If a person or business has been served with lawsuit papers and fails to answer or respond to the lawsuit within the time required by law (typically about 30 days from service), that party is in default. The plaintiff can then immediately seek to enter a default judgment against the defaulting party for the full amount claimed in the lawsuit, without a full trial and by presenting only a limited amount of proof.
A default judgment gives the plaintiff in whose favor the judgment was entered almost all of the same rights and powers to collect the amount of the default judgment (plus interest) from the defaulted party as a judgment entered after a trial or other ruling on the merits of the case.
New York law offers a defaulting party an opportunity to challenge and potentially vacate a default judgment but only if the party meets the standards and, where applicable, time limits, set forth in the law. What follows is a list of the applicable laws and a general summary of what each law requires the defaulting party to show in order to vacate a default judgment:
A. Laws with a time limit on when a motion to vacate judgment may be brought
CPLR § 5015 (a) (1)
– must show a
(1) reasonable excuse for the default; and
(2) meritorious defense to plaintiff’s case
– motion must be brought within one (1) year from entry (or service) of the default judgment
CPLR § 317
– must show
(1) the defaulting party did not personally receive notice of the summons in time to defend the lawsuit; and
(2) meritorious defense to plaintiff’s case
– motion must be brought within one (1) year from finding out that the default judgment was entered but no more than five (5) years from the entry of the judgment
B. Laws without a time limit on when a motion to vacate judgment may be brought
CPLR § 5015 (a) (4)
– must show that the court lacked jurisdiction to enter the judgment (e.g., if the lawsuit papers
were never served)
CPLR § 5015 (a) (3)
– must show fraud, misrepresentation, or other misconduct of an adverse party
Inherent power of the courts to relieve a party from a judgment
– must show
- “sufficient reason”, which generally means the judgment was obtained by fraud, mistake, inadvertence, surprise or excusable neglect; and
(2) vacating the judgment is “in the interests of substantial justice”
A judgment is a determination by a court of the rights and liabilities of the parties to a lawsuit, such as the amount of money one party owes to the other. A “judgment debtor” is the person or business against whom a money judgment has been issued. The party in whose favor a money judgment has been entered is known as the “judgment creditor”. Some monies belonging to a judgment debtor are legally exempt from the reach of a judgment creditor, such as retirement funds and 90% of recently earned salary.
In New York, a judgment generally may be enforced against half of the non-exempt funds in a judgment debtor’s joint bank account that is held in the names of both the judgment debtor and another person who is not a judgment debtor. For example, a judgment against one spouse generally may be enforced against half of the non-exempt money in a joint bank account held in the names of both spouses.
The law of joint bank accounts in New York starts with Banking Law § 675, which is titled “Joint deposits and shares; ownership and payment”. The statute sets forth that when a joint bank account is opened in the names of two people (e.g., both spouses), all deposits into that joint account “shall become the property of [both] persons as joint tenants”, and “shall, in the absence of fraud or undue influence, be prima facie evidence . . . of the intention of both depositors . . . to create a joint tenancy and to vest title to such deposit[s] . . . and additions and accruals thereon, in such survivor”.
In short, Banking Law § 675 provides that money deposited into a joint bank account becomes the jointly owned property of both account holders and it will be presumed that the account holder that made the deposit, intended the money to become the joint property of the other named account holder. As a result, the presumption in New York is that regardless of which account holder deposited funds into a joint bank account that is in the names of the judgment debtor and another person, half of the money in the joint account belongs to the judgment debtor and will be subject to the judgment. See Johnson v. Kilpatrick, 233 A.D.2d 205 (1st Dept. 1996).
However, that presumption is rebuttable and may be disproved “by a clear and convincing showing that, at the time the accounts were created, the accounts were opened as a matter of convenience, or by proving undue influence, fraud or lack of capacity”. In re Harley, 186 A.D.2d 1020 (4th Dept. 1992). If there is no contrary proof presented, then the judgment creditor can go after half of the non-exempt funds in the joint bank account to try to satisfy the judgment.