DeFlora Lake Development Associates, Inc. v. Hyde Park
689 F. App'x 99
| 2d Cir. | 2017Background
- DeFlora and Hyde Park entered a long-term land contract (1980) amended in 1995 to state Hyde Park owed DeFlora $8,404,989.43 as nonrecourse debt payable solely from property proceeds and sales.
- DeFlora sued Hyde Park earlier (2008); that action was dismissed in 2011 (not appealed).
- DeFlora filed a new action in 2013; the district court dismissed it in 2015 and this Court affirmed by summary order.
- Hyde Park sought and obtained two district-court awards of attorneys’ fees against DeFlora (one for the district-court litigation and one for the defense of the appeal).
- DeFlora did not contest the fee amounts but sought to offset those fee awards against the $8,404,989.43 debt owed by Hyde Park.
- The district court denied setoff and refused to treat the fee awards as liens that could reduce the nonrecourse debt; this Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DeFlora may set off Hyde Park's attorneys’ fee awards against the nonrecourse debt Hyde Park owes under the land contract | DeFlora: DCL § 151 permits setoff of mutual debts; the fee awards should reduce Hyde Park’s debt | Hyde Park: The land contract created a nonrecourse debt payable only from property proceeds; no mutuality for setoff | Held: No setoff — debts lack required mutuality because the contract makes the debt nonrecourse and payable only from property proceeds |
| Whether filing the fee award created a lien on the property that must be credited against the debt under the contract’s lien/encumbrance clause | DeFlora: The fee award, when filed, became a lien; the contract requires credits for liens so fees must reduce the debt | Hyde Park: The lien/credit clause protects Hyde Park’s interest in property value from third-party liens; it does not convert Hyde Park’s own fee award into a credit against the nonrecourse debt | Held: Fee award is not a contract lien triggering a credit; construing it otherwise would undermine the contract’s nonrecourse scheme |
Key Cases Cited
- CBS Broadcasting, Inc. v. FilmOn.com, Inc., 814 F.3d 91 (2d Cir.) (standard for reviewing fee awards)
- Goodheart Clothing Co. v. Laura Goodman Enters., Inc., 962 F.2d 268 (2d Cir.) (de novo review for contract construction)
- Westinghouse Credit Corp. v. D’Urso, 278 F.3d 138 (2d Cir.) (mutuality requirement for setoff)
- Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (U.S. Supreme Court) (description of common-law right of setoff)
- Brad H. v. City of New York, 17 N.Y.3d 180 (N.Y.) (contract language must be read in context)