Opinion
October 21, 1999
Uri Kaufman, New York City, for MS Associates L.P.
Jules A. Epstein, Garden City, for Nationwide Associates Inc. and Another, defendants.
MS Associates L.P. (MS) moves to be substituted as plaintiff pursuant to CPLR 1018. There is no opposition to this branch of the motion, and it is granted on consent. MS also seeks (1) confirmation of a so-called Amended Referee's Report dated July 26, 1999 in place of the earlier referee's report dated March 12, 1999, to reflect "corrected" figures due on the mortgage and (2) modification of this court's decision dated May 11, 1999, (the "Decision") which, on motion of the assignor of MS, CLM Properties, Inc., ("CLM") confirmed the original report of the referee and granted Judgment of Foreclosure and Sale.
Nationwide Associates Inc. and Barry Richter cross-move to compel plaintiff to deliver an assignment of the note and mortgage and cause of action for foreclosure on tender of all sums legally due and owing to plaintiff.
Prior Proceedings and Events
This action was commenced on March 2, 1998. It demanded judgment of foreclosure and alleged that the principal sum due on the mortgage as of January 1, 1998, was $211,283.95. The complaint asked for that sum with interest as stated in the mortgage together with fire insurance premiums, taxes, assessments, water rates, interest or liens or other charges affecting the mortgaged premises. It sought judgment against Barry Richter and Daniel Perla for any deficiency based on their guaranty. And, it asked for the costs and expenses of the action and of the sale. The defendants either defaulted or waived service of papers.
On August 4, 1998 the court granted plaintiff's motion to appoint a referee to compute the sums due to plaintiff on the mortgage. The court appointed Ravi Batra, Esq. to "take proof as to any payments which have been made, and to compute the amount due on the mortgaged premises to Plaintiff."
On August 18, 1998, plaintiff assigned the mortgage to CLM in consideration of $210,000 plus foreclosure attorney's fees. The assignment included the "bond or note or obligation described in said mortgage, and the moneys due and to grow due thereon with the [sic] interest." In a separate document, plaintiff assigned to CLM the promissory note and guaranty thereof by Barry Richter and Daniel Perla executed on January 24, 1992.
While the complaint alleges personal guarantees of Richter and Perla, the court has seen no documents bearing their personal signatures.
Mr. Batra rendered his referee's report of computations dated March 12, 1999. In it he reported that there was due since January 1, 1998, principal in the sum of $211,283.95, together with default interest at 24% per annum from that date to February 15, 1999 in the sum of $47,538.90. He reported a total due of $255,827.27 (corrected from a figure of $255,927.27). On April 21, 1999, plaintiff moved for Judgment of Foreclosure in the usual form and to substitute CLM in place of the named plaintiff. The supporting affirmation of plaintiff's attorney stated that the Referee to Compute had found there was due and owing $258,822.85 "with interest at two percent from February 15, 1999." (This is the figure, of course, that the referee did find before crediting $2,995.58 for defendant's escrow. In addition, counsel was wrong about the interest rate reported. The referee found the rate to be 24% as specified in the mortgage for the default rate.) In further support of the motion, the affidavit of the President of CLM stated that the "entire amount due Plaintiff including interest through February 15, 1999, is the sum of $255,927.27." He gave the same figures and dates for principal and interest at 24% as are reflected in the referee's report. However, he added that defendants are entitled to a credit of $2,995.59. The Senior Vice President of the Bank derived a total of $241,248.76 reflecting this credit. The referee also reflected this credit in the calculations contained in his original report.
Running interest from January 1, 1998 rather than February 1 was error since the default occurred on January 30 when the mortgagor failed to pay the final balloon payment. (See Complaint ¶ 69 "The defendants have failed . . . to pay the unpaid balance on its due date, to wit: January 30, 1998. . . .")
These figures are in error. The interest for the period covered by the referee's report should be $57,046.67. This would yield a total of $268,330.62 less a credit for escrow funds of $2,995.58 or $265,335.04.
Guarantor Richter on April 30 notified plaintiff's attorney that he was "ready, willing and able to pay all sums due and owing to the mortgagee in consideration for an assignment of the mortgage, note and cause of action."
