my opinion holding that Levin was entitled to an accounting. Defendants continued to have the use of the funds through that time, and persisted in their refusal to render an accounting to Levin for his share, despite their acknowledgment that such an accounting was due. Plainly, however, Rondi River was not actively engaged in business beyond that time.
Levin is therefore entitled to credit for his share of additional interest due to the corporation, at the rate of 18%, on $ 422,095, the adjusted amount of receivables due to the corporation from the defendants, from May 31, 1979, to June 11, 1980. This amounts to $ 78,276, of which Levin's share is $ 19,569.
Levin further objects to the master's reduction of his capital share from the $ 25,000 found to be Levin's share at trial, to $ 20,000. The master's reason for reducing Levin's share was that Levin was able to produce from his financial records evidence of only $ 20,000 in contributions. Although I agree that the master was following sound accounting principles in refusing to credit Levin with more than $ 20,000, I choose to stand by my finding at trial that Levin contributed $ 25,000. The defendants there conceded that Levin made a $ 25,000 contribution, and because interests in property were often created between the parties without the exchange of cash in settlement of various other claims and obligations, the fact that Levin does not have records reflecting the full $ 25,000 does not mean that he did not in fact contribute it. The master's findings and conclusions will be adjusted to reflect the additional $ 5,000.
G. Summary of Accounting, as Modified
In accordance with the above discussion, the following represents my findings and conclusions with respect to the Rondi River Realty Corporation:
H. Form of Judgment
As modified, the master's report shows that Levin is entitled to $ 273,554 as his share of the Rondi River venture. This figure is somewhat misleading, however, because the "Gain on Sale" figure in the master's report includes the face value of a purchase money mortgage ($ 491,456) taken back by the Rondi River Realty Corporation at the time the Rondi River property was sold. Since that mortgage calls for a stream of payments through December 1, 1985, and because the master carried the value of the mortgage at its face amount throughout his accounting, the master recommended that judgment be entered entitling Levin to cash plus a 25% participatory interest in the purchase money mortgage.
Notwithstanding the master's recommendation that Levin's proportionate share of the Rondi River venture should reflect both the liquid and long-term assets of the corporation, I am inclined to reject his recommendation that Levin's judgment consist partly of a share in the purchase money mortgage. My reasons are twofold. First, it is the purpose of this litigation and of this accounting to terminate, once and for all, the relationship between Levin and the Garfinkle interests. To give Levin a share in the mortgage would frustrate this purpose. Second, because Garfinkle and Fensterheim unlawfully pledged the purchase money mortgage to secure several illicit loans from K. B. Weissman (see Findings 279-280, 492 F. Supp. at 805), the value of the purchase money mortgage is gradually diminishing. Therefore, in my view, the equitable way to resolve this matter is to value the purchase money mortgage as of June 11, 1980 (the date I found that an accounting should be rendered), reduce Levin's share proportionately to reflect the present value adjustment, and enter a money judgment in favor of Levin for the reduced amount.
The parties were informed of my decision to adjust Levin's share to reflect the present value of the purchase money mortgage. Accordingly, on October 22, 1981, a hearing was held to determine, inter alia, the present value of the mortgage as of June 11, 1980. At the hearing, George David, Levin's expert, opined that the present value of the remaining payments under the mortgage was $ 356,893. In arriving at this figure, David applied a discount rate of 10%, which he described as the "return on cash" in 1976. David did not explain why a discount rate for 1976 should be applied to value a mortgage as of 1980. Defendants did not present any evidence whatsoever as to the present value in 1980 of the stream of payments to be paid under the mortgage, but did dispute the 10% discount rate applied by David. Asher Fensterheim testified that in the summer of 1980, second mortgages, like the purchase money mortgage involved here, were being discounted at rates of 22 to 24 percent.
Since the hearing, the parties have stipulated to the value, as of June 11, 1980, of the stream of payments to be generated by the purchase money mortgage from June 11, 1980 through December 1, 1985 for various rates of discount ranging from 10 to 24 percent.
I must determine, therefore, which specific rate is applicable. From the little evidence presented at the October 22, 1981 hearing, it appears that discount rates on second mortgages in the summer of 1980 were somewhere in the 15-24% range. In other words, as of June 11, 1980, a reasonable investor would be willing to pay between seventy-six (76) and eighty-five (85) cents on the dollar for the remaining payments to be made under the purchase money mortgage. This differential is still substantial. However, it appears that the 15% rate of discount is on the low side since, as David admitted, discount rates on second mortgages in 1977 were in the 13 to 15 percent range. Rates in 1980 were certainly higher. However, I do not accept Fensterheim's testimony that the applicable rate was as high as 22%. Based on the limited evidence presented, I conclude that the proper rate falls somewhere between the two contentions and that the stream of payments to be generated by the mortgage from June 11, 1980 through December 1, 1985, should be discounted at the rate of 20%. At this rate, the value of those payments as of June 11, 1980 was $ 283,605.
