Opinion
113749/2004
11-27-2018
In the Matter of the Application of Amy KHOUDARI and Laura Khoudari as Successor Trustees to Gloria B. Silver, as Trustee, Petitioners, v. Mary Travis BASSET, M.D., M.P.H., as Commissioner of the Department of Health and Mental Hygiene of the City of New York, Respondent.
For Petitioner: Borah Goldstein Altschuler Nahins & Goidel, PC, Myron Altschuler, 377 Broadway, New York, NY 10013-3993 For Respondent: Zachary Carter /Corporation Counsel, Mary O'Sullivan, Asst. Corporation Counsel, New York City Law Department, 100 Church Street, New York, NY 10007
For Petitioner: Borah Goldstein Altschuler Nahins & Goidel, PC, Myron Altschuler, 377 Broadway, New York, NY 10013-3993
For Respondent: Zachary Carter /Corporation Counsel, Mary O'Sullivan, Asst. Corporation Counsel, New York City Law Department, 100 Church Street, New York, NY 10007
Carmen Victoria St. George, J.
This proceeding arises out of petitioners' predecessor's challenge to a $75,472.65 charge and lien which respondent's predecessor assessed against a property held by a trust for the benefit of Amy and John A. Silver. Initially, in his March 18, 2005 order, Justice Ronald A. Zweibel granted the petition and annulled the lien based on petitioner's challenge to the five-day predicate notice requirement. On April 7, 2006, upon reargument, Justice Zweibel modified this earlier ruling to the extent of stating that a hearing was necessary to determine whether respondent had served the five-day notice. His order further directed the parties to figure out some mutually agreeable dates and then to contact the court for scheduling purposes.
When the court did not hear from the parties, Justice Zweibel inquired about the status of the case. In response, Justice Zweibel was informed that the original trustee, Amy and John Silver's mother Gloria B. Silver, had died. He therefore entered an order around August 24, 2006, which stayed the petition pending the submission of a motion to substitute a successor trustee. The order directed petitioner's estate "to move expeditiously to have a personal representative appointed and to move to substitute such proper party or risk dismissal" (Silver v. Friedan , Sup. Ct., NY County, Aug. 25, 2006, Zweibel, J. Index No. 113749/2004 [Silver I ], at pp 2-3). Despite this admonishment, the estate did not file a motion for substitution until eight years later, August 22, 2014. The motion was argued before Justice Carol E. Huff, who at that point presided over the case. The movants stated that the deterioration of the trustee's attorney's physical and mental health, his quasi-retirement in 2011, and his suspension from the practice of law in 2013, justified the delay.
In her decision, Justice Huff rejected movants' excuse for their untimeliness, stating that "[t]he burden was explicitly on the petitioner's successors to take the next step in this proceeding" and that these parties did not submit evidence of the attorney's illness or explain why they did not replace him (Khoudari v. Basset , Sup. Ct., NY County, March 31, 2015, Huff, J. Index No. 113749/2004 [Khoudari I ], at p 4; reversed in part , 147 AD3d 477 [1st Dept], lv denied , 30 NY3d 904 [2017] ). Because of the delay, the Court precluded petitioners from challenging the lien based on lack of notice. The Court further adopted the reasoning of Justice Zweibel's March 18, 2005 decision, in which the judge ruled against petitioner "on all other relevant issues" (id. , at p 5). The Court therefore found that petitioner owed respondent $75,472.65, minus a $15,335.00 credit due to Trustee Silver's prior payment toward the charge. Finally, Justice Huff ruled that "[b]ecause this proceeding has been stayed, the charge and lien amount will not be subject to interest until twenty days following service of notice of entry of this judgment" (id. ).
Petitioners have since paid the balance of the original lien, but they have not paid the interest that accrued.
