Citation Codes

Equivalent Citations

citation codes

Docket Number

No. 81 Civ. 5867 (RWS).

Attorney(S)

John S. Martin, U.S. Atty., S.D.N.Y., New York City, for plaintiff; Michael Patrick, Asst. U.S. Atty., New York City, of counsel. Paul L. Beck, New York City, for movants.

Judges

Robert Workman Sweet

Acts

Judiciary And Judicial Procedure — Executions And Judicial Sales — Procedure — Sale Of Realty Generally
Judiciary And Judicial Procedure — Executions And Judicial Sales — Procedure — Notice Of Sale Of Realty

See more information ...

Smart Summary

Case Summary: UNITED STATES v. THWAITES PLACE ASSOCIATES, et al. (No. 81 Civ. 5867 (RWS)) — Opinion of Sept. 23, 1982

Factual and Procedural Background

The court entered a default judgment on December 22, 1982 in a mortgage foreclosure action against Thwaites Place Associates and ordered that the property be sold at public auction under this Court's rules and 28 U.S.C. §§ 2001 and 2002, under the direction of the United States Marshal for the Southern District of New York. A sale was scheduled for June 4, 1982, and Deputy U.S. Marshal Peter-Paul Mihailoff conducted the sale at the New York State Supreme Court Building in the Bronx.

Before bidding began, Mihailoff read the Terms of Sale aloud; the first paragraph required ten percent of the purchase price to be paid "in cash or certified check to the said Marshal." He also informed attendees that certified checks would be accepted only if payable to the U.S. Treasury or the U.S. Marshal. During bidding, disputes arose: the highest bid (Binder) initially lacked an acceptable instrument, and the sale was restarted. Later, movant John Dedvukaj submitted the high bid of $651,000 and tendered two bank checks made out to "Harvey Sorkin" (another bidder). Mihailoff refused to accept those third-party checks, confirmed by telephone with a Marshal's Office official that third-party checks were not acceptable, and cancelled the sale to be rescheduled.

Movants John Dedvukaj and Harvey Sorkin moved for an order compelling the United States Marshal to accept their bid made at the foreclosure sale. The motion was denied by the court for the reasons set forth in the opinion.

Legal Issues Presented

Whether the United States Marshal was required to accept third-party bank checks (checks made payable to a third party and indorsed over) as compliance with the Terms of Sale requiring ten percent of the purchase money "in cash or certified check to the said Marshal."
Whether the court should compel the United States Marshal to accept the movants' bid (i.e., order acceptance of the bid and/or direct completion of the sale) after the Marshal refused the third-party checks and adjourned the sale.

Arguments of the Parties

Movants' Arguments (Dedvukaj and Sorkin)

Dedvukaj and Sorkin contended that Dedvukaj's tender of certain checks to Deputy Marshal Mihailoff complied with custom and the Terms of Sale, and therefore the Marshal wrongly refused to accept those checks.
They asserted it is customary for the U.S. Marshal to accept bank checks payable to some third-party payee and indorsed over by that payee to the Marshal.
They argued the third-party bank checks ought to have been treated as the equivalent of cash or certified checks and cited Tupper Lake National Bank v. Chimney Rock, Inc. as supporting authority.