This court, by the Decision dated May 11, 1999, granted on default plaintiff's motion (Sequence 003) "to amend the caption to reflect the substition [sic] of CLM Properties, Inc. as plaintiff, to confirm the Report of the Referee to Compute . . . and for Judgment of Foreclosure and Sale." The Decision directed a settle order. This is the Decision that the motion at bar asks to modify.
Swiftly following this Decision, CLM assigned the mortgage to MS for "One Hundred Dollars and other good and valuable consideration." This assignment embraced as well the "bond or note or obligation described in said mortgage, and the moneys due and to grow due thereon with interest." In contrast to the mortgagee's earlier assignment to CLM, the sub-assignment to MS made no mention of the personal guaranty of Richter and Perla.
In conformity with the Decision counsel for MS submitted and later withdrew a proposed "Order Judgment of Foreclosure Sale." Its first decretal paragraph provided for confirmation and ratification in all respects of the report of Ravi Batra, Esq. The second paragraph declared that plaintiff was entitled to $255,827.27 plus interest from February 16, 1999.
The last event of note before MS brought on the motion at bar was the misguided effort of MS to return to the referee, without a court order, to amend his report. The referee rendered an Amended Report dated July 26, 1999. In it he reports that the amount due to plaintiff through July 15, 1999, is $306,331.91. This consists of the same principal of $211,283.93 as the referee had reflected in his original report. He calculated interest at 24% per annum from January 1, 1998 to July 15, 1999 or $78,175.08. (The correct figure is $78,175.12.) He added late fees of $408.90 and attorneys fees of $16,464.00. The aggregate amounted to the $306,331.91, mentioned above. This Amended Referee's Report is the subject of the branch of the motion to confirm.
Actually, the original report set forth the figure as $211,283.95 — two cents more.
Again, the date of default alleged in the complaint was January 30, 1998 so that interest for the month of January should only have been 10%, not the 24% default rate.
$13,464 were the fees and disbursements of Isaac Anolic, Esq. the attorney for the original plaintiff and the first assignee. $3,000 were the fees of Uri Kaufman, Esq. attorney for MS.
The law applicable to this motion and the cross-motion of Richter and Nationwide takes us through principles of assignment, law of the case, judicial estoppel, refereeships to compute, rights of redemption and equitable termination of accruing interest.
Law of Assignment
It is familiar learning that an assignee stands in the shoes of the assignor. MS, therefore, is in no better position than was CLM. Indeed, MS is subject to all the equities and burdens that attached to CLM and Fourth Federal Savings Bank. International Ribbon Mills, Ltd. (Arjan Ribbons), 36 N.Y.2d 121, 126 (1975); Grossi v. Rialto Security Corp., 273 N.Y. 403, 406 (1937); Trisingh Enterprises v. Kessler, 249 A.D.2d 45, 46 (1st Dept, 1998); 6A N Y Jur 2d Assignments, §§ 58, 65; 73 N.Y. Jur.2d Judgments, § 184. Therefore, the motion and cross-motion need to be analyzed as if CLM were still the holder of the mortgage and note subject only to any reduction in the scope of its rights occasioned by the assignment to MS. This presents the question: Could CLM have made this motion?
Law of the Case and Judicial Estoppel
Where an issue has been resolved on the merits earlier in the litigation, this resolution becomes the law of the case.Locilento v. John A. Coleman Catholic High School, 134 A.D.2d 39, 43 (3d Dept 1987); cf., Mulder v. Donaldson, Lufkin Jenrette, 224 A.D.2d 125, 131 (1st Dept 1996). The law of the case doctrine also applies to motions. Matter of Dondi v. Jones, 40 N.Y.2d 8, 15 (1976):
It is fundamental that, in the absence of a statutory exception . . . and in order to prevent vexatious and repeated applications on the same point, a motion once fully heard and decided cannot be revived again or renewed unless with leave of the court or Judge who denied it or if made upon presentation of new facts which have occurred since the denial of the previous motion. . . . [citations omitted].
See also, 28 N.Y. Jur.2d Courts and Judges § 236.
