Opinion
97-CV-0847E(Sc).
July 31, 2001
John C. Re, Esq., c/o Morgenthau, Greens, Glodfarb Aronauer, Attorneys For The Plaintiff.
Joseph F. Gervase, Esq., c/o Diebold Farmelo, Daryl R. Brautigam, Esq., Attorneys For The Defendant.
MEMORANDUM and ORDER
Plaintiff filed a motion June 28, 2000 seeking the entry of a deficiency judgment, jointly and severally, against defendants Parkway Court, W. Curtis Stith, Edward D. Howell, Joseph F. Gervase, Jr., and Helen S. Howell ("the Parkway defendants") in the total amount of $125,400.66, 400.66 constituting $46,395.06 left on a mortgage, $68,145.60 in attorneys' fees and 10,860 in additional costs. The Parkway defendants moved for the entry of default judgment against defendant Anthony J. Battaglia in an amount equal to any deficiency judgment to be entered against them July 6, 2000. Familiarity with the facts which are set forth in this Court's August 20, 1999 Memorandum and Order herein is presumed.
As recognized by plaintiff, any amount turned over to it by the Court-appointed Receiver, Gary R. Ebersole, Esq., upon his discharge by the Court would be applied to reduce this amount pursuant to section 1371(4) of New York's Real Property Actions and Proceedings Law. Re June 16, 2000 Aff. ¶ 20.
Pursuant to section 1371 of New York's Real Property Actions and Proceedings Law, "a mortgagee is entitled to a deficiency judgment equal to the amount of the indebtedness, less the sale price of the property or the fair market value, whichever is greater." Marine Midland Bank, N.A. v. Harrigan, No. 86 CV-63, 1988 WL 103612, at *2 (N.D.N.Y Sept. 18, 1988). If the amount of "the judgment of foreclosure and sale exceeds the amount paid for the property upon the sale, plaintiff is entitled to the proceeds remaining in the receiver's account" regardless of whether the fair market value of the property at the time of the sale exceeded the amount of the judgment of foreclosure and sale. Columbian Mut. Life Ins. Co. v. Horizons of Schuyler, Inc., 645 N.Y.S.2d 258 (App.Div. 1996). Pursuant to this Court's January 25, 2001 Order discharging Gary R. Ebersole, Esq., as Receiver, he turned over to plaintiff not less than $41,000 from the Receiver's Fleet Bank Operating Account and $18,189 from the Receiver's Fleet Bank Tenant Security Deposit Account. Accordingly, the amount sought by plaintiff must be reduced by the sum of not less than such $59,189 that it received from the Special Master.
Plaintiff was awarded $742,980.27 in the October 23, 1999 Judgment of Foreclosure and Sale in addition to its attorneys' fees and disbursements, which pursuant to this Court's August 20, 1999 Order were to be calculated after the foreclosure and sale had been effectuated. The property was sold by Special Master/Receiver Gary R. Ebersole, Esq. at public auction December 21, 1999 and was purchased by plaintiff for $576,000. At the time the Special Master submitted his Report of Sale, plaintiff was owed — non-inclusive of attorneys' fees and disbursements — a total of $766,395.06 as calculated by the Special Master as follows: the $742,980.27 awarded in the October 23, 1999 Judgment of Foreclosure and Sale, plus $3,380 for interest from September 28, 1999 through October 23, 1999 at the rate of $135.20 per diem, plus $18,035.95 in interest at the legal rate of 5.411% per annum from October 23, 1999 through April 3, 2000, plus $1,498.84 for advertising and posting expenses, plus $500 for the special master's fee. Special Master's Report of Sale ¶¶ 5, 10. Based on the $576,000 sale price for the property and the $766,395.06 owed plaintiff, the Special Master calculated the deficiency owed plaintiff based upon the sale price of the property to be $190,395.06 plus attorneys' fees and disbursements. Id. at ¶ 10.
The Judgment of Foreclosure and Sale — which was submitted to this Court by plaintiff's counsel in response to this Court's Order of August 26, 1999 requesting a proposed order — contains a typographical error. It states that interest at the rate of $135.20 per diem is to be awarded from September 28, 1998 through the date of the order — i.e., October 23, 1999 —; however such interest was to be awarded beginning September 28, 1999. This error is carried over into the Special Master's Report of Sale; however he correctly calculated such interest beginning September 28, 1999.
The parties do not dispute that the fair market value of the property at the time of the sale was greater than $576,000; accordingly the $190,395.06 figure is irrelevant and the deficiency owed plaintiff will be determined based on the difference between the sum of $766,395.06 and attorneys' fees and unreimbursed disbursements and the fair market value of the property as of December 21, 1999. Pursuant to section 1371 of New York's Real Property Actions and Proceedings Law, the fair market value of the property for purposes of determining the deficiency judgment is to be determined by the court. Harrigan, at *2. The court may consider appraisals submitted by the parties in determining the fair market value of the property; however such are not determinative of the property's fair market value. Id. at *2-3
It is noted that the plaintiff's appraisal states that "the conclusions contained within this appraisal report represent the opinions of the appraiser(s). They are not, and must not be construed as factual data." Re June 16, 2000 Aff. Ex. C (Schultz Appraisal at Notice to Reader) (emphasis in original) and the defendants' appraisal states that "appraising is the art of providing an opinion". Gervase August 7, 2000 Aff. Ex. B (Wilhelm Appraisal at i).
