Opinion
No. 31033/07.
2012-06-18
MIKE BUILDING AND CONTRACTING INC., Plaintiffs, v. JUST HOMES, LLC, Albert C. Tew II, Gary Gutterman, William Barry, Sergio Condi, James Barry and “John Doe No. 1” through “JOHN DOE NO. 5”, Defendants.
William C. Thompson, Esq., Brooklyn, Referee. Michael C. Manniello, Esq., Michael C. Manniello, P.C., Westbury, for Bidder (BH Friel Place LLC).
William C. Thompson, Esq., Brooklyn, Referee. Michael C. Manniello, Esq., Michael C. Manniello, P.C., Westbury, for Bidder (BH Friel Place LLC).
CAROLYN E. DEMAREST, J.
By order dated September 30, 2010, this Court directed the sale, by Court-appointed Referee William C. Thompson, Esq., of three properties located in Brooklyn, New York at 455 18th Street (Block 876, Lot 78), 824 Friel Place (Block 5331, Lot 56) and 298 20th Street (Block 891, Lot 36), upon which plaintiff Mike Building had foreclosed mechanic liens. The total sum due to plaintiff Mike Building, pursuant to that order, was $521,932.48, inclusive of interest from March 16, 2007 to September 13, 2010 in the sum of $124,988.43.
On November 3, 2011, Mr. Thompson conducted a public auction in the Courthouse at 360 Adams Street, Brooklyn, in conformity with the Order of this Court. In accordance with the Terms of Sale, the successful bidder on all three properties, BH Friel Place LLC (BH Friel), paid a ten percent deposit of $43,500, against the successful bid price of $435,000, to Mr. Thompson who has held such sum in escrow. Pending closing, Mr. Thompson received a letter dated January 31, 2012, from Neal H. Sultzer, purporting to represent the “successful bidder” (not identified in the letter), demanding return to himself of the $43,500 deposit based upon his review of a title report which he contended indicated that “marketable title” could not be obtained. Mr. Thompson responded, by letter dated February 3, 2012, that he did not agree with Mr. Sultzer's position and gave notice that a closing would take place on February 8, 2012 and that, upon the bidder's default in closing, the $43,500 down payment would be forfeited.
Subsequent to Mr. Thompson's February 3 letter, by letter dated February 6, Mr. Sultzer protested that the notice was too short and he was still investigating the title issues. On February 24, 2012, Mr. Thompson responded that the original closing had been set for December 18, 2011, and “the seller” was pressing to close. Declaring that “Time [was] of the Essence,” the closing was set for March 6, 2012 at 3:00 PM and notice was again given that a default would result in forfeiture of the deposit and a re-advertised sale. Mr. Sultzer reiterated his arguments regarding title in responsive letters of February 28, 2012 and March 8, 2012, again demanding return of the deposit.
Paragraph 3 of the Terms of Sale, which was signed by Behrooz Benyamin on behalf of BH Friel, states that the failure to close on the date specified as “Extended” (the original closing date of “on or before December 18, 2011” was already long past) would result in forfeiture of the deposit. Paragraph 9 of the Terms of Sale indicate the properties are sold “as is” and subject to various stated liens and encumbrances, including any violations or mortgage liens of record, and Paragraph 11 expressly states: “The Parties and the Referee make no representations or warranties as to the condition of the title or marketability or insurability of the title.” No viable argument has been advanced to support the bidder's contention that the Referee could not deliver legal title under the Terms of Sale. It is well-settled that a vendee “who defaults on a real estate contract without lawful excuse, cannot recover the down payment” ( see Willsey v. Gjuraj, 65 AD3d 1230 [2d Dept 2009]; Chateau D'If Corp. v. City of New York, 219 A.D.2d 205 [1st Dept 1996]; Maxton Builders, Inc. v. Lo Galbo, 68 N.Y.2d 373 [1986], citing Lawrence v. Miller, 86 N.Y. 131 [1881] ). This is particularly true where the sale was at public auction ( cf. National Bank of Stamford v. Van Keuren, 184 A.D.2d 92, 96 [3d Dept 1992] ).
In light of the successful bidder's default in closing, by Order to Show Cause, Referee Thompson properly sought the Court's intervention to set aside the sale of November 3, declare the deposit forfeited, and notice a public sale de novo ( see National Bank, id.) Mr. Thompson also requested permission to release the balance of the deposit, following deduction of the costs of the original auction sale and his own fee, to the assignee of plaintiff Mike Building, KRJ Associates, identified by Referee Thompson as “Seller.”
