In Re AWB Associates, GP
| Decision Date | 10 September 1992 |
| Docket Number | Bankruptcy No. 92-10430S. |
| Parties | In re AWB ASSOCIATES, G.P., Debtor. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Kenneth Goodkind, Fellheimer & Eichen, Philadelphia, Pa., for debtor.
Sheila R. Miller, Asst. City Atty., Camden, N.J., for City of Camden.
Autherine B. Smith, Klehr, Harrison, Harvey, Branzburg & Ellers, Philadelphia, Pa., for Resolution Trust Co.
Frederic Baker, Philadelphia, Pa., Asst. U.S. Trustee.
Before us is a Motion of the Debtor, AWB ASSOCIATES, G.P. ("AWB"), for a determination of its real property tax liability on its only asset, a parcel of real estate located at 1421-1521 Admiral Wilson Boulevard, Camden, New Jersey ("the Property"), for the years 1985 through 1992, to the City of Camden, New Jersey ("Camden"). AWB contends that, pursuant to 11 U.S.C. § 505, this court has the authority to assess the value of the real property for ad valorem real estate tax purposes in all years subsequent to its purchase of the Property in 1985, despite its payment of the taxes without protest through 1989, and its attempt to appeal its tax liability in 1991, which was denied because the taxes were not paid for that year.
Camden claims that this contested matter is non-core and is governed exclusively by New Jersey state law. Camden further requests that this court abstain from granting the relief AWB seeks because AWB failed to timely exercise its rights to contest the assessment of the real estate under New Jersey state law procedures.
We find that the issue before the court is a core proceeding and that, under 11 U.S.C. § 505, since none of the assessments in issue were previously adjudicated, we have the authority to determine AWB's real property tax liability for the years 1985 through 1992, irrespective of the lapse of time in issue. However, although concluding that federal bankruptcy law overcomes any state law procedural shortfalls by AWB in seeking reassessment, we also find that the state law of New Jersey controls the substance of AWB's claims. Further, due to the lack of direct evidence regarding valuation of the Property prior to tax year 1992, we find that AWB's request for reassessment can be granted only from 1990 through 1992, and only in part in 1990 and 1991. We thus conclude that the assessed value of the Property for 1992 real property taxes must, as AWB argues, be fixed at $590,000. However, as to tax years 1990 through 1991, we conclude that the evidence supports no finding of a lower assessment value than $750,000, the purchase price of the Property; and that the evidence does not support an adjustment for tax years preceding 1990.
This matter arises in the course of a voluntary Chapter 11 bankruptcy case filed by AWB on January 23, 1992. AWB is a Pennsylvania general partnership including Michael Grasso as one of its general partners. Grasso is the apparent managing partner of a collection of about a dozen single-asset partnerships which have filed petitions in this court. All of these cases appear to be progressing towards confirmation. AWB's single asset is the Property, which is comprised of two commercial buildings located on 9.9 acres of land on a heavily-travelled highway artery proximate to Philadelphia in its economically-depressed neighboring City of Camden.
AWB's bankruptcy case is proceeding rather smoothly. An initial Plan and Disclosure Statement were filed on July 10, 1992. On August 12, 1992, in response to a few Objections to the Debtor's Disclosure Statement by the Resolution Trust Company ("the RTC"), which has what might loosely be described as a blanket mortgage on the assets of the Grasso-managed debtors in bankruptcy, the Debtor agreed to file an Amended Plan and an accompanying Amended Disclosure Statement by September 10, 1992, prior to hearing of September 16, 1992, to determine whether the Amended Disclosure Statement contains amendments requiring a re-noticing to all creditors and, if not, whether it can be approved for distribution. No other contested matters have arisen in the course of this case, although we were informed of one adversary proceeding which has apparently been resolved. See page 274 infra. We should add that none of the other Grasso-controlled entities have sought to invoke 11 U.S.C. § 505 in the course of their cases.
On April 2, 1992, AWB filed the Motion to Determine the Liability for Taxes Owed to City of Camden ("the Motion") in issue. The Motion sought a determination of the value of the Property for ad valorem real estate tax purposes for the years 1985 through 1992. The hearing on the Motion was continued, by agreement of the parties, from April 29, 1992, to June 24, 1992, and again to July 29, 1992.
