Opinion
14394/04.
Decided July 15, 2005.
Upon the foregoing papers, plaintiff Marc Moyal (Moyal) seeks an order, pursuant to CPLR 6401, appointing a temporary receiver to oversee and manage all of the business affairs of the subject property, including but not limited to, the collection of all rental income and deposit of such income in a designated bank account, the payment of all payroll expenses, the payment of all operating expenses and supplies and the division of any resulting profits equally between plaintiff and defendant. Defendant Maria Stadnik a/k/a Malina Nealis (Stadnik) opposes the instant motion on the ground that Moyal has not demonstrated the necessity of the appointment of a temporary receiver to manage the subject property.
The instant action stems from a partnership agreement between the parties with regard to the ownership and management of a multi-family residential unit located at 93-95 India Street in Brooklyn (the Property). In 1984, plaintiff and defendant purchased the Property as tenants in common. At the time of the purchase, the parties allegedly agreed that plaintiff would advance all the funds for the purchase of the Property and, in exchange, defendant would manage the Property without fee and account to plaintiff for all income and expenses.
In 2001, plaintiff instituted a prior action against defendant which alleged that defendant had not abided by their agreement. Specifically, plaintiff claimed that defendant routinely paid trades people in cash and then billed the partnership for claimed charges, thereby precluding plaintiff from verifying if such charges were legitimate. The action was settled pursuant to a written partnership agreement for M K Associates (the Partnership), dated April 30, 2003 (the Agreement). The Agreement enumerated the rights and duties of both plaintiff and defendant with regard to the Property. Under the terms of the Agreement, defendant agreed that she would collect the rents for the Property each month and forward them to plaintiff to be deposited in the Partnership's bank account. It was also agreed that defendant and her husband would receive 8% of the rent collections as a management fee. Plaintiff agreed that he would keep the books and records relating to the Property, manage and pay the accounts payable and deposit the accounts receivable.
Plaintiff claims that pursuant to the Agreement he obtained new bank checks requiring two signatures. Each month, defendant allegedly sent plaintiff both the rent checks for deposit and invoices from vendors. Plaintiff alleges, however, that defendant continued to bill the Partnership for amounts allegedly paid to vendors. Plaintiff avers that he would generally reimburse defendant for the amounts sought, but sometimes requested "back-up" verification in the form of the actual vendor invoices.
Plaintiff claims that from May 2003 to February 2004, defendant adhered to the terms of the Agreement. He further claims, however, that in March 2004, defendant "abruptly ceased forwarding rent checks to me and took control of the Property, including the payment of all accounts receivable." In addition, plaintiff claims that defendant began using old checks which required only one signature and wrote 25 checks to herself, including checks which allegedly reimbursed her for expenditures made to vendors for which no verifying documentation was provided.
As an example of one such "questionable" charge for which defendant sought reimbursement, plaintiff proffers an analysis prepared by his bookkeeper which allegedly demonstrates that from May to December 2003, an 8 month time period during which plaintiff allegedly was in charge of managing and paying the accounts payable, he paid only $4,265.63 for heating, whereas defendant allegedly paid out $9,608.04 in heating expenses for the four month period running from January to April 2003. Moreover, plaintiff claims that for the eight months that he was in charge of accounts payable the general maintenance costs for the Property were only $167.75, while the general maintenance costs allegedly accrued during the four months that defendant allegedly seized control of the Property were $5,762.63.
Finally, plaintiff avers that he did not receive an adequate profit distribution from defendant, and that, additionally, during her management of the building, numerous utility bills were not paid.
Defendant claims that from May 2003 to February 2004, plaintiff violated the Agreement by failing to timely remit payments to either vendors or to the defendant despite the submission by defendant to plaintiff of all required documentation. Defendant alleges that due to plaintiff's failure to remit timely payments, an unpaid heating bill in the amount of $7,382.23 accrued, and there were numerous unpaid electric bills which resulted in notices being sent to the tenants of the Property advising them that the electricity for the common areas in the building would be turned off if payment was not made.
Defendant also avers that plaintiff failed to timely remit the 8% management fee to her as was required by the Agreement. When defendant complained to someone in plaintiff's business office regarding plaintiff's alleged failure to make such payment to her, she was allegedly informed that plaintiff was "in Africa." She alleges that it was only upon his return that she began to receive "late and incorrect payments" of this fee.
