Hynes v Skarvelis

[*1] Hynes v Skarvelis 2005 NY Slip Op 50332(U) Decided on March 14, 2005 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 14, 2005
Supreme Court, Kings County

Charles J. Hynes, as District Attorney of Kings County, Plaintiff,

against

Maria Skarvelis and NICK SKARVELIS, Defendants.



22527/96

Francois A. Rivera, J.

Defendants Maria Skarvelis and Nick Skarvelis move by order to show cause to quash an information subpoena issued by Bay Ridge Towers, Inc.(hereinafter BRT) and to prevent further enforcement procedures by them. BRT opposes the motion.

On May 20, 2002, BRT served an information subpoena upon the defendants ordering them to answer, under oath and in writing, the questions contained in an attached questionnaire. The subpoena advised that they were the assignee of judgment debt in the amount of two hundred and ninety one thousand dollars ($291,000.00) owed by the defendants to judgment creditor, Charles J. Hynes. It further advised that sixty three thousand seven hundred and twenty four dollars and seventy cents ($63,724.70) in unpaid interest remained due.

On June 19, 2002, defendants filed the instant order to show cause seeking to quash the information subpoena and to prevent further enforcement efforts by BRT. BRT is a cooperative housing association in Brooklyn and is the actual plaintiff in this proceeding. Nick Skarvelis was president of the board of directors of BRT from 1992 through May 27, 1994. Maria Skarvelis, Nick Skarvelis' wife, was the office assistant to the managing agent of BRT during the same period.

The salient facts as derived from the pleadings and from the Kings County Supreme Court Clerk records are essentially undisputed. Each defendant was indicted by the Grand Jury of Kings County under indictment number 9290/95 and charged with a single count of grand larceny in the second degree. The factual recitation in the indictment accused them of acting in concert to steal property from a maintenance fund of Bay Ridge Towers, Inc., having an aggregate value of more than fifty thousand dollars during January 1, 1992 and May 27, 1994. In August of 1995, both defendants were arraigned in Part 6 of the Kings County Supreme Court. On December 14 , 1995, each defendant admitted to acting in concert to steal two hundred and ninety one thousand dollars ($291,000.00) from BRT's checking account.

Pursuant to a plea arrangement with the Kings County District Attorney's Office, each [*2]defendant pled guilty to the charge and agreed to execute a confession of judgment in the amount of two hundred and ninety one thousand dollars ($291,000.00), the stipulated amount of BRT's out of pocket loss. On May 1, 1996, Maria Skarvelis signed an affidavit confessing to a judgment in the amount of two hundred and ninety one thousand dollars ($291,000.00) and authorizing entry of that judgment against her in any county of New York. On June 14, 1996, Nick Skarvelis signed a similar affidavit of confession of judgment containing the same terms. The following identical language was contained in the defendants' respective affidavits explaining the debt owed to Charles J. Hynes, as District Attorney of Kings County: "Between January 1, 1992 May 27, 1994 Maria Skarvelis and Nick Skarvelis illegally appropriated $291,000.00 from the Bay Ridge Towers Cooperative Association located at 149 Marine Avenue, Brooklyn, New York. The funds were removed from the Bay Ridge Towers checking account without permission or authority from the Co-op's Board of Directors. Once the funds were taken from the account, they were funneled to the Skarvelis' and their various business entities, such as Amereal, Amerfin and Real Associates. In restitution for the above fraud, the undersigned agree to be jointly and severally liable for the above stated amount."

On July 1, 1996, Joseph J. McCarthy, as counsel for Charles J. Hynes, filed the defendants' affidavits of confession of judgment and the judgment by confession with the Kings County Clerk's Office. The judgment by confession ordered recovery payable to the District Attorney of Kings County as follows:

" the sum of $291,000.00 with interest of $ n/a making a total of

$291,000.00 together with $ n/a costs and disbursements, amounting

in all to the sum of $291,000 and that the plaintiff have execution

therefor."

On May 16, 2000, Executive Assistant District Attorney Paul Demartini, assigned to BRT the aforementioned judgments recovered in favor of Charles J. Hynes. At the time of the assignment, the defendants had paid approximately one hundred and ninety two thousand five hundred dollars ($192,500.00) of the total due. After the entry of defendants' pleas of guilty to the indictment and the filing of the aforementioned judgments, Supreme Court Justice Reinaldo Rivera delayed sentencing of the defendants, pending repayment of the remaining balance. On December 12, 2001, defendants paid BRT the final amount of $10,452.54 which met and slightly exceeded the restitution payment target of two hundred and ninety one thousand dollars ($291,000.00).