United States Marshal / Government Arguments

The Marshal's practice, as stated by U.S. Marshal George V. Grant and by Supervisory Staff Assistant Shirley Paccione, is to accept only cash or certified checks drawn on a New York bank and payable to the United States Treasury or the United States Marshal to ensure proper accounting and to avoid problems associated with personal checks or checks payable to individuals or third parties.
Deputy Marshal Mihailoff repeatedly announced the Terms of Sale and specifically that certified checks would be accepted only if payable to the U.S. Marshal or U.S. Treasury; he refused acceptance of the checks made payable to a third party and required to be indorsed over.
The Marshal's refusal and the decision to adjourn the sale were justified by the need to avoid acceptance of instruments inconsistent with office policy and the Terms of Sale, and because the confusion and noncompliance made a fair and meaningful sale unlikely on that date.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Erie Coal Coke Corp. v. United States, 266 U.S. 518, 45 S.Ct. 181, 69 L.Ed. 417 (1925)	Establishes that the terms or conditions prescribed for a judicial sale are binding on any purchaser.	The court invoked Erie to support that the Terms of Sale (requiring cash or certified check to the Marshal) were binding on purchasers and properly announced.
Ferry v. Udall, 336 F.2d 706 (9th Cir. 1964), cert. denied, 381 U.S. 904 (1965)	Authority cited alongside Erie for the proposition that terms/conditions of judicial sales bind purchasers (as precedent supporting that principle).	Used as supporting authority that sale conditions announced by the court/official are binding on bidders.
In re Sapolin Paints, Inc., 11 B.R. 930, 936 (S.D.N.Y. 1981)	Further authority that sale terms/conditions are binding on purchasers in judicial sales context.	Referenced to reinforce the principle that bidders must comply with announced terms of sale.
Matter of Premier Container, 95 Misc.2d 859, 408 N.Y.S.2d 725, 730 (Sup.Ct. Queens Co. 1978)	Another decision cited for the proposition that prescribed terms for judicial sales are binding.	Included among authorities supporting the binding nature of the Terms of Sale.
Tupper Lake National Bank v. Chimney Rock, Inc., 32 A.D.2d 588, 299 N.Y.S.2d 462 (3d Dep't 1969)	Involved refusal to accept a third-party bank check at sale and the related procedural circumstances; discussed by movants as supporting acceptance of third-party checks.	The court analyzed Tupper and concluded it did not mandate acceptance of third-party checks here; rather, Tupper's relevant holding concerned the reasonableness of the time allowed to procure proper payment instruments, not a requirement to accept third-party checks.
Blossom v. Railroad Co., 70 U.S. [3 Wall.] 196, 18 L.Ed. 43 (1866)	Supports the general principle that an officer of the court may exercise reasonable discretion in conducting a sale.	The court cited Blossom to justify that the Marshal could exercise discretion (including adjourning the sale) under the circumstances presented.
Quinn v. S.S. Jian, 235 F. Supp. 975 (D.Md. 1964)	Also cited for the proposition that an officer of the court can exercise reasonable discretion in conducting judicial sales.	Used to support the conclusion that the Marshal's decision to adjourn the sale was within the scope of reasonable discretion given the confusion at the sale.

Court's Reasoning and Analysis

The court proceeded in a stepwise fashion grounded in the Terms of Sale and the Marshal's stated policy:

The court noted its prior judgment directing the sale "in accordance with the rules and practices of this Court and provisions of 28 U.S.C. § 2001 and 2002" under the Marshal's direction, and that Mihailoff read the Terms of Sale aloud before bidding began. The Terms required ten percent of the purchase money to be paid "in cash or certified check to the said Marshal."
Mihailoff also announced his customary practice that certified checks would be accepted only if payable to the U.S. Treasury or the U.S. Marshal. This requirement was reiterated multiple times: at the outset, after the first round of bidding difficulties, and after Dedvukaj's high bid.
Dedvukaj tendered two bank checks payable to "Harvey Sorkin." Mihailoff informed Dedvukaj that third-party checks were unacceptable as inconsistent with the Terms of Sale and the Marshal's office policy, and he telephoned a supervisory official who confirmed that the Marshal's Office could not accept third-party checks and required checks be payable to the U.S. Marshal or U.S. Treasury.
The court relied on affidavits from United States Marshal George V. Grant and Supervisory Staff Assistant Shirley Paccione, which described a strict office policy (in place since Grant's appointment and corroborated by Paccione's seventeen years of tenure) to accept only cash or certified checks payable to the United States Treasury or the United States Marshal to avoid accounting difficulties and problems with multiple endorsements.
The court considered movants' argument that custom and the decision in Tupper Lake National Bank v. Chimney Rock supported acceptance of the third-party checks. The court analyzed Tupper and concluded it did not compel acceptance of third-party checks in the circumstances here; rather, Tupper addressed the unreasonableness of the time given to obtain proper payment instruments, not a requirement that third-party checks be accepted.
The court emphasized that terms and conditions prescribed for a judicial sale are binding on purchasers (citing Erie and other authorities) and that a sale officer may exercise reasonable discretion in conducting the sale (citing Blossom and Quinn). Given the prior bidding confusion, the failure of two bidders to comply with the Terms of Sale, and attendant uncertainty, a fair and meaningful sale could not be held on June 4, 1982.
Because Mihailoff had reasonably rejected nonconforming payment instruments (third-party checks) and properly adjourned the sale under his discretion and the announced Terms of Sale, the movants' request that the Marshal be compelled to accept their bid was denied.

Holding and Implications

Holding: The court denied the movants' motion to compel acceptance of their bid. The core ruling is emphasized as follows:

Motion denied.

Implications:

The Marshal's refusal to accept third-party bank checks made payable to another bidder (which would require multiple indorsements) was upheld as consistent with the Terms of Sale and the Marshal's established policy and practice.
The court found the Marshal acted within reasonable discretion in adjourning the sale given the confusion and noncompliance at the auction.
No broader change in law was announced; the decision enforces the binding nature of announced sale terms and the Marshal's discretion in conducting judicial sales. The direct effect is that movants' bid was not accepted and their motion to compel was denied.

