In re Frankel, Bankruptcy No. 93-B-21371 (ASH). Adv. No. 95-5103A.

• Decision Date: 16 October 1995
• Docket Number: Bankruptcy No. 93-B-21371 (ASH). Adv. No. 95-5103A.
• Citation: 191 BR 564
• Parties: In re Max FRANKEL, Debtor. Barbara BALABER-STRAUSS, as Trustee of the Estate of Max Frankel, Plaintiff, v. Joseph MARKOWITZ, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

191 B.R. 564 (1995)

In re Max FRANKEL, Debtor.

Barbara BALABER-STRAUSS, as Trustee of the Estate of Max Frankel, Plaintiff, v. Joseph MARKOWITZ, Defendant.

Bankruptcy No. 93-B-21371 (ASH). Adv. No. 95-5103A.

United States Bankruptcy Court, S.D. New York.

October 16, 1995.

Serchuk & Zelermyer, L.L.P. by Benjamin Zelermyer, White Plains, NY, Special Litigation Counsel to the trustee.

Farber, Segall & Pappalardo by Eugene I. Farber, White Plains, NY, for defendant.

ADLAI S. HARDIN, Jr., Bankruptcy Judge.

Plaintiff, Barbara Balaber-Strauss as Trustee of the debtor's estate ("Trustee"), commenced this adversary proceeding seeking specific performance and other relief against defendant Joseph Markowitz ("Defendant"), based upon Defendant's breach of his contractual obligation to purchase real property arising from his winning bid at a trustee's auction on November 17, 1994. Defendant asserted affirmative defenses and a counterclaim to recover his downpayment. After expedited discovery, the matter was tried on August 23, 24 and 25. Having carefully considered the evidence and the parties' trial and post-trial submissions,¹ I have concluded that the Trustee is entitled to specific performance. The following constitute this Court's findings of fact and conclusions of law, in accordance with Rule 52 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure. See, Saint Clare's Hospital and Health Center v. Insurance Company of North America (In re Saint Clare's Hospital and Health Center), 934 F.2d 15, 17 (2d Cir.1991) (citing United States v. El Paso Natural Gas Co., 376 U.S. 651, 656, 84 S.Ct. 1044, 1047, 12 L.Ed.2d 12 (1964)).

Facts

The Events

Among the debtor's assets to be liquidated in this Chapter 7 case were two contiguous parcels of real estate in Spring Valley, New York, known as 21 Alturas Road (also known as 290 Route 59) and 3 West Street. The subject of this proceeding, 21 Alturas Road, comprised an improved lot with a large residential-style house surrounded by trees and lawn, and an adjoining vacant lot. The adjacent property, 3 West Street, was described as a two-family house. At all relevant times the 21 Alturas Road house was divided into and had been rented as professional offices. A commercial sign in front of the building at the time of the auction identified some seven tenants, including three doctors, a mortgage broker and an executive counselling and mediation service.

In late October 1994 the Trustee filed a Notice of Intent to Sell the two parcels in question and subsequently obtained orders of this Court to sell the properties at public auction and to retain the services of an auctioneer. The auctioneer placed an advertisement in The New York Times and Westchester/Rockland Gannett newspapers on October 30, November 6 and November 13 which listed 21 Alturas Road under the legend "COMMERCIAL PROPERTY — Office Building" and showed inspection times on Sundays, November 6 and November 13. Defendant personally inspected the property at 21 Alturas Road and met with the auctioneer and the debtor on one of those inspection dates. Defendant was familiar with the neighborhood, having previously made many visits to his doctor's office located directly across the street from 21 Alturas Road.

At the time of the auction Defendant was and had been a licensed real estate broker for four or five years. He conducted his real estate business under the tradename "Best Mark Realty" from an office located in his home at 9 Sunrise Drive, Monsey, New York. Defendant has significant experience in the real estate business, going back twenty years or more as an investor in properties in New York City and elsewhere. He had previously attended real estate auctions.

The public auction was held on November 17, 1994 in front of the house at 21 Alturas Road. Approximately 30 to 35 persons attended the auction. There was a sign-in sheet, but relatively few of those in attendance bothered to sign it. At the outset of the auction, the auctioneer read a typewritten, prepared statement in a loud, clear voice, which he demonstrated at the trial, which was clearly audible to and heard by Defendant. The following are excerpts from the statement:

• "The auction is subject to the Trustee\'s confirmation and entry of a bankruptcy order confirming sale or sales. The Trustee reserves the right to reject any and all bids."

