Cush v Webster

[*1] Cush v Webster 2009 NY Slip Op 50770(U) [23 Misc 3d 1113(A)] Decided on April 16, 2009 Supreme Court, Kings County Rivera, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 16, 2009
Supreme Court, Kings County

Matilda Cush, Administrator of Estate of Leonard Cush, Plaintiff,

against

Beryl Webster, Keith Webster, Greenpoint Mortgage Corporation, Estate of Anita Adams, Defendants.



29018/03

Francois A. Rivera, J.

Upon the foregoing papers, plaintiff Matilda Cush, the Administrator of the Estate of Leonard Cush (Cush), moves for an order confirming the Referee's Report of Sale (the Referee's Report) and disbursing surplus monies in this partition action. Defendant Keith Webster (Webster) cross-moves, by order to show cause,[FN1] for an order modifying the Referee's Report of David S. Dender (Dender or the Referee) so as to:

(1) deny Cush and defendant Estate of Anita Adams (Adams) credits for closing costs and the expenses of maintaining the property;

(2) determine the fees of the Referee and Receiver;

(3) direct the distribution of the balance of the partition sale proceeds in accordance with the Interlocutory Judgment, Final Judgment, and Sale and Order of this court so that Cush receives $180,089.17, Adams receives $153,904.75, and Webster [*2]receives $127,720.33, less the amount of the Referee's fees to be determined by the court; and

(4) require the Referee to collect the $600.00 held by the title insurance company and to distribute it equally among the aforementioned three parties.

Plaintiff also cross-moves for an order directing the Referee to revise his report, such that:

(1) Webster's share of surplus funds be reduced by $10,375.06, which is the amount of the mortgage increase incurred because of Webster's alleged misconduct and such sum be divided equally between plaintiff and Adams; and

(2) Adams' share of "rents collected" be computed on a "gross rent," rather than "net rent," basis.

BACKGROUND FACTS AND PROCEDURAL HISTORY

As determined by court order and judgment entered on February 23, 2006 (the Interlocutory Order), Beryl Webster [FN2] and Keith Webster (collectively, Webster), Cush, and Adams each owned an undivided one-third interest as tenants in common in property located at 244 Linden Boulevard, Brooklyn, New York. It is undisputed that defendant Greenpoint Mortgage Corporation (Greenpoint) held the only mortgage on the property.

Cush commenced this partition action on August 7, 2003 and, among other things, asserted claims for the imposition of a constructive trust and an accounting of rents collected by Webster. After extensive litigation, the parties agreed to a Stipulation of Settlement (the Stipulation), entered into on July 17, 2004, providing, inter alia, for the appointment of a referee to sell the property at public auction and for an accounting of rents collected by Webster. On September 30, 2005, this court granted plaintiff's motion to enforce the Stipulation and denied Webster's motion to vacate the stipulation. Webster did not appeal that decision.

The Interlocutory Order, which incorporated the terms and conditions of the Stipulation, directed that the subject property be sold at public auction. It also appointed Dender as Referee to sell the property and as temporary receiver to collect rents from all tenants and to use those rents to pay the mortgage and expenses of maintaining the property. Pursuant to the Interlocutory Order, the property was sold at public auction on February 1, 2007 for [*3]$535,000.00 and the closing took place on July 25, 2007. Dender issued a Decision (the Dender Decision), dated July 18, 2008, determining that Adams would not be credited any money for her share of the rents.

The Referee's Report, dated October 14, 2008, proposes distribution of the $491,969.02 surplus so that plaintiff receives $190,174.09, Adams receives $163,989.67, and Webster receives $108,150.50. In accordance with Paragraph 14 of the Stipulation and Paragraph 10 of the Interlocutory Order, Cush would receive one-third of the net proceeds, plus $1,184.42 for reimbursement of the June 2003 mortgage payment, plus $25,000.00 for her share of rents collected, both amounts to be taken from Webster's share; Adams would receive one-third of the net proceeds, plus her share of rents collected by Webster; and Webster would receive a share of net proceeds, if any, after deducting Cush and Adams' shares, not to exceed one-third of the net proceeds. Furthermore, Webster would be responsible for Dender's costs and expenses as Referee and temporary receiver.

THE PARTIES' CONTENTIONS

In response to the Referee's Report and plaintiff's motion to confirm, Webster moves to modify the Report, arguing that the Referee should not have deducted all the costs of maintaining the property during his receivership and the expenses of its sale solelyfrom the portion of monies to be paid to Webster.[FN3] Webster asserts that the Referee's calculation of his share as only $108,150.50 unfairly burdens him with all the expenses of the sale. Finally, he challenges the Referee's finding that rents prior to August 2006 were paid to Webster (Referee's Report at ¶ 7(i)), alleging that the Referee had no admissible evidence to contradict Webster's accounting of all collected rents.

