Opinion
INDEX 850187/2020
02-28-2022
DEUTSCHE BANK TRUST COMPANY AMERICAS, Plaintiff, v. METRO JOY INTERNATIONAL, LLC, XIAOFEI WANG, BOARD OF MANAGERS OF 20 WEST 53RD STREET CONDOMINIUM, LA DOLCE VITA FINE DINING COMPANY LTD., STEPHEN SILLS ASSOCIATES LLC, JOHN DOE NOS. 1-25 Defendant.
Unpublished Opinion
JUDGMENT OF FORECLOSURE AND SALE AND DECISION + ORDER ON MOTION
FRANCIS KAHN, III, A.J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 002) 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 98, 99, 100, 101, 102, 103, 104 were read on this motion to/for CONFIRM/DISAPPROVE AWARD/REPORT
Upon the foregoing documents the motion and cross-motion are determined as follows:
This is an action to foreclose on a mortgage encumbering real property located at 20 West 53rd Street, Unit 39A, New York, New York 10019. The mortgage secured a loan of $5,125,000.00 made by Plaintiff to Defendants Metro Joy International, LLC ("Metro") and Xiaofei Wang ("Wang") and is documented by a note dated October 22, 2014. Both Metro and Wang defaulted in appearing in the action. Defendants Stephen Sills Associates, LLC ("Sills"), La Dolce Vita Fine Dining Company Limited ("La Dolce") and Board of Managers of 20 West 53rd Street Condominium ("Board") answered separately. By stipulation of all appearing parties, La Dolce Vita Fine Dining Group Holdings Limited ("La Dolce Holdings") was added as a Defendant. Plaintiffs motion for summary judgment, a default judgment and an order of reference was granted without opposition by order dated July 9, 2021.
Prior to commencement of this action, the La Dolce Defendants started an action in the United States District Court for the Southern District of New York to confirm arbitration awards they obtained against respondents therein from the China International Economic and Trade Arbitration Commission, including against Zhang Lan "Zhang"), a non-party to this proceeding. The La Dolce Defendants assert Metro is a "shell company" utilized by Zhang to disguise her "de facto" ownership of the mortgaged property.
The La Dolce Defendants also commenced, before this action was commenced, an attachment proceeding, pursuant to the Federal Rules of Civil Procedure rule 64[a] and Article 62 of the Civil Practice Law and Rules (La Dolce Vita Fine Dining Company et al. v Zhang Lan et al, 20-misc-200 and 21-civ-3071), the purpose of which was to place a hold on certain property belonging to the respondents, including the mortgaged apartment, in the arbitration confirmation action for potential satisfaction of any judgment obtained in that action. Defendant Metro was a made a respondent in the attachment proceeding, but Plaintiff was not joined. In that proceeding, United States District Court Judge Andrew L. Carter, Jr. issued two orders dated May 8, 2020 and July 13, 2020. The May 8, 2020 order is an order of attachment issued pursuant to Federal Rules of Civil Procedure rule 64[a] and Article 62 of the Civil Practice Law and Rules. In pertinent part, it states:
the Apartment and any assets and possessions owned or controlled by Respondents within the Apartment, including but not limited to artwork, furniture, jewelry, lighting and electronics, are hereby frozen and secured and barred from being sold or transferred in any manner without further order of this Court
The July 13, 2020 order is a confirmation order issued as required by CPLR §6211 [b] which documented the service of the order of attachment and posting of an undertaking as well as continued the prohibition of sale or transfer of the premises at issue.
Now, Plaintiff moves to confirm the referee's report and for judgment of foreclosure and sale. Defendants La Dolce and La Dolce Holdings opposed and cross-moved for an injunction staying the sale pending the resolution of the District Court action. Plaintiff opposes the cross-motion.
In support of the motion, Plaintiff established prima facie that the evidence before the referee substantially supported the referee's findings on the amount due under the note, accrued interest, and other expenses (see U.S. Bank, N.A. v Saraceno, 147 A.D.3d 1005 [2nd Dept 2017]; HSBC Bank USA, N.A. v Simmons, 125 A.D.3d 930 [2nd Dept 2015]). In opposition, the La Dolce Defendants did not posit any arguments that the Referee's report was issued without notice, that it was not substantially supported by admissible evidence or that the calculations were incorrect. The only opposition proffered was indirect and in support of the cross-motion for a stay.
