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T & C Leasing, Inc. v. Wachovia Bank, N.A.

421 N.J. Super. 221, 23 A.3d 440 (App. Div. 2011)

JUDGMENTS — When a bank account is levied upon for the payment of a judgment, the levy only affects the funds that were in that account on the day it was served and not any funds subsequently deposited into the account, but the judgment creditor may request the same writ of execution be used again.

A creditor corporation obtained a default judgment against its debtor and secured a writ of execution directing the county sheriff to levy on personal property belonging to the debtors. A sheriff’s affidavit reported the levy had been successfully served on a local bank branch and that the funds in the debtor’s bank account were available to the creditor. The sheriff sent a notice to the debtors with a copy to the creditors. It said that funds had been levied upon at the bank at the instruction of the creditor, but the funds could not be taken from the account until ordered by the court. The creditor then obtained a turnover order directing the bank to pay the sheriff the amount held in the account in partial satisfaction of the judgment. The bank complied. The creditor subsequently learned that funds had earlier been withdrawn from the bank account. It also ascertained that one of the debtors had issued checks from the account payable to himself, to cash, and to others during the period.

The creditor sued the bank, claiming it failed to honor the levy in violation of the law when it paid the debtors funds that had been subsequently deposited into the account. The creditor sought a judgment for the amount paid out by the bank in excess of the levy and moved for summary judgment. It argued that the execution had continuing effect and that the bank was required to turn over any additional funds deposited into the account even after the writ of execution was served and before the underlying judgment was satisfied. The creditor relied on a statute authorizing execution against proceeds thereafter become due and owing to it, and a second statute stating that such an execution becomes a lien and a continuing levy. The bank argued that a different statute governed, and that statute provided that money belonging to a defendant in execution may be levied on and returned by virtue of the execution only to the extent of the money collected. The lower court agreed with the bank, concluding that the only part of the bank account that was subject to levy was what was there at a finite moment in time. The lower court reasoned that the reference in the sheriff’s return of service to “due or to become due” applied to documents such as CDs or other time-deposit accounts with an inchoate value. The lower court further noted there was no language in the original documentation that would have alerted the parties to interpret the writ as the equivalent of a levy upon wages or the like, such as an instruction to the sheriff to conduct a continuing levy and to give notice to the bank of such continuing levy.

The creditor renewed its argument on appeal, contending that the lower court had erred in concluding that the levy on the bank account was a levy on “money,” insisting that it was on the entire “debt” owed by the bank to the depositor and, as such, the account was subject to a continuing levy until the judgment was satisfied. The Appellate Division was unconvinced that it mattered whether a bank levy was classified as “money belonging to a defendant” or, more likely, “rights and credits of an equitable nature.” Rather, the Court held that, in either instance, a deposit account levy differs from wage and related executions that create a continuing lien, in concept, policy and procedure. Article 7, read literally, does apply to “debts.” To the Court, it was apparent from the context of New Jersey’s statutes, that the property subject to execution involves regularly recurring payments to the judgment debtor. Accordingly, the Court found logic to the continuing lien principle in the statute cited by the creditor, intended to capture, until paid, all installments. Further, the Court found that a bank account is not necessarily a “debt due” to the account holder from the bank in the sense the term is used in the statute dealing with garnishing debts. Rather, considering the unpredictable nature of the deposits and withdrawals and the fluctuating balance on any given day, a bank account titled to a debtor is more akin to a sum of money, or a right and credit, belonging to the debtor. Therefore, it is subject to garnishment by a third party judgment creditor only to the extent funds happen to be available at a specific point in time.

Thus, the Court found that the bank levy was fixed in time as of the date the sheriff served the writ. The execution and levy contained no language evidencing an intention to create a continuing lien against the debtors’ bank account. In affirming, the Court observed that the creditor could have, but did not, choose to re-use the same writ of execution, valid for two years from the date of issuance, by instructing the sheriff to return to the bank and make another levy at a specified time if it had reason to believe the debtors had placed additional funds into the account or to intermittently return, as some creditors do at the beginning of each month when a debtor may routinely deposit funds into an account.

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