In opposition, Cush argues that the Stipulation's formula for distributing the sale proceeds and allocation of costs does not require an equal division of the proceeds or an equal allocation of costs. According to plaintiff, the Stipulation explicitly states that the total from which her and Adams' one-third shares would be calculated should be reduced by the mortgage balance at the time of sale and did not mention any other reductions to be taken evenly. Plaintiff also argues that her share and that of Adams should be increased, and Webster's reduced, by the amount which his misconduct caused the mortgage to increase; to wit, $15,562.62. Cush additionally alleges that the Referee should have calculated Adams' share on a "gross rent" (rather than "net rent") basis, before the deduction of property maintenance expenses. Lastly, she urges the court to set a hearing to determine the accuracy of Webster's accounting.

DISCUSSION

The role of the Referee is to determine the issues referred, as well as to resolve conflicting testimony and matters of credibility. Pursuant to CPLR 4403, the court may confirm or reject in whole or in part any report by the Referee. As a general rule, the [*4]court will not disturb the Referee's findings and the report should be confirmed if the Referee's findings are supported by the record and if he or she has already defined the issues and fairly resolved matters of credibility (see Stone v Stone, 229 AD2d 388, 388 [1996], citing Kaplan v Einy, 209 AD2d 248 [1994]). After reviewing the parties' arguments and the Referee's Report, the court finds that the Report should be confirmed as modified below.

Allocation of Costs and Expenses, Division of Sale Proceeds

Defendant argues that he was unfairly burdened with all the expenses of the sale and, consequently, received less than his due share of the sale proceeds. CPLR 2104 dictates that an agreement in writing between the parties is binding if it is subscribed by the parties, reduced to the form of an order, and entered. Such "[s]tipulations of settlement are favored by the courts and not lightly cast aside" (Hallock v State, 64 NY2d 224, 230 [1984]). Furthermore, "[p]arties by their stipulations may in many ways make the law for any legal proceeding to which they are parties, which not only binds them, but which the courts are bound to enforce [as long as they are not unreasonable, against good morals or sound public policy]" (Tepper v Tannenbaum, 83 AD2d 541, 541 [1981], citing Matter of New York, Lackawanna & W. R.R. Co., 98 NY 447, 453 [1885]; see also McCoy v Feinman, 99 NY2d 295 [2002]; Morse v Morse Dry Dock & Repair Co., 249 AD 764 [1936]). In this regard, Webster is bound by the Stipulation entered into by the parties on July 17, 2004. The parties therein agreed, after negotiation, that they would divide the proceeds of the subject property's sale according to Paragraphs 13 and 14 of the Stipulation, as well as Paragraphs 9 and 10 of the Interlocutory Order. Those paragraphs explicitly list "the Greenpoint mortgage" as the only amount deducted from the partition sale proceeds to be divided evenly among the parties. The court agrees with plaintiff's argument that "all costs and expenses with respect to the appointment of the referee" in Paragraph 7 of the Interlocutory Order refer to any expenses incurred in the course of his duties as seller of the property, including, for example, real estate taxes. Therefore, Webster's share should be reduced by all costs and expenses incurred by the Referee in the sale of the property. This view is consistent with the language in the remainder of the Stipulation and the Interlocutory Order, which, as plaintiff points out, specifically designates how plaintiff's and Adams' shares would be determined, with any remaining monies going to Webster, after deducting the Referee's fees. If the parties had intended to deduct the mortgage payoff, as well as all other costs and expenses, from the gross sale proceeds (i.e., from all three co-owners), they would have written such terms into the Stipulation. Therefore, all costs and expenses from the property's sale shall be deducted from Webster's share.

Determination of Adams' Share of Rents

Plaintiff argues that Adams' share of rents should have been calculated on a "gross rent," rather than "net rent," basis and contends that the Referee should have requested direction from the court, rather than determine the matter himself. However, as discussed above, it is within the Referee's authority to determine that Adams' share of rent collected is [*5]zero because the property operated at a loss and the costs and expenses exceeded the monies collected as rent. Dender found that there was no excess rent to distribute and the parties did not refute that finding by submitting contrary evidence. Thus, no hearing is necessary, as the Referee's calculations on a "net rent" basis will not be disturbed.

Webster's Failure to Turn Over Rent Monies to the Referee

In his Report, the Referee reserved for the court's judgment the issue of rents collected and retained by Webster (Referee's Report at ¶ 7(i) and (ii)). The Referee did not collect rents from March 2006 through July 2006 (and through August 2006 for some tenants). Moreover, he believed that all rents for periods prior to August 2006 (or September 2006 for some tenants) were paid to and retained by Webster, in violation of the Interlocutory Order which directed Webster to remit such monies to the Referee. Webster admits that he improperly collected and retained these rents from January through February 2006 with respect to the third floor apartment and from January through May 2006 with respect to the second floor apartment of the property, until his attorney advised him to cease doing so in May 2006 (Webster Affidavit at ¶ 7). According to plaintiff, the many letters she sent to Webster's attorney demanding appropriate action for his client's continued violations of the Interlocutory Order were ignored. She alleges that the rents improperly collected and retained by Webster total $9,700.00.

