Frequently, a New York judgment creditor has a judgment against an out of state debtor whose bank account was opened and maintained in a bank in the debtor’s home state but the bank, in fact, has an office or branch in New York. The judgment creditor serves a garnishment or other enforcement device on the New York office or branch in order to garnish the funds in the account maintained by the judgment debtor in his home state. To avoid this result, New York has adopted the separate entity rule. Matter of B&M Kingstone, LLC v Mega Intl. Commercial Bank Co., Ltd., 131 “A.D.3d 259, 266, First Dept. :
“The separate entity rule is that "each branch of a bank is a separate entity, in no way concerned with accounts maintained by depositors in other branches or at the home office".
The Second Circuit Court of Appeals had asked New York’s highest court, the Court of Appeals, to examine this rule. Motorola v. Standard Bank, 24 N.Y.3d 149, 157-158 :
“The Second Circuit, recognizing that we have never explicitly addressed the separate entity doctrine and finding that its viability was unclear in the wake of Koehler, certified the following question to us: "[W]hether the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating branches in New York to restrain a debtor's assets held in foreign branches of the bank" (740 F3d 108, 118 [2d Cir 2014]).”
The Court of Appeals endorsed the separate entity rule. Motorola v. Standard Bank, 24 N.Y.3d 149, 163 :
“For all of these reasons, we conclude that a judgment creditor's service of a restraining notice on a garnishee bank's New York branch is ineffective under the separate entity rule to freeze assets held in the bank's foreign branches.”
It was noted that the opinion of the Court of Appeals affected foreign bank branches but not sister-state bank branches, but the prior rule was that sister-state branches could not be garnished under the separate entity rule. Lease Fin. Group, LLC v. Fiske, 46 Misc. 3d 841 :
“Although the Court of Appeals recently upheld that the separate entity rule applies in New York, it has not defined the rule's scope in regard to domestic branches of banks located in foreign states (Motorola Credit Corp. v Standard Chartered Bank, 24 NY3d 149 ). Until there is an act of the New York Legislature or a pronouncement from the Court of Appeals, stare decisis requires this court to apply case law from the Appellate Division, First Department. As the First Department stated:
"In this matter, it is clear that the accounts which the petitioner seeks to attach are not in the same jurisdiction as the New York office that petitioner served. To the extent that the petitioner requests that we extend the holdings of Digitrex (supra) and Limonium Mar. (supra) to encompass all of a bank's branches, notwithstanding their physical location outside of this jurisdiction, we decline to do so and note that such an extension would require, in our view, a pronouncement from the Court of Appeals or an act of the Legislature" (Matter of National Union Fire Ins. Co. of Pittsburgh, Pa., 269 AD2d at 102, citing Digitrex, Inc. v Johnson, 491 F Supp 66 [SD NY 1980], and Limonium Mar., S.A. v Mizushima Marinera, S.A., 961 F Supp 600 [SD NY 1997]).”
The National Union Fire Ins. opinion emphatically upheld the separate entity rule to block any garnishment of a sister-state account. National Union Fire Ins. Co. v. Advanced Empl. Concepts, Inc., 269 A.D.2d 101:
“Order *** which, to the extent appealed from, granted the cross motion of respondent Advanced Employment Concepts, Inc. (AEC) to vacate a restraining order and order of attachment issued against two bank accounts maintained by respondent in the State of Florida, unanimously affirmed, without costs.
AEC's cross motion to vacate the order of attachment affecting bank accounts that it maintains in Florida upon the ground that the court was without authority to attach bank accounts outside of New York was properly granted. In order to be subject to attachment, property must be within the court's jurisdiction (see, ABKCO Indus. v Apple Films, 39 NY2d 670), and the mere fact that a bank may have a branch within New York is insufficient to render accounts outside of New York subject to attachment merely by serving a New York branch.
The petitioner's reliance on Digitrex, Inc. v Johnson (491 F Supp 66) is misplaced. In Digitrex, the District Court departed from the long-standing general rule in New York that each bank is a separate entity and that in order to reach a particular bank account, the branch of the bank where the account is maintained must be served (see, McCloskey v Chase Manhattan Bank, 11 NY2d 936; Therm-X-Chem. & Oil Corp. v Extebank, 84 AD2d 787; 11 Weinstein-Korn-Miller, NY Civ Prac P 5222.09). The court held that due to the advent of high-speed computers and sophisticated communications equipment, service of a restraining order upon a bank's main branch is adequate.
