Carver Fed. Sav. Bank v. Shaker Gardens, Inc.

• Decision Date: 27 December 2018
• Docket Number: 525126
• Citation: 167 A.D.3d 1337,90 N.Y.S.3d 653
• Parties: CARVER FEDERAL SAVINGS BANK, Appellant, v. SHAKER GARDENS, INC., et al., Defendants, and Yehuda Nelkenbaum, Respondent. Chava Nelkenbaum, Respondent.
• Court: New York Supreme Court — Appellate Division

167 A.D.3d 1337

90 N.Y.S.3d 653

CARVER FEDERAL SAVINGS BANK, Appellant,

v. SHAKER GARDENS, INC., et al., Defendants,andYehuda Nelkenbaum, Respondent.Chava Nelkenbaum, Respondent.

525126

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: October 16, 2018

Decided and Entered: December 27, 2018

Jaspan Schlesinger LLP, Garden City (Scott B. Fisher of counsel), for appellant.

Gerald B. Lefcourt, PC, New York City (Gerald B. Lefourt of counsel), for Yehuda Nelkenbaum, respondent.

Robert C. Hiltzik, Jericho, for Chava Nelkenbaum, respondent.

Before: Garry, P.J., Egan Jr., Clark, Mulvey and Rumsey, JJ.

MEMORANDUM AND ORDER

Mulvey, J.

In 2013, plaintiff was awarded a deficiency judgment in the amount of $3,262,667.76 against defendant Yehuda Nelkenbaum (hereinafter defendant) and others (see Carver Fed. Sav. Bank v. Shaker Gardens, Inc., 135 A.D.3d 1212, 23 N.Y.S.3d 685 [2016] ). In an effort to enforce this judgment, plaintiff subsequently served defendant with a subpoena duces tecum requiring him to appear for a May 2014 deposition and produce certain specified documentation relevant to the satisfaction of the judgment (see CPLR 5223, 5224 ). Defendant never appeared or responded to the subpoena. Plaintiff then moved to compel compliance with the subpoena or, in the alternative, to hold defendant in contempt. By order entered in December 2014, Supreme Court directed defendant to appear for a deposition on January 30, 2015 and to produce responsive documents at least 10 days prior to the scheduled deposition. This order further provided that, if defendant failed to comply with its directives, "he shall be in contempt of [c]ourt." Once again, defendant failed to appear for the deposition or to produce the requested documents.

Soon thereafter, plaintiff moved to hold defendant in contempt for his failure to comply with the December 2014 order. One day prior to the return date, defendant filed a chapter 13 bankruptcy petition. As a result thereof, the proceedings in Supreme Court were stayed and the contempt motion was withdrawn without prejudice. Following the dismissal of the bankruptcy petition due to defendant's failure to appear for a creditors' meeting and to comply with mandatory disclosure, plaintiff resumed efforts to obtain an adjudication of contempt against defendant and accordingly refiled the contempt motion. Two days before the return date of this motion, defendant appeared by prior arrangement at the office of his counsel for a deposition. Defendant was sworn in and stated his name for the record, but refused to answer any further questions propounded to him regarding his income, assets or debts and produced none of the documents requested, invoking his privilege against self-incrimination under the Fifth Amendment of the U.S. Constitution and article 1, § 6 of the N.Y. Constitution.

In July 2015, a hearing was held on the contempt motion during which Supreme Court conducted an ex parte, in camera conference with defendant's counsel to address the basis for defendant's invocation of his Fifth Amendment right. In that conference, Supreme Court accepted a letter from defendant's counsel setting forth arguments in support of defendant's invocation and entertained counsel's oral elaboration of those points. Following the conference and upon further submissions from the parties, Supreme Court denied plaintiff's motion for an order of contempt, finding that defendant was entitled to assert his constitutional privilege against self-incrimination in response to each question presented at his deposition and as a basis for not producing the documents responsive to the subpoena.

Approximately three months later, Chava Nelkenbaum, defendant's wife, was served with a similar subpoena requiring her appearance at a scheduled deposition and the production of documentation relevant to the satisfaction of the judgment. Chava Nelkenbaum ultimately appeared for a deposition and, after stating her name and acknowledging her marriage to defendant, asserted the Fifth Amendment privilege and/or the spousal privilege under CPLR 4502(b) as the basis for her refusal to answer any further questions. Supreme Court denied plaintiff's motion to compel on the same ground that it denied plaintiff's prior motion to hold defendant in contempt. Plaintiff now appeals from the denial of both motions.

