Property in which the judgment debtor has a beneficial interest, even if it is not legal title, is subject to levy | Schlam Stone & Dolan LLP

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On February 9, 2022, Judge Barry R. Ostrager of the New York County Commercial Division issued a decision in Pacific Alliance Asia Opportunity Fund LP vs. KwokHo Wan2022 NY Slip Op. 30460 (U), holding a “billionaire” judgment debtor in civil contempt for failing to hand over a yacht called Lady May, rejecting the debtor’s argument that the yacht was not his, explaining :

The Court has the power to detain Kwok in [*11] civil contempt under Judicial Act § 753 – and “to punish [him]a fine and imprisonment” — where, as here, the Court “expressly declares[s] that [Kwok’s] the actions were calculated to or actually caused to frustrate, obstruct, impede or impair a party’s rights or remedies in any civil proceeding. t 1985) (citing NY Judiciary Law § 753). Section 753 sets out four requirements:[T]To conclude that there has been contempt in a given case, it must be determined that [1] a legal court order, clearly expressing an unequivocal mandate, was in effect. [2] It must appear with reasonable certainty that the order has been disobeyed. . . [3] In addition, the party to be held in contempt must have had knowledge of the court order, although it is not necessary that the order was actually served on him. . . [4] Finally, the infringement of the right of a party to the dispute must be demonstrated.

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The extent of PAX’s continued “damage” hinges on whether PAX has demonstrated that it could ultimately levy Lady May to satisfy its now million-dollar judgment against Kwok. Under CPLR § 5225, “money or other personal property” is due when the debtor has the requisite “interest”. To meet this requirement,[i]t the judgment debtor need not have legal title to the property; a beneficial interest is sufficient.” Weinstein, Korn & Miller, New York Civil Practice: CPLR ¶ 5225.09. “A beneficial interest is ‘[a] right or expectation in something. . . as opposed to the legal title of this thing. “” Peterson v. Islamic Rep. of Iran, 2013 US Dist. LEXIS 40470, 2013 WL 1155576, at *30 (SDNY 13 Mar 2013) (citing Black’s Law Dictionary, Interest (9th ed. 2009)). Kwok has more than a beneficial interest in Lady May. Not only does Kwok control the yacht, it appears he provided the funds to purchase it, and he is the person who primarily enjoys using the yacht. .

The key factor is whether “the property has benefited [the beneficial owner] as if he had received the property directly. Id. (citing Exp.-Imp. Bank of US v. Asia Pulp & Paper Co., Ltd., 609 F.3d 111, 120 (2d Cir. 2010); see also Gliklad v. Chernoi, 129 AD3d 604, 12 NYS3d 65 (1st Dep’t 2015) (upholding rejection of judgment debtor’s assertion that he no longer held an interest in property because he had transferred his interest to his daughters); Colfin Bulls Funding B , LLC v Ampton Invs., Inc., 62 Misc. 3d 1208(A), 112 NYS3d 868 (Table), at *2, 6 (NY Sup. Ct. 2018) (judgment [*13] creditor’s rotation motion notwithstanding the judgment debtor’s assertion that he transferred property to a corporation, for even if this is true, the evidence has shown that he “retained control and/or an interest” in good).

The evidence clearly and convincingly demonstrates that Kwok has a beneficial interest in and control of Lady May. In this latter regard, the Court takes note of the filing of the Zeng case and draws a conclusion from all the facts of the record that Kwok took extraordinary measures to protect the yacht from its creditors. In addition, Kwok’s “family office” funds the day-to-day operations and maintenance of the yacht.

The Court finds that Ms. Guo’s testimony was not only inconsistent and concealed, but also significantly undermined by the testimonies of Captains Heaslop and Ivanov and Mr. Stockil, who said they never followed Ms. Guo’s instructions concerning yachts. four and a half years that she directly or indirectly held title to the yacht.

Sophisticated judgment debtors often attempt to protect their assets from creditors by transferring them out of their name, even though they continue to control and benefit from those assets. But this strategy may not succeed if a court finds that the debtor has a beneficial interest in the asset in question and, as this case shows, the penalty for failure to comply with court orders is contempt.

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