By the cross-motion, the La Dolce Defendants seek this Court to stay Plaintiff from executing a foreclosure sale of the real property that is the subject of this action. Movants posit two argument for the issuance of an injunction by this Court. First, that as a matter of comity this Court must give effect to the federal court order of attachment by prohibiting Plaintiff, despite not being named a party in the attachment proceeding, from conducting a foreclosure sale. Second, that under the principle of abstention, this Court must yield jurisdiction to the District Court since it acquired exclusive jurisdiction of the res of the mortgaged property by virtue of the federal court proceeding having been commenced before this action.
Generally, "[t]o impose a stay in one action pending the resolution of a related action, there must be a complete identity of parties, claims, and reliefs sought in the two actions" (Green Tree Fin. Servicing Corp. v Lewis, 280 A.D.2d 642, 643 [2d Dept 2001]). Nevertheless, it has "also [been] held that a stay may be warranted when there is substantial identity between state and federal actions" (Asher v Abbott Labs., 307 A.D.2d 211 [1st Dept 2003]). Justification of the latter instance is based upon "comity, orderly procedure, and judicial economy" (id).
Comity "is not a rule of law, but one of practice, convenience and expediency" (Mast Foos & Co. v Stover Mfg. Co., 177 U.S. 485, 488 [1900]). It is designed to avoid unseemly conflicts that might result from conflicting rulings between courts of concurrent jurisdiction over the same subject matter (see State by Abrams v Thwaites Place Assoc, 155 A.D.2d 3 7 [1st Dept 1990]). Resultantly, "[i]t does not of its own force compel a particular course of action Rather it is an expression of one [court's] entirely voluntary decision to defer to the policy of another" (Ehrlich-Bober & Co. v University of Houston, 49 N.Y.2d 574, 580 [1980]). "While the principle of comity requires the courts of this State to defer to Federal courts in matters peculiarly within their jurisdiction, it does not extend to permitting a party-or an entity allied in interest with a party-to avail itself of a jurisdictional void in order to evade consideration of a central issue by the appropriate tribunal" (Manufacturers Hanover Trust Co. v Crossland Sav., FSB, 177 A.D.2d 78 [1st Dept 1992]).
This Court is not obligated to stay this matter based upon an identity with the Federal court action. The present action and the Federal court case do not share any commonalities in claims or relief sought and the issues in this action, including the priority of liens, will have to be concluded irrespective of the outcome of the Federal court action (see Grand Cent. Bldg., Inc. v New York & H. R. Co., 59 A.D.2d 207; [1st Dept 1977]; see also Tribeca Lending Corp. v Crawford, 79 A.D.3d 1018, 1020 [2d Dept 2010]). At most, n these actions share some common parties. Although the La Dolce Defendants may believe title to the mortgaged premises is at issue in the action to confirm the arbitration awards, it is only indirectly so which is not a bar to this litigation proceeding (see Petition of Equilease Corp., 19 A.D.2d 19, 23 [1st Dept 1963] ["comity, or a deferring to the Federal court on jurisdiction as a courtesy, does not come into play, for the nature of the action and the nature of the relief sought differ"]).
This Court also has doubts about the statutory viability of the orders of attachment and confirmation issued by the Federal court. An order of attachment issued in an action commenced in a Federal District Court is governed by "the law of the state where the court is located" (Fed Rules Civ Pro rule 64[a]). Attachment in New York is established by Article 62 of the Civil Practice Law and Rules and the remedies created thereby did not exist at common-law. As such, the attachment statutes have continually been construed narrowly favoring the parties against whom it is employed (see J. V. W. Inv., Ltd. v Kelleher, 41 A.D.3d 233 [1st Dept 2007]; see also Penoyar v Kelsey, 150 NY 77, 80 [1896]).
Concerning attachment of real property, CPLR §6216 authorizes the sheriff to levy:
"by filing with the clerk of the county in which the property is located a notice of attachment indorsed with the name and address of the plaintiffs attorney and stating the names of the parties to the action, the amount specified in the order of attachment and a description of the property levied upon. The clerk shall record and index the notice in the same books, in the same manner and with the same effect, as a notice of the pendency of an action"(CPLR §6216).