Lest there be any hesitation, on the ground that it was granted on default, about the applicability of the doctrine of the law of the case attaching to CLM's motion for Judgment of Foreclosure and Sale upon the original referee's report and calculations, the law is also settled that a decision on default is deemed a decision on the merits. Cf., Rubeo v. National Grange Mutual Insurance Co., 93 N.Y.2d 750, New York Law Journal, October 15, 1999, p. 26, c. 1; 175 East 74th Corporation v. Hartford Accident Indemnity Company, 51 N.Y.2d 585, 590, n 1 (1980) ("That the dismissal was after default does not alter this rule of direct estoppel."); Bray v. Cox, 38 N.Y.2d 350, 355 (1976) ("Thus, we hold the dismissal of an appeal for want of prosecution to be on the merits of all claims which could have been litigated had the appeal been timely. . . ."); Christian v. Hashmet Management Corp., 189 A.D.2d 597 (1st Dept 1993); 28 N.Y. Jur.2d Courts and Judges, § 252; 10 Weinstein-Korn-Miller, N.Y.Civ.Pr. ¶¶ 5011.12, 5011.30.
Also playing a role in resolving the motion and cross-motion at bar is the concept of judicial estoppel or, more precisely, estoppel against inconsistent positions. Judicial estoppel is described in 57 N.Y.Jur.2d, Estoppel, Ratification and Waiver § 53:
. . . [W]here a party assumes a certain position in a legal proceeding and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position . . . to the prejudice of the adverse party in the original proceeding.
Strictly speaking, for judicial estoppel to apply, the party estopped must have procured a judgment on the basis of the inconsistent position. See, e.g., Manhattan Avenue Development Corp. v. Meit, 224 A.D.2d 191, 192 (1st Dept), lv. app. den., 88 N.Y.2d 803 (1996); Meyers v. Geller, 194 A.D.2d 595 (2d Dept 1993)
This is not to say, however, that no estoppel can result from inconsistent sworn statements made in the course of the same proceeding. 57 N.Y.Jur.2d § 53, supra. As this court recognized in City of New York v. Show World, 178 Misc.2d 812, 823, n. 4 (Sup.Ct. N Y Cty, 1998), such inconsistency can support an estoppel. Inter-Power of New York v. Niagara Mohawk Power Corporation, 208 A.D.2d 1073, 1075 (3d Dept 1994) (". . . [T]he doctrine of judicial estoppel . . . 'prevent[s] a party from inequitably adopting a position directly contrary to or inconsistent with an earlier assumed position in the same proceeding or a prior proceeding" citing Shepardson v. Town of Schodack, 195 A.D.2d 630, 632 (3d Dept 1993), aff'd 83 N.Y.2d 894 (1994)).
Referees to Compute
RPAPL § 1321 Acts. authorizes the court to direct a referee to compute the amount due the plaintiff in an action to foreclose a mortgage. A referee has no power beyond the order of reference. L.H. Feder Corp. v. Bozkurtian, 48 A.D.2d 701 (2d Dept 1975). The court has the power to bypass the referee's appointment and retain the authority itself to perform all the decision-making including the computation of the amount due. This is rarely done except in New York County where it reserves to itself the function to fix legal fees when they are requested. 2 Bergman on New York Mortgage Foreclosures, § 27.01 (1999)
Right of Redemption, Accrual of Interest and Attorneys Fees
A mortgagor may tender payment of the balance due on the mortgage as long as it is unconditional. If the mortgagee wrongfully refuses to accept the tender, additional interest may be forfeited. 1 Bergman, supra § 4.08. The court has discretion to determine whether interest is recoverable. Sloane v. Gape, 216 A.D.2d 285, 286 (2d Dept 1995), lv. app. dism., 87 N.Y.2d 968 (1996) A guarantor of the mortgage debt may make a tender and demand assignment of the mortgage as a subrogee of the debtor. Chemical Bank v. Meltzer, 93 N.Y.2d 296, 304 (1999). However, tender is not accomplished by a mere offer to pay. Actual payment is required. 1 Bergman, supra, §§ 2.05[2], 4.08.