Order: IT IS SO ORDERED.

Show full summary ...

UNITED STATES of America, Plaintiff, v. THWAITES PLACE ASSOCIATES, et al., Defendants.

OPINION

SWEET, District Judge.

This matter is before the court on a motion for an order to compel the United States Marshal for the Southern District of New York to accept the bid of movants made at a foreclosure sale. Movants John Dedvukaj ("Dedvukaj") and Harvey Sorkin ("Sorkin") contend that Dedvukaj's tender of certain checks to Deputy United States Marshal Peter-Paul Mihailoff ("Mihailoff") was in accordance with custom and the Terms of Sale governing the foreclosure sale and that therefore Mihailoff wrongly refused to accept said checks. For the reasons set forth below the motion is denied.

On December 22, 1982 this court entered a default judgment against Thwaites Place Associates in the underlying mortgage foreclosure action and directed that the subject property be sold at a public auction "in accordance with the rules and practices of this Court and provisions of 28 U.S.C. § 2001 and 2002, under the direction of the United States Marshal for the Southern District of New York, or his representative" (81 Civ. 5867). Pursuant to that order and judgment a sale was scheduled on proper notice for June 4, 1982. On that day, Mihailoff appeared at the New York State Supreme Court Building in the Bronx to conduct the sale.

Prior to opening the floor for bids, Mihailoff read out loud the entire Terms of Sale. The first paragraph reads as follows:

Ten percent (10%) of the purchase money of said premises will be required to be paid in cash or certified check to the said Marshal at the time and place of sale, and for which the Marshal's receipt will be given.

In addition, he followed his normal and customary practice of informing those present that any payments made by certified check would be accepted only if they were payable to the U.S. Treasury or the U.S. Marshal.

Bidding began. The highest bid was made by one Mr. Binder ("Binder") and the next highest by Dedvukaj. Binder, however, had only a personal check to cover ten percent of his bid. Arguments among the bidders ensued regarding the requirements of purchase and the manner in which the sale was being conducted. Mihailoff reiterated that the terms of sale specifically require payment "in cash or certified check" and only those checks made out to the U.S. Marshal or U.S. Treasury would be accepted. In light of the difficulties encountered up to that point Mihailoff announced that he would restart the bidding, having again made clear the requirements of the Terms of Sale. Binder left his wife at the sale and went off to the bank to get a certified check.

When bidding began again, the upset price of $650,000 was bid by the United States. Dedvukaj then bid the high bid of $651,000 and produced one bank check in the amount of $65,000 and another in the amount of $5,000, both made out to "Harvey Sorkin," one of the other bidders at the sale. Mihailoff advised Dedvukaj that the third party checks were unacceptable under the Terms of Sale and that acceptance of a doubly indorsed check was contrary to established policy and practice of the U.S. Marshal's Service and to the Terms of Sale. To confirm this, Mihailoff telephoned Shirley Paccione ("Paccione"), Supervisory Staff Assistant in the Administrative Section of the U.S. Marshal's Service, Southern District of New York, who informed him that the Marshal's Office was unable to accept third party bank checks and that the checks had to be addressed to the U.S. Marshal or the U.S. Treasury. Mihailoff related the contents of his conversation with Paccione to Dedvukaj. Dedvukaj protested claiming that indorsement of the bank checks to the Marshal satisfied the Terms. Mihailoff then cancelled the sale to be rescheduled for a later date.

In his affidavit Dedvukaj stated that while Sorkin was arguing with the Marshal, he phoned his bank and informed an officer that an employee of his would pick up checks made payable to Dedvukaj from the bank and told Mihailoff his employee would be at the courthouse with the checks shortly. In his affidavit, Mihailoff does not indicate that this statement was made to him or that he approved any such action.

Dedvukaj and Sorkin in their affidavits and memorandum of law state in conclusory terms that it is customary for the U.S. Marshal to accept bank checks payable to some third party payee and indorsed over by that payee to the Marshal. In his affidavit, George V. Grant ("Grant"), United States Marshal for the Southern District of New York, states in paragraphs three and four:

3. To account properly for all monies collected by my office, I have since my appointment in September 1977, maintained a strict policy of accepting payment only in the form of cash or certified checks drawn on a New York bank and payable to the United States Treasury or the United States Marshal. This policy has also applied to deposits mandated by this court or by statute.

4. This policy is required to avoid the difficulties encountered in collecting monies through personal checks or certified checks payable to individuals or parties other than the United States Treasury or the United States Marshal. Acceptance of doubly and triply endorsed checks is fraught with problems.

