Background
Trinity Centre LLC obtained a judgment against certain judgment debtors and served a CPLR 5222(b) restraining notice on City National Bank, which the bank acknowledged receiving. A restraining notice under CPLR 5222(b) prohibits a garnishee—any entity holding property in which a judgment debtor has an interest—from disposing of such property. After receiving the restraining notice, City National Bank accepted payments from the judgment debtors to satisfy the debtors’ separate, independent debt that the debtors owed to the bank itself. Trinity Centre argued that these payments violated the restraining notice because they involved “property in which the judgment debtor . . . is known or believed to have an interest” within the meaning of the statute.
When Trinity Centre later settled its underlying judgment with the debtors—receiving, according to the Satisfaction of Judgment, “FULL satisfaction”—it nonetheless continued to press its claims against City National Bank for compensatory damages, punitive damages, attorneys’ fees, and civil contempt sanctions arising from the bank’s alleged violation of the restraining notice. Supreme Court (Moyne, J.) granted Trinity Centre’s motion for summary judgment on liability and found City National Bank in civil contempt, leaving damages for a hearing. The bank appealed.
The Court’s Holding
The First Department unanimously modified the order in one respect—dismissing the compensatory damages claim as moot—and otherwise affirmed. The compensatory damages claim became moot when Trinity Centre accepted a settlement from the judgment debtors acknowledging full satisfaction of the underlying judgment. Trinity Centre’s argument that the settlement was only partial because the amount was less than the total judgment was squarely contradicted by the plain language of the Satisfaction of Judgment document, which stated that Trinity “acknowledged” “FULL satisfaction.” Having agreed to full satisfaction, Trinity could not maintain a claim for additional compensatory damages flowing from the restraining notice violation.
However, the court held that full satisfaction of the underlying judgment did not moot Trinity’s claim for civil contempt sanctions. Under established First Department precedent, civil contempt sanctions may include attorneys’ fees incurred as a direct result of the contumacious conduct, independent of whether the underlying judgment has been paid. Because City National Bank’s violation of the restraining notice was the conduct giving rise to contempt, and because Trinity Centre incurred attorneys’ fees in pursuing those claims, the contempt remedy remained available even after the underlying debt was fully satisfied.
On liability, the court held that a bank that receives property from a judgment debtor as payment on the debtor’s separate debt to the bank is still receiving “property in which the judgment debtor . . . is known or believed to have an interest” within the meaning of CPLR 5222(b). Accepting the bank’s contrary argument—that the debtor’s “interest” in the funds instantly extinguished upon transfer to the bank—would create a significant circumvention risk: any garnishee that is simultaneously a creditor of the judgment debtor could effectively immunize itself from restraining notice obligations simply by accepting payments on its own debt. The court also confirmed that the bank’s acknowledged receipt of the restraining notice was a sufficient basis to find that it was “sufficiently aware” of the notice for civil contempt purposes.
Key Takeaways
- A bank that is also a creditor of the judgment debtor violates a CPLR 5222(b) restraining notice when it accepts payments from the debtor to satisfy the debtor’s separate debt to the bank—the debtor’s “interest” in those funds does not vanish merely because the bank is the recipient.
- Full satisfaction of a judgment moots compensatory damage claims against a garnishee for restraining notice violations, but it does not moot civil contempt sanctions, which can include attorneys’ fees independently tied to the contumacious conduct.
- Acknowledged receipt of a restraining notice by a financial institution is sufficient to establish the “awareness” element required for civil contempt under CPLR 5251.
- A creditor-garnishee that permits payments from a judgment debtor to satisfy the debtor’s independent obligations while subject to a restraining notice does so at risk of contempt, even if the garnishee characterizes those payments as extinguishing the debtor’s interest in the funds.
Why It Matters
This decision is essential reading for banks and financial institutions that routinely receive restraining notices in commercial litigation. The CPLR 5222(b) restraining notice is a workhorse of NY judgment enforcement practice, and lenders frequently find themselves as garnishees with simultaneous creditor relationships to the judgment debtor. The court’s rejection of the “no interest” argument closes what could have been a significant gap in enforcement: banks with offsetting loans could have become judgment-proof havens for debtors who simply pay down existing bank debt to move assets beyond the reach of other creditors. For bank compliance and litigation counsel, the holding means that upon receipt of a restraining notice, all incoming payments from the named debtor—including ordinary loan repayments—must be flagged and held pending court guidance or a motion to vacate or modify the notice. For judgment creditors, the decision confirms that civil contempt can reach a bank’s violation even after the underlying judgment is fully satisfied, providing ongoing leverage to recover attorneys’ fees in enforcement proceedings.