Arbitration Award Does Not Create Priority Lien Over Competing Judgment Creditors

Trust Law Controversies

Arbitration Award Does Not Create Priority Lien Over Competing Judgment Creditors for Escrowed Funds

Prepared March 15, 2026

Court: Supreme Court, Appellate Division, Second Department, New York

Date: February 18, 2026

Citation: In the Matter of Avigdor v. Avigdor, No. 2022-05085, 2026 WL 452257 (N.Y. App. Div. 2d Dep’t Feb. 18, 2026)

Summary of Relevant Facts

In 2014, Moshe Twersky, as executor of the Gelbwachs estate, obtained a money judgment against Morton Avigdor. Separately, Morton’s brothers David and Merrill obtained an arbitration award against Morton for misappropriating funds related to their mother’s estate. When Morton contracted to sell his Brooklyn home, David commenced proceedings to confirm the arbitration award and obtained an injunction. A settlement stipulation provided that upon closing, $700,000 of the sale proceeds would be deposited into escrow with Choice Abstract Corp. In November 2021, David, Merrill, Morton, and another sibling jointly directed Choice to release $631,000 to David and the balance to Morton. In January 2022, the Gelbwachs estate’s attorney advised Choice of the prior Twersky judgment and directed it not to release the funds.

Procedural Background

David and Merrill commenced a proceeding under CPLR 5239 and 5240 to determine adverse claims to the escrow funds. The trial court found the petitioners had standing as interested persons but denied their petition on the merits, ruling the escrow funds remained subject to competing creditor claims. Choice appealed and David and Merrill cross-appealed.

Main Controversies

The central controversy was whether the settlement stipulation and confirmed arbitration award placed the $700,000 in escrow funds beyond the reach of the Twersky judgment creditors, or whether Morton retained sufficient control over the funds to make them available to satisfy competing creditor claims.

Position of the Parties

David and Merrill argued that the settlement stipulation and arbitration award effectively transferred the funds to them, putting the money beyond the Twersky creditors’ reach. The Twersky respondents argued that because the debtor (Morton) retained present or future control over the escrowed funds—as evidenced by the November 2021 joint letter directing distribution—the funds remained available to all judgment creditors.

Holding or Decision

The Appellate Division affirmed. It held that the petitioners had standing as interested persons but that their petition was properly denied on the merits. The escrow funds were not placed beyond the reach of competing creditors.

Reasons for the Decision

The court applied the principle that where a debtor places funds in escrow for payment of specific creditors, as long as those funds remain subject to the debtor’s present or future control, they are subject to claims by other creditors who know about the escrow funds. The November 2021 letter—in which the petitioners and Morton jointly directed Choice to distribute the funds—demonstrated that Morton retained control. The funds had not been irrevocably transferred beyond Morton’s control before the competing creditor’s lien attached. The arbitration award and settlement stipulation did not create an escrow arrangement so restrictive as to place the funds beyond the reach of other judgment creditors.