Laborers Union Local 1298 of Nassau and Suffolk Counties Vacation Fund v. Frank L. Lyon & Sons, Inc.

• Decision Date: 30 June 1971
• Citation: 323 N.Y.S.2d 229,66 Misc.2d 1042
• Court: New York Supreme Court
• Parties: , 77 L.R.R.M. (BNA) 3107, 66 Lab.Cas. P 12,050 LABORERS UNION LOCAL 1298 OF NASSAU AND SUFFOLK COUNTIES VACATION FUND, Plaintiff, v. FRANK L. LYON & SONS, INC., et al., Defendants.

Page 229

323 N.Y.S.2d 229

66 Misc.2d 1042, 77 L.R.R.M. (BNA) 3107,

66 Lab.Cas. P 12,050

LABORERS UNION LOCAL 1298 OF NASSAU AND SUFFOLK COUNTIES VACATION FUND, Plaintiff, v. FRANK L. LYON & SONS, INC., et al., Defendants.

Supreme Court, Special Term, Nassau County, Part I.

June 30, 1971.

Delson & Gordon, New York City, for plaintiff.

John B. Wynne, New York City, for defendant, Chemical Bank.

Joseph Jaspan, Nassau County Atty., Mineola For defendant, Michael Seniuk, as Sheriff of Nassau County.

Mullooley, Jeffrey & Rooney, Garden City, for defendants, Frank L. Lyon & Sons, Inc., Meadowbrook Nat. Bank and Security Nat. Bank.

Robert H. Tucker, Forest Hills, for defendant, American Cable Vision Leasing Corp.

MEMORANDUM

BERNARD S. MEYER, Justice.

This motion for summary judgment presents the question: what, if anything, is reached by service of a restraining notice or issuance of an execution against the interest of an individual laborer in a fund held not by his employer, but by a trust established as a result of collective bargaining? Plaintiff in this declaratory judgment action is the Vacation Fund upon whose officials have been served restraining notices or executions or both seeking to reach the interests of six laborers in the Fund. Defendants are the Sheriff who issued the executions and the judgment creditors who caused the restraining notices to be served or the executions to be issued.

To answer the question requires careful, even somewhat tedious, examination of the provisions of CPLR Article 52, of the Trust Agreement under which the funds are held, of the Plan established by the Trustees under the Trust Agreement, and of certain background facts.

There is no dispute concerning the facts. Laborers Union Local 1298 is a labor union made up of an representing general laborers working on road and heavy construction operations in Nassau and Suffolk Counties. The Nassau and Suffolk Contractors Association Inc. is an association of contractors in the building and construction industry which represents most of the employers of members of the Union. Because of the nature of their employment, many of the members of Local 1298 are employed for short periods by different employers, in consequence of which they are unable to acquire from any one employer the right to an annual vacation with pay.

On May 8, 1967 the Union and the Association entered into an agreement and declaration of trust establishing Laborers Union Local 1298 of Nassau and Suffolk Counties Vacation Fund, which is the plaintiff in this action. The agreement provided that the Vacation Fund should be operated and administered jointly by six Trustees, three appointed by the Union and three by the Association, that each employer, whether or not a member of the Association, should contribute to the Fund at the rate required by the collective bargaining agreement then in force, that the Trustees or the Administrator of the Fund have the right to audit an employer's records to ascertain whether the full payment required is being made, to assess penalties and sue for such contributions and where court action is instituted to recover reasonable attorneys' fees, that the Trustees shall use and apply the Fund thus collected to pay expenses of collection and administration, 'to provide vacation benefits in the form of vacation pay, in such amount or amounts as the Trustees in the exercise of their discretion may determine to be the vacation payment of each eligible employee under a Vacation Plan containing such rules of eligibility and other regulations as the Trustees may promulgate' (Article II(b)), and to establish such reserves as the Trustees deem necessary. On termination of the trust, the Trustees are to apply any surplus after payment of obligations in such manner as in the opinion of the Trustees best effectuates the purpose of the Fund, but no part of income or corpus may revert to an employer or for the benefit of the Union.

