In the Matter of ADAM JAKUBOWICZ, Respondent, v A.C. GREEN ELECTRICAL CONTRACTORS, INC., et al., Respondents, and CHAIM ROZENBLATT, Respondent. DUDLEY GAFFIN, as Receiver, Appellant. In the Matter of ADAM JAKUBOWICZ et al., Respondents, v 709 9th AVENUE, LLC, et al., Respondents, and CHAIM ROZENBLATT et al., Respondents. DUDLEY GAFFIN, as Receiver, Appellant.
First Department, New York
November 1, 2005
803 N.Y.S.2d 71 | 22 A.D.3d 146
Tom, J.P.
Dudley Gaffin, New York City, pro se, and Ronald Yang, New York City, for Dudley Gaffin, appellant.
Krol & O’Connor, New York City (Igor Krol of counsel), for Adam Jakubowicz and others, respondents.
Blank Rome LLP, New York City (Lawrence M. Rosenstock of counsel), for Chaim Rozenblatt and others, respondents.
OPINION OF THE COURT
Tom, J.P.
A receiver, appointed by Supreme Court to effectuate the dissolution of nine corporations and dispose of their assets, appeals from an order denying him a commission in excess of that mandated by
In March 2002, pursuant to
Gaffin moved to approve his accounting and fix his commission and expenses in the amount of $167,500, based upon the value of the real property and the amounts collected, including rent and other receivables. In January 2003, by stipulation of the parties, the eight properties were valued at $12 million, but they were purported to have been worth up to $20 million in the opinion of unnamed real estate experts. Assigning a fair market value of $15 million to the properties, Gaffin asked the court to award him 1% of this sum, or $150,000.1 In support of the motion, Gaffin maintained that he was entitled to be compensated for the “special service” he rendered during the course of the proceedings (citing Weckstein v Breitbart, 154 AD2d 305 [1989]; Precision Dynamics Corp. v 601 W. 26 Corp., 51 AD2d 907 [1976]).
In addition, Gaffin sought 5% of the approximately $350,000 in rents collected and other receipts, or $17,500, pursuant to
The receiver’s application was opposed by the partners, particularly Jakubowicz, who maintained that Gaffin had merely delayed the proceedings by his attempts to mediate a settlement and had engaged in professional misconduct. Jakubowicz argued that the receiver should not be permitted to
In reply, Gaffin argued that the court had discretion to “make an award based upon the special benefit to the parties as well as the quality of the services rendered,” noting that “had the sale taken place, I would have been entitled to my one (1%) percent commission on the amount raised.” As a policy consideration, he argued, “For the court to deprive me of a commission on the value of these properties and assets will mean that every Receiver will oppose every settlement proposed by the warring parties wherever and whenever the settlement will deprive him/her of a fee.”
For some 300 hours of service to the court, rendered over a period of 11 months, Gaffin was awarded a commission of only $5,783.33 based on a total of $378,336.84 received and disbursed by him. The court disregarded the opposing arguments advanced by Jakubowicz, which it characterized as “unfounded and speculative,” and acknowledged the receiver’s efforts to expedite the proceedings in spite of the partners’ obvious mutual hostility. Nevertheless, the court noted that
Because the receiver was appointed pursuant to
“a commission is due upon the total amount which passes through the receiver’s hands . . . In a simple case, the amount received and the amount disbursed will be the same (City of New York v Big Six Towers, 59 Misc 2d 839). Where it is not, a commission is payable as a percentage of what the court ‘decided was the value of the assets which came into the hands of the receivers, and which were disbursed or transferred by them’ (Betz v New Jersey Refrig. Co., 231 App Div 553, 558).”
While the receiver is correct in stating that, had the properties been sold, he would have been entitled to 1% of the amount received, it is dispositive that the properties were not sold; control then reverted to the corporations that owned them. This Court has construed the schedule of payment contained in
On appeal, the receiver argues that this Court should construe
Finally, Gaffin misinterprets our decision in Chatsworth Realty (284 AD2d 260 [2001]), wherein we noted that although an earlier ruling had stated that the case arose under
Gaffin ceased to represent the estate upon submission of the instant motion to approve his accounting and fix his commission. As the receiver concedes, he is not entitled to reimbursement for legal fees incurred in connection with the submission of the final accounting. Similarly, reimbursement is unavailable for the time expended by counsel in defending against accusations of professional misconduct made by Adam Jakubowicz in opposition to the motion. Unlike the factual circumstances of Jessup v Smith (223 NY 203 [1918]), upon which Gaffin relies, there was no attempt to wrest control from the appointed administrator and place it in the hands of another, requiring services by counsel deemed beneficial in preserving the trust. The receiver has provided no other authority to sup
Supreme Court properly reduced the sum due for counsel’s services rendered in connection with the intended dissolution. Duplicate hours were billed for January 2nd, 3rd, and 6th, 2003. However, the submitted time sheets indicate that counsel billed four hours for January 2nd, two hours for January 3rd and 3.5 hours for January 6th. Thus, the total should have been reduced by 9.5 hours, not 13.5 hours, as deducted by the court, and the award for legal fees should be modified to include an additional $1,000 (four hours at $250 an hour).
