Opinion
99 Civ. 3487 (AGS)(KNF)
May 6, 2002
Attorney for the Receiver, Allison M. Heilbraun, P.C. Yonkers, New York, ATTN.: Allison M. Heilbraun, Esq.
Robert Thelen, Pro Se, Wayne, NJ.
REPORT and RECOMMENDATION
I. INTRODUCTION
Before the Court in this foreclosure action, is a motion made by David Waxenberg ("Waxenberg"), whom your Honor previously appointed Receiver of the rents and profits generated from the premises located at 2270-76 University Avenue, Bronx, New York, seeking an order: 1) discharging him as Receiver; 2) fixing his commission and that of his managing agent, pursuant to New York Civil Practice Law and Rules ("CPLR") § 8004; 3) discharging his surety; 4) settling and approving his accounting; 5) approving payment of his attorney's fees for legal services rendered in connection with the receivership; and 6) authorizing payment of the balance remaining in the receivership's bank account to defendant Robert E. Thelen ("Thelen"). Thelen opposes the Receiver's motion; it is addressed below.
II. BACKGROUND
Waxenberg was appointed Receiver to collect rents and profits from the foreclosed property, the address of which is noted above. The order through which Waxenberg was appointed, provided, inter alia, that subject to the Receiver's final accounting and discharge, the receivership was to terminate automatically upon the settlement of the action or the closing of title pursuant to a referee's terms of sale. The order required that Waxenberg comply with CPLR §§ 6401 through 6404, which define the duties and powers of temporary receivers. When the subject property was sold, the receivership terminated. As a result, the Receiver ceased all his activities and surrendered management of the property to its new owner, University LLC. Thereafter, the instant motion was made to effect, inter alia the formal discharge of the Receiver and to have the court settle and approve his final accounting.
After the motion was filed, Thelen advised the Court that he opposed it. Thelen contended that he received a "proposed" accounting statement from the Receiver. Thelen maintained that it contained irregularities. However, Thelen failed to explain what the irregularities were that he observed in the accounting statement. Thelen claimed that he had requested "back-up" information from Waxenberg, which Thelen wanted to use to attempt to reconcile the irregularities that he claimed to have discovered in the accounting statement. Thelen alleged that he never received the "back-up" information. To address Thelen's concerns, and to aid the Court's analysis of the Receiver's accounting statement, a hearing was held by the Court. Waxenberg and his counsel attended the hearing, as did Thelen.
When the hearing commenced, the Court asked the Receiver to clarify several of the entries in his accounting statement. In particular, the Court inquired about a commission payment to Waxenberg of $1,441.71. This commission payment appeared to the Court to be a payment in addition to the 5% commission payment authorized by CPLR § 8004. The Court was advised that the $1,441.71 commission payment was authorized by the plaintiff, Federal Home Loan Mortgage Corporation, through an independent agreement it had entered into with Waxenberg. Since that commission agreement was not contemplated by the court's receivership order, during the hearing, Waxenbeng agreed to relinquish any claim to the $1,441.71 and to add that sum to the balance remaining in the receivership's bank account.
The Court also entertained the contentions made by Thelen. At the hearing, Thelen challenged the accuracy of several entries in the Receiver's accounting statement. For example, the accounting statement showed that funds had been expended by Waxenberg to pay fees charged by government agencies for permits, licenses and inspections. Thelen claimed that, during the period he owned the subject premises, he ensured that all applicable municipal permit, license and/or inspection fees were paid timely. Therefore, he alleged that the Receiver's fee payments to government agencies were suspect.
In response, Waxenberg explained that, upon taking control of the premises, in accordance with the order of the court appointing him Receiver, he notified relevant government agencies of his appointment and of his responsibility for the management of the property. As a consequence, these agencies issued notices to him directing that he pay the fees associated with relevant permits, licenses and inspections, as if the property had been acquired by a new owner. In support of his contention, and by way of example, the Receiver placed into the record, as a hearing exhibit, an invoice sent to him by the New York City Department of Buildings. The invoice was for the fee charged by that agency for the annual low-pressure boiler inspection required by municipal law. Thelen did not contest the validity of the invoice; he conceded that after he ceded management of the building to the Receiver, he was not aware of any of the notices sent to the Receiver, by government agencies, directing the Receiver to pay the applicable fees for mandated permits, licenses and inspections.
Thelen also challenged that portion of the Receiver's accounting statement that showed that rental income was received by Waxenberg in September 1999. Thelen maintained that this was an erroneous entry in the accounting statement because the subject property had been sold in August 1999; consequently, any rental payments would have been made to the property's new owner. The Receiver explained that, after the building was acquired by a new owner, two tenants sent their monthly rental payments to Waxenberg inadvertently. Waxenberg explained further that he caused the errant rental payments to be forwarded promptly to the new owner of the property. That disbursement appears as a September 1999 entry in the Receiver's accounting of his activities.
