Judgments totaling over $500 million have been entered against former president Donald Trump (and certain other defendants in the New York Attorney General civil fraud trial) across three lawsuits tried in the Supreme Court of the State of New York, New York County. (Unlike most states, where the Supreme Court is the highest court of appeal, in New York State the Supreme Court is the trial court of unlimited general jurisdiction. In practice, the Supreme Courts typically hear matters in which larger sums are in dispute, i.e. $50,000.00 or more in New York City).
What Happens When A Judgment Is Entered?
Judgment enforcement practices differ in each state. Unlike many states that model their rules of civil procedure after the Federal Rules of Civil Procedure, such as Florida, New York has adopted its own unique Civil Practice Law and Rules (CPLR). Article 50 of the CPLR concerns judgments. It addresses, among other things, what must be included in a judgment (5011), the computations of interest (5001-5003), the rate of interest (5004), and the entry of judgment (5016).
The entry of judgment in the office of a Clerk in a County situated in New York State creates a judgment lien against any real property owned by the party against whom the judgment was entered (the judgment debtor) located in that county. If a judgment debtor is believed to have real property in other counties located in the State of New York, the judgment holder (the judgment creditor) can obtain a transcript of the judgment from the Clerk of the county in which it originated and record it with the Clerk of each county in which the judgment debtors is believed to hold real property.
Unlike states like New Jersey and Florida, where there are central registries where judgments made be recorded to create liens against personal property (broadly speaking person property is all property other than real property) held by a judgment debtor throughout the state, there is no simple means of collecting against a judgment debtor’s personal property in New York.
Instead, a judgment creditor must used the discovery devices found in Article 52 of the CPLE to locate, restrain, seize, levy and execute against assets for the purposes of satisfying the judgment. In contrast to those states that have adopted modified versions of the Federal Rules of Civil Procedure in which courts issue writs of garnishment, without judicial participation New York attorneys may issue information subpoenas with restraining notices to the judgment debtors, financial institutions and other third parties reasonably believed to have knowledge about or be in possession of the judgment debtor’s assets.
A judgment creditor can issue the information subpoena and restraining notice to a prospective garnishee without first providing notice to the judgment debtor, providing it has met other statutory requirements and timely services the judgment debtor with a copy of the information subpoena and restraining notice shortly thereafter. This avoids the judgment debtor emptying bank accounts and moving assets before they are frozen by the garnishee following receipt of the restraining notice.
Once property has been identified or restrained, a judgment debtor may enlist the assistance of a county sheriff to levy and execute against assets located in that county. In the City of New York, a judgment creditor may alternatively utilize a New York City Marshall to assist in the collection of debts against assets located in any of the Burroughs of the City of New York. Subject to certain statutory exemptions and paying senior liens, claims and encumbrances on title, the judgment creditors remedies include forcing the sale of real property owned by the judgment debtor.
With respect to the Trump judgments, the recording of the judgments entered in favor of E. Jean Carroll and the New York Attorney General would ordinarily become judgment liens against the real property held by the Trump judgment debtors located in Manhattan. The judgment creditors would likely next seek to restrain known bank accounts held by the judgment debtors and seek the turnover of non-exempt funds. From there, the judgment creditors would target the liquidation of personal property and compelling the sale of real property. The judgment creditors could also seek to domesticate the judgment to other states in which the judgment debtors might hold real and personal property. Most states will recognize and honor a judgment on the merits once properly recorded on notice to the judgment debtor.
How Can a Judgment Creditor Prevent Enforcement Pending Appeal from the Judgment?
Judgment debtors often seek to stay the collection of the judgment pending appeal from the judgment. Stays pending appeal are governed by CPLR 5519. The general notion is that the judgment debtor must post sufficient funds or provide adequate collateral to satisfy the judgment, with interest thereon. Alternatively, a judgment debtor may purchase a bond against which the judgment can be collected.
The deposit of funds into Court or the purchase of the bond protects the judgment creditor from a judgment debtor divesting itself of assets and frustrating collection prospects while the appeal is pending. If the judgment is affirmed on appeal, the judgment creditor can collect the funds or property from the court or make a demand for payment under the bond. The amount paid into court or that is bonded is commonly 120% of the judgment amount to account for interest that will accrue while the appeal is briefed and determined.
A party that deposits its own funds into court will have its funds or property returned if it prevails on appeal, less poundage charged by the Clerk. While the judgment debtor is unable to earn a return on the funds while deposited into court, it avoids having to pay for the bond. In contrast, bond fees are not returned if the judgment debtor prevails on appeal.
Trump posted a $5.6 million with the court to act as security pending appeal of the first Carroll judgment in the amount of $5 million arising from his sexual abuse of Carroll in the 1990s and later defamation of her.
On February 23, 2023, Trump’s attorneys request that Judge Kaplan suspend enforcement of the second Carroll judgment in the sum of more than $83 million on the grounds the amount would likely be reduced on appeal.
Today a New York appellate court denied a motion by Trump and his co-defendants in which Trump proposed to only post $100 million, notwithstanding the entry of judgment for $454 million. His team claimed that since an independent monitor of the Trump Organization continues in place, the judgment could be collected from the Trump Organization if the judgment is affirmed on appeal. The Trump defendants also complained that liquidating real estate in the near term to generate the funds necessary would result in depressed sale prices and prejudice them since the property could not be recovered should they prevail on appeal. Judge Anil Singh declined to approve Trump’s proposal such that Trump must either post sufficient cash or purchase a bond. Judge Singh did stay part of the judgment that prohibited Trump and his sons from operating their businesses pending appeal.
This follows Trump’s recent payment of $392,000.00 in attorneys fees and costs to the New York times for his failed strategic lawsuit against public participation. As previously reported, Trump Ordered to Pay Attorney’s Fees in NY SLAPP Lawsuit.
David’s Dicta: It should be clarified that the Carroll verdicts were rendered in Federal Court. Carroll would need to obtain an abstract of each judgment and record them in the land records of each county in which Trump owns property to create a judicial lien. Rule 62 of the Federal Rules of Civil Procedure addresses stays of proceedings pending appeal in federal cases. Rule 62(a) provides for an automatic 30-day stay unless the Court orders otherwise. Rule 62(b) states: “At any time after judgment is entered, a party may obtain a stay by providing a bond or other security. The stay takes effect when the court approves the bond or other security and remains in effect for the time specified in the bond or other security.” In support of his Rule 62(b) motion, Trump has sought to piggyback on the arguments made by Carroll in her closing that only a huge penalty would discourage someone of his means. In substance, he asked the Court to take his word that he would make good on the judgment if affirmed because he is rich. Rule 62(b) exists because someone’s word is not something that one can collect against at the end of the day. In Trump’s case, he has a significant credibility problem in light of the findings in the civil fraud trial that he made material misrepresentations about his assets.