Silber v Emigrant Savs. Bank

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Silber v Emigrant Savs. Bank 2012 NY Slip Op 32227(U) August 8, 2012 Supreme Court, New York County Docket Number: 113851/06 Judge: Debra A. James Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY DEBRAA, J W PART 59 Justlce index No.: SILBER, as ADMINISTRATRIX of the ESTATE OF LEO SILBER, A 113851/08 Motion Date: _ 2 2 1 2 0 1 8 1 Plaintiff, -w- Motion Seq, No.: 03 Motion Cal. No.: EMIGRANT SAVINGS BANK, Defendant. The following papers, numbered 1 to 3 were read on this motion to interplead funds. Notice of Motlqn/Order to Show Cause -Affidavits -Exhlblts - Answering Affidavits Exhibits Replying Affldavlts - Exhibits Cross-Motlon: 0 Yes No Upon the foregoing papers, This decision addresses motion a@- N 06, all of which werk brought on by orders to show cause. The three motions, which are based on t h e same facts and involved closely related issues, are consolidated herein f o r disposition. In its motion (sequence number 03), Emigrant Savings Bank (Emigrant) s e e k s an o r d e r of t h i s court: (1) authorizing its counsel, Belkin Burden Wenig & Golden LLP (BBWG), to deposit w i t h the New York City Department of Finance (a) $ 1 1 8 , 1 8 4 . 4 9 , which is held i n escrow by BBWG pursuant to a stipulation and settlement (the Stipulation), and the sum represents the \ \ n e t surplus" from Check One: a FINAL DISPOSITION Check if appropriate: 0 DO NOT POST U NON-FINAL DISPOSITION REFERENCE [* 2] the foreclosure sale by Emigrant, as the mortgage lender, of the cooperative apartment, its appurtenant lease and shares that were h e l d by plaintiff HaMa Silber (Silber), as administratrix of the estate of Leo Silber, her deceased husband; and (b) 9,918.21, which is also held BBWG in escrow, and the sum allegedly represents the 'net holdback" in the original amount of $15,000.00, which was intended by Emigrant to be applied toward i t s gost-sale legal fees and expenses, including fees and expenses incurred in bringing the instant motion; and (2) discharging Ernigrant/BBWG of liability from t h e claims asserted by Silber. i In her motion (sequence number 0 5 ) , Silber seeks an order of this court to compel BBWG to turnover t h e $15,000 escrow fund, which represents t h e amount held by BBWG on behalf of Emigrant for "potential litigation" expense, plus an amount of $4,974 (i.e. $123,158 - $118,184), which represents additional post-sale legal fees and expenses. In a separate motion (sequence number 061, Silber seeks an order of this court vacating the Apartment's foreclosure sale, alleging that the sale was permeated by fraud, as well as unwarranted and exceqsive legal fees. The parties have been involved in protracted litigation s h c e 2003. On March 11, 2008, Emigrant noticed the Apartment f o r foreclosure sale for April 17, 2008. On April 11, 2 0 0 8 , Silber requested a stay of the sale from the Appellate Division, -2- [* 3] First Department, but the request was denied. On April 16, 2008, Silber filed a petition for Chapter 13 relief with the United States Bankruptcy Court for the Southern District of New York. On July 14, 2008, Emigrant moved to dismiss the Chapter 13 case and/or for an order vacating the automatic atay under the United States Bankruptcy Code. T h e Bankruptcy Court vacated the automatic stay by order dated September 12, 2008. On October 8, 2008, Emigrant again noticed the Apartment f o r sale f o r October 31, 2008. Silber then commenced an adversary proceeding in the Bankruptcy C o u r t and moved for an order to stay the sale from going forward. The dispute was ostensibly aettled via the Stipulation dated Decanber 9, 2008, the terms of which are discuslsed below. Silber asserts that the Stipulation was never approved by the Bankruptcy Court. Even though Emigrant initially conceded that the Stipulation had not been approved, it now disgites Silber's assertion. On February 9, 2009, Emigrant again noticed the Apartment f o r sale for March 6, 2009. Coincidentally, the Bankruptcy Court entered an order dismissing Silber's Chapter 13 case on March 6, 2009. The sale to the highest bidder (with a successful bid of $285,000) was closed on April 17, 2 0 0 9 . By notice to creditors dated April 2 3 , 2 0 0 9 , Emigrant stated that t h e 'net surplus" funds then available for distribution to the Chapter 13 creditors was $123,158.67, after satisfaction of Emigrant's secured debt, -3- [* 4] which included legal fees and o t h e r exgenqes. The notice also stated that Emigrant would retain $15,000, as collateral security for potential litigation exgeases between Emigrant and Si1ber.l c QP M y 8, 2009, Silber filed a motion in the Bankruptcy Court a Heeking to re-open her dismiased Chapter 13 case and to set aside the. s a l e . The motion waB denied by the Bankruptcy Court in a 1 memorandum decision dated June 10, 2009. Silber s appeal of t h a t decision was denied in September 2010 because of her failure to timely prosecute the appeal. Due to Silber s pursuit of varJqus post-sale legal actions, Emigrant alleged that it has incurred additional legal fees and expendes, which reduced the n e t surplus escrow funds to $118,184.19. Emigrant asserted t h a t since Silber failed to cash the check reflecting t h e remaining emrow funds heLd by BBWG, BBWG stopped