Supreme Court, Appellate Division, First Department, New York.
EAST CHATMAN CORP., Plaintiff-Appellant,
v.
Rose IACOVONE et al., Defendants, and Aaron I. Schwartz, Receiver-Respondent.
Dec. 6, 1966.
Mortgage foreclosure proceeding. The Supreme Court, New York County, Korn, J.,
entered order granting receiver's motion to confirm referee's report and denying
plaintiff's cross motion to reject referee's report and to surcharge referee,
and an appeal was taken. The Supreme Court, Appellate Division, held that
employment by receiver for hotel of managing agent, who had no prior hotel
experience, and who only gave cursory supervision to activities of existing
manager and staff of hotel, was improvident and unnecessary.
Judgment modified and, as modified, affirmed.
Capozzoli, J., dissented in part.
See also 25 A.D.2d 622, 267 N.Y.S.2d 839.
West Headnotes
[1] Mortgages 474
266k474 Most Cited Cases
Allowance of $25,532.84 to receiver appointed for hotel premises under
foreclosure was reasonable and was affirmed.
[2] Mortgages 474
266k474 Most Cited Cases
It was incumbent on receiver appointed for hotel premises under foreclosure to
establish that employment of managing agent for hotel which had manager who was
paid $22,000 per year, was necessary.
[3] Receivers 96
323k96 Most Cited Cases
Employment by receiver for hotel of managing agent, who had no prior hotel
experience, and who only gave cursory supervision to activities of existing
manager and staff of hotel, was improvident and unnecessary.
[4] Receivers 196
323k196 Most Cited Cases
Receiver is required to render services in order to earn his commissions, and if
services are performed by others without showing of justification, receiver may
not be reimbursed.
[5] Mortgages 474
266k474 Most Cited Cases
Mortgage foreclosure plaintiff, which had no knowledge of alleged oral consent
of attorney for former plaintiff to appointment of managing agent by receiver
appointed for hotel premises under foreclosure, was not precluded from objecting
to receiver's account in so far as it included disbursement for services of
managing agent.
[6] Receivers 202
323k202 Most Cited Cases
It is burden of receiver to justify his account.
[7] Mortgages 474
266k474 Most Cited Cases
Mortgage foreclosure plaintiff, which did not consent to retention of managing
agent by receiver appointed for hotel premises under foreclosure, was not
estopped from relying on receiver's failure to justify his claim for
reimbursement for services of managing agent.
[8] Mortgages 473
266k473 Most Cited Cases
Allowances of $10,000 for counsel to receiver appointed for hotel premises under
foreclosure and $13,612.50 for receiver's accountant were excessive, in view of
proof that services of attorneys and accountant included services which in case
of attorneys should have been performed by receiver, and in case of accountant,
duplicated services of hotel's clerical staff, and such allowances would be
reduced to $5000 for attorney and no more than $5000 for accountant.
**54 *434 Samuel Kirschenbaum, Brooklyn, of counsel (Dreyer & Traub, Brooklyn,
attorneys), for appellant.
Nathan Hirschberg, New York City, of counsel (McAloon & Hirschberg, New York
City, attorneys), for receiver-respondent.
Before BOTEIN, P.J., and McNALLY, STEUER, CAPOZZOLI and BASTOW, JJ.
PER CURIAM.
In this foreclosure action an ex parte order was made April 22, 1964 on the
application of the then plaintiff Manhattan Savings Bank appointing a receiver
Pendente lite of the premises under foreclosure and authorizing him 'to employ
an agent, if he shall deem it proper, to rent and manage the mortgaged
premises'. On February 11, 1965 Manhattan Savings Bank assigned its senior
interest in the consolidated mortgage under foreclosure to East Chatham Corp.
Thereupon on March 29, 1965 an order was made substituting East Chatham Corp. as
plaintiff in place of Manhattan Savings Bank. The receivership was terminated
and the receiver directed to settle his account by order entered April 14, 1965.
