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

State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: January 19, 2017 522266
________________________________

LEHMAN COMMERCIAL PAPER, INC.,
Respondent,
v

POINT PROPERTY CO., LLC, MEMORANDUM AND ORDER
et al.,
Appellants,
et al.,
Defendant.
________________________________

Calendar Date: November 17, 2016

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

__________

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.

__________

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
 -2- 522266

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
AD2d 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 AD3d 878, 878 [2007]). While

1
Supreme Court granted defendants an interim stay of the
proceedings pending resolution of the appeal. Defendants,
however, failed to post an undertaking within the time frame
specified by Supreme Court for the stay to remain in effect.
 -3- 522266

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 NY2d 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 AD3d 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 NY2d 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.

2
Defendants only challenge the reasonableness of the
counsel fees and not plaintiff's entitlement to them.
 -4- 522266

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 AD2d 425, 426
[1987], lv dismissed 70 NY2d 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 AD3d 1051, 1054 [2013]; cf. Vacation Vil.
Homeowners' Assn. v Mordkofsky, 254 AD2d 650, 651 [1998], lv
dismissed 93 NY2d 920 [1999], appeal dismissed 94 NY2d 898
 -5- 522266

[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
AD3d 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 calculating [counsel] fees"
(Key Bank of N.Y. v Anton, 241 AD2d 482, 483 [1997]; see Sears v
First Pioneer Farm Credit, ACA, 46 AD3d 1282, 1287 [2007];
General Motors Acceptance Corp. v FMJ Computer Servs., 277 AD2d
543, 543-544 [2000]).

Notwithstanding Supreme Court's discretion in this realm
and the fact that the court awarded plaintiff an amount less than
what was sought, before an award of counsel fees may be fixed,
"the court must possess sufficient information upon which to make
an informed assessment of the reasonable value of the legal
services rendered" (Bankers Fed. Sav. Bank v Off W. Broadway
Devs., 224 AD2d 376, 378 [1996]). In our view, Supreme Court did
not have before it sufficient information to summarily determine
the reasonableness of the sought counsel fees. Furthermore, "to
permit intelligent review, a court must provide a concise but
clear explanation of its reasons for the [counsel] fee award"
(Ricciuti v Lombardi, 256 AD2d 892, 893 [1998] [internal
quotation marks and citations omitted]). Although Supreme Court,
in its order, recited the necessary factors relevant to
determining the reasonableness of counsel fees, it did not
provide a clear explanation for its ultimate counsel fee award.
Rather, the $80,000 awarded by Supreme Court appears to derive
merely from adding up all of the fees attributable to one of the
attorneys who represented plaintiff – i.e., the attorney who
submitted the affidavit of services – without regard to the
necessary factors used to reach an award of counsel fees and with
insufficient information in light of the block billing and vague
and redacted time entries in the legal invoices. Accordingly,
given that plaintiff's proof was insufficient for Supreme Court
to fix an award of counsel fees on the papers alone and that
 -6- 522266

defendants were never afforded an opportunity in the first
instance to challenge the reasonableness of the requested counsel
fees, the matter must be remitted for an evidentiary hearing.

Peters, P.J., Devine and Mulvey, JJ., concur.

Garry, J. (concurring in part and dissenting in part).

I concur with the majority's determination that the aspect
of the appeal pertaining to redemption rights is moot, but I
respectfully dissent as to the issue of the counsel fee award. I
do not agree that the underlying circumstances require remittal
for a further hearing, as the record reveals that Supreme Court
properly provided for an evidentiary hearing on the issue of
counsel fees. At the scheduled hearing, counsel for defendants
Point Property Co., LLC and Point Annex Land Co., LLC
(hereinafter collectively referred to as defendants) deliberately
chose to instead discuss several other issues and to present only
oral argument, rather than submitting testimony and evidence.
This strategic choice should not now result in a second hearing.
I most strongly reject the majority's assertion that "it was
incumbent upon Supreme Court to direct the parties to commence"
with submission of evidence or testimony at the hearing. These
were sophisticated parties in a multimillion dollar dispute; it
was certainly not the court's obligation to direct them as to how
to proceed upon the hearing date, any more than it was incumbent
upon the court to serve subpoenas upon witnesses, prepare
documents for submission, or question the witnesses at the
hearing. As set forth below, the transcript reveals that the
court made every reasonable effort to properly direct counsel.
These efforts were met with obfuscation rather than cooperation.