The holding of Digitrex (supra), however, was clarified, and limited, by Limonium Mar. v Mizushima Marinera (961 F Supp 600), in which the court held that the exception to the separate entity rule is applicable only where the restraining notice is served on the bank's main office; the main office and the branches where the accounts in question are maintained are within the same jurisdiction; and the bank branches are connected to the main office by high-speed computers and are under its centralized control (supra, at 607-608).
In this matter, it is clear that the accounts which the petitioner seeks to attach are not in the same jurisdiction as the New York office that petitioner served. To the extent that the petitioner requests that we extend the holdings of Digitrex (supra) and Limonium Mar. (supra) to encompass all of a bank's branches, notwithstanding their physical location outside of this jurisdiction, we decline to do so and note that such an extension would require, in our view, a pronouncement from the Court of Appeals or an act of the Legislature.”
Based on Motorola, it was confirmed that sister-state accounts could not be restrained or garnished. Matter of B&M Kingstone, LLC v Mega Intl. Commercial Bank Co., Ltd., 131 A.D.3d 259  (lv to app dism’d. 26 N.Y.3d 995 ) recognized that the separate entity rule :
“The separate entity rule is that "each branch of a bank is a separate entity, in no way concerned with accounts maintained by depositors in other [branches] or at the home office" (Cronan v Schilling, 100 NYS2d 474, 476 [Sup Ct, NY County 1950]; see also Matter of National Union Fire Ins. Co. of Pittsburgh, Pa. v Advanced Empl. Concepts, 269 AD2d 101 [1st Dept 2000]; Therm-X-Chem. & Oil Corp. v Extebank, 84 AD2d 787 [2d Dept 1981]). The continuing validity of this arcane rule was recently upheld by the Court of Appeals in Motorola Credit Corp. v Standard Chartered Bank (24 NY3d 149 ), solely with respect to restraining notices and turnover orders affecting assets located in foreign branch accounts (id. at 159 n 2 ["(t)he narrow question before us is whether the rule prevents the restraint of assets held in foreign branch accounts, and we limit our analysis to that inquiry"]). "In other words, a restraining notice or turnover order served on a New York branch will be effective for assets held in accounts at that branch but will have no impact on assets in other branches" (id. at 159)."
Matter of B&M Kingstone held that Motorola did not affect an information subpoena which simply sought information from the branch office subpoenaed in New York.
Accordingly, the current law of the State of New York is that the account opened and maintained in a branch office in a sister-state cannot be restrained or garnished.
This conclusion is inescapable when another critical factor is considered. The law is that if a default judgment is obtained against a defendant in a state other than the defendant’s home state and then sought to be enforced in the defendant’s home state, the defendant has the right to contest jurisdiction either in the sister-state or the home state. Vander v. Casperson, 16 A.D.2d 881, 882  (aff’d. 12 NY 2d 56 ):
“A defendant is not required to litigate the issue of jurisdiction in a foreign court but may raise the issue as a defense in a suit upon the judgment in this State. Where, however, defendants choose to litigate the question of jurisdiction of the foreign court in that court, as the defendants did in this case, they are bound by an adverse decision of the foreign court and we are required by the provisions of section 1 of article IV of the Constitution of the United States to give full faith and credit thereto. (Chapman v. Chapman, 5 A D 2d 257, 263, 264.)”
Therefore, if a New York default judgment is entered against a sister-state judgment-debtor, the debtor has the choice of contesting jurisdiction in either New York or in the debtor’s home, sister-state. This right is rendered meaningless if the separate entity rule is ignored. Without the separate entity rule, the judgment creditor could enforce the judgment in New York against an account maintained in the home, sister-state. This would force the debtor to contest jurisdiction in New York since the home, sister-state cannot enjoin the judgment-creditor from proceeding in New York to enforce or collect the judgment. By the time the home state decided that New York had no jurisdiction, the judgment creditor could already have satisfied the judgment.