In February, 1998, Maria Skarvelis was sentenced to five years probation. On December 14, 2001, shortly after conclusion of the restitution payments, Nick Skarvelis was sentenced to two hundred hours of community service and five years probation. Defendants submitted a transcript of the December 14, 2001 sentencing proceedings of Nick Skarvelis in support of the instant motion. The transcripts reflect the following statements made by Kings County Assistant District Attorney Paul DeMartini to Justice Reinaldo Rivera during sentencing: "I would just put on the record that I have received the final payment today, a check in the amount of $10,452.94. That brings the total to $291,454.94, which is the total [*3]restitution."

Mr. DeMartini further testified to the People's appreciation of the court's patience and perseverance in adjudicating the claim over some six years, noting specifically: "I know you have a letter to the [same] extent from Bay Ridge Towers from Mr. Spencer [the President of Bay Ridge Towers, Inc. during the pendency of restitution payments]. Bay Ridge Towers also is grateful for your actions in this case in allowing them to get full restitution."

On March 1, 2002, BRT's counsel sent a letter to defendants demanding payment of interest on the "principal" sum of $291,000, at a rate of 9% per annum for a total of

$62,527.71.

It is noted that the caption of the confessions of judgment as well as that of the instant motion names Charles J. Hynes, as District Attorney of Kings County, as the plaintiff. The actual plaintiff in interest is BRT, as assignee of Charles J. Hynes. The defendants are not claiming improper service of the information subpoena, and did execute the confessions of judgment knowing that the victim and intended beneficiary of the restitution payments was actually BRT. In light of these facts, the inaccuracy in the aforementioned captions may be disregarded as merely technical defects (Schwartzberg v. State 121 Misc 2d 1095, 1098 [NY Ct. Cl. 1983]).

On January 15, 2004, this court orally granted defendants' request for an order quashing the information subpoena and prohibiting further enforcement action. By Decision and Order issued June 17, 2004, this court vacated its prior oral order of January 15, 2004, and scheduled further oral argument. The parties were advised to prepare to reargue the issue of whether the confession of judgment and the restitution agreement of the criminal plea arrangement were separate civil and criminal proceedings. On October 1, 2004, the parties offered additional oral argument and submitted supplemental affirmations and memoranda of law.

The information subpoena is a disclosure device not used for pretrial or trial practice but explicitly offered for enforcement purposes by CPLR§ 5224[a][3](Siegel, New York Practice, 3rd Ed. § 509).

CPLR §3018(a) provides in pertinent part : Responsive pleadings. (a) Denials. A party shall deny those statements known or believed by him to be untrue. He shall specify those statements as to the truth of which he lacks knowledge or information sufficient to form a belief and this shall have the effect of a denial. All other statements of a pleading are deemed admitted, except that where no responsive pleading is permitted they are deemed denied or avoided.

BRT contends that pursuant to CPLR§ 5003, the confessions of judgment accrued interest from the date that they are filed with the appropriate clerks office by the operation of law. In the case at bar, there is no dispute that on July 1, 1996, the District Attorney of Kings County filed the defendants' confessions of judgment with the Kings County Clerk's Office. CPLR §5003 provides: [*4] Every money judgment shall bear interest from the date of its entry. Every order directing the payment of money which has been docketed as a judgment shall bear interest from the date of such docketing.

CPLR §3218 provides in pertinent part: Judgment by confession. (a) Affidavit of defendant. Except as provided in section thirty-two hundred one, a judgment by confession may be entered, without an action, either for money due or to become due, or to secure the plaintiff against a contingent liability in behalf of the defendant, or both, upon an affidavit executed by the defendant;

1. stating the sum for which judgment may be entered, authorizing the entry of judgment, and stating the county where the defendant resides or if he is a non-resident, the county in which entry is authorized; 2. if the judgment to be confessed is for money due or to become due, stating concisely the facts out of which the debt arose and showing that the sum confessed is justly due or to become due; and3. if the judgment to be confessed is for the purpose of securing the plaintiff against a contingent liability, stating concisely the facts constituting the liability and showing that the sum confessed does not exceed the amount of the liability.

