XAJ Partners, LLC. v L & V Post Realty, LLC
Annotate this CaseDecided on August 14, 2018
Supreme Court, Westchester County
XAJ Partners, LLC., Plaintiff,
against
L & V Post Realty, LLC, A. THOMAS CURI, NYDIA D. PEREZ, LAURA CHAVEZ, JOHN DOE, and JANE DOE, Defendants.
57588/2017
Appearance:
Adam E. Mikolay, PC
Attorney for Plaintiff
Via NYSCEF
Richard G. Fontana, Esq.
Receiver
Via NYSCEF
Lawrence H. Ecker, J.
The following papers numbered 1 through 12 were read on the motion of RICHARD G. FONTANA ("Fontana") [Mot. Seq. 6], made pursuant to CPLR § 8004, for an order fixing commissions:
PAPERS NUMBERED
Notice of Motion, Affidavit, Exhibits 1-6, 1 - 8
Affirmation in Opposition, Exhibits A-B, 9 - 11
Reply Affidavit, 12
In this commercial mortgage foreclosure action, the court, by order dated November 3, 2017, upon plaintiff's application, appointed Fontana, a well-experienced [*2]and respected Westchester attorney of long-standing, to serve as the temporary receiver authorized to collect rents and profits of a premises located at 42 Post Street, Yonkers, New York ("the property"). [Ex A]. Thereafter, this action was settled, and title was transferred from defendant to plaintiff by deed in lieu of foreclosure. A stipulation was signed by all parties discharging Fontana and recognizing his right to petition the court to fix his commission. [Ex. B]. Fontana now moves to settle and approve his final accounting and to be paid his commissions.
In his application, Fontana requests compensation based upon quantum meruit rather than in accordance with the statutory constraints prescribed by CPLR § 8004 [Commission of Receivers]. It is undisputed that the property is located in an older neighborhood in which many of the buildings are one hundred years old or older. Such buildings are often in need of constant care and repair to remain code compliant so as to protect the safety and well-being of the tenants. All of the foregoing is expected to be paid for by a limited rent roll that is based on an often fluid population of tenants, resulting in the landlord sometimes failing to obtain the rent receipts needed to meet overhead.
The property in question, as depicted by Fontana, contains a ground floor grocery store/ "bodega" and apartments on the second and third floors. He describes, in detail, the significant efforts and time he expended collecting rents from unidentified tenants and paying expenses, in his discretion, that were required to protect the interests of the tenants, in a building he describes as "in old but fair condition." He carefully allocated the available rent funds to pay those expenses that were critical to the continued viability of the occupancies. It is clear that in addition to receiving, with some difficulty, the rents from the tenants and paying the necessary expenses, he spent a considerable amount of time in the active management of the property, which is often the case where the building is old and the rent roll is modest.
CPLR § 8004 reads:
(a) Generally. A receiver, except where otherwise prescribed by statute, is entitled to such commissions, not exceeding five per cent upon the sums received and disbursed by him, as the court by which he is appointed allows, but if in any case the commissions, so computed, do not amount to one hundred dollars, the court, may allow the receiver such a sum, not exceeding one hundred dollars, as shall be commensurate with the services he rendered.(b) Allowance where funds depleted. If, at the termination of a receivership, there are no funds in the hands of the receiver, the court, upon application of the receiver, may fix the compensation of the receiver and the fees of his attorney, in accordance with the respective services rendered, and may direct the party who moved for the appointment of the receiver to pay such sums, in addition to the necessary expenditures incurred by the receiver. This subdivision shall not apply to a receiver or his attorney appointed pursuant to article twenty-three-a of the general business law.Fontana states that approximately $7,300. remains in the relevant account, such that CPLR §8004(b) is inapplicable, thus requiring that the court consider his request for commissions under CPLR §8004(a). He asserts that the commissions due to him, at the rate of 5%, as authorized by statute, are $1,421. In analyzing the Informal Account submitted with this application [Ex. 2], it appears that Fontana reached this number by adding the amount of rent collected ($17,869.42) to the amount expended [*3]($10,559.44), for a total of $28,428.86. Fontana then multiplied the $28,428.86 by 5%, for total claimed commission of $1,421.44.
This is not, however, the correct manner by which to calculate a receiver's commission. The commission of the receiver should be calculated as 5% of the "gross receipts" and not "the aggregate amount of both receipts and disbursements." WF Shirley, LLC v William Floyd Plaza Associates, 270 AD2d 255 [2d Dept 2000].The commission here is therefore determined based on the total amount of rent ($17,869.42). See Silvestre v Shelley, 30 AD3d 401 [2d Dept 2006]; Friesch-Groningsche Hypotheekbank Realty Credit Corp. v Semerjian, 232 AD2d 448 [2d Dept 1996]. Hence, in accord with these authorities, if Fontana is to be compensated strictly upon the statutory rate of 5% (the maximum amount allowed), then he is due $893.47. This is the amount that plaintiff argues Fontana is entitled to be paid.
The dilemma for the court, sitting in equity, is whether it is fair to award a commission of only $893.47 when it is evident that the receiver has performed services that merit compensation greater than the amount authorized by statute. Of note, were the receiver to seek the permission of the court to hire a professional property manager, and that application was granted, it is unlikely that a professional property manager would be willing to accept responsibility for this property. Moreover, even if a property manager was willing to take on the project, it is clear that said services would cost more than $893.47. Instead, the court called upon an attorney who was willing to act as more than a rent collector, to step into the shoes of the owner and who, in essence, became the manager, caretaker and custodian of the property. The receiver's work was designed to assure the continued habitability of the property, which was marginal and overly leveraged with mortgage indebtedness far beyond the owner's ability to pay.