Similarly, Paccione in her affidavit states that throughout her seventeen year tenure at the U.S. Marshal's Service, "it has been the established policy and procedure of the office to accept such payment only in cash or in certified check(s) payable to the United States Marshal or to the U.S. Treasury." The bank checks offered by Dedvukaj would have required multiple indorsements and as indicated above, that is exactly what the Marshal avoids by requiring cash or certified check(s) payable to the U.S. Marshal or to the U.S. Treasury.

Presumably, as payment would have been required from the highest bidder, Sorkin would have indorsed the checks over to Dedvukaj and Dedvukaj in turn would have indorsed them over to the Marshal. Movants appear to argue that Mihailoff should have accepted the checks because they were not offered by Dedvukaj individually but on behalf of the joint venture between Dedvukaj and Sorkin. Because the movants did not identify themselves as joint venturers at the time of bidding but instead listed their names separately as different bidders, it is unnecessary for this court to address the joint venture status of movants.

Moreover the Terms of Sale specifically state that ten percent of the purchase money "will be required to be paid in cash or certified check to said Marshal." The terms or conditions prescribed for a judicial sale are binding on any purchaser. Erie Coal Coke Corp. v. United States, 266 U.S. 518, 45 S.Ct. 181, 69 L.Ed. 417 (1925); Ferry v. Udall, 336 F.2d 706 (9th Cir. 1964), cert. denied, 381 U.S. 904 (1965); In re Sapolin Paints, Inc., 11 B.R. 930,936 (S.D.N.Y. 1981); Matter of Premier Container, 95 Misc.2d 859, 408 N.Y.S.2d 725, 730 (Sup.Ct. Queens Co. 1978). Mihailoff read out loud the Terms of Sale before the bidding began. He then made clear that a certified check would only be accepted if made payable to the U.S. Treasury or U.S. Marshal. Mihailoff repeated this requirement after the high bid made by Binder fell through. And once again, after Dedvukaj submitted the high bid of $651,000, the requirement was stated for a third time.

Despite the fact that the third party bank checks proffered by Dedvukaj did not conform with either the U.S. Marshal's practice and procedure or the Terms of Sale, Dedvukaj and Sorkin argue that the third party bank checks should nonetheless have been accepted by the Marshal as the equivalent of cash or certified checks. The only support to which they point is Tupper Lake National Bank v. Chimney Rock, Inc., 32 A.D.2d 588, 299 N.Y.S.2d 462 (3d Dep't 1969). If anything, however, Tupper dictates that Mihailoff properly refused the checks. In Tupper the Referee would not accept as a portion of the required payment by the high bidder a check issued by a bank to a third party although a person present at the sale said he was the person named as payee. The high bidder requested time to "travel to a nearby community" to obtain that portion of the payment in the form of a proper instrument. The Referee consented, requiring payment within five minutes. At the end of that time, the Referee struck down the premises to another bidder. The Appellate Division found that the Referee had acted unreasonably and ordered the Referee to accept the high bidder's payment "in cash or by certified check made payable to the order of the Referee." The court's conclusion, however, was not that the Referee had improperly refused to accept the third party's bank check, but rather that in exercising his discretion to permit the bidder to travel to procure proper payment instruments, the Referee was required to allow a reasonable time for such procurance and five minutes under the circumstances was found to be unreasonable.

There is language in Tupper indicating that the Referee accepted as partial payment from the high bidder "(as the equivalent of certified checks) two checks issued by a bank. . . ." 299 N.Y.S.2d at 463. The opinion does not indicate to whom the checks were made payable. However, the portion of Tupper relevant to this discussion is that dealing with the third party bank check made out to one other than the high bidder as is the case here.

An officer of the court can exercise reasonable discretion in conducting a sale. See Blossom v. Railroad Co., 70 U.S. [3 Wall.] 196, 18 L.Ed. 43 (1866); Quinn v. S.S. Jian, 235 F. Supp. 975 (D.Md. 1964). The failure of two bidders to comply with the Terms of Sale, coupled with the attendant confusion and uncertainty made it unlikely that a fair and meaningful sale could be held on June 4, 1982. As such, the sale was properly adjourned. Having rejected Binder's request either to submit a personal check or to wait until Binder returned with his certified check it would have been improper for Mihailoff to accept third party bank checks proffered by Dedvukaj or even to wait until Dedvukaj returned with the proper form of payment. For these and the reasons discussed above, Dedvukaj's and Sorkin's motion is denied.

IT IS SO ORDERED.

UNITED STATES v. THWAITES PLACE ASSOCIATES, (S.D.N.Y. 1982)