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A Day in the Life of a Cooperative Transfer Agent: Saving the Closing Against Money Judgments

Adam Leitman Bailey, P.C. recently represented a New York City co-op board as the transfer agent for a cooperative unit. The owner was deceased and the estate was selling the unit. A lien search revealed a money judgment against the deceased seller, raising concerns among the attorneys at Adam Leitman Bailey, P.C. as well as the buyer, buyer’s counsel, and buyer’s lender.

Adam Leitman Bailey, P.C. turned to Article 52 of the CPLR for guidance. The firm found that a shareholder’s interest in a cooperative unit is an interest in personal property rather than real property. To enforce a money judgment against real property, such as a house or a condominium, the creditor only needs to take one step; according to CPLR 5203, the creditor must docket the judgment in the county in which the property is located and the lien will be secured by the property.

However, securing a money judgment against personal property – in this case, the seller’s stock certificate and proprietary lease to the coop – involves a second step after docketing. An execution must be delivered to the proper sheriff and only at that time will the lien be secured on the personal property. At this point, the sheriff is required to seize the personal property, sell it, and apply the proceeds to the money judgment. A creditor can execute at any time during the life of a judgment.

There are two different ways a sheriff can execute on a judgment and levy the personal property. If the personal property (stock and lease) is in the shareholder’s possession, levy by seizure will take place (CPLR 5232(b)). The sheriff will serve a copy of the execution to the shareholder and take the property into custody. Then, the sheriff will sell the personal property within 60 days of the execution unless the creditor gives a 60-day extension (CPLR 5233).

If the personal property (stock and lease) is not in the shareholder’s possession and is instead with one who has the superior right to possess it – for example, the shareholder’s lender is holding the stock and lease as collateral on their loan under the rights given in the loan documents – levy by service will be performed. A copy of the execution will be sent to the garnishee lender (CPLR 5232(a)). If the garnishee lender does not hand over the property willingly to the creditor, the creditor must take a further step within 90 days, such as commence an action against the garnishee for not cooperating or extending the 90-day-period (CPLR 5225 or 5226).

In this case, the judgment against the deceased seller had not been executed upon by the creditor. Adam Leitman Bailey, P.C. knew this because the judgment itself would have to specifically state that judgment was levied against the shares of the stock certificate; it did not. Therefore, although the estate is ultimately responsible for the judgment, the estate was not required to satisfy the judgment at closing and therefore was able to transfer the stock and proprietary lease to the new buyer.

The bottom line is that ownership of shares allocated to a cooperative unit (stock certificate) is considered personal property under Article 52 of the CPLR, and a money judgment cannot be secured against personal property if it is not executed upon.

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