NYCTL 1998 TRUST v. Office of the Comptroller of the State of New York, Nonparty–Respondent. (2023)

Order, Supreme Court, Bronx County (Adrian Armstrong, J.), entered April 22, 2022, which, to the extent appealed from, granted nonparty Office of the Comptroller of the State of New York's (the Comptroller) motion to vacate the orders dated April 15, 2021, June 15, 2021, and February 15, 2022 directing the disbursement of surplus funds from the tax lien foreclosure sale of the subject property to defendant Danny Z LLC, unanimously affirmed, without costs.

Although a nonparty to the proceeding, the Comptroller had standing to bring the motion to vacate because, as the custodian of the surplus funds for the benefit of the rightful owners (see Friar v. Vanguard Holding Corp., 125 A.D.2d 444, 446 [2d Dept 1986]), it had a legitimate interest in challenging any improper disbursement of the funds (see CPLR 5015[a];  Oppenheimer v. Westcott, 47 N.Y.2d 595, 602 [1979]).

Supreme Court providently exercised its discretion in granting the motion, as the Comptroller demonstrated an “excusable default” (CPLR 5015[a][1]) and, in any event, the circumstances warranted vacatur in the “interests of substantial justice” (Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 68 [2003]).  The Comptroller had no opportunity to oppose Danny Z's claim to the funds, since it was not given the requisite notice of the claim prior to its adjudication on the merits (see Abandoned Property Law § 1406[2][a]), and the court failed to consider the papers it filed in opposition to Danny Z's notice of settlement in issuing the February 22, 2022 amended order.  Furthermore, the Comptroller raised a potentially meritorious defense to Danny Z's claimed entitlement to the funds by submitting evidence demonstrating that the decedent may have surviving heirs with a rightful claim to the funds (see Eugene Di Lorenzo, Inc. v. A.C. Dutton Lbr. Co., 67 N.Y.2d 138, 141 [1986]).