Wandschneider v. Bekeny

• Decision Date: 14 June 1973
• Parties: Hajo WANDSCHNEIDER, as Executor of the Estate of Margaretha Marth, Deceased, and Rosemarie Brunhilda Lippmann, Plaintiffs, v. Peter BEKENY and Ilona Bekeny, Defendants.
• Court: New York Supreme Court

Page 925

346 N.Y.S.2d 925

75 Misc.2d 32

Hajo WANDSCHNEIDER, as Executor of the Estate of Margaretha

Marth, Deceased, and Rosemarie Brunhilda Lippmann, Plaintiffs, v. Peter BEKENY and Ilona Bekeny, Defendants.

Supreme Court, Westchester County.

June 14, 1973.

Windels, Merritt & Ingraham, New York City, for plaintiffs.

Boal, Doti & Larsen, New York City, for defendants.

John J. S. Mead, County Atty., White Plains, for Westchester County.

JOSEPH F. GAGLIARDI, Justice.

In a special proceeding to set aside a Sheriff's Sale defendants move for reargument. The motion for reargument presents an important and novel question in this State: whether a judgment-debtor, whose real property is executed upon and sold at a Sheriff's Sale, can obtain a credit against the judgment being enforced in an amount determined to be the fair market value of the property. The motion for 'reargument' is granted and disposed of in accordance with the following opinion.

On April 25, 1972 plaintiffs obtained a money judgment in the sum of $97,811.30 in the Federal District Court, Southern District of New York against defendants and others for violation of the federal securities laws. The judgment was affirmed by the Second Circuit Court of Appeals and certiorari denied by the United States Supreme Court. A transcript of the judgment was docketed in the Westchester County Clerk's Office on August 14, 1972 and execution issued thereon eight days later. The real property levied upon represents defendants' residence and consists of a home located on one acre in New Rochelle. Two mortgages exist as senior liens on the property and amount to $28,252.78.

By decision dated October 6, 1972 another justice of this Court denied defendants' motion for a stay of the Sheriff's Sale which was originally scheduled to be held on November 30, 1972. Thereafter, the Sheriff's Office ascertained that a mortgagee had not been notified of the impending sale and rescheduled the auction for January 15, 1973. At defendants' request a further adjournment was granted and the sale was ultimately held on April 16, 1973. On the following day defendants commenced a special proceeding by order to show cause to set aside the Sheriff's Sale. The order stayed plaintiffs from further enforcement of their judgment against the property in question pending a determination in the special proceeding.

On the return day of their motion in the special proceeding defendants requested vacatur of the sale on the ground of 'newly discovered evidence'. It was conceded that plaintiffs' counsel was the only bidder at the sale and that he purchased the property for the magnificent sum of $500. Title is being held in escrow for plaintiffs pursuant to an arrangement with their attorney. Defendants submitted an appraisal which showed that as of April 21, 1972 the real property had a market value of $73,000. Defendants further contended that as of April 1973 the value had increased by an additional $7,000. Plaintiffs averred that they had an appraisal in their possession (not exhibited to the Court) which valued the property as of the date of sale at $55,000. Thus, using the lower figure supplied by plaintiffs it is undisputed that they have obtained approximately $27,000, equity for the paltry sum of $500.

However, on the original motion defendants merely noted these figures and characterized the results as unfair. Defendants sought vacatur of the sale solely on the ground that the selling procedure had been defective. By decision dated May 2, 1973 the Court rejected defendants' argument and held that the Deputy Sheriff fully complied with the appropriate statutory provisions. On the within application defendants concede the correctness of the original decision. Nevertheless, defendants purportedly move for reargument and contend for the first time that they are entitled to a credit against the federal judgment for a sum to be determined which represents the true net fair market value of the property. Alternatively, defendants renew their motion to set aside the sale on the new ground that the amount of the purchase price is grossly inadequate.

Insofar as defendants seek an offset against the debt evidenced by the federal judgment, this motion is not properly labeled one for reargument. It is, in reality, a motion for a rehearing on additional facts which, in the exercise of discretion, may be entertained by the Court (Hinckley v. Paige,4 A.D.2d 949, 167 N.Y.S.2d 627; Gold v. The Travelers Ins. Co., 263 App.Div. 817, 31 N.Y.S.2d 580; 2 A Weinstein-Korn-Miller, N.Y.Civil Pract., 2221.03; 2 Carmody-Wait 2d, Motions and Orders, § 8.84). Wnile reargument is not a proper vehicle for seeking new forms of relief (Simpson v. Loehmann 21 N.Y.2d 990, 290 N.Y.S.2d 914, 238 N.E.2d 319) defendants on this motion seek no greater relief than that originally requested. Plaintiffs have addressed themselves to the merits and to avoid unnecessary litigation the Court will consider the issues raised (Fox v. Abe Schrader Corp., 36 A.D.2d 591, 318 N.Y.S.2d 548).

