City Department of Finance Not Entitled to Two Percent Payment Fee On Abandoned Funds Transferred to Comptroller

On October 25, 2018, Justice Ramos of the New York County Commercial Division issued a decision in Swezey v. Lynch, 2018 NY Slip Op. 32810(U), holding that the City Department of Finance was not entitled to a two percent fee on abandoned funds transferred to the City Comptroller, explaining:

The DOF is the custodian of court-deposited funds in New York City under Article 26 of the CPLR. When the DOF takes custody of court-deposited funds, it is entitled to two statutory fees, set forth in CPLR 8010: one fee for investing, and one fee for making payment. Specifically, sub-section (1) of CPLR 8010 entitles the DOF to receive two percent upon a sum of money paid of out court by him. Sub-section (2) entitles the DOF to one half of one percent upon a sum of money invested by him.

The term "paid out of court," as used in CPLR 8010(1), has not been judicially construed. The Court of Appeals has stated that when the language of a statute is clear and unambiguous, the statute should be construed so as to give effect to the plain meaning of the words.

The plain meaning of the term "paid out of court," which triggers the DOF's entitlement to a two percent fee for its custodial services, is the payment of the money out of court, either an award of the court or other order of the court directing payment.

Considering the construction of CPLR 8010 with the Abandoned Property Law does not alter this Court's conclusion. Abandoned Property Law §§ 600 and 602 directs the DOF to transfer dormant court-deposited funds to the comptroller without a court order, after five years. The substance of this transfer is a ministerial act triggered by the passage of time, which runs from the date the DOF takes custody of the money. The ministerial act of transferring abandoned funds to the comptroller does not entitle the DOF to a two percent fee under CPLR 8010 (1) because it is not money paid out of court to the party entitled to the money or other order directing payment.

This Court originally ordered the DOF to take custody of the Arelma assets, and neither this Court, nor any other court with competent jurisdiction, has awarded the Arelma assets or otherwise directed payment thereof out of the DOF's custody. Thus, the only fee to be retained by the DOF for its services as custodian of the Arelma assets is the retention of one half of one percent of the sum initially received by him for its placement of the funds in an interest bearing account. There is no statutory authority for the DOF's retention of two percent for transferring funds as abandoned property to the comptroller's custody, by passage of time.

(Internal quotations and citations omitted).

It happens from time-to-time that money related to a court case must be paid into court (or, as this decision explains, if the court is in New York City, into the New York City Department of Finance). Getting that money back from the Department of Finance is time consuming and, as this decision shows, potentially expensive. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding the payment of funds into court.