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RESOLUTION TRUST CORP. v. SHERYAL A. VOLPE

January 22, 1996

RESOLUTION TRUST CORPORATION, AS CONSERVATOR OF COLUMBIA BANKING FEDERAL SAVINGS ASSOCIATION, Plaintiff,
v.
SHERYAL A. VOLPE, VOLRAN DEVELOPMENT CORP., PEOPLE OF THE STATE OF NEW YORK BY STATE TAX COMMISSION, Defendant.



The opinion of the court was delivered by: LARIMER

 BACKGROUND

 Prior to removal, State Supreme Court Justice Donald J. Wisner appointed Shane P. Mallory as receiver for the real property ("the property") located on East Ridge Road in Rochester. The property consists of several small commercial buildings which generate rent as income. On June 30, 1995, the property was sold at public auction pursuant to previous orders of this court. The court confirmed the sale on August 28, 1995.

 Mallory now moves before this court for an order settling his accounts, fixing his commissions and attorney's fees, discharging the undertaking, and directing payment of the remaining balance in his hands.

 Mallory seeks a total receiver's commission of $ 25,126.83 which is 5% of $ 502,536.57, less $ 7,000 previously paid to him as an interim award, for a balance due as receiver's commissions of $ 18,126.83. RTC does object to the amount of these receiver's fees. Mallory also seeks attorney's fees in the sum of $ 10,944.00 plus disbursements. The attorney's fees request is not challenged by RTC.

 To understand the relevance of the events in question, it is necessary to review the governing statute, N.Y. C.P.L.R. § 8004, which states in pertinent part:

 
(a) Generally. A receiver, except where otherwise prescribed by statute, is entitled to such commissions, not exceeding five per cent upon the sums received and disbursed by him, as the court by which he is appointed allows ...
 
(b) Allowance where funds depleted. If, at the termination of a receivership, there are no funds in the hands of the receiver, the court, upon application of the receiver, may fix the compensation of the receiver and the fees of his attorney, in accordance with the respective services rendered, and may direct the party who moved for the appointment of the receiver to pay such sums, in addition to the necessary expenditures incurred by the receiver.

 Under § 8004, then, the receiver's commission can be less than or equal to, but no more than, 5% of the funds received and disbursed by him. *fn1" "Expenditures" are not expressly limited in such a manner, except that they must have been "necessary."

 The dispute here centers around Mallory's employment of a managing agent for the property. The order appointing Mallory as receiver authorized the receiver, inter alia "to employ an agent, if it shall be deemed necessary, to rent, to collect the rents, and to manage the property, and to pay such agent out of the rents received the reasonable value of the agent's services ..." See Receiver's Reply Affidavit Ex. A.

 After his appointment, Mallory hired Lawrence Management ("Lawrence") to act as managing agent. Mallory is President of Lawrence, and that fact is at the heart of this fee dispute. At the time of his appointment, Mallory and Columbia agreed that Mallory would receive a receiver's commission of 5% of sums received by him (his limit under § 8004), and that Lawrence would receive an additional 3.5% management fee. See Receiver's Reply Affidavit Ex. B. Although Columbia was represented on the foreclosure action by the law firm of Harter, Secrest & Emery ("Harter, Secrest")--the same firm that represents RTC now--Harter, Secrest was not involved in this arrangement concerning fees or commissions. Id.

 Pursuant to this agreement, Mallory directed payment to Lawrence of $ 16,389.58 in management fees incurred during the course of his receivership. He now seeks $ 18,126.83 in receiver's commissions, and attorney's fees.

 RTC does not object to the attorney's fee request, but only to the amount sought for the receiver's commission. RTC's objection is based on the fact that $ 16,389.58 has already been paid to Lawrence as agent and that Mallory's request duplicates fees already paid. RTC contends that because the receiver, Mallory, is president of the managing agent, Lawrence, Mallory's commission should be reduced by the amount paid to Lawrence. RTC maintains that Mallory is simply trying to circumvent § 8004's 5% cap ...


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