Respondent appealed Justice Huff's decision but only to the extent that it held that the charge and lien was not subject to interest during the pendency of the proceeding. The First Department reversed Justice Huff's decision on this issue and remanded the proceeding to the Supreme Court "for imposition and calculation of interest accrued since imposition of the lien on September 27, 2004" ( Khoudari v. Basset , 147 AD3d 477, 477 [1st Dept], lv denied , 30 NY3d 904 [2017] ). The court stated that "[s]tatutory interest, as on the subject tax lien continues to accrue at the statutory rate until it is satisfied. The stay of the proceedings effected in April 2006 did not serve to stay the accrual of interest on the lien" (id , [citations and internal quotation marks omitted] ). The First Department pointed out that the provision governing such liens, Administrative Code § 17-151, states, at subsection e, that the interest is included in the lien and that, along with the unpaid charge, the interest "shall continue... until paid" (id. ). It further relied on Colgate v. Broadwall Management Corp. (51 AD3d 437, 437 [1st Dept 2008] ), which noted that a party cannot "avoid payment of interest on the judgment" and that such interest is not a penalty but "the cost of having the use of [the money] for a specified period" ( id. at 437-38 [citations and internal quotation marks omitted] ). It also relied on NYCTL 1998-2 Trust v. McGill (138 AD3d 1077, 1079 [2nd Dept 2016] ), which points out that "the Supreme Court lack[s] the equitable power to limit the amount of interest that accrued on the lien."
After the issuance of the First Department's order, petitioners brought the three motions which are now before this Court. In motion sequence number 006, the successor trustees move to a) restore the proceeding to active status, and b) refer the matter to Part 16, over which JHO Alice Schlesinger presides, for a hearing on the amount of interest that is due to respondent. Petitioners argue that the First Department's order did not resolve the questions of the appropriate interest rate and of whether there should be interest on interest. The Court grants the prong of the motion seeking to restore the proceeding to active status without opposition.
This case is marked "disposed" as of December 3, 2004, prior to the stay, when the petition itself was decided.
JHO Schlesinger also presided over this matter when respondent moved to reargue Justice Huff's 2015 order.
Respondent cross-moves for statutory interest commencing September 27, 2004, and for denial of the application for a hearing. The cross-motion points out that the First Department expressly stated that petitioner would pay the statutory interest — which, under the law, is 18% (citing Administrative Code § 11-224 [h] ). Moreover, respondent argues, the interest is compounded daily (relying on NYCTL 1996-1 Trust v. Stavrinos Realty Corp. , 113 AD3d 602, 603-04 [2nd Dept 2014] [indicating that this was the testimony before the JHO and noting that the Referee determined the interest should be compounded daily] ). Respondent points to the Notice of Charge annexed to the petition, which states that interest is compounded daily from the due date unless the charge is paid by the end of the grace period. Respondent further notes that, in their appellate brief, at page 5, footnote 1, petitioners acknowledge that the statutory interest is 18% and is compounded daily. Respondent states that a hearing by this Court is improper because the Department of Finance has a nondelegable duty to compute the interest. A hearing, respondent contends, would in effect allow petitioners to relitigate issues resolved by the First Department.
Respondent also urges the Court to reject petitioners' arguments regarding prejudice from the delay in the form of the accumulation of interest, which by now far exceeds the debt. According to respondent, the original petitioner should have followed the usual practice, paying the lien and then challenging it. Also, respondent notes that she has formally notified petitioners of the outstanding balance, including accrued interest, once every quarter. For a third, respondent argues that the delay resulted almost entirely from petitioner's litigation practices and from the eight-year stay due to the death of Ms. Silver. Also, respondent argues that the burden was not on respondent to restore petitioner's action to the court calendar after the First Department issued its order.
In reply, petitioners argue that CRP/Extell Parcel I, L.P. v. Cuomo (27 NY3d 1034 [2016] [CRP] ), governs. That case denied statutory interest following the issuance of an order which directed petitioner to return the down payments, with accumulated interest, to parties with whom it entered into purchase agreements. Because here, too, the petition was disposed of by a prior order, petitioner states, the principle similarly applies.
