Opinion
27833/99.
Decided April 7, 2009.
Perry Ian Tischler, Esq., Bayside, NY, Attorney for Movant (Atlantis Asset Recovery LLC on behalf of Claimant).
Michael Sullivan, Esq., New York State Attorney, General's Office — Charities Bureau, New York, NY, Attorney for the New York Attorney General's Office.
Atlantis Asset Recovery LLC ("Atlantis"), by virtue of a limited power of attorney executed by John Criscione ("Claimant"), brings a renewed motion for an order confirming the Referee's Report of Sale and an order directing the Office of the State Comptroller ("Comptroller") to disburse surplus monies deposited as a result of the present action.
BACKGROUND
On March 22, 2000, this court signed a judgment of foreclosure and sale on property located at 1646 E. 33rd Street, Brooklyn, New York ("Property"). The Referee's Report of Sale, by Hal S. Mercer IV, indicated that the Property was sold at auction on June 22, 2000 and a surplus of $20,793.61 remained after the sale. According to the Certificate of Deposit from the Comptroller submitted in support of this motion, the Commissioner of Finance of the City of New York paid the $23,630.61 surplus, which included interest from the date of it's deposit, to the Comptroller in April of 2006.
Pursuant to an "Asset Recovery Agreement" ("Agreement") between Atlantis and the Claimant, notarized on October 18, 2007, Atlantis was engaged to recover "an undetermined amount of money" that the Claimant "may be entitled to receive." In the Agreement, the Claimant authorized Atlantis to retain attorney Perry Ian Tischler to "assist [Atlantis] with the legal filing of any claims necessary to procure payment."
It is not clear who filed a claim on behalf of the Claimant with the Kings County Clerk on September 10, 2007, or who requested the Certificates of No Exceptions and Claimants by the Kings County Clerk dated September 19, 2007, if the Agreement did not Authorize Atlantis or Mr. Tischler to act on the Claimant's behalf until October 18, 2007.
Mr. Tischler, on behalf of Atlantis, previously filed a motion for the distribution of surplus monies on December 5, 2007. On July 17, 2008, this court denied Atlantis' motion noting that upon renewal, Atlantis should provide a current power of attorney and affidavit from the Claimant, a copy of the recovery agreement between Atlantis and the Claimant, and an affidavit explaining why defendant Peggy Martire was not served notice of the motion for the distribution of surplus funds. The court also noted that the proposed Order of Distribution indicated "that the fee due to Atlantis Asset Recovery shall be limited to 15% of the sums recovered herein, plus $3,500.00 in reasonable counsel fees, in accordance with New York State Abandoned Property Law" and that the $3,500.00 in legal fees was approximately 15% of the $23,630.61 sought in surplus funds. The court noted that the affirmation in support of the renewed motion should include legal support for charging the Claimant for attorney's fees in addition to Atlantis' recovery fees in light of Abandoned Property Law § 1416, which invalidates abandoned property recovery agreements that provide for the payment of fees in excess of 15% of the value of the recoverable property.
The affirmation in support of the renewed motion states that the Agreement was "in compliance with New York State Abandoned Property Law 1406" and further states:
"[w]ith respect to counsel fees, it is respectfully submitted that in conjunction with the policy, practice, and interpretation of the statute by the Office of the New York Comptroller and the New York State Attorney General, that the statute does not preclude an award of counsel fees, as contractually agreed with the client. The basis of this policy is that the respective agencies have acknowledged the difference between the administerial services provided by a finder, and the legal services provided by counsel."
In support of the motion, Mr. Tischler cites an unpublished short form order, that does not identify the abandoned property, but grants legal fees of $3,078.00 to Mr. Tischler in addition to 15% of the recovered property as fees for Atlantis ( Fed. Natl. Mtge. Assoc. v Occean, Sup Ct, Kings County, December 4, 2008, Saitta, J., index No. 12109/94), and an unpublished decision in which Mr. Tischler was granted "reasonable legal fees" of $2,766.00 in addition to 15% of the recovered property as fees for Atlantis ( Midcoast Mtge. Corp. v Wilson, Queens County, June 11, 2008, Rios, J., index No. 7375/94). At oral arguments herein, the New York Attorney General's Office took a "neutral position" on legal fees with respect to abandoned property recovery agreements where the legal fees are not "egregious" and took no position on the statutory interpretation of Abandoned Property Law § 1416. The Comptroller has not appeared in this action.