An action for partition is "equitable in nature" (Degliuomini v Degliuomini, 45 AD3d 626, 630 [2007], quoting Frater v Lavine, 229 AD2d 564, 564 [1996]; Wawrzusin v Wawrzusin, 212 AD2d 779, 780 [1995]; Bailey v Mormino, 6 AD2d 993, 993 [1958]). In a partition action, the court may adjust the rights of the parties where one party obtains more than his or her proper share of rents or profits derived from the property (Wawrzusin, 212 AD2d at 779). The Referee found that Webster improperly collected and retained rents from the subject property and thus acted in violation of Paragraph 13 of the Interlocutory Order. Webster's contention that he collected and retained the rents because he did not realize he was enjoined from doing so and because the Receiver had not taken any steps to collect rent is unavailing, especially in light of plaintiff's letters notifying Webster of his misconduct. The court thus determines that plaintiff and Adams are each entitled to a one-third credit for such rents.

The Mortgage's Increased Balance and Additional Interest

Plaintiff argues that Webster's refusal to remit $9,700.00 in improperly collected rents to the Referee ultimately led Greenpoint to declare the entire balance of its mortgage immediately due under the acceleration clause and caused additional interest to accrue in the amount of $5,862.62. She further avers that Webster's violations reduced the net proceeds from which her share and that of Adams were calculated, and requests that the court credit [*6]them for the consequences of Webster's improper actions. Webster, however, argues that the Referee's failure to apply collected rents to the existing mortgage balance caused the mortgage to increase.[FN4]

The court rejects the parties' claims of fault based on late mortgage payments as conclusory and lacking evidentiary support. Furthermore, such claims of fault are irrelevant to the obligation to pay the mortgage. In that regard, the amount due is undisputed and the parties herein have an equal obligation to satisfy the mortgage. According to the Stipulation and the Interlocutory Order, the "expenses" to be borne solely by Webster do not include jointly-shared obligations. Thus, there was no ambiguity in the parties' or the court's intention that the mortgage obligation be divided evenly between the three title owners. Similarly, the Referee's responsibilities are clearly and specifically defined in the Interlocutory Order. Nothing in the Interlocutory Order assigns or attributes fault to the amount due on the mortgage.

In regard to the Referee's fees, Webster does not oppose the amount of $26,338.13 requested in the Referee's Affidavit of Services Rendered, dated December 3, 2008. The court finds the requested Referee's fees reasonable and directs the Referee to deduct such fees from Webster's share of the sale proceeds for his reimbursement (see CPLR 4321).

Additionally, the court directs the Referee to collect the $600.00 held by the title insurance company and distribute it equally among the aforementioned three parties.

The Referee should also determine the amount of rents that Webster improperly collected and did not remit to the Referee, to the extent it can be determined, and credit that amount equally to Cush, Adams, and Webster. The Referee is further directed to report such sum to the court and distribute it in accordance with the Stipulation and the Interlocutory Order.

The only remaining issue is how the funds are to be distributed. The court agrees that the Referee's figures cause confusion, but nonetheless directs that the Referee distribute the funds with the modifications herein, consistent with the Stipulation and the Interlocutory Order. With the exception of Webster's improperly collected and retained rents, Cush, Adams, and Webster should receive the amounts computed below:

Cush receivesone-third share after payment of mortgage of $163,989.67, plus a mortgage payment reimbursement of $1,184.42, plus a share of rents collected of

$25,000.00, plus money held by title insurance company of $200.00, for a total of$190,374.09.

Adamsreceives one-third share after payment of mortgage of $163,989.67, plus money held [*7]by title insurance company of $200, for a total of $164,189.67.

Webster receives one-third share after payment of mortgage of $163,989.67, plus money held by title insurance company of $200.00, minus a mortgage payment reimbursement of $1,184.42, minus Cush's share of rents collected of $25,000.00, minus partition sale expenses of $29,654.76, minus referee's fees of $26,338.13, for a total of $82,012.36.

Accordingly, plaintiff's motion confirming the Referee's Report is granted as modified. Webster's cross motion is granted only to the extent of directing the Referee to collect and distribute the $600.00 held by the title insurance company. The court has considered the parties' remaining contentions and finds them without merit.

The foregoing constitutes the decision, order, and judgment of the court.

ENTER,

J.S.C. Footnotes

Footnote 1: The order to show cause contains an affidavit of emergency in which Webster requests that the court compel the Referee to make his fee application expeditiously so that it may be decided as part of the confirmation and modification of his Report. The court declined to compel the Referee to submit his fee application in response to Webster's motion and struck that part of Webster's order to show cause.

Footnote 2: Defendant Beryl Webster, now deceased, transferred her interest in the property to her son, defendant Keith Webster. Hereinafter, any reference to "Webster" is understood to mean either Beryl and Keith Webster, collectively, or Keith Webster, alone.

Footnote 3: Webster does not contest that he is solely obligated under the Stipulation for the fees of the Referee and temporary receiver. This matter is not at issue herein.

Footnote 4:Plaintiff also objects to the Referee's payment of the mortgage balance at closing, rather than applying the collected rents to the balance, but otherwise does not object to the Referee's calculation of the mortgage balance.