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Citibank, N.A. v. Bombshell Taxi LLC (In re Hypnotic Taxi LLC) - 543 B.R. 365 (Bankr. E.D.N.Y. 2016)

Rule:

Due process for any entity claiming an interest in property attached is preserved by N.Y.C.P.L.R. § 6221, which gives it the opportunity to challenge the attachment.

Facts:

An order of attachment was entered in favor of Citibank, N.A., ordering the Sheriff to levy the assets purportedly owned by The Birkin Funding Trust, The Evelyn Funding Trust, The Kelly Funding Trust, and The Lindy Funding Trust (Trusts). These assets were allegedly transferred by Freidman to the Trusts. Thereafter, the Trusts filed a petition pursuant to N.Y. C.P.L.R. § 6221, challenging the attachment of the interests in the assets. The Trusts argued, among other things, that the Court lacked personal jurisdiction over the Trusts because the Order of Attachment was not served on the current trustees. In opposition, Citibank argued that in personam jurisdiction over the Trusts was not necessary prior to attaching the Trusts’ assets because the CPLR provided the Trusts with a mechanism to protect their interests in the Real Estate Entities.

Issue:

Was in personam jurisdiction over the Trusts necessary prior to attaching the Trusts’ assets?

Answer:

No.

Conclusion:

The Court held that personal jurisdiction over the trusts was not required prior to attaching Freidman’s assets, including the ownership interests in the Real Estate Entities purportedly owned by the Trusts. According to the Court, due process for any entity claiming an interest in property attached is preserved by N.Y.C.P.L.R. § 6221, which gave it the opportunity to challenge the attachment. Moreover, the Court held that Freidman's transfer of his interests in the Real Estate Entities to the Trusts was fraudulent, and may be disregarded pursuant to DCL § 278. According to the Court, such transfer was clearly done with the intent to hinder, delay, or defraud creditors. Thus, the Court recommended that the District Court deny the Trusts’ Petition.

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