The receiver's account and objections thereto were referred to a referee to hear
and report. The order appealed from confirms the referee's report. Appellant
objects to the report in so far as it pertains to the allowances and
disbursements for services of the receiver, his attorneys, accountant and
managing agent.
[1] In his account the receiver charges himself with receipts of $680,875.81
and payments of $658,546.64. The receiver has paid his managing agent
$34,022,90 and his accountant $13,612.50. The receiver requested the sum of
$34,043.80 as the reasonable value of his services. The receiver's counsel
requested $25,000. The order appealed from confirms the referee's report
approving the receiver's account and recommending **55 receiver's commissions of
$25,532.84, a fee of $10,000 for the counsel to the receiver, and the allowance
of $13,612.50 to the receiver's accountant. We find the allowance to the
receiver to be reasonable and affirm same.
[2][3] However, it was incumbent on the receiver to establish the employment of
the managing agent was necessary. (Kitt v. D.M.V. Estates, Inc., 7 A.D.2d 291,
182 N.Y.S.2d 667; Pfeifer v. 1770 West Sixth St. Corp., 234 App.Div. 777, 253
N.Y.S. 436; Niagara Life Ins. Co. v. Lincoln Mtge. Co., 175 App.Div. 415, 161
N.Y.S. 853.) This he has failed to do. The premises involved consist of a hotel
staffed with a manager, who was paid $22,000 per year, clerical and maintenance
help. The employment of the managing agent with no prior hotel experience who
only gave cursory supervision to certain activities of the manager and the staff
was improvident and unnecessary.
*435 [4][5][6][7] A receiver is required to render services in order to earn
his commissions. If the services are performed by others without a showing of
justification therefor, the receiver may not be reimbursed. (Niagara Life Ins.
Co. v. Lincoln Mtge. Co., supra, p. 416, 161 N.Y.S. 853.) This plaintiff who had
no knowledge of the alleged oral consent of the attorney for the former
plaintiff to the appointment of the managing agent is not precluded from
objecting to the account in so far as it includes a disbursement for the
services of the managing agent. It is the receiver's burden to justify his
account. This he has failed to do. Appellant did not consent to the retention
of the managing agent and is not estopped from relying on the receiver's failure
to justify his claim for reimbursement. (cf. Kitt v. D.M.V. Estates, Inc.,
supra, 7 A.D.2d p. 292, 182 N.Y.S.2d p. 668.)
[8] The services of the attorneys and the accountant for the receiver include
services which in the case of the attorneys should have been performed by the
receiver, and in the case of the accountant, who had no prior hotel experience,
duplicated services of the hotel's clerical staff. We deem excessive the
amounts beyond those hereafter provided for the attorneys and for accounting
services.
The order and judgment should be modified, on the law and on the facts, to the
extent of reducing the allowance of the attorneys for the receiver to $5,000,
disallowing the disbursements for the services of the accountant for the
receiver in excess of $5,000, disallowing the fees of the managing agent
retained by the receiver, and surcharging the receiver accordingly, and, as so
modified, affirmed, without costs or disbursements.
Order, entered on June 3, 1966, and entered as a judgment on June 13, 1966,
modified, on the law and on the facts, to the extent of reducing the allowance
of the attorneys for the receiver to $5,000, disallowing the disbursements for
the services of the accountant for the receiver in excess **56 of $5,000,
disallowing the fees of the managing agent retained by the receiver, and
surcharging the receiver accordingly, and, as so modified, affirmed, without
costs or disbursements.
All concur except CAPOZZOLI, J., who dissents in part in the following
memorandum:
CAPOZZOLI, Justice (dissenting in part):
I dissent in part and vote to allow the managing agent, whose appointment was
consented to by the attorney for the former plaintiff, a fee of $5,000.
275 N.Y.S.2d 53, 26 A.D.2d 433
END OF DOCUMENT