On April 18, 2012, the return date of the Order to Show Cause, Hertzl Behr Benyamin appeared as the alleged “Purchaser,” as did Roxanne Tzihkakis, a member of KRJ, to which the lien of Mike Building had been assigned. The matter was adjourned to May 16, 2012, for opposition by counsel on behalf of BH Friel. The Referee was directed to relist the properties for sale at auction.
In response to the Referee's application, BH Friel cross-moved against the Referee, claiming that his motion was “premature” and “improper,” and seeking the Court's direction to return the deposit. The cross-motion was based exclusively on the affirmation of counsel, Michael C. Manniello, Esq., and did not contain a representation that the successful bidder was ready, willing and able to close. Under these circumstances in which there appeared to be no disputed issues of fact, notwithstanding counsel's continuing protestations based upon the title report, on May 16, the Court directed the Referee to proceed with the sale scheduled for May 24, 2012, which was also noticed to the City of New York.
The sale of November 3, 2011 occurred after the commencement by the City of New York, on or about September 27, 2011, of a foreclosure action (Kings County Index No. 21932/2011), upon which a lis pendens was filed on September 27, 2011. BH Friel was therefore presumptively on notice of the mortgage liens filed against the properties at the time of the auction sale.
On June 6, 2012, Referee Thompson and Michael Manniello, Esq., counsel to BH Friel, appeared before the Court. Mr. Thompson reported that the sale of May 24 had occurred and that the highest bid was $420,000, $15,000 less than the earlier successful bid. Mr. Thompson sought leave to deduct from the deposit of BH Friel, the expenses of the earlier sale, his reasonable and statutory fees and the $15,000 difference between the earlier bid and the more recent sale price, and refund to BH Friel the balance of $21,725.
There is no question that the $15,000 difference between the new highest sale bid and BH Friel's bid must be retained by the Referee as the plaintiff's judgment has not been fully satisfied by either bid ( see Fannie Mae v. Walsh, 259 A.D.2d 660 [2d Dept 1999]; National Bank of Stamford, 184 A.D.2d 92, citing Rowley v. Feldman, 74 AD 492 [1st Dept 1902] ). Paragraph 6 of the Terms of Sale provide that a defaulting purchaser “will be held liable for any deficiency” upon resale and “the bid deposit shall automatically be forfeited and applied to the ... deficiency.” Only if the current successful bidder defaults in closing and a subsequent re-sale results in a price above that of BH Friel's bid, could any portion of the $15,000 difference be refunded to BH Friel. In any event, BH Friel is responsible for all costs associated with the auction sale of November 3, 2011, at which its bid was successful, but which is now void. Those costs include the advertising charge of $637.50 and the fees due to Referee Thompson. The costs associated with the May 24, 2012 sale will be recovered from the proceeds of that sale.
Pursuant to CPLR § 8003(b), Mr. Thompson is entitled to $500, which may be supplemented upon a sale in excess of $50,000, in the Court's discretion. Had this been a routine auction sale which had duly closed, there would be no need to further compensate the Referee. However, BH Friel's default has necessitated extraordinary legal services having been performed by the Referee, for which reasonable compensation is warranted.
Mr. Thompson affirms that he has had to prepare the Order to Show Cause, made three court appearances and met with opposing counsel in an attempt to negotiate a resolution. In addition, the Court notes his submission of additional responses to BH Friel's cross-motion. For these additional services, based upon his usual billing rate of $750 per hour, Mr. Thompson requests $4500. While BH Friel disputes the reasonableness of this request and its own liability for such services, its default is what caused the additional services to be rendered and it is responsible to compensate the Referee. Contrary to the cross-movant's contentions, Mr. Thompson has performed entirely within the parameters of this Court's Order of September 30, 2010, as an officer of the Court ( see National Bank of Stamford, 184 A.D.2d at 95). The Court must determine the reasonable value of his services. While Mr. Thompson's regular billing rate would appear to be within the usual rates charged in New York City for the legal services of an attorney of his considerable experience and skill, $750 per hour far exceeds the rate customarily allowed to a Court-appointed Referee ( see East River Savings Bank v. Steingart, 160 A.D.2d 345 [1st Dept 1990]. As noted, however, the Court recognizes that his time commitment actually exceeds the modest “minimum” mentioned in his affirmation. Accordingly, the Referee is awarded a total of $4500 as reasonable compensation for the services rendered relating to the void sale at which BH Friel was the successful bidder.
Mr. Thompson is directed to hold in escrow, pending the closing upon the May 24 sale, $15,000 of BH Friel's deposit to be paid to plaintiff's assignee if that sale closes. Mr. Thompson is further entitled to deduct from the deposit of $43,500, the $637.50 in advertising costs for the November 3 auction sale, and his own fees associated with that sale, $4,500. The balance, $23,362.50, shall be returned to BH Friel LLC through its counsel.
This constitutes the decision and Order of the Court.