It bears noting at the outset that Supreme Court was fully
familiar with the matter, having been engaged throughout the
course of the litigation, and was thus well poised to review the
request, which was addressed to its discretion (see Shrauger v
Shrauger, 146 AD2d 955, 956 [1989], appeal dismissed 74 NY2d 844
[1989]). The court specifically advised the parties in writing
that a "hearing on the issue of [counsel] fees" was to be
conducted. Prior to this scheduling order, counsel for plaintiff
 -7- 522266

had submitted a detailed affidavit in support of the fee
application, which set forth the contractual basis for the
requested award and summarized the activities undertaken on a
monthly basis – with the corresponding fees – for services
performed over a period of just under two years. This affidavit
was accompanied by approximately 65 pages of detailed time
records revealing the tasks performed on particular dates and the
duration of each task, as well as who had performed them.

As the hearing commenced, Supreme Court again advised as to
the purpose, and asked defendants' counsel "to address any issues
in the [counsel] fees request." In response, counsel instead
chose to launch into extensive argument on three issues "other
than legal fees." After a considerable amount of argument,
Supreme Court interrupted, reminding counsel that the issue of
counsel fees "was the whole purpose of today's hearing."
Defendants' counsel called no witnesses and presented no
evidence, but did then present oral argument addressed to the fee
request, which included expressing his "hope [that] they testify
on this, because [he] want[ed] to cross[-]examine them." The
court expressed some confusion, as counsel had not initially made
this request; defendants' counsel responded with further
argument, ultimately concluding that the fee request should be
rejected in its entirety. Plaintiff's counsel then argued in
support of the requested fees, and, in conclusion, offered either
to submit testimony in support or, alternatively, to allow the
court to render determination upon the submissions. Defendants'
counsel then offered further argument – again on the other topics
– without addressing the issue of fees. The court noted the time
that had been spent in the hearing and reiterated, once again,
that "today is about [counsel] fees." Defendants' counsel then
asserted that plaintiff's counsel "need[s] to get up on the stand
and testify," as "their invoices don't get it done," but, still,
failed to call witnesses or offer evidence. The hearing
concluded shortly thereafter. Supreme Court subsequently issued
a decision based upon the well-established discretionary factors
that guide such determinations (see Hinman v Jay's Vil.
Chevrolet, 239 AD2d 748, 748-749 [1997]), and rendered an award
that reduced the requested fee considerably; the sum requested
was $119,350, and the sum awarded was $80,000.
 -8- 522266

Upon review, I cannot find on this record that defendants
were deprived of the right to conduct an evidentiary hearing.
The time for the hearing was specifically scheduled by Supreme
Court, with full and due notice provided. A stenographer was
present; all the required elements were fully available.
Nonetheless, despite the court's repeated efforts to encourage
defendants' counsel to address the issue of counsel fees, he
failed to utilize the opportunity for this purpose and instead
opted to vigorously pursue other issues. Given the
circumstances, counsel's failure to offer evidence upon the
scheduled hearing date should not now inure to defendants'
benefit (see Bell v White, 112 AD3d 1104, 1105 [2013], lv
dismissed 23 NY3d 984 [2014]). I find no abuse of Supreme
Court's discretion relative to the award (see Curtis v Nutmeg
Ins. Co., 256 AD2d 758, 759 [1998]). Accordingly, I would affirm
the award of counsel fees.

ORDERED that the order is modified, on the law, without
costs, by reversing so much thereof as awarded plaintiff counsel
fees; matter remitted to the Supreme Court for further
proceedings not inconsistent with this Court's decision; and, as
so modified, affirmed.

ENTER:

Robert D. Mayberger
Clerk of the Court