether the judgment debtor is subject to the court’s jurisdiction.
Summary
Koehler, a judgment creditor, sought to enforce a Maryland judgment against Dodwell, a judgment debtor, by compelling the Bank of Bermuda (BBL) to turn over Dodwell’s stock certificates held as collateral in Bermuda. The New York Court of Appeals addressed whether a New York court, with personal jurisdiction over BBL, could order the turnover of assets located outside New York. The Court held that personal jurisdiction over the garnishee (BBL) allows the court to order the turnover of out-of-state assets, even if the judgment debtor (Dodwell) is not subject to the court’s jurisdiction. This decision clarifies the reach of CPLR Article 52, facilitating judgment enforcement against entities with a presence in New York, regardless of the asset’s location.
Facts
Koehler obtained a judgment against Dodwell in Maryland and registered it in the Southern District of New York. Dodwell owned stock certificates in a Bermuda corporation, held by BBL in Bermuda as collateral for a loan. Koehler initiated a proceeding in the Southern District of New York, seeking a turnover order against BBL to compel delivery of the stock certificates or their equivalent value. BBL initially contested personal jurisdiction but later consented to it.
Procedural History
The U.S. District Court for the Southern District of New York initially dismissed Koehler’s petition, citing a lack of in rem jurisdiction over the shares. The Second Circuit Court of Appeals certified a question to the New York Court of Appeals: whether a New York court, with personal jurisdiction over a defendant other than the judgment debtor, can order the delivery of assets located outside New York. The New York Court of Appeals accepted the certified question.
Issue(s)
Whether a court sitting in New York may order a bank over which it has personal jurisdiction to deliver stock certificates owned by a judgment debtor (or cash equal to their value) to a judgment creditor, pursuant to CPLR article 52, when those stock certificates are located outside New York?
Holding
Yes, because CPLR Article 52 contains no express territorial limitation, and having personal jurisdiction over the garnishee allows the court to compel observance of its decrees via proceedings in personam.
Court’s Reasoning
The Court reasoned that CPLR Article 52 governs post-judgment enforcement, requiring personal jurisdiction over the person against whom the order is issued, unlike pre-judgment attachment under Article 62, which requires jurisdiction over the property. The Court emphasized that no express territorial limitation exists within Article 52 barring a turnover order requiring a garnishee to transfer assets into New York. The Court cited the First Department’s holding in Gryphon Dom. VI, LLC v APP Intl. Fin. Co., 41 AD3d 25 (1st Dept 2007), affirming that New York courts can order judgment debtors to turn over out-of-state assets under CPLR article 52 because the court had personal jurisdiction over the defendant. The court stated, “[H]aving acquired jurisdiction of the person, the court[ ] can compel observance of its decrees by proceedings in personam against the owner within the jurisdiction”. The court further stated that “As long as the debtor is subject to the court’s personal jurisdiction, a delivery order can be effective even when the property sought is outside the state”. The Court distinguished this situation from attachment proceedings, where jurisdiction is based on the property’s location within New York. The dissent argued that the majority’s holding creates an expansive garnishment remedy, unsupported by precedent, and raises concerns about forum shopping and potential constitutional issues under Shaffer v. Heitner, 433 U.S. 186 (1977). The dissent argued that the judgment creditor should not be permitted to do what the judgment debtor could not do, citing United States v First Natl. City Bank, 321 F2d 14 (1963). Nonetheless, the majority held that personal jurisdiction over a defendant, be it a judgment debtor or garnishee, allows a New York court to order the turnover of out-of-state property.