MARCY FRIEDMAN, Judge.
Pursuant to an Interim Decision and Order, dated February 22, 2017 (the Interim Decision), this court held an evidentiary hearing on June 12, 2017 in this commercial mortgage foreclosure proceeding brought by plaintiff 1180 President Funding, LLC (1180 President), the successor of the lender. The issues addressed at the hearing were (a) whether 1180 President and/or its counsel, Mr. Kenneth P. Horowitz, should be sanctioned, pursuant to 22 NYCRR 130-1.1, for engaging in conduct undertaken primarily to harass or maliciously injure defendant 2201 7th Avenue Realty LLC (Seventh), including but not limited to representing in this proceeding that Seventh had a right to redeem the mortgaged premises until a foreclosure sale, while failing to disclose the pendency of an application for a judgment of foreclosure and sale in a related mechanic's lien foreclosure proceeding; and (b) whether 1180 President and/or its counsel perpetrated a fraud upon the court by means of the aforesaid representations and omissions.
The facts and circumstances warranting the hearing are detailed in the Interim Decision and are summarized briefly as follows: In July 2015, Seventh moved for an order compelling 1180 President to issue a payoff letter and to accept redemption. (
As set forth in detail in the Interim Decision, without notice to the undersigned, during the pendency of Seventh's motion to compel redemption and prior to the filing of the affirmations in which Mr. Horowitz and Mr. Tress made the representations described above, Harlem Contracting LLC (Harlem)—another entity managed by Mr. Tress—applied to Justice Edmead of this Court for a judgment of foreclosure and sale of Seventh's premises. This application was made in a related mechanic's lien foreclosure proceeding (the mechanic's lien proceeding), commenced in 2010 in the name of the original plaintiff/lienholder, Galaxy General Contracting Corp. (Galaxy).
In July 2015, three years after the Appellate Division's decision, and notwithstanding the transfer of the mechanic's Hen proceeding and the pendency of the instant mortgage foreclosure proceeding before the undersigned, Harlem filed the proposed judgment of foreclose and sale. before Justice Edmead. (Interim Decision, at 2-3.) At that time, the mechanic's lien proceeding had been dormant for nearly two years. Mr. Andre R. Soleil, Seventh's counsel of record in the instant mortgage foreclosure proceeding as of July 2015, had never filed a notice of appearance in or registered for NYSCEF notifications in the mechanic's lien proceeding.
Despite their involvement in the mechanic's lien proceeding, neither Mr. Horowitz nor Mr. Tress informed the undersigned of Harlem's application for a judgment of foreclosure and sale in that proceeding, which led to an auction sale of the property on December 23, 2015— again, without notice to the undersigned. (
Subsequent to the foreclosure sale, Seventh again moved before the undersigned for an undated payoff letter and for other relief related to the premises (motion sequence 20).
The above orders by Justice Edmead plainly preclude the undersigned from granting Seventh any relief from the judgment of foreclosure and sale in the mechanic's lien proceeding. The Interim Decision, however, held that Justice Edmead's determination did not bar this court's consideration of the separate issue of whether 1180 President and/or its counsel engaged in sanctionable or other otherwise improper conduct by means of their representations to the undersigned regarding Seventh's right of redemption and their failure to keep the undersigned apprised of the status of the mechanic's lien proceeding. The Interim Decision therefore directed an evidentiary hearing on the issues described at the outset of this decision. (Interim Decision, at 5.)
At the evidentiary hearing, Mr. Horowitz testified that, although he was counsel of record for 1180 President in the mechanic's lien proceeding and registered for NYSCEF notifications in that proceeding, he was not following the docket in July 2015, when the proposed judgment was filed, or at any time leading up to the foreclosure sale. Mr. Horowitz explained that, in his view, he had accomplished everything he wanted in the mechanic's lien proceeding when he secured a stipulation, dated August 1, 2013 (the Stipulation), with the original plaintiff and holder of the mechanic's lien, Galaxy. This Stipulation provided that 1180 President's mortgage liens had priority over Galaxy's mechanic's lien, and that the sale of the property in the mechanic's lien proceeding would "not affect the lien status of 1180 President . . . ." (Stipulation of Settlement as to Priority of Liens, ¶¶ 2-3, mechanic's lien proceeding [NYSCEF No. 57].) According to Mr. Horowitz, following the Stipulation, there was no reason for him to pay attention to the mechanic's lien proceeding, because no further acts could be taken in that proceeding that could adversely affect 1180 President's interest in the premises. Mr. Horowitz further testified that, although he was retained by and dealt primarily with Mr. Tress in connection with his representation of 1180 President in the instant and mechanic's lien proceedings, he has never represented Harlem and had no knowledge of the application to Justice Edmead for a judgment of foreclosure and sale in the mechanic's lien proceeding. Finally, Mr. Horowitz argued that his representation to the undersigned concerning Seventh's right of redemption was not untrue.