In motion sequence number 007, petitioners seek a stay of this matter pending the resolution of a quiet title action they commenced in Bronx County around April 30, 2018. That action challenges the assertion of the lien involved in this proceeding. That action alleges that respondent waived the right to act on the lien because the statute of limitations expired in 2010, six years after the 2004 order on this petition. Respondent notes that in a portion of Justice Huff's 2015 decision in Khoudari I which neither party appealed, and which thus remains in effect, denied petitioners' application to hold that respondent's claim is barred by the statute of limitations. Furthermore, respondent argues that the six-year statute of limitations does not apply to nuisance abatement tax liens (citing, inter alia, NYCTL 1996-1 Commercial Reo v. El Pequeno Restaurant Food Corp. , 1 Misc 3d 574, 577 [Sup Ct Kings County 2003] [noting that "[t]he life and validity of a tax lien are not affected by the lapse of time"].
Motion sequence number 008, also by petitioner, seeks to vacate Justice Huff's decision based on lack of subject matter jurisdiction, Justice Zweibel's May 8, 2005 order, and respondent's purported failure to serve a 90-day demand based on petitioners' purported failure to prosecute. Respondent counters that the 2015 decision did not dismiss the proceeding based on failure to prosecute but instead allowed the matter to proceed, granting petitioners' application to amend the caption. Respondent further points out that Justice Huff's decision in Khoudari I noted that petitioners bore the burden of litigating this matter, and that their delay has substantially prejudiced respondent.
The Court consolidates the three motions for the purposes of disposition. It grants motion sequence number 006 to the extent that it seeks to restore the matter to active status without opposition. Contrary to petitioners' contention, the First Department did not leave open the questions of what the interest rate should be and whether there should be compounded interest. Instead, as respondent states, the decision expressly stated that statutory interest should be awarded (see Khoudari , 147 AD3d at 477 ). Moreover, for the reason respondent alleges, the interest is 18% and should be compounded daily. For this reason, too, the Court grants respondent's cross-motion to sequence number 006 to the extent that it seeks statutory interest from September 27, 2004, at the statutory rate, compounded daily. The Court denies petitioner's request for a hearing, as there is no need to litigate the interest rate or the compounded interest. The First Department's order remands the matter to this Court "for imposition and calculation of interest" ( Khoudari , 147 AD3d at 477 ). As a nondiscretionary computation is involved, the Clerk may compute the interest.
The Court denies motion sequence 007, as it improperly attempts to evade the law of this case by relitigating issues the trial and appellate courts reviewing this matter have already decided. Petitioners did not commence the quiet title action until April 2018, around three years after Justice Huff's order and around fourteen months after the First Department issued its decision on February 10, 2017. Moreover, the action relitigates the statute of limitations argument, which already has been resolved in this proceeding. If there is a conflicting ruling in Bronx County, petitioners may apply for the appropriate relief at that time. However, this Court does not stay this matter, which has been resolved, pending the resolution of the 2018 lawsuit. Motion sequence number 008 attempts to relitigate portions of Justice Huff's order that petitioners did not challenge in 2015. Petitioners' failure to timely appeal these matters bars petitioners' argument (see CPLR §§ 2221, 5513 ; Benitez v. City of New York , 2 AD3d 285, [1st Dept 2003] ). The Court rejects petitioners' argument that Justice Zweibel's 2005 decision granting the petition was a final disposition, after which no further action was warranted, and no further interest could accrue. The judge's 2006 order granting reargument and scheduling a hearing on notice implicitly or explicitly reversed the prior dismissal. The Court further notes that petitioners' reliance on CRP is misplaced, as the case deals with the rights of the apartment purchasers and does not apply to the computation of interest on tax liens.
The Court has considered all arguments, even if not expressly discussed here, and they do not alter these conclusions. Accordingly, it is
ORDERED that motion sequence numbers 006, 007, and 008 are denied, and the cross-motion to motion sequence number 006 is granted; and it is further
ORDERED that the Clerk is directed to enter judgment dismissing the matter and granting judgment to respondent on the amount of the lien including interest -- computing interest at the statutory rate of 18%, compounded daily, from the date of the lien until the date of entry and thereafter at the statutory rate, and giving petitioners credit for any payments they have made.