Nothing in that, or the other provisions of Article 62, sanctions any other restriction on the alienation of attached real property. By contrast, CPLR §6214 authorizes a court to prohibit transfer of personal property levied upon by the sheriff (CPLR §6214[b]). Resultantly, "an order of attachment does not bar sale of the attached [real] property" and transfer of same by the owner does not constitute contempt of an order of attachment (see Finance Inv. Co. v Gossweiler, 145 A.D.2d 462 [2d Dept 1984V see also United States Fid. & Guar. Co. v J. United Elec. Contr. Corp., 62 F.Supp.2d 915 926 [EDNY 1999] [An order of attachment of real property "does not operate to prevent a sale"])
The District Court's order rendering the mortgaged property "frozen" lacks statutory support, particularly given the strict construction of same that must be given. Indeed, such a comprehensive restraint would even be untenable were personal property at issue (CPLR §6214). The service of a levy on personal property is only effective to prohibit "sale, assignment or otherwise" by "the garnishee" pending turnover of the attached personal property (CPLR §6214[b]).
By its terms, an attachment of real property is the equivalent of a notice of pendency under CPLR §6501 and simply binds anyone taking a conveyance thereafter to the outcome of the proceedings taken in the association action. The District Court, by restricting transfer of the mortgaged premises without limitation has, for all intents and purposes, superseded Plaintiffs mortgage without notice or an opportunity to be heard. This result is unsettling since the note and mortgage appear to have been given before the arbitration started and indisputably recorded before the order of attachment was issued. Also, there is no allegation that the Mortgagee in this action was acting in league with Zhang or Metro to frustrate recovery by the La Dolce Defendants when it made the loan and took the mortgage. Indeed, there is no proof that the outcome of the Federal action will place the La Dolce Defendants' judgment in priority to Plaintiffs mortgage.
The La Dolce Defendants' reliance on the doctrine of abstention and the United States Supreme Court decision in Colo. River Water Conservation Dist. v United States, 424 U.S. 800 [1976] is misplaced. On the contrary, "there is no strict legal bar to the existence of simultaneous actions concerning the same subject matter in state and federal court" (see Frankel v. J. P. Morgan Chase & Co., 76 A.D.3d 664, 667 [2d Dept 2010]). The reliance on the principle that where two in rem or quasi in rem proceedings are pending the court first exercising jurisdiction may proceed to the exclusion of the other court is inapposite. First, for the principle to be applicable, the two actions must be "parallel" (Dittmer v County of Suffolk, 146 F.3d 113, 118 [2d Cir 1998]). "Federal and state proceedings are 'concurrent' or 'parallel' for purposes of abstention when the two proceedings are essentially the same; that is, there is an identity of parties, and the issues and relief sought are the same" (National Union Fire Ins. Co. v Karp, 108 F.3d 17, 22 [2d Cir 1997]). In the present circumstances, the Federal and state court actions are not essentially the same, do not have an identity of parties and the relief sought is entirely divergent.
Based on the foregoing, the attachment and confirmation orders do not stay this proceeding nor authorize issuance of a stay. Parenthetically, the Court notes that this decision in no way renders the Federal court order of attachment invalid. The conclusions drawn herein regarding the efficacy of that order are offered as observations only and if the Plaintiff risks a reckoning in the District Court should it chose to proceed with a sale without challenging that order under CPLR §6221.
Accordingly, it is
ORDERED and ADJUDGED that the motion for a judgment of foreclosure and sale and to confirm the referee's report is granted and the cross-motion is denied; and it is further
ORDERED that the mortgaged property described in the complaint and as described in this judgment, or such part thereof as may be sufficient to discharge the mortgage debt, the expense of sale and the costs of this action as provided in the RPAPL be sold within 1 year of this judgment, in one parcel, at a public auction at the New York County Courthouse located at 60 Centre Street, New York, New York under the direction of Roberta Ashkin. Esq., who is appointed Referee for this purpose; and it is further
ORDERED that PRIOR to scheduling publication, Plaintiff shall contact the auction part clerk at sfc-foreclosures@nycourts.gov and obtain consent to place the matter on the auction calendar and, thereafter, Plaintiff shall upload the notice of sale to NYSCEF at least 21 days before the sale and the Referee. IF THE AUCTION IS NOT ON THE CALENDAR, then the auction will not go forward; and it is further
ORDERED that the sale shall be conducted in accordance with the annexed New York County Auction Part Rules for Outdoor Auctions.