Defendant further alleges that she provided plaintiff with all required documentation for every vendor expenditure. Moreover, she claims that the difference in heating bills cited to by plaintiff resulted from a winter heating bill that was higher than the bill which covered the summer and fall months for the same year. In addition, she claims that the general maintenance bills were much lower during plaintiff's alleged management of the accounts payable due to plaintiff's "inattention to the [P]roperty, . . . his breach of the [A]greement and . . . his lack of skill and understanding in what is required to keep a building operating in . . . tip-top shape." Defendant also claims that she made a profit distribution of $26,000 to both herself and to plaintiff during the relevant time period.
Plaintiff commenced the instant action seeking an accounting, the partition of the Property and money damages for defendant's alleged conversion of rent proceeds. Pursuant to the instant motion, plaintiff requests that a temporary receiver be appointed to manage the Property during the pendency of the action.
Plaintiff is not entitled to the appointment of a temporary receiver to manage the subject Property. CPLR 6401(a) provides that a receiver may be appointed "upon motion of a person having an apparent interest in the property which is the subject of an action in the [Supreme Court] . . . where there is danger that the property will be removed from the state, or lost, materially injured or destroyed." It is well established that "courts . . . exercise extreme caution in appointing receivers . . . because such appointment [generally] results in the taking and withholding of possession of property from a party without an adjudication on the merits" ( Hahn v. Garay, 54 AD2d 629, 629). Accordingly, "the provisional remedy of receivership may be invoked only in cases where the moving party has made a clear evidentiary showing of the necessity of conserving the property and protecting that party's interests" ( Kristensen v. Charleston Square, Inc., 273 AD2d 312, 312). Stated differently, "[t]he drastic remedy of the appointment of a receiver is to be invoked only where necessary for the protection of the parties . . . [t]here must be danger of irreparable loss, and courts of equity will exercise extreme caution in the appointment of receivers, which should never be made until a proper case has been clearly established" ( In re Armienti, 309 AD2d 659, 661 [internal quotation marks and citations omitted]; see also Scharff v. SS K Partnership, 187 AD2d 645, 646-647, lv dismissed 81 NY2d 954 ["A detailed evidentiary showing is necessary for the appointment of a receiver" and "conclusory allegations that the appointment of a receiver was necessary" will not suffice]; Bilicki v. Bilicki, 257 App Div 868, 868 [order granting motion for appointment of receiver for the rents and profits of the subject premises reversed where "there was no basis for the appointment of a receiver . . . on the facts disclosed by the record"]; cf. Nelson v. Nelson, 99 AD2d 917 [motion for appointment of receiver properly granted where it was undisputed that plaintiff was a joint manager and operator of marital business, and it was also conceded that no accounting had been rendered or profits distributed for year in question, thereby demonstrating that subject assets were in danger of dissipation]; Gimbel v. Reibman, 78 AD2d 897 [motion for appointment of receiver properly granted where it was undisputed that plaintiff owned 25% interest in subject property or joint venture concerning said property and it was also conceded by defendants that they had commingled income from such joint venture with funds from other properties, thereby creating a situation "ripe for dilution of the income assets"]).
In the instant action, plaintiff has not made the requisite detailed evidentiary showing that the Property in question "will be removed from the state, or lost, materially injured or destroyed." Rather, although the nature and extent of the parties' respective compliance with the terms of the Agreement are sharply contested in this matter, the Property appears to have suffered little demonstrable harm as a result of the parties' current partnership dispute. Although there is some evidence that unpaid utility bills have accrued from time to time due to the parties' conflicts over the management of the Property, there is no evidence whatsoever that any utility services actually have been disrupted or that any taxes or mortgages on the Property have been unpaid. It is not alleged that the Property is in danger of foreclosure or otherwise susceptible to dissolution or to any diminution in value. Nor is it claimed, except in wholly conclusory and vague terms, that any profits from the Property have been diverted out of state, misappropriated or otherwise lost, or that any tenants have abandoned the Property or ceased paying rent as a result of the parties' various claimed actions. Accordingly, given the drastic nature of the receivership remedy, and the lack of a sufficient evidentiary showing on the part of plaintiff that the Property in question is currently in danger of loss or material injury, this court is constrained to deny plaintiff's motion for the appointment of a receiver ( see Scharff, 187 AD2d at 646-647).
As a result, plaintiff's motion for the appointment of a temporary receiver is denied in its entirety.
The foregoing constitutes the decision and order of the court.