A confessed judgment is valid only if it conforms to the strict requirement of

CPLR §3218. It is a device virtually limited to money claims and may be used for money due or to become due or to secure the plaintiff against a contingent liability on behalf of the defendant (Siegel, New York Practice, 3rd Ed. § 299). Also, it is well settled that it cannot be expanded beyond the terms prescribed by order of the court (Rae v. Kestenberg, 23 AD2d 565, 566, [2nd Dept., 1965], aff'd, 16 NY2d 1023, [1965]; followed by, Irons v. Roberts, 206 AD2d 683, 684, [3rd Dept., 1994]). When a defendant has confessed to the illegal misappropriation of money, restitution may not exceed the actual amount misappropriated as alleged in the indictment (People v. Smith, 146 AD2d 722 [2nd Dept., 1989]; see also, People v. Martinez, 202 AD2d 735, 738, [3rd Dept., 1994]). Similarly, the appreciated value of the fruits of the crime is not contemplated in the statutory scheme authorizing restitution, as defined in NY Penal Law § 60.27 (2); (People v. Young, 163 Misc 2d 72, 78, [NY Sup.,1994]). When a court orders restitution, it must set a fixed monetary value (People v. Hong Pincomeg Lou, 299 AD2d 559, 561, [2nd Dept., 2002]) and must determine the exact amount to be paid (People v. Dickson, 260 AD2d 931, 934, [3rd Dept., 1999]).

Pursuant to CPLR § 3218(b), the creditor is permitted to file the confession of judgment with the appropriate clerk at any time within three years after the affidavit is executed. This is so even on a contingent liability in which the contingency has not yet occurred, so long as the terms of the judgment do not prevent same.

Contrary to BRT's contention, the mere filing of a confession of judgment does not render [*5]the confessed amount to be immediately due and owing. Nor does it automatically result in the accrual of interest. The court must look to the language in the affidavit describing the debt to determine whether it is for money due or to become due or whether it is for the purpose of securing the plaintiff against a contingent liability.

The judgment by confession is among other things a security device. It enables a creditor to secure entry of a debt against the debtor before the debt is due (although execution on the judgment may not be levied until the due date). If the judgment is confessed for a sum already due, execution may be issued on it and levied in full. If the sum is not yet due, execution may not be issued until it becomes due. If it is due only in part, the execution may be levied only to satisfy the sum already due (with subsequent executions to issue, seriatim if necessary, as further sums fall due [McKinney's Practice Commentaries to CPLR § 3218 by David Siegel]; see also Coreless v. Leonardo II, 298 AD2d 693, 696 [3rd Dept. 2003]).

The first step in the analysis is to search for the intent of the parties as expressed within the four corners of the affidavits. Here, the language in the defendants' affidavits of confession speaks to restitution for a fraud for misappropriated funds. The affidavits, however, are silent as to whether the amount is due and owing or to become due.

Any dispute between the parties as to whether the debt is due or to become due, or whether it is a contingent liability, and if so, whether the contingency has occurred, may be resolved by the court on a motion (McKinney's Practice Commentaries to CPLR§ 3218 by David by Siegel). The court may then resolve the dispute either on the motion papers or, if necessary, after a proceeding or evidentiary hearing.

The instant order to show cause contains Nick Skarvelis' affidavit swearing to the following allegations of fact. He and his wife, Maria Skarvelis, entered into a plea arrangement with the Kings County District Attorney to cover a felony indictment pending against them. The plea arrangement contained the following terms. Defendants were to execute affidavits of confession of judgment making them jointly and severally liable for restitution in the amount of $291,000.00. The district attorney was to hold the affidavits of confessions of judgment in escrow pending payment, and the presiding judge was to monitor and control the time for completing the payment. Nick Skarvelis also alleged that there was never any discussion with the District Attorney of interest on the judgment. Furthermore, he claimed the terms of the agreement were satisfied by his payment of the restitution amount in full.

These allegations of fact are deemed admitted pursuant to CPLR §3108(a) based on BRT's failure to deny or dispute them. In light of these admissions and the aforementioned undisputed facts, a hearing is unnecessary. It is apparent that the confessed judgments were not for an amount due and owing, but rather security for a contingent liability. The contingency was the defendants' failure to complete the payment of restitution in the total amount of two hundred and ninety one thousand dollars ($291,000.00) in accordance with their respective plea arrangements and as monitored by the court pending their sentences. Inasmuch as the defendants fully complied with the restitution requirements of their plea arrangements, the contingency never occurred. As such, no liability accrued and thus no debt became due and owing to BRT. In light of these facts the court need not address the issue of whether a confession of judgment may accrue interest when it is created as part of a plea, conviction and sentence (see People v. Ekinici 191 Misc 2d 510, 514 [NY Sup. Ct. 2002]). [*6]

Defendants' order to show cause is hereby granted. BRT is directed to take no further action to enforce the aforementioned judgments as they have been found by this court to have been fully satisfied.

The foregoing constitutes the decision and order of the court.

________________________

J.S.C.