ORDERED that after receiving permission from the Auction Part Clerk, the Referee shall give public notice of the time and place of sale in accordance with RPAPL 231(2) in the Irish Voice; and the referee need not conduct the sale unless plaintiff shall provide the referee with proof of publication of the notice of sale, and if the sale is adjourned due to plaintiffs failure to provide such proof, then said adjournment shall not be considered at the referee's request; and it is further
ORDERED that by accepting this appointment the Referee certifies that she/he is in compliance with Part 36 of the Rules of the Chief Judge (22 NYCRR Part 36), including, but not limited to §36.2 (c) ("Disqualifications from appointment"), and §36.2 (d) ("Limitations on appointments based upon compensation"), and, if the Referee is disqualified from receiving an appointment pursuant to the provisions of that Rule, the Referee shall immediately notify the Appointing Judge; and it is further
ORDERED that the Referee is prohibited from accepting or retaining any funds for herself/himself or paying funds to him/herself without compliance with Part 36 of the Rules of the Chief Administrative Judge; and it is further
ORDERED that the Referee shall conduct the foreclosure sale only if Plaintiff, its successors and/or assignees or its representatives is present at the sale or the Referee has received a written bid and Terms of Sale from Plaintiff, its successors and/or assigns, or its representatives; and it is further
ORDERED that if the Referee cannot conduct the sale within 180 days of the date of this judgment, plaintiff must make a motion to extend the time to sell the subject property explaining the reasons for the delay; and it is further
ORDERED that at the time of sale the Referee may accept a written bid from the Plaintiff or the Plaintiffs attorney, just as though Plaintiff were physically present to submit said bid; and it is further
ORDERED that the Referee shall accept the highest bid offered by a bidder who shall be identified upon the court record, and shall require that the successful bidder immediately execute Terms of Sale for the purchase of the property, and pay to the Referee in cash, certified check or bank check, ten percent (10%) of the sum bid, unless the successful bidder is Plaintiff, in which case no deposit against the purchase process shall be required and it is further
ORDERED that notwithstanding the previous paragraph, the Referee shall have the right to refuse cash payments and require a bank or certified check from the successful bidder and the Referee shall be entitled to qualify bidders and require bidders to show proof of funds before or during the auction; and it is further
ORDERED that in the event the first successful bidder fails to execute the Terms of Sale or fails to immediately pay the ten percent (10%) deposit as required, the property shall be immediately reoffered at auction on the same day; and it is further j
ORDERED the Referee shall deposit the down payment and proceeds of sale, as necessary in an FDIC-insured bank where the Referee has an account for that purpose in accordance with CPLR 2609; and it is further
ORDERED that after the balance of the purchase price is paid or credited and the property is sold, the Referee shall execute a deed to the purchaser in accordance with RPAPL 1353 and the terms of sale (which shall be deemed a binding contract); and it is further
ORDERED that in the event a party other than Plaintiff becomes the purchaser at the sale, the closing of title shall be held no later than 30 days after the date of such sale; and it is further
ORDERED that, pursuant to RPAPL 1353(1), if Plaintiff (or its affiliate as defined in paragraph [a] of subdivision one of section six-1 of the banking law) is the purchaser, the property shall be placed back on the market for sale or other occupancy within 180 days of the execution of the deed of sale or within 90 days of construction, renovation, or rehabilitation of the property, provided that such construction, renovation or rehabilitation proceeded diligently to completion, whichever comes first, provided that this court grants an extension upon a showing of good cause; and it is further
ORDERED that the Referee, after receiving the proceeds of the sale, shall pay (from the proceeds) the taxes, assessments, sewer rents, or water rates, which are, or may become, liens on the property in accordance with their priority according to law with such interest or penalties which may have lawfully accrued thereon to the date of payment; and it is further
ORDERED that the Referee shall deposit the balance of the proceeds from the sale in his or her own name as Referee in an FDIC-insured bank where the Referee has an account for that purpose and shall make the following payments in accordance with RPAPL 1354:
1. The Referee's fees for conducting the sale, which are $1,100.00. Plaintiff shall also compensate the Referee in the sum of $350 for each adjournment or cancellation made on less than two business days' notice unless the Referee caused the delay.
2. All taxes, assessments and water rates that are liens upon the property and monies necessary to redeem the property from any sales for unpaid taxes, assessments or water rates and any other amounts due in accordance with RPAPL 1354(2). The purchaser shall be responsible for interest and penalties accrued after the sale. The Referee shall not be responsible for the payment of penalties or fees pursuant to this appointment. The purchaser shall hold the Referee harmless from any such penalties or fees assessed.
3. The expenses of the sale and the advertising expenses as shown on the bills presented and certified by the Referee to be correct, copies of which shall be annexed to the report of sale.