Finally, where a mortgage provides for legal costs or reasonable attorneys fees, it will be enforced. 2 Bergman, supra § 26.01. But, there must be an express provision for payment of attorneys' fees in the mortgage. Ibid. A provision solely in the note will not accomplish the mortgagee's objective. "A provision in the note for the payment of legal fees simply does not create an obligation to pay counsel fees incurred in an action to foreclose on the mortgage secured by that note." 2 Bergman, supra, §§ 26.01 and 26.01[1], citing Lipton v. Specter, 96 A.D.2d 549 (2d Dept 1983), lv. app. den, El N Y 2d 608 (1984).
Application to Motion and Cross-Motion
MS, the assignee, wants this court to confirm the Amended Referee's Report. The Referee was without jurisdiction to render that report. His original report had already been confirmed and was the basis for granting CLM's motion for Judgment of Foreclosure and Sale "in the usual form." CLM proclaimed the validity of the figures reported by the referee. It also conceded the credit of $2,995.59. (Affidavit of Glenn Miller, III sworn to November 24, 1998 and Affidavit of Louis Mazzella sworn to January 29, 1999.)
MS as assignee steps into the shoes of CLM. CLM could only "correct" the alleged errors it induced in the referee's original report by moving this court to reconsider its decision granting plaintiff's motion for Judgment and to recommit the computation to the referee. Of course, this would require a showing of new facts or, at the very least, an explanation of why the errors were not discovered before the report was submitted in support of the motion for Judgment of Foreclosure and Sale. Foley v. Roche, 68 A.D.2d 558, 568 (1st Dept 1979).
Since MS has not moved for renewal or reconsideration, nor complied with the requisites of such a motion, its application to confirm the Amended Referee's Report is blocked by the law of the case and by estoppel. Its assignor has saluted the correctness of Mr. Batra's original computation. CLM obtained a favorable decision on its motion for Judgment based on that computation.
Even were the court to reach the merits of the Amended Referee's Report, the plaintiff would not prevail. First, the interest calculation for the month of January 1998 is inflated by $2,464.98 — the difference between 10% and 24% for that month. In addition, CLM agreed that a $2,995.58 credit was owing to defendants. The Amended Report omitted this credit. Second, the amended report accepted without analysis the legal fees of $16,464.00. But, MS would be entitled at most to $3,000 to the extent Mr. Kaufman's fees are reasonable. Collection of the fees of the original plaintiff and of CLM were not assigned to MS. (Neither, for that matter, were the guarantees of Richter and Perla.) Finally, the late fees of $408.90 seem to be calculated on the installment that preceded the balloon and were extended over a four month period. This is at odds with the theory of the complaint that defendants failed to pay the unpaid balance (i.e., the balloon) on January 30, 1998.
It comes with ill grace for MS to repudiate this concession of CLM in Mr. Kaufman's reply affirmation to the cross-motion.
Only if there had been a provision for them in the mortgage — not the note — would the mortgagee have a right to claim them.
The court does not agree with the defendants that the default rate of interest cannot apply to the balloon payment, but only applies to the installments. The balloon payment itself is an installment, albeit the final installment under the note.
The defendants also claim that MS is not entitled to attorneys fees at all. It is true that CLM never asked for them. It is also accurate to observe that the mortgage is silent as to legal fees. However, the note makes provision for them. This is not good enough. They cannot be recovered in this foreclosure action.Lipton v. Specter, supra. Moreover, the $3,000 for Mr. Kaufman's services includes time spent post-tender, and much of these services were duplicative of prior counsel's efforts or were squandered on the misguided effort to obtain an amended referee's report. They would, if applied for, be denied for the added reason of plaintiff's lack of showing that they were reasonable and necessary.
In view of the foregoing, Richter and Nationwide may tender in accordance with the figures previously confirmed in the original referee's report.
This all means that plaintiff's motion to confirm the Amended Referee's Report and to modify the Decision dated May 11, 1999 is denied, save only for a change of caption to reflect the substitution of MS. This also means that the cross-motion is granted on condition that Richter or Nationwide or both perform their tender, in accordance with the figures in the referee's original report, within a short period to be specified in the order to be settled hereon.