Thelen also questioned a $600 payment made for carpeting. To address that issue, the Receiver submitted, as a hearing exhibit, an invoice for work performed to repair marble steps at the subject property. Waxenberg noted that his accounting statement could not accommodate an entry title sufficiently long to include carpets, floors and marble steps. Therefore, the entry title listed carpets and floors only. The invoice received as a hearing exhibit established that the property's marble steps were repaired at a cost of $600. The amount noted on the invoice is consistent with the expenditure reflected in the accounting statement entry pertinent to the expenditure for carpets and floors. Furthermore, the invoice reflects that the Receiver obtained a significant discount on the amount charged to repair the marble steps. The invoice shows that the original amount billed for the repair work was $885. However, the Court was advised at the hearing that, because of the volume of work that Waxenberg' s managing agent provides to the contractor who repaired the marble steps, the agent was able to negotiate a lower fee for the repair work performed on the marble steps. By doing so, the agent was able to reduce the expenditures that would have otherwise been made by the Receiver to maintain the property.
In order to safeguard the rental payments that would come to him during the term of the receivership, Waxenberg opened a bank account. The bank account was also the vehicle through which funds were disbursed, as needed, to maintain the property during the term of the receivership. Thelen challenged the propriety of the fees charged Waxenberg by the bank for opening and maintaining the receivership's account at that financial institution. The bank fees charged for opening and maintaining the account were $145.24. Although Thelen questioned the bank fees, he did not present any evidence to the Court that established that the bank fees charged were either excessive or reported incorrectly by Waxenberg in his accounting statement.
Thelen also took issue with the costs the Receiver incurred for legal services. While the Receiver's accounting statement listed the amount that his counsel billed for legal services performed for the Receiver through January 2000, no information was provided concerning the date(s) on which the work was performed. To remedy that deficiency, the Receiver agreed to supplement the materials previously submitted to the Court in connection with the instant motion. In addition, counsel to the Receiver advised the Court that since the motion was filed, additional attorney's fees had been incurred by Waxenberg, which would also be reflected in the supplemental submission that Waxenberg would make to the Court. While Thelen questioned the costs Waxenberg incurred for legal services, he never presented any evidence to the Court that established that those costs were either excessive or recorded improperly on the Receiver's accounting statement.
The Court was also advised that Waxenberg's supplemental submission would contain information concerning additional funds that had been expended, after the instant motion was made to ensure that the surety bond, which the Receiver was required to post, remained in effect, until the court discharged the Receiver.
As promised, following the conclusion of the hearing, Waxenberg made a supplemental submission to the Court in the form of an affirmation from his counsel. In that document, Waxenberg's counsel set forth the date on which the legal services referenced in the exhibits attached to the Receiver's moving papers were provided, and documented the additional costs Waxenberg incurred for legal services and for maintaining the surety bond, after he filed the instant motion.
III. DISCUSSION
A receiver is an officer of the court, whose function is to preserve and protect property, in accordance with the terms and conditions of appointment, pending the outcome of litigation. See Federal Home Loan Mortgage Corp. v. Richmond, No. 91 Civ. 2178, 1994 WL 191902, at 1 (S.D.N.Y. May 17, 1994); Jacynicz v. 73 Seaman Associates, 270 A.D.2d 83, 85, 704 N.Y.S.2d 68, 70 (App.Div. 1st Dep't 2000). By order of the court dated June 10, 1999, Waxenberg was appointed Receiver of the rents and profits of the premises located at 2270-76 University Avenue, Bronx, New York.
When a receiver makes an application to a court to be relieved of the obligations and responsibilities attendant on that position, by having the court approve his account and fix his commission, any challenge to the application should be resolved at a judicial hearing. See Bozewicz v. Nash Metal Ware Co., Inc., 280 A.D.2d 443, 720 N.Y.S.2d 514 (App. Div. 2d Dep't 2001). Here, Thelen challenged the final accounting made by the Receiver. Thelen alleged that expenditures made by the Receiver for repairs and for municipal licenses, permits and inspections were suspect. Furthermore, he questioned the need for the legal services provided by the Receiver's counsel, as well as the fees incurred by the Receiver for those services. Thelen also questioned the utility of Waxenberg's hiring an agent to assist him in managing the property, and the fee paid to that agent. Moreover, Thelen called into question the bank fees charged to the account Waxenberg established to hold the rental payments that came into his possession during the term of the Receivership.
