Court Opinion

ID: 5691802
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:28:18.920037+00
Date Added: 2024-06-11T08:40:09.769909
License: Public Domain

Ellerin, J. (dissenting).
While I agree that ordinarily the statute appears to limit the receiver’s fees to the schedules in Business Corporation Law § 1217,1 believe that the unique circumstances of this case require additional relief. Indeed, the motion court itself acknowledged “the receiver’s invaluable assistance in successfully expediting these proceedings tactfully, notwithstanding the open hostility of the litigants towards each other,” but indicated that it was “barred from basing his compensation on the worth of these services however useful they may have been.” This encomium merely touches upon the extraordinary amount of time and inordinate skill required to resolve the myriad disputes between the bitterly warring and litigious defendant partners who apparently have been able to overcome their animosity only on the issue of limiting the receiver’s fees.
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 *154and the parties disclosed were worth more than $15 million. This value was later confirmed in the receiver’s discussions with brokers and their clients to whom he showed the properties before the auction sale, and is the reason that he was required to post a $2 million bond in the first action in which he was collecting approximately $25,000 per month in rent.
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 *155the buyer(s) would receive title insurance. He prepared and arranged for the publication of a notice of sale of the properties, met with more than 50 prospective brokers and investors and had telephone conversations with many more concerning the prospective sale, and showed the properties to groups of prospective buyers on at least six occasions. When the auction scheduled for January 7, 2003 was stayed on January 6, he notified almost 50 people that day that the auction was canceled and he went to the court on the auction date to tell those who appeared that the auction was suspended.
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 CPLR 8004, which permits an award that exceeds the statutory maximum under the doctrine of quantum meruit if the statutory maximum would be “manifestly unfair,” the receiver undoubtedly would have been compensated for the reasonable *156value of the services he performed (Federal Home Loan Mtge. Corp. v S.E.A. Yonkers Assoc., 869 F Supp 187, 188 [US Dist Ct, SD NY 1994], quoting American Sav. Bank, 812 F Supp at 32). In the circumstances, it would be manifestly unfair to limit his compensation according to the fee schedules in Business Corporation Law § 1217.
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 Business Corporation Law § 1217 where justice warranted it (see State of New York v Chatsworth Realty Corp., 284 AD2d 260 [2001], lv denied 97 NY2d 604 [2001]). Justice warrants that we do so again here.
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.