The Attorney General's Office cited Sadow v Poskin Realty Corp., 63 Misc 2d 499 [Sup Ct, Queens County 1970] with respect to it's position on attorney's fees in surplus recovery motions. Sadow contains a complex analysis of competing claims against the surplus funds and concludes with a denial of any attorneys' fees in the absence of statutory authority to make such award. It is noted, however, that § 1416 was added to the Abandoned Property Law in 1980 and Sadow is therefore of limited applicability to the case at bar ( see In re Devlin, 182 AD2d 322, 329 [2d Dept 1992]).
Atlantis moves for an order directing the Comptroller to pay $3,500.00 in legal fees to Mr. Tischler, a sum equal to 15% of the total sum on deposit with the Comptroller to Atlantis, and the remaining balance to the Claimant.
DISCUSSION
Monetary proceeds from the sale of property that are deposited in court, and remain for five years, are deemed abandoned property pursuant to Abandoned Property Law § 600(1)(a) ( see NYCTL 1996-1 Trust v Nuthree Inc. , 18 Misc 3d 603 , 604 [Sup Ct, Bronx County 2007]) and the Commissioner of Finance of the City of New York is then required to deposit the abandoned funds with the Comptroller (Abandoned Property Law § 602). "Claims of $5,000 or more for any abandoned property paid to New York State may be established only on an order of the court after service of notice on the State Comptroller and on due notice to all the parties to the action or proceeding which resulted in the moneys being paid into court" under Abandoned Property Law § 1406(2)(a) ( NYCTL 1996-1 Trust, 18 Misc 3d at 605). As a matter of public policy, New York has regulated the activities of abandoned property locator services that become involved in the claim process on behalf of other individuals through Abandoned Property Law § 1416 ( see generally Matter of HD Servs., LLC v Office of the State Comptroller, 14 Misc 3d 1225A [Sup Ct, Albany County 2007]). Pursuant to Abandoned Property Law § 1416:
1. No agreement to locate property held by the comptroller pursuant to this chapter shall be valid unless that agreement: (a) is in writing and signed by the property owner; (b) discloses the nature of the property; and (c) discloses the name and address of the holder. 2. No such agreement shall be valid if it provides for payment of a fee in excess of fifteen percent of the value of recoverable property. 3. Nothing in this section shall be construed to prevent an owner from asserting, at any time, that any agreement to locate property held by the comptroller is based on an excessive or unjust consideration.
The Agreement herein between the Claimant and Atlantis is unenforceable pursuant to Abandoned Property Law § 1416 due to the inadequate description of the abandoned property. Under Abandoned Property Law § 1416(1)(b), an abandoned property agreement is invalid where the agreement fails to "disclose[] the nature of the property." Paragraph A of the Agreement states:
Atlantis has informed the [Claimant] that through it's diligence, research, and expertise, that Atlantis has discovered that the [Claimant] may be entitled to receive an undetermined amount of money that may currently be on deposit with an agency, entity, corporation, municipality, clerk, or other governmental body in the City and/or State of New York.
The Agreement does not contain any further indication of the type of property that Atlantis was seeking to recover. This description is insufficient for the Claimant to determine the nature of the abandoned property as required under Abandoned Property Law § 1416 (1)(b) ( see Unclaimed Prop. Recovery Serv., Inc. v UBS PaineWebber Inc., 2009 NY Slip Op 257 [1st Dept 2009]; see In re Estate of Kraus, 144 Misc 2d 34 [Sup Ct, Queens County 1989]).
The Agreement is also invalid under Abandoned Property Law § 1416(1)(c) due to Atlantis' failure to "disclose[] the name and address of the holder" as required under Abandoned Property Law § 1416(1)(c) ( see Unclaimed Prop., 2009 NY Slip Op 257; see Kraus, 144 Misc 2d at 40; see State of New York v Abandoned Funds Information Center, Inc., 129 Misc 2d 614, 620 [Sup Ct, New York County 1985]).
The Agreement is further unenforceable pursuant to Abandoned Property Law § 1416 (2) due to the fee provision which provides for the payment of fees greater than 15% of the recoverable property. Paragraph D of the Agreement states:
the parties agree that the fee which shall be due to Atlantis shall be an amount equal to fifteen percent (15%), plus reimbursement for reasonable legal fees (which shall not exceed $3,500.00) of the monies collected of the monies collected [sic].
According to paragraph F of the Agreement:
[Claimant] understands that Atlantis is not a law firm or any [sic] entity providing legal services. [Claimant] hereby authorizes Atlantis to retain Parry Ian Tischler, Esq, . . . as counsel to assist them with the legal filing of any claims necessary to procure payment. In the event that Atlantis shall not be successful, they will nevertheless remain liable for any legal fees incurred and will indemnify [Claimant] to that extent. The parties understand that Perry Ian Tischler, Esq. will look only to Atlantis for said legal fees.