payment on the check apd f i l e d motion sequence number 03 on behalf of Emigrant. In response, Silber filed motions sequence nhbera 05 and 06. In response to Emigrant s motion which seeksl court authority to allow BBWG to deposit the escrow funds with the New York C i t y Department of Finance, Silber does not oppose the requested relief that m c h funds be depoeited with the Department of Based on the closing statement for the Apartment sale, the gross proceeds of $285,000.00,after subtracting the secured claim of Emigrant of $146,841.33,was $138,158.67. The net surplus available to Chapter 13 cyeditors, after subtracting the $15,000 retainage fox potential litigation, was $123,158.67. -4- [* 5] Finance. However, she argues t h a t Emigrant and its counseh BBWG should not be discharged of liability as to her claims against them. In support of her argument, Silber alleges that: (1) s h e had the funds to repay the Entigrant debt and was willing and able to do so prior to the auction sale of the Apartment; (2) t h e notice of sale stated that it wars to take place on March 6, 2009, but the sale took glace on April 1, 2009 instead, as stated i n Emigrant s notice to creditors dated April 23, 2009; (3) on March 17, 2009, Silber s counsel w r o t e to BBWG that she had the funds tp \\redeem the cQllatera1 (i.e . , the Apartment) , but BBWG r e p l i e d by letter dated March 25, 2009 that her time to redeem had expired; and ( 4 ) t h e a u c t i o n sale waa boguB, and a hearing should be conducted on t h e issue of whether a properly noticed auction was given and held by Emigrant. Notably, in motion sequence number 06 Silber also ahallenges the validity of the Apartment s auction sale and seeks an order of this court Vacating t h e sale. Plaintiff s arguments with respect to t h e validity of: the auction sale are ungersuasive. Even assuming that t h e sale might have been improperly noticed (i.e., whether the sale took glace on March 6, 2009 or April 1, ZOOS), it is undisguted that in May 2 0 0 9 , Silber filed a motion with the Bankruptcy Court seeking to re-open her Chapter 13 case and set aside the sale. Her motion wa$ denied in a Bankruptcy Court decision dated June 10, 2009, -5- p [* 6] which stated that the Apartment was sold at a Public auction on April 1, 2009, and the sale was closed on April 17, 2009. The c w r t also stated that Silber'ec objection to Emigrant's claim f o r legal fees, her challenge to the validity of the Stipulation and the auction sale, ad well as hex: purported ability to gay off getrt of the Emigrant debt, did not constitute grounds f o r re- opening her Chapter 13 case or reconsideration of a prior court order that had dismissed her Chapter 13 case. Separately, in an earlier decision dated January 14, 2008, this court also denied Silber's motion f o r a stay of the auction sale of the Apartment. The decision indicated t h a t Silber failed to show that she would suffer irreparable harm if the Apartment was s o l d because she did not live there, and that any error in the calculation of her debts to Emigrant, including the amount of legal feea, would be compensable by monetary relief. As discuesed above, her a p p e a l of that decision to the Appellate Division, First Department, wag denied. These decisions demonstrate that there is no merit to Filber's argument t h a t this court should vacate the auction sale, conduct a hearing on the validity of the sale and/or the propriety of the notice related thereto. In any event, such request is barred on the grounda of laches and collateral estoppel. Accordingly, t h e relief sought in motion msquence number 06 is denied. -6- [* 7] As to t h e amount of goat-auction sale legal f e e s , this c o u r t held at the oral argument held on May 10, 2011 (motion sequence 031, which sought c o u r t authority to deduct such fees from the escrow held by BBWG, that En-dgrmt/BBWQ's request for such additional fees was denied. As to the amount of gre-auction sale legal fees sought by Emigrant/BBWG, excluding the fees attributable to Emigrant's prior counsel Rosenberg & E s t f s (which apparently were documented and are not the subject of these motions), Emigraet/BBWG relies on the terms of the Stipulation as support. The Stipulation dated December 9, 2008, provided, in relevant part: (1) Silber was to notify Emigrant by November 15, 2008 as to whether she would accept Emigrant's offer to reduce the Emigrant debt due as of February 2 8 , 2009 by $15,000 in consideration of and exchange for her waiving the right to have a hearing on Emigraet's secured claim that included its c l a i m for legal fees; ( 2 ) if Silber elected not to accept Emigrant's offer, all sums due to Errtigrant Mould have to be paid without reduction, and in t h a t scenario, the parties would contact the Bankruptcy Court to schedule a hearing on Emigrant's fees, and Emigrant would return to Silber that portion of the legal fees that the Bankruptcy Court found Emigrant was not entitled to; and ( 3 ) if Silber failed to notify Emigrant by November 15, 2008 whether she would accept t h e offer, -7- [* 8] migrant c o u l d rescind the offer or apply the $15,000 credit, even if Silber did n o t affirmatively accept the credit. In motion sequence number 05, Silber s e e k s to compel BBWG to turnover the $15,000 fund held