United States v. Asare

Background

The United States had obtained a $390,000 judgment against Emmanuel O. Asare and Springfield Medical Aesthetic PC after a bench trial. The court had found that the Judgment Debtors violated the Americans with Disabilities Act and the New York City Human Rights Law by discriminating against people living with human immunodeficiency virus through preoperative testing and denial of services. The Judgment Debtors appealed but did not file their opening brief, and the appeal was dismissed.

The Government began collection efforts by subpoenaing TD Bank and serving a restraining notice on accounts held by the Judgment Debtors. TD Bank identified three accounts: a savings account in Asare’s name and his wife’s name, a checking account in Asare’s name, and an account in Springfield’s name. The accounts held $122,421.16 when the accounts were first reported and $133,694.94 by July 2022. The Government moved for a writ of garnishment, and the Court ordered TD Bank to withhold and retain the funds.

Asare claimed exemptions under the federal Bankruptcy Code and two provisions of New York law. Springfield argued that a security interest related to a Small Business Administration loan had priority over the Government’s garnishment. The Government also requested a ten-percent surcharge on the judgment balance and an order requiring the Judgment Debtors to make monthly payments of at least $7,000.

Asare’s Claimed Exemptions

The Court denied all three claimed exemptions.

First, Asare claimed the federal Bankruptcy Code’s wildcard exemption, 11 U.S.C. § 522(d)(5). The Court concluded that he had abandoned that claim by failing to raise it at the hearing or in his post-hearing briefing. The Court therefore denied the exemption.

Second, Asare claimed protection for 90 percent of earnings for personal services rendered within 60 days before, and at any time after, the account was restrained under N.Y. CPLR § 5205(d)(2). The Court found that only $29,154.52 of the relevant funds represented earnings for services during the covered period, making the maximum possible exemption $26,239.07. The Court nevertheless denied the exemption because Asare did not prove that it was necessary for his reasonable requirements and those of his dependents. The Court relied on evidence that Asare and his wife had substantial monthly income, that their reported expenses exceeded applicable federal collection standards, and that Asare had transferred substantial sums to another company while the judgment remained unpaid.

Third, Asare claimed a $2,500 exemption under N.Y. CPLR § 5205(l) for certain statutorily protected payments deposited electronically. The Court found that Asare had not provided proof supporting the exemption. It also ruled that, even assuming the Small Business Administration loan qualified as a protected payment, the loan was deposited into Springfield’s account and later transferred to the savings account after being mixed with other funds. It therefore was not deposited by the direct-deposit or electronic-payment method required by the statute.

Because the exemptions were denied, the Court granted the Government’s writ of garnishment as to the Asare accounts.

Springfield Account

The Court also granted garnishment of the Springfield account. Springfield argued that a security interest connected to the Small Business Administration loan had priority and prevented garnishment. The Government argued that the security interest had never been perfected because the Small Business Administration did not have control over the deposit account.

The Court explained that, under New York’s Uniform Commercial Code, a security interest in a deposit account is perfected only when the secured party has control over the account. The Court found no evidence that the Small Business Administration was TD Bank, that Springfield, the Small Business Administration, and TD Bank had agreed that the bank would follow the Small Business Administration’s instructions without Springfield’s further consent, or that the Small Business Administration had become TD Bank’s customer regarding the account. The Court therefore concluded that the asserted lien did not prevent garnishment.

Additional Requests

The Court granted the Government’s request for a ten-percent surcharge under 28 U.S.C. § 3011 because the Government had been forced to use litigation to collect the judgment.

The Court denied the Government’s request for an installment-payment order without prejudice to renewal. The Court found that the Government had not shown that it served notice of that request in the manner required by 28 U.S.C. § 3204(a). The Court stated that a renewed request must include proper service, a proposed order, and briefing on the statutory basis for requiring payments from Asare and on whether the statute applies to corporations such as Springfield.

Disposition

Judge Analisa Torres granted the Government’s motion for garnishment, denied Asare’s request for exemptions, granted the request for a ten-percent surcharge on the balance owed, and denied the request for an installment-payment order without prejudice to renewal.