Although Mr. Horowitz's representation to the undersigned that Seventh would have a right to redeem the premises in the instant proceeding until acceptance of a final bid at "a foreclosure sale" may not, strictly speaking, have constituted an inaccurate statement, there can be no genuine dispute that the statement left out the crucial detail that a foreclosure sale of the premises was likely to be ordered by another justice of this Court in a very short period of time. This detail was reasonably ascertainable by Mr. Horowitz, given his appearance in the mechanic's lien proceeding. This court cannot condone Mr. Horowitz's decision to ignore NYSCEF notifications related to the mechanic's lien proceeding. Even assuming that no further acts in that proceeding could have harmed 1180 President's interest in the premises, Mr. Horowitz, as an officer of the court, was obligated to inform himself of critical and reasonably ascertainable facts before making representations to the court about Seventh's redemption rights. His failure to do so was unjustifiable. The court nonetheless finds credible Mr. Horowitz's testimony that he was unaware of Harlem's application for a judgment in the mechanic's lien proceeding at the time of his representation. Consequently, the court does not find that he engaged in any act or omission with intent to mislead the court or to harass or maliciously injure Seventh. (
It bears noting that Seventh has never claimed that it was unaware of the Appellate Division decision against it in the mechanic's lien proceeding (95 A.D.3d 789,
As to 1180 President, despite and extended opportunity to subpoena Mr. Tress or any other witness to provide testimony at the hearing. Seventh failed to do so. There does not appear to be any dispute that Mr. Tress manages both 1180 President and Harlem, although there is evidence that the two entities do not have identical members. (
The court accordingly declines to award sanctions against 1180 President and/or its counsel. The balance of the relief sought in motion sequence 22, including but not limited to relief from the judgment of foreclose and sale issued by Justice Edmead in the mechanic's lien proceeding, is foreclosed by Justice Edmead's recent orders. Motion sequence 22 will therefore be denied in its entirety.
As to motion sequence 20, the parties agree that the December 23, 2015 foreclosure sale terminated Seventh's right to redeem. 1180 President will, however, be directed to provide Seventh with an accurate and up-to-date payoff letter. Moreover, on its own motion, the court determines that relief should be afforded Seventh in the form of a further discharge of interest on the mortgage debt. As explained in the undersigned's Decision and Order dated March 10, 2016, "[i]n an action of an equitable nature, the recovery of interest is within the court's discretion. The exercise of that discretion will be governed by the particular facts in each case, including any wrongful conduct by either party." (
In addition, 1180 President has represented that, "if the sale proceeds arising from the foreclosure sale of the Property in this Action do not satisfy, in full, the amount set forth in the submitted judgment of foreclosure and sale herein . . ., Plaintiff will not seek any such deficiency judgment . . . ."
It is accordingly hereby ORDERED that the motion of defendant 2201 7th Ave. Realty, LLC (Seventh) and Trevor Whittingham for a payoff letter and for other relief (motion sequence 20) is granted to the extent that it is
ORDERED that plaintiff 1180 President Funding, LLC (1180 President) shall provide to Seventh an accurate and complete payoff letter within seven days of service of a copy of this order with notice of entry; and it is further
ORDERED, upon the court's own motion, that 1180 President shall not be entitled to any interest on the mortgage debt from January 5, 2015 until the date of entry of the judgment of foreclosure and sale; and it is further.
ORDERED that 1180 President shall not be entitled to a deficiency judgment; and it is further
ORDERED that the motion of defendants Seventh, Trevor Whittingham, Global Investment Strategies Trust, and Trevor Whittingham, Inc. to vacate the July 28, 2015 judgment in
This constitutes the decision and order of the court.