Stay Now or Pay Later
A couple of recent cases illustrate the risks attendant upon foregoing a stay of enforcement pending appeal.
In the New York case of Cashel v. Cashel (Supreme Ct., Suffolk County, #05/21537), a lender sought to foreclose on its mortgage, while the borrower’s ex-spouse contended that the borrower’s deed was forged, that he was the sole owner of the property and therefore, the mortgage was void. The ex was awarded judgment in the trial court. The lender appealed, but did not obtain a stay. The ex immediately deeded the property to a third party.
The lender prevailed on appeal, but was forced to seek restitution pursuant to CPLR §5523, because it could not foreclose on the mortgaged property. As of this writing, the lender had prevailed in establishing an equitable lien on the proceeds of the sale (Court order dated Dec. 10,2012). But, the effort and expense of the restitution proceedings could have been avoided by obtaining a stay of the original judgment pending appeal.
Meanwhile, out in Nevada, a defendant in a fraud case lost in the trial court. The plaintiff was awarded a money judgment. The defendant appealed without obtaining a stay. While the appeal was pending, the plaintiff obtained an execution that directed the sheriff to levy on “all causes of action, claims, allegations, assertions and/or defenses of [the defendant].” Accordingly, the sheriff sold to the plaintiff (at auction) all the defenses that the defendant claimed to have in the fraud case being appealed. Playing out this inventive gambit, the plaintiff then moved to be substituted for the defendant as the real party in interest, for the purpose of dismissing the lawsuit against it!
The Nevada Supreme Court rebuffed the ploy. In a precedent-setting decision, they held that defenses to an action are non-assignable, and hence, immune from execution. Butwinick v. Hepner, 128 Nev. Adv. Opn. No. 65 (Dec. 27, 2012). The defendant won the battle, but at a higher cost, in terms of expense and delay, than the quicker and relatively cheaper route of seeking a stay of the original judgment. And, it still must pursue the pending appeal.
In each case cited above, the prevailing party was forced to advance a previously untested theory to get out of a tight spot. While getting a stay is not without attendant costs, time-pressure and uncertainty, counsel would be wise to consider the ramifications that can occur in the appellate “window.” Clients should understand that seeking a stay can lessen the risk of a Pyrrhic appellate victory.