"To sustain a civil contempt finding based upon the violation of a court order, it must be established that there was a lawful court order in effect that clearly expressed an unequivocal mandate, that the person who allegedly violated the order had actual knowledge of its terms, and that his or her actions or failure to act defeated, impaired, impeded or prejudiced a right of the moving party" ( Howe v. Howe, 132 A.D.3d 1088, 1089, 19 N.Y.S.3d 111 [2015] [internal quotations marks and citations omitted]; see Judiciary Law § 753[A][3] ; El–Dehdan v. El–Dehdan, 26 N.Y.3d 19, 29, 19 N.Y.S.3d 475, 41 N.E.3d 340 [2015] ). It is undisputed that defendant failed to comply with the December 2014 order directing him to appear for the deposition scheduled for January 30, 2015 and to produce the documents requested in the subpoena, that he was in receipt of such order and that he had knowledge of its terms. Plaintiff's counsel asserted, without contradiction, that plaintiff's right to enforce the judgment was impaired, impeded and/or prejudiced by defendant's failure to comply with the order, as it had been unable to locate assets available to enforce the underlying judgment. Further, defendant has never furnished an affidavit addressing his failure to appear for the deposition or to otherwise comply with the December 2014 order. Thus, a finding of civil contempt was amply justified on this record. That said, "a contemnor will be allowed to purge the contempt by performing the act required, or by undoing the act constituting the contempt" ( Matter of January 1979 Grand Jury of Albany Supreme Ct. v. Doe, 84 A.D.2d 588, 588, 444 N.Y.S.2d 201 [1981] ; see Matter of Pronti v. Allen, 13 A.D.3d 1034, 1036, 787 N.Y.S.2d 470 [2004] ; Matter of Silverstein v. Aldrich , 76 A.D.2d 911, 912, 429 N.Y.S.2d 41 [1980] ; Matter of Ferrara v. Hynes, 63 A.D.2d 675, 675, 404 N.Y.S.2d 674 [1978] ). Here, defendant did ultimately appear for a deposition and testify as ordered, albeit belatedly. The question thus distills to whether defendant's invocation of the Fifth Amendment privilege against self-incrimination in response to each of the questions presented, and his assertion of the privilege as a basis for withholding disclosure of the documents demanded in the subpoena, served to purge himself of the contempt.

It is settled that "a party may not be held in contempt based upon his or her good faith invocation of the Fifth Amendment privilege against self-incrimination" ( Matter of County of Orange v. Rodriguez, 283 A.D.2d 494, 495, 724 N.Y.S.2d 477 [2001] ; see United States v. Rylander, 460 U.S. 752, 760–761, 103 S.Ct. 1548, 75 L.Ed.2d 521 [1983] ; El–Dehdan v. El–Dehdan, 114 A.D.3d 4, 21, 978 N.Y.S.2d 239 [2013], affd 26 N.Y.3d 19, 19 N.Y.S.3d 475, 41 N.E.3d 340 [2015] ). The Fifth Amendment privilege against self-incrimination, which "can be asserted in any proceeding, civil or criminal, ... protects against any disclosures which the [individual] reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used" ( Kastigar v. United States, 406 U.S. 441, 444–445, 92 S.Ct. 1653, 32 L.Ed.2d 212 [1972] ; see Lefkowitz v. Turley, 414 U.S. 70, 77, 94 S.Ct. 316, 38 L.Ed.2d 274 [1973] ; People v. Cantave, 21 N.Y.3d 374, 379, 971 N.Y.S.2d 237, 993 N.E.2d 1257 [2013] ). However, "this protection must be confined to instances where the witness has reasonable cause to apprehend danger from a direct answer. The witness is not exonerated from answering merely because [the witness] declares that in so doing he [or she] would incriminate himself [or herself]" ( Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 95 L.Ed. 1118 [1951] [internal citation omitted]; accord Ohio v. Reiner, 532 U.S. 17, 21, 121 S.Ct. 1252, 149 L.Ed.2d 158 [2001] ; see Zicarelli v. New Jersey State Comm. of Investigation, 406 U.S. 472, 478, 92 S.Ct. 1670, 32 L.Ed.2d 234 [1972] ; State of New York v. Carey Resources, 97 A.D.2d 508, 509, 467 N.Y.S.2d 876 [1983] ). Stated differently, a witness may validly claim the privilege only where it is shown that the hazards of incrimination are "substantial and real, and not merely trifling or imaginary" ( Marchetti v. United States, 390 U.S. 39, 53, 88 S.Ct. 697, 19 L.Ed.2d 889 [1968] [internal quotation marks and citation omitted]; see Ohio v. Reiner, 532 U.S. at 21, 121 S.Ct. 1252 ; Zicarelli v. New Jersey State Comm. of Investigation, 406 U.S. at 478, 92 S.Ct. 1670 ). Determining whether the privilege is applicable thus involves a factual inquiry in which the court must determine, "from the implications of the question, in the setting in which it is asked, that a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure could result" ( Hoffman v. United States, 341 U.S. at 486–487, 71 S.Ct. 814 ; accord Ohio v. Reiner, 532 U.S. at 21, 121 S.Ct. 1252 ).

Preliminarily, we agree with plaintiff that the subpoenaed tax forms – that is, defendant's income tax returns, W–2 wage statements and 1099 forms – fall within the "required records exception" to the privilege against self-incrimination. Under this exception, "[t]he Fifth Amendment privilege which exists as to private papers cannot be asserted with respect to records which are required, by law, to be kept and which are subject to governmental regulation and inspection" ( People v. Doe, 59 N.Y.2d 655, 656, 463 N.Y.S.2d 405, 450 N.E.2d 211 [1983] ; see Shapiro v. United States, 335 U.S. 1, 33, 68 S.Ct. 1375, 92 L.Ed. 1787 [1948] ; Matter of Grand Jury Subpoena Duces Tecum Dated...