Although we are required to give literal application to the provisions of
In sum, the remedy lies not with the courts but with the Legislature. We strongly urge that consideration be given to amending
Accordingly, the order of the Supreme Court, New York County (Nicholas Figueroa, J.), entered May 7, 2004, insofar as it fixed the receiver’s commission at $5,783.33 and denied certain compensation for counsel fees relating to his motion for approval of his accounting, should be modified, on the law, to the extent of increasing the award for counsel fees by $1,000 and, except as so modified, affirmed, without costs.
Ellerin, J. (dissenting). While I agree that ordinarily the statute appears to limit the receiver’s fees to the schedules in
A brief recital of some of the services rendered by the receiver demonstrates their nature and value in preserving the assets of the corporations despite the best efforts of the warring partners to deplete these assets by way of unnecessary litigation fueled by their animosities.
The receiver’s time sheets reflect that he and his staff expended more than 396 hours performing work in connection with these actions. He spoke to counsel for the respective parties and met with counsel and the parties in an effort to settle the disputes or, in the alternative, to obtain documents each claimed were needed by the other for the pending actions. During these conversations and meetings, he learned about the complexity of the dispute and other pending actions and was informed of the parties’ desire to settle the matter rather than selling the properties, which would be very costly to them.
The receiver also learned that settling the matter would involve all nine entities, which these discussions with counsel
After he was appointed in Action No. 1, the receiver had difficulty finding a managing agent because of the low rent roll, which was due to the many vacancies in the buildings and petitioner Jakubowicz’s and respondent Rozenblatt’s refusal to pay for the use and occupancy of the spaces they occupied. The receiver permitted Jakubowicz to continue managing the properties that he had managed before the receiver’s appointment, but because Jakubowicz was continually late in responding to the receiver’s requests, the receiver discontinued his services and retained another managing agent.
In addition to managing the properties and preparing them for sale, the receiver helped the parties, at their request, resolve a myriad of issues, including accusations of misconduct, that arose in connection with court orders directing the individual parties to account to each other. He also continued to supervise the operation of all the entities, including the electrical corporation, and entered into an agreement with Jakubowicz to complete a contract between A.C. Green and the Medical Examiner of the City of New York, under which Jakubowicz and Rozenblatt were personally obligated under a bond of $1 million.
The receiver arranged to give the parties an opportunity to review the voluminous records that had come into his possession, some of which the parties had withheld from each other, to enable them to obtain the necessary data to settle the remaining litigation issues. He continued to try to settle the dispute, assisting the parties in obtaining records for discovery, meeting with the principals and their assistants to organize the documents, holding conversations with the mortgagees, notifying the creditors by publication in two newspapers, and helping to obtain documents from computer records. He negotiated a settlement of the dispute as to the procedure for a court-ordered accounting, which involved conversations with counsel and attendance at court hearings and conferences concerning the four properties that were the subject matter of Action No. 2 even before he was appointed in that action.
The receiver had discussions with chief counsel of a title company to fashion a method of selling the properties so that
The receiver expended a vast amount of time in assisting the parties to resolve their disputes. By playing so significant a role in the parties’ settlement, he averted the sale of the subject properties, thereby preserving the parties’ assets. His compensation as calculated according to the statutory schedules simply is not commensurate with his extraordinary efforts. Indeed, the $5,783.33 commission thus computed is manifestly unfair; fair compensation would be an award for the reasonable value of the services he rendered (see American Sav. Bank v Saleski Dev., Inc., 812 F Supp 28, 32 [US Dist Ct, SD NY 1993]), and I would remand the matter for a determination thereof.
It is undisputed that, as respondent Rozenblatt conceded on appeal, “[i]n his capacity as a mediator, negotiator or special master, Mr. Gaffin did spend an extraordinary amount of time on his extraordinary activities.” The motion court explicitly recognized that this extraordinary work benefitted the parties. Had the receiver hired a mediator to perform the dispute-resolution functions he performed, he likely would have been reimbursed those costs (see e.g. Sun Beam Enters. v Liza Realty Corp., 210 AD2d 153, 153 [1994] [receiver authorized to retain counsel for all reasonable purposes in connection with receivership was entitled to attorneys’ fees and costs where “the facts, including extensive motion practice concerning violations and disrepair of the subject property, established that counsel’s services were warranted”]; Kraizberg v Frank, 170 AD2d 306, 307-308 [1991] [“the IAS court was well within its authority to ratify the hiring of attorneys by the receiver in circumstances which the IAS court determined were ‘pregnant’ with unusual circumstances”]). Indeed, had he been appointed under
As Lieutenant Governor T. Whitfield Davidson, appointed a federal District Court Judge for the Northern District of Texas, said, “A sound principle of justice is that there must never arise a wrong for which there is not a tribunal wherein there is a remedy. That is in fact the spirit of equity that has come down to us through the ages.” This Court has deviated from a strict interpretation of
Andrias, Marlow and Sweeny, JJ., concur with Tom, J.P.; Ellerin, J., dissents in a separate opinion.
Order, Supreme Court, New York County, entered May 7, 2004, modified, on the law, to the extent of increasing the award for counsel fees and, except as so modified, affirmed, without costs.