FEDERAL DEPOSIT INSURANCE CORPORATION v. Harry Horowitz, nonparty appellant. (2000)

In an action to foreclose a mortgage, the nonparty receiver, Harry Horowitz, appeals from a judgment of the Supreme Court, Kings County (Garry, J.), entered May 3, 1999, which is in favor of the intervenor and against him in the principal sum of $203,900.19.   The notice of appeal from an order dated September 11, 1998, is deemed a premature notice of appeal from the judgment (see, CPLR 5520[c] ).

ORDERED that the judgment is affirmed, with costs.

The appellant was appointed the receiver of a building that was subsequently bought by the intervenor at a foreclosure sale.   On a previous appeal, this court sustained the intervenor's objections to the appellant's final accounting (see, Crossland Sav. Bank v. 65 Lenox Rd. Owners Corp., 232 A.D.2d 520, 648 N.Y.S.2d 973).   The intervenor subsequently moved to compel the appellant to return his commission and certain funds which were the basis of its objections.   The parties stipulated to refer the matter to a referee to hear and report.   The referee scheduled a hearing at which the appellant failed to appear.   Thereafter, upon the appellant's default, the referee issued a report recommending that the appellant pay the intervenor the principal sum of $203,900.19.   The intervenor then moved to confirm the referee's report and the appellant cross-moved to disaffirm the report.   The Supreme Court issued an order confirming the report and entered judgment thereon.

 The referee's decision not to hold a hearing was due to the appellant's default and not the referee's failure to comply with CPLR article 43.   Moreover, the Supreme Court, which was the ultimate arbiter of the dispute, had the power to reject the referee's report and make new findings (see, CPLR 4403).   Since the Supreme Court considered the appellant's evidence and arguments, the appellant was not prejudiced by the referee's failure to hold a hearing (see, Shultis v. Woodstock Land Dev. Assocs., 195 A.D.2d 677, 599 N.Y.S.2d 340;  see also, Adelman v. Fremd, 234 A.D.2d 488, 651 N.Y.S.2d 604;  Stein v. American Mtge. Banking, 216 A.D.2d 458, 628 N.Y.S.2d 162).

 It is well settled that compensation may be denied to a receiver who has grossly mismanaged the property entrusted to him or her (see, Matter of Corcoran v. Corcoran, Inc., 135 A.D.2d 531, 521 N.Y.S.2d 757;  Title Guar. & Trust Co. v. Adlake Corp., 161 Misc. 27, 290 N.Y.S. 1007).   In addition, the appellant here commingled receivership funds with his personal funds, which is a serious breach of a receiver's fiduciary duties, and warrants denying the appellant any compensation.

The appellant's remaining contentions are without merit.

MEMORANDUM BY THE COURT.