• Surrogate's Court, New York County
  • 0175/82
  • Nov 21 2013 (Date Decided)
  • Surrogate Anderson

RICHARD S. LAWRENCE AND PETER A. VLACHOSE, AS EXECUTORS OF THE ESTATE OF ALICE LAWRENCE, plf v. GRAUBARD MILLER, C. DANIEL CHILL, ELAINE M. REICH, AND STEVEN MALLIS, def (0175/82) — Presently before the court is a motion by the executors of the estate of Alice Lawrence ("movants") seeking discharge of a bond that movants posted to obtain a stay under CPLR 5519(a)(2)1 pending their appeal from an amended decree dated October 14, 2011 (the "October 2011 decree"). The October 2011 decree awarded the firm of Graubard Miller some $15.8 million for its legal services to movants' decedent in connection with a decades-long litigation involving the estate of Sylvan Lawrence. The magnitude of the award was attributable in part to a contingency element allowed by the court. By the terms of the appeal bond in question, the surety undertook that, "if the[October 2011] decree so appealed from, or any part of it, is affirmed, or the appeal is dismissed, the [executors] shall pay the sum directed to be paid by the decree or the part of it as to which said decree is affirmed."

As the basis for their request for relief, movants point to two developments following the issuance of the bond. The first was a decision rendered by the Appellate Division, First Department, modifying the October 2011 decree to allow for a fee to Graubard to be calculated upon the considerably more modest basis of an hourly rate. The second was movants' payment of some $2.9 million to Graubard in total satisfaction of a decree dated July 29, 2013, entered in this court following the remand.

Movants contend that the abovedescribed developments have rendered Graubard's need for an appeal bond moot, and on that ground they seek discharge of the bond and release of the surety. That is, according to movants, there is '"no longer a judgment order to enforce'" and '"no stay [of enforcement] is necessary' David Siegel, Practice Commentaries C 5519:6 at 7BMcKinney's Consolidated Laws of New York 228." Movants further note that, "This is true whether or not Graubard...succeeds on its appeal to the Court of Appeals." Affidavit of Daniel J. Kornstein, at p. 4.

In pressing such position, however, movants overlook the basic purpose of an appeal bond under CPLR 5519 and ignore the terms of the surety's undertaking in this case. The statute requires such an undertaking to assure that a judgment creditor who may prevail at the conclusion of the appellate process cannot be harmed in the interim by a stay obtained at an earlier stage of that process. The present case illustrates the point. But for the stay of the decree obtained by movants in October 2011, Graubard could have taken steps to obtain and enforce a judgment for some $15.8 million. The appeal bond was required to protect Graubard against the possibility that movants might become judgment-proof during the course of the appellate process, rendering an ultimate affirmance of the October 2011 decree only a pyrrhic victory for Graubard (see Robert Stigwood Org., Inc. v. Devon Co., 91 Misc 2d 723 [Sup. Ct., New York County 1977]). It is therefore critical to note that, although Graubard did not prevail at the first appellate level, the appellate process in this case remains on-going, the Court of Appeals having given leave to appeal.

Certain appellate decisions (e.g., Self Serv. Super Market v. Harris, 3 NY2d 615; Robinson, Receiver v. Plimpton, 25 NY 484; Jones v. Wicks, 16 AD2d 685 [2d Dept. 1962]; Consolidated Ind. & Ins. Co. v. Dein, 233 AD 380 [1st Dept. 1931]) have been the subject of considerable argument between the parties on this motion. Each of those decisions recognized that "an intermediate reversal of a judgment does not discharge the surety on an appeal bond if the higher court subsequently reverses the intermediate court" Consolidated Indem. and Ins. Co. v. Dein, supra, at 383.

Movants argue that such decisions either are no longer viable or, in any event, are distinguishable from the present case. Movants question the viability of these precedents on the ground that the decisions predate the CPLR. But movants do not explain in what way the CPLR's provisions alter the above-quoted principle acknowledged by these rulings. Nor do movants explain how the rulings' context — i.e., after the appellate process had been concluded — renders those rulings inapplicable here. Indeed, where, as here, a surety has bound itself to make good on a judgment, it appears that the surety cannot sensibly be held to be released from liability at an intermediate stage of appeal if, as the cited precedents hold, a court of final resort may ultimately hold the surety liable on its undertaking (compare T.T. Chems. [U.S.A.] Inc v. Vinmar Impex, Inc., 189 AD2d 727 [1st Dept. 1993])[where stay of enforcement of judgment is terminated by denial of leave to appeal from judgment's reversal or modification, liability on bond discharged]). To the extent that a lower court decision cited by movants is to the contrary, but not distinguishable, this court respectfully declines to adopt its reasoning (see City of New York v. 17 Vista Assoc., 1991 WL 11762684 (Sup. Ct. 1991). See Sunrise Harbor Realty, LLC v. 35th Sunrise Corp., 2011 WL 8183983 (Sup. Ct., Suffolk County 2011); compare Sung Hwan Co. Ltd. v. Rite Aid Corp., 2009 NY Slip Op 31727(U) [Sup Ct, New York County] (where intermediate appellate court denied leave to appeal from judgment secured by undertaking, the latter was in effect vacated).

Thus, Robinson and like decisions written long ago are no less instructive for the present case than if they had been rendered recently. Then, as now, there was "no reason for making [an] undertaking effectual only upon the first appeal, and for the judgment of a court which [is] not necessarily final" (id., at 485). Accordingly, surety undertakings addressed in the decisions issued more than a century ago were understandably expressed in terms akin to those used in the surety's undertaking herein (see, e.g., Foo Long v. The Am. Sur. Co., 146 NY 251; Robinson, Receiver v. Plimpton, supra; cf. Consol. Indem. And Ins. Co. v. Dein, supra).

The court has considered movants' other arguments and finds them lacking in merit. The motion is denied for the reasons discussed above.

This decision constitutes the order of the court.

Dated: November 21, 2013

1. Under section 5519(a)(2) of the CPLR, a stay of enforcement of a judgment or order is available without court order where "the judgment or order directs the payment of a sum of money, and an undertaking in that sum is given that if the judgment or order appealed from, or any part of it, is affirmed, or the appeal is dismissed, the appellant or moving party shall pay the amount directed to be paid by the judgment or order, or the part of it as to which the judgment or order is affirmed...."