STUART M. BERNSTEIN, Bankruptcy Judge.
Elmwood Vision Center, Inc. is a creditor of General Vision Services. Its dividend check was never cashed, and the amount necessary to satisfy it is currently held in the United States Treasury. Atlantis Asset Recovery LLC ("Atlantis") is the assignee of a judgment against Elmwood, and has applied to the Court for the payment of Elmwood's unclaimed dividend. For the reasons that follow, the application is denied without prejudice.
General Vision Services, Inc. filed a chapter 11 case in this Court on April 16, 1999, but its case was subsequently converted to chapter 7. On March 31, 2000, Elmwood filed an unsecured proof of claim no. 187 (the "Claim") in the amount of $112,276.70.
On January 26, 2012, the chapter 7 trustee filed a report entitled Dividends Remitted to the Court, dated Nov. 23, 2011 (ECF Doc. # 310).) The report identified the claimants who had not cashed their distributions and the amounts of the distributions. It indicated, among other things, that the trustee had sent Elmwood a check in the sum of $27,062.95. The filing of the report implied that the check had not been cashed, the trustee had stopped payment and had turned over the balance of the unclaimed funds, including Elmwood's dividend, to the Clerk of the Court. See 11 U.S.C. § 347(a); FED. R. BANKR. P. 3011.
Meanwhile, on March 5, 2002, 21
Pursuant to Bankruptcy Code § 347(a), ninety days after the distribution in a chapter 7 case, "the trustee shall stop payment on any check remaining unpaid, and any remaining property of the estate shall be paid into the court and disposed of under chapter 129 of title 28." Chapter 129 of title 28 includes two provisions relevant to this dispute. First, under 28 U.S.C. § 2041,
Second, 28 U.S.C. § 2042 provides:
After the clerk has held the funds for five years, they escheat to the United States Treasury, 3 ALAN N. RESNICK & HENRY J. SOMMER, COLLIER ON BANKRUPTCY ¶ 347.02[1], at 347-4 (16
Leider v. United States, 301 F.3d 1290, 1293 (Fed. Cir. 2002); accord In re Parker, 400 B.R. 55, 59 (Bankr. E.D. Pa. 2009). Given the amount of time that has elapsed since the trustee in this case deposited the funds with the Clerk of the Court, I assume that Elmwood's unclaimed dividend has escheated to the United States Treasury.
The question presented by the Motion is whether a judgment-creditor can apply for the release of unclaimed funds owed to its judgment-debtor. The Court has been unable to locate any authority directly on point, and the application gives pause. On the one hand, there is no absolute bar to the enforcement of an attachment order against funds held in custodial legis provided that the attachment will not prevent the court "from disposing of the funds in accordance with the purpose for which they were deposited" and will not interfere with the authority of another court.
In light of these concerns, the Court invited supplemental briefing from Atlantis regarding its standing to request the unclaimed funds and the Court's authority to grant the application. Atlantis responded with the Movant's Brief in Support of Motion for an Order to Disburse the Unclaimed Dividend Due to Elmwood Vision Center Inc., to Creditor Atlantis Asset Recovery LLC, dated Dec. 12, 2017 ("Supplement") (ECF Doc. # 320)), but the Supplement didn't answer the Court's question. Aside from invoking the Court's equitable powers, Atlantis cited three cases in support of its argument that the Court has the authority to grant its application, (Supplement at 4), but Atlantis' authorities are inapposite. In In re Applications for Unclaimed Funds Submitted in Cases Listed on Exhibits A, 341 B.R. 65 (Bankr. N.D. Ga. 2005), the bankruptcy court emphasized that the rightful owner of the funds is the holder of the proof of claim, id. at 69, but an assignee of the claim can petition for the unclaimed funds. Id. at 72. Atlantis is not the rightful owner or the assignee of Elmwood's claim. In Louisville & N.R. Co. v. Robin, 135 F.2d 704, 706 (5
The Motion also raises due process concerns. Atlantis served Elmwood and the United States Attorney, the latter in accordance with 28 U.S.C. § 2042. But it served Elmwood at the address listed in its proof of claim, and such service was guaranteed not to reach Elmwood. According to the New York Department of State's website, Elmwood was dissolved by proclamation on December 27, 2000, and I assume it no longer operates at the location listed in its proof of claim. In addition, it is the same address to which the trustee sent the check that Elmwood never cashed. The New York Department of State's website, in this regard, lists a different address for the service of process: "Elmwood Vision Center, Inc., 8305 Northern Blvd., Jackson Heights, New York 11372." Furthermore, if Atlantis had sought to garnish a debt owed to Elmwood under state law, it would have had to commence a special proceeding, serve the garnishee in the same manner as a summons, N.Y.C.P.L.R. § 403(c), and serve the judgment debtor in the manner of a summons or by registered or certified mail, return receipt requested. N.Y.C.P.L.R. § 5227, made applicable by FED. R. BANKR. P. 7069 and FED. R. CIV. P. 69(a). In short, and however unlikely it may be that Elmwood would respond to or oppose Atlantis' application after so many years, Elmwood failed to receive adequate notice of the request for its unpaid dividend.
I address one final word to Atlantis' parade of horribles listed in the Supplement. Atlantis argues that by refusing to honor the execution issued by the New York City Marshal, "the court in essence is allowing a Judgment Debtor to secrete their [sic] assets in the United States Treasury for twenty (20) years, until the Judgment is deemed expired (CPLR 211)," "the United States Treasury is an accomplice in a contemptuous enterprise, to impede creditor's rights," "the United States Government has established a `wall' that in action, frustrates and impedes creditors rights under State Law," the Court is a "haven for wrongdoers," and the refusal to honor the execution "places the government in the role of a `shield' from the rightful seizure of these funds to satisfy a judgment." (Supplement at 3.)
These criticisms are undeserved given the difficult legal issues raised by Atlantis' application. Furthermore, while it is not the Court's function to give legal advice, it seems that Atlantis can acquire the right to petition for Elmwood's unclaimed dividends through the exercise of the rights afforded judgement-creditors under the appropriate provisions of Article 52 of the New York C.P.L R. Alternatively, Atlantis could file an involuntary bankruptcy petition against Elmwood, and the trustee could request the unclaimed dividend.
In conclusion, the Motion is denied without prejudice. Should Atlantis renew it, it must serve Elmwood consistent with due process, and demonstrate that its application is not barred by sovereign immunity, it has standing as a judgment creditor to request the unclaimed dividend and this Court has the authority to grant that request.
So ordered.