NJ App. Div. Holds Wages Due to Employees on Date of Levy are Exempt from Lien on Debtor’s Bank Acct

NJ App. Div. Holds Wages Due to Employees on Date of Levy are Exempt from Lien on Debtor’s Bank Acct
Banking Alert May 13, 2015

On May 8, 2015, in a decision approved for publication, the New Jersey Appellate Division held that a debtor corporation was entitled to use funds in its levied bank account to pay amounts owed to its employees at the time of the levy, even if the company paid the employees by other means.  However, the Appellate Division further found that the debtor was not entitled to use any levied funds to pay wages accruing after the date of the levy.  See Pitney Bowes Bank, Inc. v. ABC Caging Fulfillment, 2014 WL 8773311 (N.J. Super. Ct. App. Div. May 8, 2015). 

In Pitney Bowes, the creditor obtained a default judgment against the debtor in the amount of $69,315.59 in July of 2013.  On September 6, 2013, the Ocean County Sheriff levied on the debtor’s bank account pursuant to a writ of execution.  When the creditor moved for a turn-over order, the debtor opposed and argued that the funds were exempt as unpaid wages under N.J.S.A. 34:11-31 (“No personal property, . . . shall be liable to be removed by virtue of any execution, attachment or other process, unless the [creditor] shall first pay or cause to be paid to the . . . [debtor’s] employees . . . the wages then owing . . . .”).  The creditor argued that the statute did not apply as the debtor’s president had paid the employees out of her personal funds, and there was thus nothing more due and owing.  After initially denying the motion, the trial court granted it on reconsideration and held that the statute did not apply, opining that the fact that the debtor’s president paid employees out of personal funds simply made her a creditor of her company.  On appeal, the Appellate Division reversed that holding, stating that the plain language of the statute made clear that any funds due and owing the debtor’s employees were exempt from the levy.  The fact that the debtor’s president later paid those owed wages out of her own funds had no impact on the statute’s applicability, as she was legally required to pay her employees at least twice a month.  The Appellate Division did affirm the lower court’s holding that any wages that became due and owing between the date of the levy and the date of the turn-over order were not exempt under the statute.  This was because the funds were deemed “removed” from the bank account on the date of the levy, and not on the date of the turn-over order.

For a copy of this decision or for any questions, please contact Michael O’Donnell of Riker Danzig's Banking Practice Group.