Plaintiff states that according to its appraiser, Howard P. Schultz and Associates, the fair market value of the property at the time it was sold was $720,000. Re June 16, 2000 Aff. ¶ 7. Schultz appraised the property as it was valued October 27, 1999 determining that, under the sales comparison approach, the property was worth $762,500 and, under the income approach, $722,084. Re June 16, 2000 Aff. Ex. C (Schultz Appraisal at 42, 52). Giving more weight to the income approach — without explaining why — Schultz concluded that the "as is" market value of the property was $720,000. Re June 16, 2000 Aff. Ex. C (Schultz Appraisal at 53). Plaintiff accordingly requests the entry of a deficiency judgment, in the amount of $46,395.06 plus attorneys' fees and disbursements, based on the fair market value of the property being $720,000. Re June 16, 2000 Aff. ¶ 7. The Parkway defendants dispute plaintiff's determination of the fair market value, arguing that — according to their appraiser, Klauk, Lloyd and Wilhelm, Inc. — the fair market value of the property at the time of the sale was $1,035,000 under the sales comparison approach. Gervase August 7, 2000 Aff. ¶ 5, Ex. B (Wilhelm Appraisal at 7).
Schultz rounded these figures downward to $760,000 and $720,000 respectively.
Schultz had stated that "the sales comparison approach to value in this appraisal report provides a very good measure of the value of the subject property"and, even though he did not say the same thing about the income approach, he relied on it instead. Re June 16, 2000 Aff. Ex. C (Schultz Appraisal at 63).
Although a court should normally conduct an evidentiary hearing when faced with conflicting appraisals of the fair market value of property at the time of the time of its sale — Trustco Bank v. 400 Delaware Avenue Property Co., 681 N.Y.S.2d 404 (App.Div.3d Dep't 1998); Columbus Realty Investment Corp. v. Gray, 658 N.Y.S.2d 685 (App.Div.2d Dep't 1997) —, the parties have not requested such hearing and this Court will determine the fair market value based on the affidavits submitted, in conjunction with the oral argument on this motion. Despite the bickering among the parties and their appraisers over the methods used for determining the fair market value of the property and their ultimate conclusions, this Court believes that the best method for determining the fair market value of the property for present purposes is to utilize its assessed value for property taxes — the one fact on which both parties are in agreement. Re June 16, 2000 Aff. Ex. C (Schultz Appraisal at 1, 12-14); Gervase August 7, 2000 Aff. Ex. B (Wilhelm Appraisal). The property was assessed at $870,000 in 1999; accordingly this Court determines such to be the fair market value of the property at the time of the sale. Subtracting $870,000 from the $766,395.06 owed plaintiffs, results in a negative deficiency of $103,604.94. From this amount, the $59,189 paid by the Receiver to plaintiff must be added which results in a total deficiency of negative $162,793.94 to be applied against the attorneys' fees and disbursements and additional costs sought by plaintiff which this court has not yet calculated.
Re June 16, 2000, September 6, 2000 and September 21, 2000 Affidavits and attached exhibits and Gervase August 7, 2000 and September 12, 2000 Affidavits and attached exhibits.
Not surprisingly, this figure falls almost in the middle of the values argued by the parties — i.e., $877,600. See Marine Midland Bank, N.A. v. Harrigan Enterprises, Inc., 500 N.Y.S.2d 408 (App.Div.3d Dep't 1986) (comparing fair market value of property as determined by court to its current assessment).
Plaintiff had originally requested $68,145.60 in attorneys' fees and disbursements and $10,860 in additional costs for a total of $79,005.60 in its motion for a deficiency judgment. However, plaintiff subsequently stated that the amount of attorneys' fees and disbursements requested should be reduced by a total of $2,819.50 which amount was incurred in conjunction with the assignment of the mortgage from original plaintiff Bankers Trust Company of California, N.A., to Beal Bank and therefore should not have been included in the request for attorneys' fees and disbursements from the Parkway defendants. Re September 6, 2000 Aff. ¶ 18. This reduces the amount requested to $76,186.10. In as much as this amount is less than the $162,793.94 left over from above to cover plaintiff's requested attorneys' fees and disbursements and additional fees, this Court need not consider the Parkway defendant's objections to such.
Accordingly it is hereby ORDERED that plaintiff's motion for a deficiency judgment against the Parkway defendants, jointly and severally, is denied, that the Parkway defendants' motion for default judgment against defendant Anthony J. Battaglia is denied as moot and that this case shall be closed in this Court.