Painting With A Sledgehammer

In New York, both the state legislature as well as the Court system, view the Fair Debt Collection Practices Act (FDCPA) as a minimum template, and through judicial activism and statutory increases, have created a tremendous structure of debtor protection.


The bad news is that some of the rules and laws are so stringent, it’s super easy, barely an inconvenience, for debtors to take advantage of the law, even with regard to debts that are entirely commercially based, and are entirely commercial transactions. This is especially apparent when dealing with a commercial collection against a personal guarantor when the corporation is no longer operating, where the Courts hear these matters in the consumer part on a daily basis, and paint commercial transactions with a consumer paintbrush.


The good news is that as Plaintiff attorneys attempt to collect debts, we have very little uncertainty, since everyone is against us, the debtors can always find the most favorable outcomes, and Judges are salivating to dismiss cases. Consistency and predictability! Huzzah!


We were retained by The Daily Bugle, who in addition to publishing anti-Spider-Man propaganda, also prints an annual directory for local small businesses. One such business was Black Cat Contracting. The owner of Black Cat, Ms. Felicia Hardy, signed a personal guarantee for the directory. The agreement called for twelve monthly payments of $2000 each, and after three months, Black Cat stopped paying, so we sued both Black Car Contracting, as well as Hardy herself.


Neither Hardy nor Black Cat ever responded, and we obtained a default judgment. In post-judgment asset searches, we ascertained that Black Cat Contracting went out of business, Hardy owned no home and owned no motor vehicles. However, we did locate a bank account at G&R Bank belonging to Hardy, and so we restrained the account. Unfortunately, one the requirements in New York is to send an “Exemption Claim Form”, which allows a judgment-debtor to claim an exemption from judgment enforcement. While designed to protect consumers, since Hardy is an individual, the legal mechanism is readily utilized by her. As such, Hardy claimed an exemption, namely, that she was on disability, and the funds in the G&R account were exempt. With the Exemption Claim Form account declared as exempt, the burden would fall on us to prove that the funds were not exempt, (totally ridiculously impossible), and without any evidence to the contrary, and a statutory time limit of seven days to bring a motion, we had no choice by the send a facsimile to G&R authorizing the release of the account, lest we be held in contempt of an exemption claim.


But of course, we didn’t give up. We would never give in so easily!


About a month later, we located an account at H&S Bank, which was entirely held by Black Cat Contracting. We realized that this was a recent deposit made, presumably by the last vestige of accounts receivables going in to Black Cat. We restrained the account at H&S Bank, and engaged the marshal to execute on the funds.


Lo and behold, when we dispatched the marshal they reported that the account had been released!  We immediately contacted H&S bank to inquire as to how the account could possibly have been released.


Turns out, H&S Bank received a facsimile, purportedly from our office, authorizing the release of the bank account. We demanded a copy of the purported release, and upon our review, the letter was completely on our letterhead, and was indeed our form, but… there was no addressee! Apparently, somebody… made a photocopy of the release we sent to G&R Bank, whited out the addressee block, and then sent it to H&S!


So, we immediately brought an emergency motion essentially painting the entire picture before the Court, and requested that the H&S reverse the release, and issue payment to satisfy the judgment. This was no mere paintbrush, this was a sledgehammer. Within a week, which is about four months faster than the Court usually issues decisions, the Court granted our motion in the entirety, and even went as far as to acknowledge that it was Hardy who sent the fraudulent release. The bank even recommended that H&S Bank seek a fraud investigation.  While we don’t know what else may have happened, what we do know, is that H&S sent us the entire amount due, and we satisfied our judgment.


Timothy Wan is the Senior Partner of the firm Smith Carroad Levy Wan & Parikh, in Commack, New York, and can be reached at Tim totally recognizes that he has mixed Marvel and DC Universes, but we all know Gotham City is really just a euphemism for New York.