63 Misc.2d 499, Sadow v. Poskin Realty Corp.

Citation:63 Misc.2d 499, 312 N.Y.S.2d 901
Party Name:Sadow v. Poskin Realty Corp.
Case Date:July 01, 1970
 
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Page 499

63 Misc.2d 499

312 N.Y.S.2d 901

Bernard J. SADOW, Plaintiff,

v.

POSKIN REALTY CORP. et al., Defendants.

Supreme Court, Special Term, Queens County, Part I.

July 1, 1970.

Page 500

[Copyrighted Material Omitted]

Page 501

[312 N.Y.S.2d 904] Kornblum & Shlefstein, Brooklyn, for claimant, Louis D. krasner, inc.

Louis P. Rosenberg, Brooklyn, for claimant, Brewster House, Inc.

Marvin Usdin, Massapequa, for tenants.

MEMORANDUM

J. IRWIN SHAPIRO, Justice.

This is a motion in a surplus money proceedings pursuant to section 1362 of the Real Property Actions and Proceedings Law to confirm the report of the referee appointed to ascertain and report the amounts due to those persons who have liens upon the surplus moneys realized upon the sale of the mortgaged premises and to ascertain the priorities of those liens.

The property covered by plaintiff's mortgage was sold on July 12, 1968 and a surplus of $71,911.62 above the amount due under the judgment of foreclosure was realized. On August 7, 1968, the referee's report of sale, dated July 30, 1968, was filed. In his report the referee stated that, subsequent to the sale, he executed and delivered to the purchaser upon the foreclosure sale the usual referee's deed to the property. By order of this court made on February 17, 1969 that report of sale was confirmed and the referee in this surplus money proceedings was appointed to ascertain and report the amounts due to the persons claiming the surplus moneys and the priorities of such claimants. Some ninety-six claims in all have been filed against the surplus moneys. They are (1) eighty-nine by the tenants of the property foreclosed for the loss of the security deposit made by each to Poskin Realty Corp. (Poskin), the owner of the fee, under a lease, some of which also include claims for prepaid rent and similar losses; (2) by Brewster House, Inc. (Brewster) for $74,000, by virtue of an alleged unrecorded mortgage given by Poskin to Brewster (which claim, filed on November 25, 1968, is made by Gabriel Arab, Trustee in Bankruptcy of David Merkin, who allegedly owned 90% Of the outstanding common shares of stock of Brewster); (3) by Anita G. Greenfield, as Executrix

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of the Estate of [312 N.Y.S.2d 905] Nathan Mittag, deceased (Greenfield), for $23,529.32, by virtue of holding all the issued and outstanding shares of stock of Poskin as collateral security for loans made to David Merkin and Harold B. Posner; (4) by Louis D. Krasner, Inc. (Krasner) for $809.50, by virtue of a judgment against Poskin, docketed in the Office of the County Clerk of Queens County on September 30, 1968; (5) by Consolidated Edison Company (Consolidated) for $736.74 for electric current furnished; (6) by New York Telephone Company for an unspecified amount for telephone service; (7) by the State of New York for $910.72 for unpaid franchise taxes by virtue of a warrant (which has the force and effect of a judgment) docketed in the Office of the Clerk of the County of Kings on November 27, 1968; (8) by Burns Bros. Preferred, Inc. for $5,229.36 by virtue of a judgment docketed in the Office of the Clerk of Queens County on June 4, 1969.

Although a consideration of the validity of the claims to the surplus money and the priorities among them makes it manifest that they raise a number of questions of law, the referee's report is utterly devoid of any citation of applicable authority or discussion of the legal principles involved. It consists merely of dogmatic dispositions of those claims. Thus, the referee has rejected claims of Brewster, Greenfield, some of the tenants and Burns Bros. Preferred, Inc., and has found the claims of the balance of the tenants, Krasner, The State of New York and Consolidated entitled to share in the surplus moneys. Some of these findings are clearly contrary to governing principles of law, and those are rejected as specifically set forth below. (See, CPLR 4403.)

Before discussing the individual claims and the referee's findings relative to each, an analysis of the principles of law applicable to the issues seems desirable. Such an analysis necessarily starts with the basic premise that surplus money realized upon a sale in foreclosure is not a general asset of the owner of the equity of redemption, for it stands 'in the place of the land for all purposes of distribution among persons having vested interests or liens upon the land' (15 Carmody-Wait 2d, New York Practice, § 92.425; also see, Albro v. Blume, 5 A.D. 309, 310--311, 39 N.Y.S. 215, 216). Put another way, surplus money takes the place of the equity of redemption. (Davison v. MacDonald, 124 Misc. 726, 728, 209 N.Y.S. 145, 147, affd. 216 A.D. 759, 214 N.Y.S. 825.) It thus follows that only one who had a vested estate or interest in the land sold under foreclosure which was cut off by the foreclosure sale is entitled to share in the surplus money. (15 Carmody-Wait 2d Op. cit., §§ 92:426, 92:427; Albro v. Blume, Supra, 5 App.Div.

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pp. 310--311, 39 N.Y.S. pp. 215--216; Davison v. MacDonald, Supra, p. 728, 209 N.Y.S. p. 147; Goldberg v. Feltmans of Coney Island, Inc., Sup., 144 N.Y.S.2d 250, 252.) The mechanism by which this is accomplished is by considering the lien existing on the land at the time of the foreclosure to...

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