The issue, then, is to what extent the court may exercise its equitable powers, in the face of a continuous line of appellate cases that state the receiver is limited to commissions based upon the statutory rate. A receiver is authorized to be paid for the necessary expenses and compensation which exceeds the money in the receiver's hand, particularly when the receiver is found to have spent expenditures judiciously. Long Is. City Sav. & Loan Assn.v Bertsman Bldg. Corp., 123 AD2d 840 [2d Dept 1986]; see Pondview Corp. v Russand, Inc., 132 AD3d 964 [2d Dept 2015]. Here, plaintiff does not contest the extent or quality of the services rendered by Fontana. Nor does plaintiff deny that those services enured to its benefit to the extent that the asset plaintiff recovered, by deed in lieu of foreclosure, was better maintained during the pendency of Fontana's appointment than had he not undertaken necessary active management of the property. Importantly, plaintiff, as the mortgagee, was undoubtedly aware of Fontana's efforts and elected not to voice concern or objection.
The court finds that it should exercise its inherent equitable authority to award Fontana a commission based on quantum meruit in excess of that calculated by plaintiff which, albeit mathematically accurate, is "manifestly unfair." See Fed. Home Loan Mtge. Corp. v S.E.A. Yonkers Assocs., 869 F. Supp. 187 [S.D.NY 1994]; JDM Long Island, LLC. v U.S. Bank Nat. Assn., 2014 WL 6632644 [E.D.NY 2014]; American Sav. Bank v Saleski Dev., Inc., 812 F. Supp. 28, 31 [S.D.NY 1993]; Klemczyk v Levin, 144 Misc 2d 124 [Sup. Ct. Erie County 1989]. The court finds that in the case now before it, [*4]as in others where receivers have been appointed to assume responsibility for the upkeep and maintenance of marginal inner city properties, it is unfair to expect the court appointee to put in the required time and effort, with the expectation of only bare minimal compensation in return. As this court has experienced, it is not an easy task to find individuals willing to serve in this capacity under these circumstances.
There is a public policy issue at stake here as well, namely the preservation of
aging, privately owned housing stock serving a significant part of the population of Westchester County, who otherwise may require public subsidized housing or be at risk for homelessness.[FN1] From the lender's point of view, it has taken the risk of extending credit to the owner, presumably based upon creditworthiness and the lender's assessment of the building as security for the loan. If that risk is undertaken, and the loan goes into default, which is a business risk, then it should be the expectation of the lender that, when requesting the appointment of a temporary receiver, there will be a reasonable expense to be incurred for that individual's services, as fixed by the court. The commission is a part of the cost of doing business.
"Upon application of a receiver, the court may direct the party who moved for the appointment of the receiver to pay necessary expenses and compensation which exceeds the money in the receiver's hand at the termination of the receivership. However, special circumstances must be demonstrated before this burden is imposed." Long Is. City Sav. & Loan Assn.v Bertsman Bldg. Corp., supra. In that case, the court found that the receiver demonstrated that the money she expended toward the upkeep of the subject premises was judiciously spent, as well as necessary and beneficial to the plaintiff. In Sun Beam Enters.v Liza Realty Corp. (210 AD2d 153 [1st Dept 1994]), the Court, citing Long Is. City Sav. & Loan Assn. v Bertsman Bldg. Corp., supra, found that special circumstances existed, where the proof submitted by the receiver established that the receivership was conducted with the utmost concern for the physical and economic preservation of the subject property, and that the money expended by the receiver was judiciously spent.
It is incongruous that the court has the authority to award a receiver an amount that exceeds the statutory rate when the account has been depleted, but not when funds remain in the account, or that the court can authorize the appointment of a property manager at an expense greater than that to be awarded the receiver for the same work. The court finds, therefore, that, under the special circumstances presented in this matter, the discretion of the court as a court of equity should be invoked to suitably compensate the temporary receiver for his time and care, as invoiced, and not contested by plaintiff.
The court finds that Fontana is entitled to be compensated on a quantum meruit basis, with due regard to the limited funds available. In support of his application, properly documented, Fontana represents that he spent more than 25 hours managing the subject premises, together with approximately $100 in disbursements. He has requested to be paid at the rate of $300. per hour, which is less than the going rate for [*5]a well-experienced attorney practicing law for many years in Westchester County. At the same time, it is unlikely that a professional property manager, typically paid on a percentage of rent roll basis, would be compensated at $300. per hour. The court finds, therefore, that a fair and reasonable rate for Fontana's services as temporary receiver is $200. per hour. As such, he is entitled to be paid a total commission of $5,000., based upon his time expended, and $100. for disbursements. This is not an unreasonable amount for plaintiff to pay from the rent receipts in light of the receiver's preservation of what is now plaintiff's property.
Accordingly, it is hereby
ORDERED that the motion of RICHARD G. FONTANA, made pursuant to CPLR § 8004, is granted and the court fixes the compensation of the receiver, in accordance with services rendered, at $5,000.00 plus $100. for expenses, and directs that the receiver is hereby authorized to draw a check to himself in the amount of $5,100., and that he shall thereafter disburse the balance of the funds in the account to plaintiff AJ PARTNERS, LLC, at which time he shall be relieved of any further responsibility, other than to comply with the requirements of Part 36 of the Rules of the Chief Judge.
The foregoing constitutes the Decision/Order of the court.
Dated: August, 2018
White Plains, New York
E N T E R,
HON. LAWRENCE H. ECKER, J.S.C. Footnotes
Footnote 1:The court urges the legislature to re-visit the issue of receiver's commissions and to provide specific authority for the court to exceed the statutory maximum when the circumstances so warrant.
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