This constitutes a $ 207,851 reduction in the value of the purchase money mortgage as reflected in the master's report. Therefore, since Levin must bear 25% of this reduction, his share in the Rondi River venture must be reduced by $ 51,962.75. Accordingly, I conclude that Levin is entitled to $ 221,592.25 as his share of Rondi River. Judgment will be entered against Garfinkle and Fensterheim jointly and severally for this amount.
Interest runs on a sum found to be due in an accounting from the date of the order requiring it. Blum v. William Goldman Theatres, Inc., 174 F.2d 908 (3d Cir. 1949). Here, although the formal order directing an accounting was not entered until October, 1980, I made clear that Levin was entitled to an accounting in my findings of fact and conclusions of law filed on June 11, 1980. Conclusion of Law 26, 492 F. Supp. at 818-19, 820. Accordingly, legal interest will be added to the Rondi River judgment from that date.
III. Motion for Entry of Judgment Regarding the Indemnities
As part of the unliquidated judgment entered in favor of Levin, I ordered Garfinkle to indemnity Levin for (1) one-half of all the amounts which Levin would be required to pay on account of a judgment against him with respect to a New Jersey property known as Bromley Estates, and (2) any portion of Garfinkle's $ 83,167 share in Levin's indebtedness to K. B. Weissman, which Levin would be required to pay because of Garfinkle's failure to make payment to Weissman. (See document 265). Averring that he has paid $ 15,000 on account of the Bromley judgment and $ 149,407 to satisfy his debt to Weissman, Levin has now moved for the entry of a liquidated judgment in the amount of $ 90,667 against Garfinkle, Huckleberry Farm, Inc., Country Realty, Inc., Czar Realty Corporation, TAFU, Inc., and HAW Corporation (document 462).
Insofar as judgment on the indemnities is sought against the corporations, I will deny Levin's motion for the reasons stated in Part I of this opinion. I will, however, grant Levin's motion for entry of judgment in favor of Bennett Levin against Howard Garfinkle in the further amount of $ 90,667, representing principal amounts for which indemnification is sought. There is no dispute as to the principal amounts.
On May 24, 1982, as I was preparing opinions to conclude all outstanding matters in this case, Levin filed still another motion entitled, "Motion to Include Further Interest in Judgment" (document 486). By this motion, Levin seeks indemnification from Garfinkle for a portion of the interest which Levin will be required to pay in order to satisfy the Weissman debt. Since it appears from the motion paper that the amount of interest has not yet been finally resolved between Levin and Weissman, and also because Garfinkle has not yet had the opportunity to respond to this most recent motion, I will not rule on the motion at this time and will await a response to the motion on Garfinkle's behalf.
IV. Outstanding Counterclaims
One further housekeeping matter needs to be attended. As mentioned earlier in this opinion, several defendants have filed counterclaims in both Civil Action No. 77-3211 and Civil Action No. 78-3271. Many of these have been dismissed voluntarily pursuant to Fed.R.Civ.P. 41 (see documents 406 & 487), but no motions for voluntary dismissal have been filed on behalf of Howard Garfinkle and Norman Septimus in Civil Action No. 77-3211, and none on behalf of any of the named defendants in Civil Action No. 78-3271. Since no action has been taken to prosecute any of the counterclaims, I will dismiss all of the remaining counterclaims for failure to prosecute.
This 7th day of June, 1982, upon consideration of plaintiff's Consolidated Motion for Entry of Various Liquidated Judgments (document No. 475) (which incorporates plaintiff's Motions for Entry of Judgment against the Alter Ego Corporations (document No. 412); for Adoption of the Master's Report (document No. 436); and for Entry of Judgment Regarding Certain Indemnities (document No. 462) ), it is
1. the Motion for Entry of Judgment Pursuant to Rule 54(b) against the defendant Alter Ego Corporations is DENIED;
2. the Motion for Adoption of the Master's Report is GRANTED with the modifications noted in the opinion filed this date, and Judgment is entered in Civil Action No. 78-3271 in favor of Bennett Levin against Howard N. Garfinkle and Asher Fensterheim, jointly and severally, in the amount of $ 221,592.75, with interest at the rate of six percent (6%) per annum from June 11, 1980; and
3. the Motions for Entry of Judgment Regarding Certain Indemnities is GRANTED as to defendant Garfinkle and DENIED as to Alter Ego Corporations; and Judgment, in addition to that entered by Order dated November 26, 1980, is entered in Civil Action No. 77-3211 in favor of Bennett Levin against Howard N. Garfinkle in the amount of $ 90,667.
It is FURTHER ORDERED that
4. all counterclaims not heretofore voluntarily dismissed in Civil Actions Nos. 77-3211 and 78-3271 are DISMISSED for lack of prosecution;
5. the Court retains jurisdiction in Civil Action No. 78-3271 for the sole purpose of determining the liability of Bennett Levin for a share of any tax liability hereafter imposed by the Internal Revenue Service on the Rondi River Realty Corporation for the tax years 1976-1980 inclusive.