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Lehman Commercial Paper, Inc. v. Point Prop. Co., LLC

Supreme Court of New York, Third Department

January 19, 2017

POINT PROPERTY CO., LLC, et al., Appellants, et al., Defendant.

          Calendar Date: November 17, 2016

          Buchanan Ingersoll & Rooney, New York City (Christopher P. Schueller of counsel), for appellants.

          Menter, Rudin & Trivelpiece, PC, Syracuse (Teresa M. Bennett of counsel), for respondent.

          Before: Peters, P.J., Garry, Devine, Mulvey and Aarons, JJ.


          AARONS, J.

         Appeal from an order of the Supreme Court (Ellis, J.), entered September 28, 2015 in Franklin County, which, among other things, granted plaintiff's motion to, among other things, confirm a referee's report of an amount due.

         In July 2007, defendants Point Property Co., LLC and Point Annex Land Co., LLC (hereinafter collectively referred to as defendants) executed a note in favor of Lehman Brothers Holding, Inc. (hereinafter Lehman) in the amount of $12, 500, 000. The note was secured by a mortgage and encumbered two commercial properties, one located in the Village of Saranac Lake, Franklin

         County and the other one in the Town of Harrietstown, Franklin County. Defendants and Lehman also entered into a security agreement that granted Lehman a security interest in various items, including personal property, fixtures and furniture in the mortgaged premises, as well as general intangible items. In May 2011, defendants and Lehman executed a first amendment to the loan agreement, which, among other things, reduced the principal amount due from $12, 500, 000 to $10, 000, 000. In December 2011, Lehman assigned its interest to plaintiff.

         When defendants failed to make the full payment by the February 1, 2013 maturity date, plaintiff commenced this foreclosure action. Defendants never interposed an answer and, upon plaintiff's motion for an order of reference, Supreme Court appointed a referee to determine the amount due to plaintiff. In his report, the referee computed the amount due under the note as of May 31, 2014 to be $13, 713, 203.30, of which $11, 560, 394.97 was secured by the mortgage. Plaintiff moved for, among other things, to confirm the referee's report, a judgment of foreclosure and sale and for an award of counsel fees. Supreme Court granted plaintiff's motion and awarded plaintiff $80, 000 in counsel fees. Defendants now appeal.

         We conclude that the appeal is moot to the extent that defendants challenge the order as affecting their right to redeem the subject commercial properties. In this regard, defendants assert various errors, which, according to them, artificially inflated the redemption price and precluded them from exercising their right to redeem the subject commercial properties. During the pendency of the appeal, however, the subject commercial properties were sold, thereby extinguishing defendants' right to redeem the properties (see Trustco Bank, Natl. Assn. v Eakin, 256 A.D.2d 778, 780 [1998]) [1]. More critically, once lost, the right to redeem cannot be revived, even by court order (see Kolkunova v Guaranteed Home Mtge. Co., Inc., 43 A.D.3d 878, 878 [2007]). While defendants assert that the appeal is not moot to this extent because they are entitled to a vacatur of the foreclosure sale, which, in turn, could implicate their right to restitution (see CPLR 5523), there is no indication in the record that defendants moved either to vacate the judgment of foreclosure and sale or to set aside the foreclosure sale before Supreme Court. Accordingly, because defendants' redemption rights in the subject commercial properties will not be directly affected by a decision of this Court, that aspect of defendants' appeal concerning such redemption rights is moot (see generally Matter of Hearst Corp. v Clyne, 50 N.Y.2d 707, 714 [1980]).

         Defendants' challenge to the reasonableness of the counsel fee award, however, is not moot (see generally Vigo v 501 Second St. Holding Corp., 121 A.D.3d 778, 779-780 [2014]) [2]. To that end, we agree with defendants that Supreme Court erred in awarding plaintiff $80, 000 in counsel fees in the absence of an evidentiary hearing to determine the reasonableness of the requested fees. Contrary to plaintiff's assertion and the dissent's characterization, no evidentiary hearing took place. Rather, when the parties appeared at the scheduled proceeding upon Supreme Court's invitation, at most, only a discussion about counsel fees occurred. The appearance progressed in the nature of an oral argument and did not involve the presentation of evidence or examination of witnesses. Both parties seemed ready to proceed with an evidentiary hearing, but defendants' counsel ultimately digressed to argue other matters. Such digressions understandably caused some frustration but, inasmuch as the trial court "exercise[s] supervisory control over all phases of pending actions and proceedings" (Teitelbaum Holdings v Gold, 48 N.Y.2d 51, 54 [1979]), Supreme Court was best situated to restrain defendants' counsel from further digression, to direct him to call a witness and to advise the parties that oral argument would no longer be entertained and that the evidentiary hearing on the issue of counsel fees would commence.

         While plaintiff's counsel offered to have the counsel fee dispute resolved through testimony or on submission, defendants' counsel voiced his demand to cross-examine plaintiff's counsel regarding the requested counsel fees. Although defendants' counsel did not specifically identify one of the factors involved in assessing the reasonableness of counsel fees as a basis for contesting plaintiff's counsel fee application, he nonetheless argued that he wanted to examine plaintiff's counsel regarding the block billing and vague and redacted time entries on the legal invoices (see Kumble v Windsor Plaza Co., 128 A.D.2d 425, 426 [1987], lv dismissed 70 N.Y.2d 693');">70 N.Y.2d 693 [1987]). Furthermore, when Supreme Court inquired whether defendants' counsel wanted the entire counsel fee application rejected in its entirety, defendants' counsel responded, "I don't see how you can issue a ruling on it in its present form" - an objection directed at the insufficiency of plaintiff's papers. Moreover, plaintiff's counsel stated that he "would have expected that [defendants' counsel] would have had specific objections... but I suppose we could hear those on cross-examination."

         The parties' appearance, however, concluded without Supreme Court ever hearing testimony from any witnesses. Critically, there is no indication that defendants' counsel explicitly waived his demand to examine opposing counsel or otherwise consented to the resolution of the issue of counsel fees solely on the papers. Under these circumstances, defendants' counsel was never provided with an evidentiary hearing in the first instance. Indeed, at the conclusion of the proceeding, defendants' counsel stated that "if they want those legal fees, they need to get up on the stand and testify, because right now, their invoices don't get it done." Supreme Court noted that "we can keep arguing the same arguments over and over again, " but, in light of defendants' counsel's request, it was incumbent upon Supreme Court to direct the parties to commence the evidentiary hearing, as opposed to concluding the appearance.

         While a hearing on counsel fees is not required when a determination can be made on the papers alone (see Matter of Claydon, 103 A.D.3d 1051, 1054 [2013]; cf. Vacation Vil. Homeowners' Assn. v Mordkofsky, 254 A.D.2d 650, 651 [1998], lv dismissed93 N.Y.2d 920');">93 N.Y.2d 920 [1999], appeal dismissed94 N.Y.2d 898');">94 N.Y.2d 898 [2000]), this is not the case here inasmuch as plaintiff's "affidavit of services rendered... fail[ed] to set forth counsel's experience, ability, and reputation, and fail[ed] to detail the prevailing hourly rate for similar legal work in the community" (People's United Bank v Patio Gardens III, LLC, 143 A.D.3d 689, 691 [2016]). Furthermore, the itemized legal bills submitted by plaintiff are insufficient to assess the reasonableness of the fees in the absence of proof showing "the necessity of the services rendered, the benefit achieved, the difficulty of the issues involved, or any other of the considerations normally involved in ...

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