NYCTL 1998-2 v Kee Kiong Kwah

[*1] NYCTL 1998-2 v Kee Kiong Kwah 2008 NY Slip Op 52155(U) [21 Misc 3d 1123(A)] Decided on October 27, 2008 Supreme Court, Kings County Saitta, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 October 27, 2008
Supreme Court, Kings County

NYCTL 1998-2 AND THE BANK OF NEW YORK, AS COLLATERAL AGENT AND CUSTODIAN FOR THE NYCTL 1998-2, Plaintiff,

against

Kee Kiong Kwah, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, THE PEOPLE OF THE STATE OF NEW YORK, Defendants.



8064/04



Plaintiff's Attorney -

Law offices of Sanford Solny

150 Broadway, suite 1600

New York, New York 10038

(212) 359-3090

Rosicki, Rosicki & Associates, P.C.

One old Country Road, Suite 495

Carle Place, New York 11514

REFEREE-

Robert Gershon

175 Remsen Street

Brooklyn, New York 11201

(718) 855-2507

Defendants-

Kee Kiong Kwah 40 Monroe Street, AFJ6

New York, New York 10002

New York Transit Adjudication Bureau

505 Fulton Street, Suite 6

Brooklyn, New York 11201

The People of the State of New York

320 Jay Street

Brooklyn, New York 11201

Wayne P. Saitta, J.

Joseph Katz, a non party defaulting bidder, moves for an order directing return of his deposit made pursuant to a successful bid at the auction of the property foreclosed upon in this action.

Upon review and consideration of movant's Notice of Motion, dated August 29, 2008, the attached Affidavit of JOSEPH KATZ, dated December 20, 2006, the affirmation of Sanford Solny Esq., dated August 29, 2008, and exhibits annexed thereto, upon all the proceedings heretofore had herein and due deliberation thereon, movant's motion for return of his deposit is denied for the reasons set forth below.

FACTS

The underlying action is to foreclose a tax lien on a property in Kings County located at Block 5932 Lot 62 . A judgment of foreclosure was issued on May 24, 2005 which confirmed the referee's finding that $4,376.82 was due and owing to the plaintiffs, exclusive of costs and attorneys fees. The Judgment of foreclosure, Notice of Sale, and Terms of Sale identified the property only by the block and lot number. No metes and bounds description or street address was given.

A first auction took place on November 10, 2005, which resulted in a final bid of $205,000. The successful bidder did not put down a deposit. The property was then rebid and the movant Joseph Katz was the successful bidder at $165,000. Katz then executed a memorandum of sale and gave the referee a deposit of $16,500. Katz then defaulted on the bid and the property was rebid a third time. The third successful bidder defaulted as well and the property was rebid a fourth time. The property was ultimately sold at auction for $40,000.

Movant asserts that he was misled by the notice of sale and at the time he bid he did not know that the lot was an irregular lot of only 800 square feet.

ANALYSIS

Movant seeks return of his deposit, despite his default, on two grounds. First, that he was misled as to the value of the lot by the terms of the sale. Second, that since the ultimate sale of the property at auction resulted in a surplus over the foreclosure judgment, the forfeit of his deposit would result in a windfall to the former owner.

Movant's claim that he was misled is without merit. The judgment, the notice of sale, and terms of sale all identified the property only by block and lot.

There was nothing inaccurate or misleading in the identifications as they did not list any lot dimensions or square footage.

The Judgement of Foreclosure specifically provided that the property would be sold "subject to any state of facts that an accurate survey would disclose." [*2]

Movant states in his affirmation that his investigation found the lot to be 25 feet by 64.92 feet which he believed to be a buildable lot. He does not state the nature of his investigation or when he conducted it. He claims that he learned that the lot was only 800 square feet when he received a meets and bounds description from a title company.

However it is clear that his error resulted from his own lack of diligence in conducting his investigation, rather than any misinformation contained in the foreclosure documents. The size of the lot is a matter easily discovered by an inspection or survey of the property.

Movant's failure to accurately ascertain the size of the lot, is not a basis to refund his deposit.

Movant's argument that he his entitled to return of his deposit because the final sale was for an amount in excess of the foreclosure judgment is also without merit.

