Coronet Capital Co. v. Spodek

• Decision Date: 04 August 1994
• Citation: 202 A.D.2d 20,615 N.Y.S.2d 351
• Parties: CORONET CAPITAL COMPANY, Plaintiff, v. Rosalind T. SPODEK d/b/a College Properties, et al, etc., Defendants, and J. Leonard Spodek, Appellant, Fred Leist, et al., Respondents. CORONET CAPITAL COMPANY, Plaintiff, v. Rosalind T. SPODEK d/b/a College Properties, et al., Appellants, et al., Defendants. Laurence J. Gold, Temporary Receiver, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 351

615 N.Y.S.2d 351

202 A.D.2d 20

CORONET CAPITAL COMPANY, Plaintiff, v. Rosalind T. SPODEK d/b/a College Properties, et al, etc., Defendants, and J. Leonard Spodek, Appellant, Fred Leist, et al., Respondents.

CORONET CAPITAL COMPANY, Plaintiff, v. Rosalind T. SPODEK d/b/a College Properties, et al.,

Appellants, et al., Defendants.

Laurence J. Gold, Temporary Receiver, Respondent.

Supreme Court, Appellate Division First Department.

Aug. 4, 1994.

Martin B. Adelman, New York City, for defendant-appellant, J. Leonard Spodek.

Alan G. Blumberg, New York City, and Michael L. Kaplan, Brooklyn, of counsel, (Leonard Goldstein, Brooklyn, and Szold & Brandwen, New York City, attorneys), for defendants-appellants, Rosalind T. Spodek d/b/a College Properties, and J. Leonard Spodek.

Josh B. Rosenblum, Rockville Center, and Kenneth P. Mintz, New Hyde Park, of counsel, (Gutman, Mintz, Baker & Sonnenfeldt, P.C., New Hyde Park, attorneys), for respondents, Leist.

John A. Monteleone, Brooklyn, of counsel, (Lindenbaum & Young, P.C., attorneys) for respondent, Gold.

Before SULLIVAN, J.P., and ELLERIN, ROSS, ASCH and TOM, JJ.

TOM, Justice.

Defendant, J. Leonard Spodek was the guarantor of a mortgage, pursuant to a written guaranty dated September 2, 1987, on the building designated as 777 East 31st Street, Brooklyn, New York (the "East 31st St. Building"). The building was owned by Mr. Spodek's wife, defendant Rosalind J. Spodek. It was in this building that Mr. Spodek illegally converted storage space in the southeast corner of the lobby into an office for his real estate management company.

Coronet Capital Company ("Coronet"), the mortgagee, commenced an action, on or about October 4, 1988, to foreclose on the East 31st St. Building and on another building owned by Mr. Spodek located at 10 Stratford Road, Brooklyn, New York (the "Stratford Building"). Together, the residential buildings housed approximately 220 tenants.

The Spodeks acknowledged service of process and by order dated October 19, 1988, respondent Laurence J. Gold was appointed temporary receiver of the buildings ("the Receiver") by Justice Gabriel Krausman. The Receiver contends that upon inspecting the buildings, he found, inter alia, that: the buildings were in "reprehensible" condition and were unfit for human habitation; the Stratford Building was involved in a partial rent strike and the East 31st St. Building was on the verge of a rent strike; there was little or no heat and hot water; and various vendors and contractors would not service the buildings because of non-payment of bills. On or about October 21, 1988, the Receiver sent a Notice to Attorn to all of the tenants directing them that all rents due "now and in the future", as well as all arrears, are to be sent to him.

Mr. Spodek, however, refused to cooperate with the Receiver, would not supply a rent roll, leases or DHCR registrations, refused to vacate his offices in the East 31st St. Building, and would not stop collecting rent. Less than two months after his appointment, the Receiver moved, by order to show cause (without a temporary restraining order) signed on December 15, 1988, for an injunction restraining Mr. Spodek and his agents: from interfering with the Receiver's duties and responsibilities; from demanding payment for, or collecting rents; from occupying or using the storage room converted into an office; and directing them to correct the Department of Housing Preservation and Development (HPD) violations caused by the illegal conversion of the storage room into office space.

In support of the foregoing, the Receiver submitted evidence (a letter from a tenant and a rent check made payable to Ms. Spodek's real estate business, College Properties) which indicates that despite the service of the Notice to Attorn, defendants continued to accept rent from the tenants. The Receiver argued that in addition to correcting the HPD violations, the Spodeks should be forced to vacate the converted office space so as to deprive them of a presence in the building and the base from which they are collecting rents.