Atlantis cites Midcoast Mtge. Corp. v Wilson, Queens County, June 11, 2008, Rios, J., Index No. 7375/94, for the proposition that the Comptroller and the New York State Attorney General do not interpret the statute as "preclud[ing] an award of counsel fees, as contractually agreed with the client" because "the respective agencies have acknowledged the difference between the administerial services provided by a finder, and the legal services provided by counsel." In Midcoast, the court indicated that the Comptroller had "request[ed] that the Court establish reasonable attorney's fees, limit the finder's fees to 15% of the amount recovered by claimant, and direct that payment, if any, be made only to claimant and not counsel."
It is noted that the New York Attorney General's Office appeared but did not take a position on the interpretation of the statute at oral arguments.
It is noted that while the facts leading to Atlantis' claim for abandoned property in Midcoast are similar to the facts in the present action, Midcoast is distinguished from the present action because the agreement in that action disclosed the nature of the property and the name and address of the holder, and, more significantly, the Comptroller opposed Atlantis' motion for distribution of surplus, thus necessitating actual litigation. The attorney requested and was awarded fees of $2,766.00 from the abandoned property recovery which had been valued at $44,085.72 more than 4 years prior to the date of the decision. Thus, in Midcoast, the attorney was awarded fees equal to only approximately 6% of the recovered property whereas, in the present action, the requested attorney's fees of $3500 represent over 14% of the recovered property in an unopposed motion. Furthermore, while the Comptroller is authorized to make rules and regulations to enforce provisions of the Abandoned Property Law ( see Abandoned Property Law § 1414; see Matter of U.S. Claims Servs. Inc. v New York State Dept. of Audit Control, 2009 NY Slip Op 29071, *3-*4 [Sup Ct, Albany County 2009]; see Matter of HD Servs, 14 Misc 3d at 1225A), the Comptroller's position in Midcoast does not compel the granting of the relief requested here.
Although there is limited case law interpreting the statute, the Second Department Appellate Division has included reasonable attorney's fees within the 15% fee cap of Abandoned Property Law § 1416 (2) when determining whether the Surrogate's Court reduction of an unclaimed asset locator fee was proper. In In re Devlin, 182 AD2d 322 [2d Dept 1992], the Appellate Court held that the Surrogate's Court had the power to review the reasonableness of a fee imposed by one engaged in the business of locating owners of unclaimed assets and assisting in the recovery of such assets. Although the Court noted that the Abandoned Property Law was not directly applicable to In re Devlin because the estate at issue did not escheat to the State as abandoned property, the Court determined that the fee cap established by Abandoned Property Law § 1416 (2) was properly considered by the Surrogate's Court ( In re Devlin, 182 AD2d at 329). The Court noted with approval that the properly reduced fee awarded to the asset locator, inclusive of out-of-pocket expenses and attorney's fees, was approximately 15% of the recovered assets ( In re Devlin, 182 AD2d at 330).
As Abandoned Property Law § 1416 (2) invalidates abandoned property locating agreements that provide for the payment of fees in excess of 15% of the value of recoverable property, making no distinction between attorney's fees and any other fees incurred in the recovery efforts, an agreement to locate abandoned property that provides for attorney's fees over and above a 15% recovery fee is invalid pursuant to Abandoned Property Law § 1416 (2) ( see In re Devlin, 182 AD2d at 329-330; see Abandoned Funds, 129 Misc 2d at 619-621 (holding that a flat fee abandoned property recovery agreement is barred by Abandoned Property Law § 1416 (2) "since it may result in a fee of more than 15% of the recoverable property")). Excluding attorney's fees, or any other fee listed separately in an abandoned property recovery agreement, from the 15% limitation would nullify the protection to consumers that Abandoned Property Law § 1416 (2) was intended to provide ( see Abandoned Funds, 129 Misc 2d at 620).
Accordingly, the Agreement is invalid pursuant to Abandoned Property Law § 1416 and, as such, neither Atlantis nor Mr. Tischler are entitled to recover any portion of the recovered assets from the Claimant in this action. As indicated in Mr. Tischler's affirmation in support of the motion, and the "standing agreement" between Mr. Tischler and Atlantis as reflected in Mr. Tischler's letter to Atlantis dated October 19, 2007, Mr. Tischler's fees in this action are to be paid solely by Atlantis.
CONCLUSION
Accordingly, the motion is granted to the extent that the Referee's Report of Sale is confirmed. Pursuant to Abandoned Property Law § 1406(2), the Office of the State Comptroller is ordered to distribute all of the surplus monies on deposit in this action to the Claimant, John Criscione, who currently resides at 1614 77th Street, 1st Floor, Brooklyn, NY 11214.
The foregoing constitutes the decision of the Court.