The agreement contains provisions protecting the Trustees and persons dealing with the Trustees and concerning the powers of the Trustees usually found in trust instruments. It also gives the Trustees express power: (1) to construe the agreement and the plan, and makes such construction adopted in good faith binding upon the Union, the Employers, the Employees and their beneficiaries and legal representatives (Article IV, Sec. 1 and Sec. 2(t)); (2) to formulate a Vacation Plan for the exclusive benefit of the Employees in order to provide vacation benefits for eligible employees, and to disburse both principal and income for the purposes of the Trust (Article IV, Sec. 2(c)); (3) to establish rules of eligibility and other regulations for operation of the plan, and determine all questions relating to eligibility of employees to participate (Article IV, Sec. 2(d)); and (4) to pay all taxes, including income, payroll and other taxes arising out of or applicable to the Fund, the contributions made to it or the payment of vacation benefits to eligible employees (Article IV, Sec. 2(f)).

With respect to the rights of the individual employees, the agreement provided in Article XII:

'Section 1. VESTED RIGHTS. No Employee or any person claiming by or through such Employee, including his family, dependents, beneficiary and/or his legal representatives or the legal representatives of his estate, shall have any right, title or interest in or to the Fund or property of the Fund or any part thereof except as may be specifically determined by the Trustees.

'Section 2. ENCUMBRANCE OF BENEFITS. No moneys, property or equity, of any nature whatsoever, in the Fund, or policies or benefits or moneys payable therefrom, shall in any manner be subject by any Employee or person claiming through such Employee to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, garnishment, mortgage, lien or charge, and any attempt to cause the same to be subject thereto shall be null, void and of no effect.'

Effective July 1, 1967 the Trustees adopted a Vacation Plan which established the benefit year as the period from July 1st to the next June 30th, required that 'each eligible employee shall be credited with all vacation contributions actually contributed on his behalf during each benefit year and a separate record shall be set up for reach employee * * *' (Sec. 2(a)), that a flat service charge fixed by the Trustees be deducted each year from the employee's account, and that 'The balance in an employee's vacation account at the end of each benefit year (June 30) shall be payable to the employee in December of each calendar year or as soon thereafter as possible, less any taxes or deductions required by law,' (Sec. 2(f)).

Until April 6, 1970, the plan provided:

'(h) Vacation benefits payable to eligible employees are vested and non-forfeitable, and shall not be assigned, pledged, encumbered, released or committed, and shall be exempt from all claims of creditors from levy, execution and attachment or any other remedy for recovery of a collection of a debt',

and in subdivision (i) directed that any balance in an employee's account when he died should be paid to his distributees or personal representative.

On April 6, 1970 subdivision (h) was amended to read in part:

'(h) Vacation benefits payable to eligible employees shall not be assigned, pledged, encumbered, released or committed, and shall be exempt from all claims of creditors from levy, execution and attachment or any other remedy for recovery of a collection of a debt, except pursuant to court order or as hereinafter set forth in this subsection,'

and to direct that if a former participating employee failed to apply for his vacation allowance within five years of the July 1st immediately following the last vacation year during which 'contributions were made on his behalf' the money shall be paid into the expense account, the Trustees, however, being authorized thereafter on written application by the employee to pay to him out of the expense account his vacation benefit. At the same time subdivision (i) was changed to provide that any unpaid balance in an employee's account at his death be paid to the beneficiary or beneficiaries he designates, and in the absence of designation or of a surviving beneficiary, to the Fund expense account.

The papers do not disclose when the contributions made on behalf of the six employees were paid into the Fund, or, except as to defendant Chemical Bank, the dates on which the restraining orders were served or executions levied. Chemical Bank's answer states that its restraining notice was served on July 17,1970, and it may reasonably be inferred from the fact that the action was not begun until December, 1970 that service or levy in the other cases occurred after April 6, 1970. Contributions have been made to the Fund at the rate of 50 cents per hour for each hour worked by an eligible employee and such contributions have been accumulated to the account of the respective employees and, after deduction of a pro rata share of expenses, distributed to the individual employee, once a year. At the time of the service of the restraining order or levy of execution, each of the six employees involved had a credit balance in his account ranging from a low of $177 to a high of $761.50.

The declaration asked by the Fund, and resisted by defendant creditors, is that Article XII, Sections 1 and 2 are valid, that by reason thereof no employee is entitled to any money credited to his account until the Trustees so declare, that under the procedures of the Plan there is no such entitlement until the employee actually receives payment, that the funds, therefore, are not subject to execution or restraint, and that in any event money held for an employee member is exempt under CPLR 5205(d) and (e).

CPLR 5201(a) and (b) declare that a judgment may be enforced against any debt or property, unless exempt, if the debt '* * * is past due or...