Although the order to show cause required personal service upon the Spodeks, the affidavit of service indicates that this was not accomplished as to Mr. Spodek as there was no follow-up mailing. Nonetheless, on or about February 21, 1989, Justice Aronin executed an order granting a preliminary injunction for the relief sought. On or about March 14, 1989, Mr. Spodek and his agents were served with the injunction, by ordinary mail, addressed to the illegally converted office in the E. 31st St. Building.

By order to show cause dated May 9, 1989, the Receiver moved for an order punishing the Spodeks for contempt for failing to obey the directives of the injunction. The Receiver alleged that the Spodeks continued to occupy the lobby office and undermine his authority and also interfered with his ability to maintain and operate the buildings. The motion was subsequently denied due to the non-appearance of either side.

By notice of motion dated July 27, 1989, the Receiver moved for contempt a second time and, in addition to the previously profferred grounds, the Receiver delineated, in detail, the dangerous conditions in the East 31st St. Building, including those caused by the illegal conversion of lobby storage space into an office which resulted in a housing code violation issued by HPD on February 16, 1988.

The foregoing motion was granted on default and on or about December 8, 1989, Mr. Spodek moved, pro se, by order to show cause, for an order vacating his default. Mr. Spodek alleged that he had been ordered deposed in another action on the return date of the contempt motion and that he had been misled by opposing counsel, who purportedly had agreed to adjourn the contempt motion. In way of a meritorious defense, Mr. Spodek asserted that: he had vacated the lobby office and had hired an architect to file plans in order to legalize the occupancy.

The IAS court denied Mr. Spodek's motion and on January 25, 1990, Justice Aronin signed a final order of contempt fining each contemnor $250 and allowing them a window through which to purge the contempt by surrendering the office space on or before February 15, 1990.

In the interim, on or about November 8, 1989, Coronet was awarded a judgment of foreclosure and sale which, inter alia, contained the standard provision for the purchaser to take title subject to the "rights of tenants and/or occupants in possession ...". The judgment also provided that "defendants in this action and all persons claiming under them ... hereby are, forever barred and foreclosed of all right, claim, lien, title interest and equity of redemption in said mortgaged premises ...". The East 31st St. Building was subsequently purchased on May 1, 1990 by Fred, Scott, Ivan and Seth Leist (the "Leists").

By notice of motion dated March 5, 1991, the Leists gave Mr. Spodek notice that possession must be delivered; that he would be subject to contempt for his failure to vacate the lobby office space as set forth in the foreclosure judgment; and that failure to comply would result in an application, pursuant to RPAPL 221, to have the sheriff assist in delivering possession.

In support of their motion, the Leists asserted that Mr. Spodek continued to occupy the converted storage space as well as three interior garage spaces, and that the Spodeks failed to pay rent or utility fees for that space (the purchasers were concerned because computer and other electronic equipment in the Spodeks' office utilized a great deal of electricity).

In opposition, Mr. Spodek averred that in addition to having an ownership interest in the buildings, he was also a tenant of the East 31st St. Building pursuant to a lease for the office/storage space purportedly executed two years prior to the commencement of the foreclosure action. Mr. Spodek contended that since he was served with the notice of the foreclosure action not as a tenant, but as a party, his tenancy was not extinguished, he was not in violation of the foreclosure judgment, and the sheriff could not compel delivery of possession. Mr. Spodek also maintained that his tenancy could not be extinguished because it came into existence before the purchase upon foreclosure and that use and occupancy was not owing because his wife, as owner of the East 31st St. Building, had given him a sweetheart deal of rent-free usage.

Mr. Spodek also moved, by order to show cause dated May 10, 1991, for an order vacating Justice Aronin's order of February 21, 1989 which granted the injunction which was the basis for the January 25, 1990 final order of contempt. In support of this motion, Mr. Spodek alleges that he had not been properly served with the moving papers for the injunction and, as a result, the IAS court lacked jurisdiction to grant that relief.

Subsequent to the foreclosure sale, on or about November 27, 1990, the Receiver moved to settle his account stating, inter alia, that he faced "extensive problems" when he took over the buildings, which were "in decline." The Receiver averred, inter alia, that he made capital improvements, restored services, forestalled rent strikes, cured numerous violations, entered into renewal leases and rented vacant apartments resolved problems with unions and service suppliers, and instituted a tax certiorari proceeding which resulted in a $425,000 reduction of the 1989-1990 tax assessment for one of the buildings.

The Receiver concluded that he had collected income totalling $2,427,112.05 and disbursed $2,484,368.20. After various adjustments, the Receiver requested $227,123.57, which figure represented a 5% commission, pursuant to CPLR 8004(a), based upon the sum total of the monies received and disbursed. Since the Receiver had received interim commissions of $153,283.55, he requested an additional $73,840.02. In an amended summary of account, the Receiver reduced the total net...