Resolution Trust Corp. v Two B Holdings, Inc.

[*1] Resolution Trust Corp. v Two B Holdings, Inc. 2004 NY Slip Op 51126(U) Decided on July 2, 2004 Supreme Court, New York County 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 2, 2004
Supreme Court, New York County

RESOLUTION TRUST CORPORATION, as Conservator of ENSIGN FEDERAL TRUST SAVINGS BANK, successor to the interests of Ensign Bank, FSB, Plaintiffs,

against

TWO B HOLDINGS, INC., CITY OF NEW YORK DEPARTMENT OF HOUSING, PRESERVATION AND DEVELOPMENT, PHILIP GLUCK SUPPLY CO., INC., CITY OF NEW YORK, STATE OF NEW YORK, ENVIRONMENTAL CONTROL BOARD, and JOHN DOE NO. 1 through JOHN DOE NO. 100, said names being fictitious, the true names being unknown to plaintiff but representing the persons entities in possession of the mortgaged premises as tenants or otherwise, Defendants.



15958/91

Carol E. Huff, J.

In this closed foreclosure action, infants Philip Burgess, Desmond Burgess and Ann Marie Burgess, by their mother and natural guardian Tirsa Burgess, move for an order vacating an order dated March 31, 1997, to the extent such order discharged the Court-appointed receiver Paul R. Sklar (the Receiver) from liability for the plaintiffs' claims in connection with lead poisoning, and granting plaintiffs leave, nunc pro tunc, to sue the Receiver. Tirsa Burgess has submitted an affidavit of merit in which she states that during the time of the Receivership, the Receiver was aware of a lead paint condition in the building that resulted, she believes, in injuries to her children.

The Burgesses are plaintiffs in an action captioned Burgess v Charles H. Greenthal Mgmt. Corp., Index No. 18560/99, in Bronx Supreme Court. The infant plaintiffs seek damages from their exposure to lead paint in the building (located at 520 West 144th Street, New York, New York) that was the subject of the foreclosure action. The plaintiffs were tenants of the building from 1986 until 1997. The Receiver was appointed in October 1991. His duties as Receiver were stayed immediately as a result of the owner's filing for bankruptcy. The duties [*2]resumed beginning February 20, 1992, and lasted until January 20, 1993, a period of eleven months. The Receiver was formally discharged by the subject order, issued by Special Referee Julius Birnbaum, dated March 31, 1997.

The Burgesses filed their Bronx action in July 1999. In June 2000, the Receiver moved for summary judgment on the ground, among others, that the March 31, 1997 order had fully discharged him, and that plaintiffs had failed to apply for relief from that order. The Hon. Anne E. Targum stayed the action pending the next preliminary conference, scheduled for May 2001, at which time, Justice Targum wrote, "If Plaintiff fails to diligently satisfy all conditions precedent to this suit, this action may be dismissed, upon further application to the Court."

For reasons that are not entirely clear, the action remained effectively suspended until the Receiver moved for summary judgment in the Bronx Court on February 17, 2004, contending, among other things, that the Burgesses still had failed to seek leave to sue. That motion is pending. The Burgesses obtained new counsel on March 23, 2004, and brought this motion April 1, 2004.

The failure to satisfy the condition precedent of obtaining leave to sue the discharged Receiver is not fatal to the Bronx action: "The omission of such a condition does not necessarily bar the claim entirely. If no time limit for compliance with the condition is established, or the established time limit is still open . . . the omission can be supplied and the action or a new action replacing it will be decided on the merits." Copeland v Salomon, 56 NY2d 222, 227 (1982) (allowing personal injury suit against discharged receiver after plaintiffs sought to obtain leave to sue subsequent to filing of suit). The order of Justice Targum, which stated that the action may be dismissed, did not set a deadline, and it did require an application for dismissal. While it took the Burgesses at least three years to make the present motion, it also took the Receiver almost that long to seek dismissal.

A motion to vacate a receiver's discharge will not be denied on the ground of laches where the receiver cannot demonstrate lack of knowledge or notice of the claims against him or injury or prejudice resulting from the assertion of the claims. Columbus Realty Investment Corp. v G&S Winding Road L.P., 257 AD2d 592 (2d Dept 1999). The Columbus court reversed the lower court's denial of a motion to vacate a receiver's discharge despite the plaintiff's failure to cite grounds specified in CPLR 5015 (Relief from Judgment or Order), invoking "the court's inherent power to grant relief in the furtherance of justice." Id. at 593.

Here, the Receiver has not specified how he might be prejudiced by the delay in bringing this action. Indeed, the infant plaintiffs in the Burgess action are permitted at least five more years in which to assert their claims. The bulk of the argument in opposition concerns the Receiver's duties and abilities with respect to the complained-of conditions in the building, but the ultimate merits of the case are not relevant in deciding this motion.

Accordingly, because the Receiver has not shown lack of notice, injury or prejudice resulting from the assertion of the Burgess claims, the motion to vacate the order of March 31, 1997, to the extent such order discharged the Court-appointed Receiver from liability for the plaintiffs' claims in connection with lead poisoning, and granting plaintiffs leave, nunc pro tunc, to sue the Receiver, is granted.

Dated: July 2, 2004______________________________ [*3]

J.S.C.