     15-2653-cv (L)
     DeFlora Lake Dev. Assocs. Inc. v. Hyde Park

 1                       UNITED STATES COURT OF APPEALS
 2                           FOR THE SECOND CIRCUIT
 3
 4                                SUMMARY ORDER
 5
 6   RULINGS  BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER
 7   FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
 8   APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY
 9   ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX
10   OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
11   ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
12
13        At a stated term of the United States Court of Appeals for
14   the Second Circuit, held at the Thurgood Marshall United States
15   Courthouse, 40 Foley Square, in the City of New York, on the
16   3rd day of May, two thousand seventeen.
17
18   PRESENT: DENNIS JACOBS,
19            ROBERT D. SACK,
20                          Circuit Judges,
21            PAUL A. ENGELMAYER,
22                          District Judge.*
23   - - - - - - - - - - - - - - - - - - -X
24   DEFLORA LAKE DEVELOPMENT ASSOCIATES,
25   INC.,
26            Plaintiff-Appellant,
27
28                -v.-                                           15-2653-cv (L)
29                                                               16-3436-cv (CON)
30   HYDE PARK,
31            Defendant-Appellee,
32
33   LEWIS WROBEL,
34            Defendant.†
35   - - - - - - - - - - - - - - - - - - -X

           *
               Paul A. Engelmayer, United States District Judge for the
     Southern District of New York, sitting by designation.
          †
               The Clerk of Court is respectfully directed to amend the
     official caption to conform with the above.

                                                1
 1   FOR APPELLANT:               CHARLES I. EPSTEIN, Hackensack,
 2                                NJ.
 3
 4   FOR APPELLEE:                LEONARD BENOWICH, Benowich Law,
 5                                LLP, White Plains, NY.
 6
 7        Appeal from orders of the United States District Court for
 8   the Southern District of New York (Seibel, J.).
 9
10        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED AND
11   DECREED that the orders of the district court be AFFIRMED.
12
13        DeFlora Lake Development Associates, Inc. (“DeFlora”)
14   appeals from two orders of the United States District Court for
15   the Southern District of New York (Seibel, J.), which each
16   granted against DeFlora an award of attorneys’ fees. We assume
17   the parties’ familiarity with the underlying facts, the
18   procedural history, and the issues presented for review.

19        This litigation (and its precursor litigation) arises from
20   a land contract between Deflora and Hyde Park, which was entered
21   into in 1980 and amended multiple times over the years since.
22   The contract is complex, but in relevant part, the 1995 Amendment
23   No. 5 provides that Hyde Park owed DeFlora $8,404,989.43 for
24   all obligations under the contract, and that this nonrecourse
25   debt was to be paid “solely from the proceeds of the management
26   of the PROPERTY, and from the sale(s) of the PROPERTY and from
27   other credits and reductions described herein.” App’x 163.

28        An earlier action for breach of the agreement was filed in
29   2008, and was dismissed in 2011, and not appealed. DeFlora
30   brought the present action in 2013, it was dismissed in 2015,
31   and this court affirmed that dismissal by summary order. See
32   DeFlora Lake Dev. Assocs., Inc. v. Hyde Park, 654 F. App’x 9
33   (2d Cir. 2016) (summary order). Hyde Park moved in the district
34   court for attorneys’ fees, as allowed by a provision in the land
35   contract, and the district court entered an award against DeFlora
36   for $47,930.96. DeFlora appealed that order. Hyde Park moved
37   for additional fees in connection with its defense of the merits
38   appeal, and the district court entered an award for $31,341.98.
39   DeFlora appealed that order, too, and the two appeals have been
40   consolidated.

                                    2
 1        DeFlora does not challenge the awards themselves, nor the
 2   amount awarded. It argues only that it is entitled to a setoff
 3   of the fee awards against the $8,404,989.43 owed by Hyde Park.
 4   The district court rejected that argument three times (in the
 5   two orders awarding fees and in an order granting a motion to
 6   enforce the judgment) on the ground that the debt was
 7   nonrecourse.

 8        We review awards of attorneys’ fees for abuse of discretion.
 9   CBS Broadcasting, Inc. v. FilmOn.com, Inc., 814 F.3d 91, 104
10   (2d Cir. 2016). Questions of contract construction and other
11   questions of law are reviewed de novo. Goodheart Clothing Co.
12   v. Laura Goodman Enters., Inc., 962 F.2d 268, 273 (2d Cir. 1992).

13        1. DeFlora argues that, under New York Debtor and Creditor
14   Law (“DCL”) § 151, the fee awards may be set off against the
15   money owed to DeFlora under the land contract. The common law
16   right of setoff, codified by DCL § 151, “allows entities that
17   owe each other money to apply their mutual debts against each
18   other, thereby avoiding the absurdity of making A pay B when
19   B owes A.” Citizens Bank of Maryland v. Strumpf, 516 U.S. 16,
20   18 (1995) (internal quotation marks omitted). In order for
21   setoff to apply, the debts “must be mutual. Debts are mutual
22   when they are due to and from the same persons in the same
23   capacity.” Westinghouse Credit Corp. v. D’Urso, 278 F.3d 138,
24   149 (2d Cir. 2002) (internal citation, modification, and
25   quotation marks omitted).

26        Such mutuality is absent in this case, because according
27   to the terms of the land contract, the debt owed to DeFlora is
28   nonrecourse debt payable “solely from the proceeds of the
29   management” and sales of the land. App’x 163. As DeFlora
30   concedes, Appellant Br. 19, Hyde Park assumed no personal
31   liability for the debt. Applying a setoff of the fee awards
32   against it would be, in effect, to require payment--crediting
33   one debt against another--by a method other than the sole means
34   by which the debt is payable under the land contract.

35        2. DeFlora argues that the fee awards should be deducted
36   from the debt owed to it under the land contract because (1)
37   the land contract requires DeFlora to keep the property clear
38   of liens and encumbrances; (2) the first fee award, when filed


                                    3
 1   with the county clerk, became a lien against the property; and
 2   (3) Hyde Park’s sole remedy for liens under the land contract
 3   is that the amount of the lien be credited against the debt owed
 4   to DeFlora. In essence, DeFlora argues that the filing of the
 5   fee award constituted breach of the land contract by DeFlora,
 6   and that Hyde Park’s sole remedy for that breach is a credit
 7   against the debt.

 8        This argument distorts the lien provision of the land
 9   contract, and undermines the nonrecourse nature of the debt.
10   The land contract requires DeFlora to maintain and insure the
11   property and keep it clear of liens, and to satisfy any liens
12   within 30 days of their being placed on the property. This
13   provision preserves Hyde Park’s interest in the property: if
14   DeFlora fails to perform its obligations and a lien is placed
15   on the property, the value of the lien is deducted from the debt
16   owed to DeFlora by Hyde Park and Hyde Park’s interest is thereby
17   unimpaired. That circumstance is not implicated by a fee award
18   in Hyde Park’s favor. The land contract expressly provides for
19   attorneys’ fees, and that provision could have said (but does
20   not say) that such an award is to be credited against debt. To
21   construe the fee award as a lien within the meaning of the lien
22   provision would therefore undermine the contract. See Brad H.
23   v. City of New York, 17 N.Y.3d 180, 186 (2011) (“[L]anguage should
24   not be read in isolation because the contract must be considered
25   as a whole.”).

26        Accordingly, and finding no merit in appellant’s other
27   arguments, we hereby AFFIRM the judgment of the district court.

28                                 FOR THE COURT:
29                                 CATHERINE O’HAGAN WOLFE, CLERK




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