§ 5229.Enforcement before judgment entered.

This section is new. It authorizes the examination of an adverse party and the granting of a restraining order against him immediately after the rendition of a verdict or decision, to prevent divesting of assets before the judgment is entered. There is no reason for requiring a judgment creditor to wait for judgment to be entered in order to serve a subpoena or restraining notice where it can be shown at the conclusion of the trial that such delay may prejudice him. Examination may not be necessary for the evidence at the trial may indicate that the adverse party has sufficient assets to satisfy the judgment. If there is a danger that he will dispose of them, however, the court may order him restrained until a judgment can be entered and a payment or delivery order sought.

Substantially the same reform has been repeatedly advocated. Over a quarter of a century ago, for example, Mr. Justice Cuff suggested:

“. . . Legislation should be enacted which would automatically, on the rendering of a verdict by a jury or a decision by a court in actions at law, stay the loser from disposing of or transferring any of his property unless allowed to do so by his creditor’s consent or an order of court upon notice. The burden would then be where it belonged—on the one who owes the money.

“Another improvement would be to do away with the supplementary proceedings entirely—require plaintiff and defendant to be in court when a verdict or decision is to be announced. In inquests and defaults subpoena defendant. Nonappearance should be punishable as a contempt of court. The loser should immediately be sworn and examined by the court and opposing counsel as to his property and ability to pay the judgment to be entered.

Some will readily object to this procedure on the ground that the trial judge should not be required to actually preside at such an examination. This is only because we have grown used to the theory that an action at law ends with the entry of judgment. It should not end until all the processes and instrumentalities of the court have been employed to put the money in the purse of the successful party. The examination could be avoided upon filing a bond or obtaining the creditor’s consent. The questioning as to the property of the unsuccessful party would not take long if conducted in the presence of the trial judge and with his active cooperation. Even if it consumed some additional time, it would be worth while, for it would be moving toward the end the litigant had in view when he started the suit, to wit, to obtain money. As a matter of fact, the time required for this examination would be compensated for by the elimination of all the motions incidental to the supplementary proceedings in which the judgment creditor vainly attempts to collect his just deserts. Volumes of typing would be saved; days and weeks of the time of attorneys, who now are required to carry on their examinations without the presence or aid of the court, would be spared for other gainful work. The palpable lying that is typical of the supplementary proceeding inquiry would be greatly reduced or perhaps eliminated, for obvious lying is not nearly as likely to be perpetrated before an organized court as it is in the corner of the examination room with no judge, clerk, or stenographer present. There is room for more improvement in this direction.” [Zwerdling v Hamman Bldg. Corporation, 145 Misc 471, 473, 259 NY Supp 593, 596–97 (Sup Ct 1932).].

An enforcement order granted under any of the provisions of this article may be stayed pending appeal. See § 5519.

In addition to provisional remedies which may be available, the advisory committee recommends that creditors have a further remedy to discourage a defendant from fraudulently disposing of assets in contemplation of an adverse judgment while an action is still pending. In order to overturn such transfers under the Fraudulent Conveyance Act, the creditor was formerly required to show actual intent to defraud; or that the debtor was rendered insolvent by the transfer; or that after any particular conveyance by a debtor in business he was left with an “unreasonably small capital”; or that the debtor intended or believed that he would incur debts “beyond his ability to pay as they mature” at the time of the conveyance. Debt & Cred Law §§ 273, 274, 275, 276. These facts are frequently difficult to prove.

Even if the gift was made without intent to defraud and if the judgment debtor was not rendered insolvent thereby and is not insolvent after judgment but simply chooses not to satisfy it, there is nevertheless no reason for requiring the judgment creditor to pursue him rather than a gratuitous recipient of the debtor’s assets.

Accordingly, a new section has been added to the Debtor and Creditor Law, as follows:

§ 273-a. Conveyances by defendants. Every conveyance made without fair consideration when the person making it is a defendant in an action for money damages or where a judgment in such an action has been docketed against him, is fraudulent as to the plaintiff in that action without regard to the actual intent of the defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment.

This new section will place no greater burden upon gratuitous transferees with regard to their acting in reliance of the gift than was placed upon them under former provisions of the Fraudulent Conveyance Act. In fact, it should be much easier for them to determine whether the transferor is involved in litigation than to determine whether he was left with “an unreasonably small capital” or intended to incur subsequent debts.

Formerly § 5228, add, L 1962, ch 308; renumbered § 5229, L 1962, ch 315, § 5; L 1964, ch 279, § 1, eff Sept 1, 1963.