That portion of the motion to vacate the sale on the ground of the inadequacy of the bid price is denied (State Realty & Mortgage Co. v. Villaume, 121 App.Div. 793, 106 N.Y.S. 698; Monthar, Inc. v. Haralambides, 56 Misc.2d 29, 287 N.Y.S.2d 989; 9 Carmody-Wait 2d, Enforcement of Money Judgments, § 64:225; 2A Warren's Weed, N.Y., Real Property, Judicial Sale, § 8.05). Unlike the situation in Community Capital Corp. v. Lee, 58 Misc.2d 34, 294 N.Y.S.2d 336 (Gulotta, J.), the within sale was conducted in accordance with lawful procedure. That the amount bid in is disproportionate to the supposed true value is not a ground for vacatur but is a factor to be considered in the wise exercise of the Court's equitable jurisdiction which shall be discussed Infra.

Defendants rely upon CPLR 5240 which has been held applicable in diverse circumstances to protect judgment debtors from the harsh results of lawful enforcement procedures (Cook v. H.R.H. Construction Corporation et al., 32 A.D.2d 806, 302 N.Y.S.2d 364; Seyfarth v. Bi-County Elec. Corp., 73 Misc.2d 363, 341 N.Y.S.2d 533; Hammond v. Econo-Car of No. Shore, 71 Misc.2d 546, 336 N.Y.S.2d 493; Lee v. Community Capital Corp., 67 Misc.2d 699, 324 N.Y.S.2d 583; Gilchrist v. Commercial Credit, 66 Misc.2d 791, 322 N.Y.S.2d 200; see Concord Landscapers, Inc. v. Pincus, 41 A.D.2d 759, 341 N.Y.S.2d 538). The cited section provides:

'The court may at any time, on its own initiative or the motion of any interested person, and upon such notice as it may require, make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure. Section 3104 is applicable to procedures under this article.'

This is broad provision without prior statutory counterpart. Its major purpose is to prevent abuse in the use of or as a result of the use of the enforcement procedures in Article 52 of the CPLR (D. Siegel, Supplementary Practice Commentary to CPLR 5236, McKinney's Consol.Laws, of N.Y., Book 7B (1972/73 Supp. pp. 155--156); 10 Carmody-Wait 2d, Enforcement of Money Judgments, § 64:434; 6 Weinstein-Korn-Miller, N.Y. Civil Pract., 5240.01, 5240.02). The application of CPLR 5240 to a lawfully consummated Sheriff's Sale appears to be without precedent. Furthermore, the prayer for an offset within the context of an execution sale for the difference between the bid price and the fair market value of the property presents a novel question in this jurisdiction.

In a recent article by Professor Stefan A. Risenfeld entitled 'Enforcement Of Money Judgments In Early American History' (71 Mich.L.Rev. 691 (March 1973)) the author traces the origins of money judgment enforcement procedure in this country. It is interesting to note that virtually every jurisdiction adopted numerous and different legislation within their own borders regarding execution of money judgments on real property. At diverse times the individual states precluded execution on real property, authorized judgment-creditors to obtain rents, etc., for a term of years without transfer of the fee, permitted execution at public auction only upon bids greater than upset prices, authorized execution only after impartial appraisal, directed satisfaction of the judgment upon transfer of title and permitted the judgment-debtor to redeem. The author concludes that none of these methods proved satisfactory and opts for a more flexible system such as exists in certain foreign jurisdictions (71 Mich.L.Rev. 691, 727--728).

In New York the right of redemption has been eliminated upon sales under money judgments, upset prices are not statutorily mandated, impartial appraisals are usually not utilized and the judgment is satisfied only as the amount passing to the judgment-creditor after the sale.

In the absence of CPLR 5240 what would normally occur at bar is that plaintiffs would succeed to defendants' interest in the premises and obtain title to property with an admitted net market value of $27,000 for the meager sum of $500. The latter figure, minus poundage and incidental sale expenses, would be credited against the judgment. Therefore, as was noted at the outset, plaintiffs have obtained at least $26,000 in property without a concomitant adjustment in the outstanding debt. The result is unconscionable and the Court cannot give sustenance to such an undeserved windfall.

By way of analogy it would be useful to review basic principles applicable to mortgage foreclosure actions and deficiency judgments. The mortgagee has alternative remedies to proceed at law on the bond for the mortgage debt or to proceed in equity on the mortgage in foreclosure (Seaman's Bank for Savings v. Smadbeck, 293 N.Y. 91, 56 N.E.2d 46). At common law a deficiency judgment could not be obtained in an action to foreclose the mortgage (Irving Trust Co. v. Seltzer, 265 App.Div. 696, 40 N.Y.S.2d 451). The Revised Statutes changed common law rules and...