New York Probate and Estate Administration Lawyer Blog
When someone dies, money held in the person’s bank accounts does not automatically become available to family members. In most cases, the bank must wait until an executor or administrator has been appointed and presents the appropriate court-issued authority, such as Letters Testamentary or Letters of Administration, before releasing estate funds. If a bank distributes money without proper authority, it may be required to repay the estate. In Matter of Rosenblatt, the Queens County Surrogate’s Court considered whether a bank could set aside a default judgment entered against it after it failed to respond to a turnover proceeding seeking the return of estate funds.
Background
Pauline Kozerska died in January 2020. She had two bank accounts at JPMorgan Chase Bank. Although the accounts had originally been opened jointly with her father, he had died several years earlier, making Ms. Kozerska the sole owner.
In early 2021, Chase detected suspicious activity involving the accounts. The bank sent notices about possible fraud and eventually combined the funds into a single account in Ms. Kozerska’s name.
Even though Chase knew that both Ms. Kozerska and her father had died, the bank issued a cashier’s check for more than $94,000 payable to them. The check was later cashed at another bank.
After the Queens County Public Administrator was appointed to administer Ms. Kozerska’s estate, Chase informed the estate that the accounts had been closed and the money was gone. The Public Administrator then filed a turnover proceeding under SCPA 2103, asking the court to require Chase to return the estate’s money.
Chase received notice of the court proceeding but did not respond or appear in court. As a result, the Surrogate’s Court entered a default judgment ordering Chase to pay more than $94,000 to the estate, plus interest. By the time a formal judgment was entered, the amount owed had grown to more than $126,000.
Chase later asked the court to set aside both the default judgment and the judgment requiring it to pay the estate.
Issue
May a bank vacate a default judgment in a turnover proceeding by arguing that it no longer possessed the estate funds because it had already paid them out before the proceeding was commenced?
Holding
No. The Surrogate’s Court denied Chase’s request to vacate the default decree and judgment because the bank failed to demonstrate a reasonable excuse for its default or a potentially meritorious defense.
Discussion
Under CPLR 5015(a)(3), a party seeking to vacate a default judgment based on fraud or misconduct generally must establish both a reasonable excuse for failing to appear and a potentially meritorious defense.
The court found that Chase satisfied neither requirement.
First, Chase admitted that it had received the citation in the turnover proceeding but simply failed to appear or file an answer. Its petition offered no explanation for that failure. The court emphasized that even a strong legal defense cannot excuse a party’s complete failure to respond to properly served legal process.
Second, the court rejected Chase’s claimed defense that it could not comply with the turnover order because it no longer possessed the money.
The court explained that Chase’s own records showed it knew there had been suspicious activity involving the accounts and that both account holders were deceased before it issued the cashier’s check. Nevertheless, the bank mailed the check payable to deceased individuals, allowing the funds to leave the estate.
The court concluded that Chase failed to establish that it exercised ordinary care in protecting the decedent’s assets. Instead of demonstrating a defense to liability, the bank’s own submissions showed why it could be held responsible for the loss.
The court also rejected Chase’s argument that the Public Administrator committed fraud by seeking turnover despite knowing the funds had already been disbursed. The court explained that wrongful distribution of estate assets does not relieve the party that made the unauthorized transfer of liability. Rather, the unauthorized transfer itself may establish the basis for recovery.
Because Chase failed to establish grounds for vacating the underlying decree, the court also denied its request to vacate the resulting judgment.
Conclusion
Matter of Rosenblatt shows that banks and other financial institutions have a duty to protect a deceased person’s assets. A bank cannot avoid responsibility simply because it already paid out the money before the estate sought its return, especially if it failed to respond to the court proceeding. If you are involved in a dispute over estate assets or believe property belonging to an estate was improperly transferred, an experienced Queens probate lawyer can explain your rights and help you pursue or defend a turnover proceeding in Surrogate’s Court.