A defaulting bidder is liable for the amount the resale price is less than his bid, up to the amount of his deposit. Wells Fargo v Acosta, 32 AD3d 511, 822 NYS2d 83 (2nd Dept. 2006); Matter of Bertino v Kalmanash, 94 AD2d 794, 463 NYS2d 44 (2nd Dept. 1983) ; Renaissance Complex Redevelopment Corp. v Renaissance Associates, 255 AD2d 274, 680 NY2d 248 (1st Dept. 1998).

Movant cites § 30.07[3][b] of Bergman's on New York Foreclosures for the proposition that if there is no deficiency, the deposit of a defaulting bidder must be returned. However, §30.07[3][a] of Bergman's also states that "A defaulting bidder's liability for the deficiency between the sum bid at the original sale and that bid at resale is not necessarily diminished even if the resale results in a surplus above the amount due the foreclosing plaintiff.

Some confusion results for the fact that the term "deficiency" is used two cover two different amounts. The term deficiency is used to denote a sale at auction for less than the lien of the foreclosing plaintiff. The term is also used to indicate that an ultimate bid at resale that was less than the amount of the defaulted bid.

A defaulting bidder is liable for the difference between his original bid and the ultimate bid at resale, up to the amount of his deposit. To the extent that the ultimate bid is less than the amount due the foreclosing plaintiff, the plaintiff is entitled to the deposit. To the extent that the ultimate bid exceeds the amount due the plaintiff then that portion of the forfeited deposit becomes part of the surplus available to the other lienors who have been foreclosed or to the owner of equity in redemption.

The underlying facts in the case of Bertino v Kalmanash, 94 AD2d 794help clarify the point. Bertino bid successfully $16,000 at a foreclosure auction and then defaulted. A resale of the property was ordered and the order provided that if the resale is equal or larger than the first bid there would no deficiency. At resale the property was sold for $120,500. The lien of the foreclosing plaintiff was only $116,000.

Thus, the price at resale was $4,000 more than the amount due the foreclosing plaintiff, but some $40,000 less than the bid defaulted on.

The Court held that the defaulting bidder was liable for the difference between the final bid and the bid she defaulted on, even though the final bid exceeded the amount due the foreclosing plaintiff, because the order of resale so provided. Id

In this present case, paragraph 6 of the Terms of Sale specifically provides that in the case of a purchaser who defaults, "upon resale, the purchaser will be held liable for any deficiency there may be between the successful bid at the first sale and the bid at the resale." In the memorandum of sale, signed by the movant, he agreed to comply with the conditions in the Terms of Sale.

Similarly, in the case Wells Fargo v Acosta, 32 AD3d 511, a bidder purchased the property for $381,000, put down a deposit of $38,1000 and then defaulted. The property was sold at resale [*3]for $365,000 and which resulted in a surplus of $28,533 over the amount due the plaintiff. The Second Department held that the deposit should not be returned to the defaulting bidder but that the entire deposit should be included in the referee's report as part of the surplus over the amount due the plaintiff. Id.

An owner or foreclosed lienor has no standing to enforce the terms of the Terms of Sale Agreement against a defaulting bidder. Scheckter v Emigrant Savings Bank, 237 AD2d 273, 654 NYS2d 162 (2nd Dept., 1997); Katzeff v Cohn, 139 Misc 2d 1076. However, this is because the Terms of Sale Agreement is a contract between the defaulting bidder and the Court through the person of the referee. An owner does not have standing to enforce the Terms of Sale Agreement because it is not a party to the agreement or a third party beneficiary. Scheckter, 237 AD2d at 273

However this does not mean that the referee is not bound to enforce the Terms of Sale and include, as part of the surplus, that part of the defaulting bidder's deposit that exceeds the amount due the plaintiff. Nor does it bar either a foreclosed owner or lienor from claiming the forfeited deposit as part of whatever portion of the surplus to which they are otherwise entitled.

Movant's deposit was properly forfeited and included as part of the surplus pursuant to the Terms of Sale and subject to claim by the foreclosed lienors or owner. The defaulting bidder is not entitled to return of his deposit.

WHEREFORE, the motion is herein denied. This shall constitute the decision and order of the court.

ENTER,

JSC