by B W G under escrow, and argues that the Stipulation was invalid becauae it was never approved by the Bankruptcy Court. The Bankruptcy Court decision, dated June 10, 2009, stated, in relevant part, that " [ i l n February or March, 2009, the Debtor [Silber] and migrant signed a stipulation of settlement (the 'Stipulatipn'), purporting to resolve all outstanding issues, but the agreement quickly fell apart. The Stipulation was never so-ordered by the Court." While Emigrant/BBWG initially conceded that the Stipulation was never approved, it now argues that the Stipulation WBB "so-ordered" on December 10, 2009, and attaches a conformed copy of the electronically-signed Stipulation and Order (as Exhibit 4 ) to the Rifkin Affirmation in Opposition to Plaintiff's November 1, 2 0 1 1 Order to Show Cause. Emigrant/BBWG contended t h a t "it bppears that the confusion lies in the docket e n t r y for the atigulation was indexed under Plaintiff's adversary proceeding case number and not under the docket f o r her chapter 13 c a s e . " The Stipulation has several notable issues. First, although the Stipulation appeared to have been so-ordered on December 10, 2008, it was not until November 16, 2011 that Emigrant/BBWG's counsel noticed that it had been approved by the Bankruptcy Court -8- [* 9] almost three years earlier.' Second, while the Stipulatiofi was ostensibly signed by the parties on December 9, 2008, it has a provision that would have required Silber to notify Emigrant by November 15, 2008 as to whether she would agree to Emigrant's reduction of the debt by $15,000, in exchange for waiving her right to a fee hearing. This was unusual because the document signature date post-dated the required action date. Third, the Stipulation seemingly so-ordered by the Bankruptcy Court on December 10, 2008 ( o n l y one day after it was signed by the parties) was apparently without notice to any other party or creditor, including the trustee f o r the Chapter 13 case. This was unusual in that the Stipulation contained provisions that affected important claims against the Chapter 13 e s t a t e , namely t h e amount of Emigrant's secured claims, which included significant legal fees (when compared with the value of the Most importantly, and as noted above, Silber's Chapter 13 wme was dismissed by the Bankruptcy C o u r t on March 6, 2009, and it is undisputed that no fee hearing was ever conducted by the Bankruptcy Court. Thus, BBWG's fees have never been reviewed by Indeed, in Rifkin's Affirmation in Support of Emigrant's Order to Show, dated January 6, 2010, Rifkin noted t h a t '[flor reasons that are not clear, the Stipulation of Settlement was never 'so ordered' by the Bankruptcy Court." Id. at 4 , note 6. -9- [* 10] any court as to their reasonableness. Also, Emigrant/BBWb agrees and asserta that it should be \\awarded its reasonable Bttorneys fWt9 and expenses ...." On the other hand, there was a fee h e a r i n g conducted by a special referee Of thia court on December 18, 2 0 0 3 , pursuant to an order of Justice Qans dated July 2 , 2003, with respect to the legal fees of Roaenberg , Emigrant's prior counasl. & Eatis, While t h e record in this case supports Emigrant's assertion that the significant fees and exgenaes incurred by it were due to Silber's pursuit of years of relentless litigation, the fact ,remains that BBWQ'a fees and expenses have not been subjected to judicial review with respect to'their reasonableness. In auch regard, and to the extent that *erewith shall be heard by a Special Referee in accordance with the procedures stated below. Accordingly, for all of the foregoing reasons, it is hereby ORDERED that, pursuant to CPLR 4311, all issues ariaing in cannection with t h e fee application of defendant Emigrant Savings Bank (Emigrant) is referred to a Special Referee, to hear and -10- . . . . [* 11] Bank (Emigrant) is r e f e r r e d to a, Special Referee, to hear and report w i t h recommendations, except that, in t h e event of and upon the filing of a stipulation by t h e parties, as permitted by CPLR 4317, the Special Referee, or a n o t h e r person designated by the parties to serve as referee, shall hear and determine all issues arising w i t h s u c h application; and it is further ORDERED that, within thirty (30) days from the date h e r e o f , a copy of t h i s decision and order w i t h notice of entry, together with a completed Information Sheet, shall be served by Emigrant s counsel upon the Special Referee Clerk in the Motion Support Office in Room 119 at 60 Centre Street, who is directed to place thie matter on the calendar on the Special Referee s P a r t (Part 50R) f o r t h e earliest convenience date; and it is f u r t h e r ORDERED that, pending the resolution of Emi-grant sfee application, a l l issues ari&ing in connection with motion sequence numbers 03 and 05, which were brought on by orders to show cause dated J a n u a r y 13, 2010 and June 2 , 2011 respectively, lshall be held in abeyance; and it is further ORDERED that t h e relief requested by plaintiff Hanea S i l b e r , aa administratrix of the estate of Leo Silber, in motion sequence number 06 t o v a c a t e t h e coop apartment auction s a l e is DENIED. Dated: m q q s , t 8 , 2012 ENTER : FILED -11- ...- .

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