4. The Referee shall also pay to the Plaintiff or its attorneys the following:
a. Amount Due from the Referee's Report: $4,760346.77, together with interest at the per diem rate of $323.73 from July 1, 2021 until entry of judgment, together with any advances as provided for in the note and mortgage which Plaintiff had made for taxes, insurance, principal, and interest and any other charges due to prior mortgages or to maintain the property pending consummation of the foreclosure sale, not included in the computation upon presentation of receipts for said expenditures to the Referee, and then with interest from the date of entry of this judgment at the statutory rate until the date the deed is transferred.
b. Costs and Disbursements:____________________(to be filled in by the Clerk) to Plaintiff for costs and disbursements in this action with interest at the statutory judgment rate from the date of entry of this judgment.
c. The Court declines to award additional allowance.
d. Attorneys' Fees: $70,133, 16.
5. Surplus monies from the sale shall be paid into Court by the Referee within five days after receipt in accordance with RPAPL 1354(4); and it is further
ORDERED that if Plaintiff is the purchaser of the property, or in the event that the rights of the purchasers at the sale and the terms of sale under this judgment shall be assigned to or be acquired by Plaintiff, and a valid assignment is filed with the Referee, the Referee shall not require Plaintiff to pay in cash the entire amount bid at sale, but shall execute and deliver to Plaintiff or its assignee, a deed or deeds of the property sold upon the payment to said Referee of the amounts specified as 1, 2, and 3 above, and the Referee shall allow Plaintiff to pay the amounts specified in 2 and 3 above when it is recording the deed; that the balance of the bid, after deducting the amounts paid by Plaintiff, shall be applied to the amount due to Plaintiff as specified in 4 above; that Plaintiff shall pay any surplus after applying the balance of the bid to the Referee, who shall deposit it in accordance with 5 above; and it is further
ORDERED that all expenses of recording the Referee's deed, including real property transfer taxes, which is not a lien upon the property at the time of sale, shall be paid by the plaintiff from the sale proceeds; and it is further
ORDERED that Plaintiff may seek to recover a deficiency judgment in accordance with RPAPL 1371 if applicable, and it is further
ORDERED that if the property is sold in one parcel in "as is" physical order and condition, subject to any condition that an inspection of the property would disclose; any facts that an accurate survey of the property would show; any covenants, restrictions, declarations, reservations, easements, right of way, and public utility agreements of record, if any; any building and zoning ordinances of the municipality in which the mortgaged property is located and possible violations of same; any rights of tenants or persons in possession of the subject property; prior liens of record, if any, except those liens addressed in RPAPL 1354, any equity of redemption of the United States of America to redeem the property within 120 days from the date of sale, any rights pursuant to CPLR 317, 2003 and 5015 or any appeal of the underlying action or additional litigation brought by any defendant or its successor or assignee contesting the validity of this foreclosure; and it is further
ORDERED that the purchaser be let into possession of the property upon production in hand of the Referee's Deed or upon personal service of the Referee's deed in accordance with CPLR 308; and it is further
I ORDERED that defendants in this action and persons claiming through them and any person) possessing a junior interest in the property after the Notice of Pendency was filed are barred and foreclosed of all right, claim, lien, title, and interest in the property after the sale of the mortgaged property; and it is further
ORDERED that within 14 days after completing the sale and executing the proper conveyance to the purchaser, the Referee shall file with the clerk a report under oath of the disposition of the proceeds of the sale and upload the report to NYSCEF if it is an e-filed case; and it is further
ORDERED that if the purchaser or purchasers at said sale default upon the bid or terms of sale, the Referee may place the property for resale without prior application to this Court unless Plaintiffs attorney elects to make such an application; and it is further
ORDERED that Plaintiff shall serve a copy of this judgment with notice of entry upon the owner of the equity of redemption, any tenants named in this action, and any other parties entitled to service, including the Referee appointed herein; and it is further
ORDERED that nothing herein shall be deemed to relieve Plaintiff of any obligation imposed by RPAPL 1307 or 1308 to secure and maintain the property until ownership of the property has been transferred and the deed duly recorded; and it is further
ORDERED that when the Referee files a report of sale, she or he shall also file a Foreclosure Action Surplus Monies Form and also upload this document to NYSCEF if an e-filed case; and it is further
ORDERED that, without further order of the Court, the referee shall be entitled to an additional fee of $950.00 for conducting and attending a closing with a purchaser other than plaintiff, plus, if such a closing is scheduled for the referee's conference room, then the referee shall be entitled to a reasonable fee for use thereof, without further order of the Court; and it is further identified:
A description of the premises is annexed hereto as schedule A.