Court Opinion

ID: 5396664
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:19:08.29136+00
Date Added: 2024-06-11T08:30:23.029445
License: Public Domain

Boteih, J.
(dissenting). The judgment creditor is the former wife of the judgment debtor. In the course of an examination in supplementary proceedings she elicited that the debtor’s brother, as informal manager of the debtor’s tangled business affairs, followed a practice of receiving his earnings, deducting sums for tax payments and other debts and expenses, and remitting the balance to the debtor’s present wife. Thereupon a subpoena was served upon the debtor’s wife to appear as a third-party witness. It contained the injunctive provisions of section 781 of the Civil Practice Act, forbidding the transfer or disposition of the debtor’s property. Upon examination the debtor’s wife testified candidly that over a three-month period she had spent for the family’s requirements the greater part of the funds she had on deposit when served with the subpoena and additional funds which she had subsequently received — all derived from the debtor’s earnings. For thus withdrawing the debtor’s funds she has been adjudged in contempt for disobedience of the restraining provisions of the third-party subpoena.
The debtor’s scheme of financial husbandry was at best a very loose one. However, some color of plausibility is lent to his protestations of good faith by the fact that he is an actor, with uncertain income ranging in the space of one year from $30 a week to $2,500 a week, that he was in arrears in payment of taxes and that he evidently possessed no capital assets or reserves. Certainly there can be no quarrel with the practical wisdom in the practice of entrusting sufficient funds to his wife in the lush periods to tide the family over during the lean ones.
The following facts emerge clearly from the welter of charges and countercharges and dictate the determination of this appeal. During the three-month period under consideration the third-*132party witness expended that portion of the debtor’s current earnings given her for what were in the main indubitable family expenses, and such expenditures bore a reasonable relationship to the debtor’s total income. She itemized her payments in great detail and the judgment creditor does not appear to challenge their authenticity.
In granting the motion to punish the third party the learned Justice at Special Term stated that the moneys “ in her possession belonging to defendant were disbursed at her risk.” However, the risk she thereby assumed was no greater than the risk that would be incurred by the debtor himself under similar circumstances; and it has been held that when the debtor is enjoined, as was the third party here, he will not necessarily be held in contempt for applying his earnings to the support of his family. If he does so without prior leave of the court, the burden will rest upon him to justify the use made of the funds. “ Nor was it necessary for the debtor to bring the facts constituting exemption to the attention of the judge or court, before applying his earnings to relieve the necessities of his family. Such a course would cause delay, perhaps suffering, to his family, and we think the intent of the statute is answered by putting upon the debtor the burden of justifying its use ”. (Hancock v. Sears, 93 N. Y. 79, 81.)
The statutes quoted in Hancock v. Sears (supra) were substantially similar to those controlling the decision herein. The injunctive provision in section 781 of the Civil Practice Act, and as contained in the subpoena served on the appellant, reads insofar as pertinent as follows: “ [The] third party is hereby forbidden to make or suffer any transfer or other disposition of, or to interfere with, any property belonging to the judgment debtor or to which he may be entitled * * * or to pay over or otherwise dispose of any moneys due or to become due to such judgment debtor, not exempt by law from application to the satisfaction of the judgment ’ ’.
Section 781 is part of the integrated scheme of supplementary proceedings procedure set forth in article 45 of the Civil Practice Act. Upon this motion it must be considered in conjunction with section 792, which relates to the exempt property contemplated by section 781 and reads in part: “ This article does not authorize the seizure of, or other interference with * * * (c) the earnings of the judgment debtor for his personal services rendered within sixty days next before the institution of the special proceeding, or rendered thereafter, to the extent that such earnings shall appear to the court by oath or otherwise to *133be necessary for the reasonable requirements of the judgment debtor and his family, if dependent upon him ’ ’.
The purpose of supplementary proceedings is to reveal and reach property and income of the judgment debtor not exempt under section 792 or otherwise. The proceedings are equitable in nature and may not be used ‘ ‘ for the purpose of oppression, or to subvert the policy or defeat the spirit of the law ” (Tillotson v. Wolcott, 48 N. Y. 188, 191). The exemption of so much of a debtor’s earnings as is needed for the support and maintenance of himself and his family is a “ humane provision ” which “ should be liberally construed in favor of the debtor ” (Miller v. Hooper, 19 Hun 394 [1st Dept.]). The primary concern of the exemption statute is to provide, within reasonable limits, for the needs of the debtor and his family. In Matter of Gill v. Schwarts (273 App. Div. 606, 609) it was held that unless and until there has been a determination of such needs a restraining order served on the debtor’s employer is ineffectual.
The statutes reflect a deep-rooted public policy against reckless seizure of funds necessary for the support of the debtor and his dependents, and substitute a system of planned allocations of the debtor’s income among his dependents and his creditors. Thus, section 793 makes provision for installment payment by debtors out of income, “ after due regard for the reasonable requirements of the judgment debtor and his family ”, etc. In the conventional procedure, followed in Olson v. Olson (275 App. Div. 60) the creditor proceeds against the debtor and his employer. In such applications the creditor is granted relief out of earnings not necessary to satisfy the reasonable requirements of the debtor and his family.
In the case at bar the creditor did not choose to proceed against the debtor’s employers or brother while they held the funds. She is not seeking excess earnings but the very funds which the debtor has given his wife for support of their household. The contention that the debtor earns considerably in excess of the amount spent by his wife merely leads to the conclusion that a court under section 793 might well have allowed him an equivalent amount for the support of himself and his family and also emphasizes the desirability of proceeding pursuant to section 793, under the Olson v. Olson formula.
A heavy burden of justifying the expenditures in issue rests upon the third party, and the risk she courted in making such expenditures was correspondingly great. She must not only satisfy the court that the moneys she expended were for neces*134saries as contemplated by section 792 of the Civil Practice Act; but she must also show that these funds were not received or expended by her as part of any scheme to divert funds that would otherwise be applied towards satisfaction of the judgment. Although she moved promptly to vacate the subpoena (which motion was denied) she could have reduced her risk by asking specifically for a ruling on the status of the funds in her possession.
However, the uncertainty and irregularity of the debtor’s income explain the debtor’s unorthodox method of paying his household expenses and go far toward establishing the good faith of the debtor and his wife in the situation presented here. It is virtually conceded that the third party expended these moneys for household expenses and other necessaries of the debtor. It is also clear that the payments to her were not made to defraud creditors as evidently neither the debtor nor his wife, during the three-month period in issue, was in possession of additional funds which could have been applied toward payment of the judgment. In fact, the total earnings of the judgment debtor during this period were about one third of the amount expended by his wife. Accordingly she should not be adjudged in contempt for in effect carrying out the very purpose for which the statutory exemption was created.
The cases cited by the creditor in support of her contention that the funds in issue were previously earned and therefore not exempt are not applicable, since it appears that the moneys were for personal services rendered “ within sixty days next before the institution of the special proceeding, or rendered thereafter ” (Civ. Prac. Act, § 792).
The order appealed from adjudging the third-party appellant in contempt should be reversed, and the motion in all respects denied.
Cohit, J. P., and Breitel, J., concur with Bergait, J.; Boteiit, J., dissents and votes to reverse and deny the motion, in opinion, in which Bastow, J., concurs.
Order affirmed, with $20 costs and disbursements to respondent, and the period for compliance extended consistently with the periods provided by the Special Term in the order appealed from. Settle order on notice.