At a hearing held by the Court, all of Thelen's questions and contentions respecting the Receiver's accounting statement were addressed through the Receiver's proffer of evidence and his presentation of supporting documentation. This information established that the work performed by Waxenberg and the costs incurred by him in fulfilling his receivership responsibilities were reasonable, appropriate and in consonance with the terms of the order appointing him Receiver for the property located at 2270-76 University Avenue, Bronx, New York.
Based upon the submissions made by the parties and the record generated during the hearing discussed above, the Court finds that Waxenberg collected rents totaling $36,191.90 during the term of the receivership; $26,932.33 of the total rents collected were disbursed by Waxenberg to meet his receivership obligations. The record evidence establishes that Waxenberg engaged an agent to assist him in fulfilling his responsibilities as Receiver. Waxenberg paid the agent, as permitted by the order creating the receivership, 3% of the rental payments he received from tenants of the property that was the subject of the foreclosure action. In addition, Waxenberg assigned to the agent the 5% statutory commission to which Waxenberg was entitled as the Receiver of the above-noted premises. Therefore, the Receiver and his agent were entitled to receive the combined sum of $2,893.64. However, based upon an agreement between the plaintiff and the Receiver, that was discussed earlier in this writing, Waxenberg received an additional commission of $1,441.71 for the work he performed pursuant to the receivership order. At the hearing held by the Court to address the challenges to the Receiver's accounting statement raised by Thelen, Waxenberg agreed to relinquish that commission and to add $1,441.71 to the balance remaining in the receivership bank account.
The Receiver's accounting statement reflects that $21.39 of non-commission based funds were received by Waxenberg. That sum was deducted from the $36,191.90 before the agent's fee or the Receiver's commission was calculated. Therefore, the agent's fee and the Receiver's commission were calculated based on $36,170.51.
The Receiver engaged the services of legal counsel, as he was permitted to do under the terms of the court's appointment order. The Receiver's counsel instituted legal proceedings against certain of the tenants of the subject property. The legal proceedings instituted were needed either to secure payment of the applicable rents or to remove the tenants from the premises. The Receiver's counsel billed him for this work, but has not been paid. In addition, the Receiver incurred additional legal fees in order to have the court intervene, after Thelen engaged in conduct that the Receiver believed was contumacious. The Receiver has also been billed for this work, but has not paid that bill. Competent evidence has been presented to the Court establishing the date, the hours expended, and the nature of the work performed for the legal fees that have been billed to the Receiver. Information of this sort is needed for a court to determine whether a request for attorney's fees is reasonable. See, e.g., New York State Association for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983).
The Court finds, based upon its review of the submissions made and the record generated during the hearing held by the Court, that the Receiver reasonably incurred $2,775.00 in legal fees. This sum should be paid from the balance which remains in the bank account into which Waxenberg deposited the funds that came into his possession, during the term of the receivership.
The Court finds further that, based on the record evidence, at the time the Receiver filed the instant motion, the balance held in the receivership bank account was $10,309.57. After the motion was filed, $1,050.00 were expended to maintain the surety bond that Waxenberg was required to post in accordance with the order of the court appointing him Receiver. That expenditure reduced the receivership bank account balance to $9,259.57. As noted earlier, during the hearing held by the Court, the Receiver agreed to relinquish $1,441.71 which had been paid to him by the plaintiff as an additional commission. Therefore, the funds being held by the Receiver, in the receivership bank account, total $10,701.28. The Receiver has been billed $2,775.00 for legal fees; those fees, which have yet to be paid, should be paid out of the balance that remains in the receivership bank account. Once those fees are deducted from the receivership bank account balance, $7,926.28 will remain in that account and be available for disbursement to Thelen.
IV. RECOMMENDATION
For the reasons set forth above, I recommend that: (a) the court approve the Receiver's accounting; (b) the Receiver be authorized to pay his counsel, from the balance outstanding in the receivership bank account, $2,775.00, the reasonable attorney's fees the Receiver incurred during the course of the receivership; (c) the Receiver's commission and the fee paid to the Receiver's agent be fixed at $2,893.64; (d) the Receiver's surety be discharged; and (e) Waxenberg be discharged as Receiver. I also recommend that all funds remaining in the receivership bank account, after the payment for legal services is made to the Receiver's counsel, be tendered to Thelen.
V. FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Allen G. Schwartz, 500 Pearl Street, Room 1350, New York, New York, 10007, and to the chambers of the undersigned, 40 Foley Square, Room 540, New York, New York, 10007. Any requests for an extension of time for filing objections must be directed to Judge Schwartz. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Arn, 474 U.S. 140 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir. 1988);McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).