Madison Natl. Bank v 256 Jefferson Mgt. LLC
Annotate this CaseDecided on September 22, 2011
Supreme Court, Kings County
Madison National Bank, Plaintiff,
against
256 Jefferson Management LLC, New York State Department of Taxation and Finance, New York City Department of Finance, New York City Department of Housing Preservation and Development, New York City Environmental Control Board, Solomon Steinlauf, and Faigy Steinlauf, Defendants.
16545/2010
Sylvia O. Hinds-Radix, J.
In this action to foreclose a mortgage on commercial real property, plaintiff Madison National Bank (plaintiff) moves (in sequence No. 2) for an order to confirm the report of Referee Lyle F. Silversmith, Esq. (the Referee) and direct the entry of a default judgment of foreclosure and sale. For the reasons explained below, the motion is denied without prejudice upon resubmission of proper papers.
Background
The subject commercial real property (the property) is a multi-unit dwelling consisting of six separate apartments located at 256 Jefferson Street in Brooklyn, New York (Block 3174, Lot 22). The property is owned by defendant 256 Jefferson Management LLC (256 Jefferson). Defendant Solomon Steinlauf is a managing member of 256 Jefferson. [*2]Defendant Faigy Steinlauf is a member of Solomon's family (collectively, the Steinlaufs).
Plaintiff seeks to foreclose on its non-purchase money Consolidated Mortgage dated December 29, 2008 (the Mortgage), securing its Consolidated Mortgage Note of the same date (the Note), signed and delivered by 256 Jefferson. Certain obligations of 256 Jefferson to plaintiff under the Note and Mortgage are guaranteed by the Steinlaufs pursuant to the Limited Guaranty of Payment of Non-Recourse Mortgage, dated December 29, 2008 (the Guarantee).
256 Jefferson and the Steinlaufs have not answered or appeared in this action to date. Of the remaining named defendants, only the New York City Department of Housing Preservation and Development, the New York City Department of Finance, and the New York City Environmental Control Board have answered or appeared in this action to date. New York State Department of Taxation & Finance has not answered or appeared in this action to date.
By order dated August 9, 2010, the court (Miller, J.) appointed Kevin Cahill of Commercial Realty Resolution LLC as the receiver (the Receiver). The order appointing the Receiver recites (at page 8 thereof) that "the Receiver . . . shall file monthly accounting from the date of this Order, and each and every month thereafter during the pendency and existence of this receivership . . ." It appears that, to date, the Receiver has not complied with this requirement and has made no monthly filings in this case.
By order dated November 1, 2010, the court (Miller, J.) appointed the Referee "to ascertain and compute the amount due to the Plaintiff herein for principal, interest, and other disbursements advanced as provided for by statute and in the Note and Mortgage upon which this action was brought . . ."[FN1] On April 1, 2011, the Referee submitted an Oath and Report and a separate Report of Amount Due.
On April 12, 2011, plaintiff served the instant motion for entry of a judgment of foreclosure and sale. The motion is supported by, among other papers: (a) a proposed judgment of foreclosure and sale which provides (at page 10 thereof) that any deficiency judgment resulting from the sale may be recovered from 256 Jefferson as well as from the Steinlaufs, and (b) an affirmation by plaintiff's counsel of the amount of its legal fees and expenses incurred in this matter through April 6, 2011. Although no opposition has been received to plaintiff's motion, the court has an independent obligation to review the proposed judgment of foreclosure and sale for accuracy.
Discussion
The court has identified the kinds of circumstances that warrant denial of plaintiff's motion. The court disapproves of the language of the proposed order permitting plaintiff to recover any Mortgage debt deficiency from the Steinlaufs-guarantors. The subject Guarantee requires (at pages 1-2 thereof) that, in the event of default by 256 Jefferson-borrower, the [*3]Steinlaufs must pay: (a) the proceeds of insurance policies, (b) condemnation awards, (c) tenant security deposits, (d) prepaid rent, (e) post-default rents which have not been applied to the ordinary and necessary expenses of owning and operating the property, (f) damage to the property, (g) unpaid taxes and mechanic's liens, (h) hazardous and toxic substances, and (i) misapplication of funds or property by 256 Jefferson-borrower (collectively, the Guaranteed Amounts). Significantly, however, the Guaranteed Amounts do not include the principal and interest owed under the Note and Mortgage. Accordingly, plaintiff may not seek any Mortgage debt deficiency from the Steinlaufs.
The court further notes that plaintiff's counsel, Jaspan Schlesinger LLP, has submitted some expenses for approval of reimbursement, even though such expenses are not reimbursable on their face. These expenses consist of a subway fare of $2.50 incurred on March 16, 2001 and a parking fee of $5.00 incurred on November 16, 2010.[FN2] Although the total amount at stake is minor (only $7.50), the principle prevails in "recognition of the traditional authority of the courts to supervise the charging of fees [and expenses] for legal services under [their] . . . inherent and statutory power to regulate the practice of law" (Matter of First Natl. Bank of East Islip v Brower, 42 NY2d 471, 474 [1977]). These expenses do not fit within the requirement of the Note (at page 3) that 256 Jefferson-borrower "shall be obligated to pay [plaintiff's] reasonable attorneys' fees, costs and disbursements."
Lastly, the court notes that the time records of plaintiff's counsel indicate (on page 4) that on December 9, 2010, it "[p]repared letter to Chambers adjourning Motion for Summary Judgment due to Bankruptcy." It is unclear whether the bankruptcy, if any, of 256 Jefferson was intended. Upon resubmission, therefore, plaintiff's counsel must certify to the court whether 256 Jefferson is a debtor in a pending bankruptcy case. Should it appear that 256 Jefferson is a debtor, the foreclosure will be subject to the bankruptcy stay.
Accordingly, it is
ORDERED that plaintiff's motion for an order to confirm the Referee's report and for a judgment of foreclosure and sale is denied without prejudice upon resubmission of proper papers; and it is further
ORDERED that, within fourteen days after entry of this decision and order, plaintiff's counsel shall serve a copy of this decision and order with notice of entry, pursuant to CPLR 2103 (b) and 5513 (a), upon: (a) the Referee, (b) the Receiver, (c) 256 Jefferson, (d) each of the Steinlaufs, (e) the New York City Department of Housing Preservation and Development, (f) the New York City Department of Finance, and (g) the New York City Environmental Control Board, and shall file proof of service thereof with the clerk's office; and is further
ORDERED that the Receiver shall file: (a) the monthly accounting from August 9, [*4]2010 through September 2011 within thirty days after service of a copy of this decision and order with notice of entry upon the Receiver, and (b) the monthly accounting thereafter during the pendency and existence of this receivership.
This decision also constitutes the order of the court pursuant to Rule 202.8 (g) of the Uniform Rules for the New York State Trial Courts.
E N T E R,
J. S. C. Footnotes
Footnote 1:The November 1st order appointing the Referee also amended, in certain respects not relevant to this decision, the August 9th order appointing the Receiver.
Footnote 2:See Jaspan Schlesinger LLP, Time and Expense Details, at 2 and 6, annexed to plaintiff's motion as Exhibit H.
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