On July 27, 1992, Camden requested a further continuance, claiming that it was only recently made aware of AWB's appraisal of the Property and had not yet produced one of its own. In light of the opposition of AWB to a further continuance and our observations that the matter had already been continued for three months and that AWB's presentation of an appraisal should hardly have been a surprise to Camden, we denied this request and conducted the hearing on the Motion on that date. In support of the Motion, AWB offered the testimony of Grasso and an expert appraiser, Allen Black.
Grasso testified that the Property, containing two contiguous parcels, was purchased from Wm. G. Rohrer Corp. ("Rohrer") by him and placed in the name of the Debtor in July, 1985. The amount paid by Grasso at settlement was $750,000, although this figure included a $75,000 broker's fee absorbed by Grasso. The sale was financed, for the most part, by Rohrer, which took back a purchase money note secured by the Property in the amount of $600,000.
Prior to the sale, the Property was the long-time site of the Rohrer's car dealership. At the time of the hearing, the buildings were leased and occupied by a truck driving school and a truck repairman. Another tenant, a warehousing company, is scheduled to occupy the premises in September, 1992. However, as a result of vandalism and the departure of AWB's former primary tenant, a large greenhouse, the larger buildings and much of the land were described as in a poor condition.
Grasso further testified that, shortly after the sale, AWB discovered that Rohrer had complied with applicable New Jersey environmental clean-up laws. This discovery revealed that AWB may be exposed to liability for possible clean-up costs. Consequently, AWB initiated an adversary proceeding against Rohrer in this court. In settlement of this dispute, AWB and Rohrer have entered into a proposed agreement which provides, inter alia, that the sale price of the Property is to be reduced to $450,000. The proposed agreement does not, however, indicate whether the reduced price is based upon the "true market value" of the Property. The consummation of the agreement is scheduled to follow our decision of the present Motion.
In support of its contention that Camden had mis-valued the Property, AWB also offered the testimony and appraisal report of Black, a licensed New Jersey real estate appraiser. Black's testimony and the appraisal report indicated that the value of the Property, as of October, 1991, was $590,000. Black also stated that, while his evaluation of the Property's value was rendered only as of October 1, 1991, his analysis revealed that the value of the Property had declined from its initial value in 1985, of which he inferred to be $750,000, less the $75,000 commission, or $675,000, to the current value of $590,000. This decrease in value was attributed to the overall decline and deterioration of real estate values in Camden. Black indicated that the market values of the Property had probably remained constant from 1985 to 1989, and declined thereafter. However, Black expressly declined to offer any opinion of the fair market value or the rate of decline of the Property for the tax years 1985 through 1991. He merely stated that, in light of his assumption of a $675,000 purchase price of the Property, he believed that its value was between $590,000 and $675,000 throughout that period.
The parties stipulated that, between 1985 and 1991, the two parcels of the Property were assessed by the City in the following amounts for each year:
Lot 1 Lot 11
Land $148,000 $37,000
Improvements 137,000 3,000
________ _______
TOTAL $285,000 $40,000
They also stipulated that the total assessment of $325,000 was revised to $1,305,700 as the result of New Jersey legislation requiring that tax assessments be based upon the full value of properties. Finally, they agreed that the ratio of the assessment of Camden properties to their actual value was, due to declining values of Camden realty, as follows from 1992 (when the legislation required assessment at full value) back to 1984:
1992 96.33%
1991 24.6%
1990 24.93%
1989 30%
1988 31.47%
1987 40.58%
1986 45.17%
1985 48.93%
1984 51.05%
AWB paid the real estate taxes due on the Property from 1985 and paid part of the tax due for 1989. Grasso testified that AWB was unable to pay the remainder of the 1989 taxes or the real estate taxes for 1990 through 1992.
In 1991, two Petitions for Re-assessment of Taxes were filed with the Camden Board of Assessors by Rohrer (still listed on Camden's rolls as the owner of one of the parcels) on AWB's behalf. Prior to that time, neither AWB nor any entity on its behalf had filed any objections or contested the real estate taxes. No evidence was offered by either party whether a hearing or any other activity occurred in connection with the petitions. AWB does...
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