• "The properties are sold as-is, with no guarantee or warranty expressed or implied."

• ". . . closing which is to be within 30 days after entry of the court order."

• "Do not bid on these properties if you do not possess the necessary amount of monies to close. The sales are not contingent upon financing."

Immediately after this statement was read, four separate auctions took place. In accordance with the statement, both 21 Alturas Road and 3 West Street were initially auctioned collectively as a package. Defendant's bid of $350,000 for both properties was accepted as the high bid. The auctioneer then separately auctioned 3 West Street, followed by 21 Alturas Road. The 3 West Street property was auctioned twice because the first auction was nullified when the high bidder did not produce a certified or bank check for the downpayment. The high bid on 3 West Street was $100,000.² The auction of 21 Alturas Road followed immediately after that of 3 West Street. The bidding opened at $200,000 and proceeded through bids announced by the auctioneer of $220,000, $225,000, $230,000, $235,000, $250,000 and Defendant's winning bid of $275,000.

Two issues of fact were raised at the trial concerning the auction of 21 Alturas Road. First, the auctioneer testified that the $250,000 bid was signified by the bidder by means of a hand signal, rather than audibly. While expressly disclaiming any charge that the auctioneer intentionally fabricated a non-existent bid, counsel for Defendant argued that the auctioneer was mistaken in announcing the $250,000 bid. Absent any evidence to support a finding of mistake, and based upon the auctioneer's impeccable credentials as auctioneer of choice for bankruptcy trustees and other public officials and agencies, his professional experience in countless auctions over a period of many years and the evident candor and reliability of his testimony, I find as a fact that the auctioneer acted in good faith in reporting a $250,000 bid based on a hand signal perceived by him during the auction.

The second point of dispute related to bidding increments. The Trustee and the auctioneer testified that at no time did the auctioneer require that bidding proceed by increments in any amount. Another witness who was a bidder at the auction (Dr. Wurzburger) testified at his deposition read at trial that he had no recollection of any announcement of bidding increments. However, Defendant testified at the trial and another witness (Mr. Klein) testified in his deposition read at trial that after announcing the $250,000 bid the auctioneer stated that any further bids should be in increments of $25,000. While I conclude that this issue of fact has no legal significance, based on the weight of the credible evidence I find that Defendant and Mr. Klein were mistaken in their testimony and that the auctioneer did not impose a requirement of $25,000 bidding increments. No such claim is made by Defendant with respect to the other three auctions. The auctioneer testified quite credibly that he had no reason to impose the alleged requirement of a $25,000 bidding increment and, to the contrary, that he would have been pleased to accept any increment in excess of the $250,000 bid, as he had accepted the prior bids. Moreover, Defendant never complained of or even mentioned the point to anyone in any context until after commencement of this adversary proceeding.

Each of the four auctions was conducted rapidly, requiring five minutes or less, and each auction followed the other promptly.

Immediately after acceptance of his $275,000 bid, Defendant delivered to the Trustee two certified checks totalling $28,000 and signed and delivered to the Trustee a Memorandum of Sale dated November 17 evidencing the selling price, $275,000, the deposit of $28,000 and the balance due in full at closing of $247,000. The Memorandum of Sale contained the following language:

• "BUILDING AND PROPERTY IS SOLD AS-IS, NO GUARANTEES OR WARRANTY EXPRESSED OR IMPLIED."

• ". . . Closing to be held within THIRTY (30) days after entry of a Federal Bankruptcy Court Order."

• "PURCHASER(S) IS RESPONSIBLE FOR OBTAINING OWN FINANCING. DEPOSIT IS REFUNDABLE ONLY IN THE EVENT THAT THE SALE IS NOT CONFIRMED EITHER BY THE TRUSTEE OR THE COURT. . . . "

On November 30, 1994 the Trustee caused to be served a "NOTICE OF PRESENTMENT OF ORDER AND OF OPPORTUNITY TO BE HEARD" reciting that an order in the form attached to the Notice confirming the sales at the November 17 auction would be presented to the Court on December 8. This Notice was served on Defendant, among others. The "Order Confirming Sales", which was duly signed by this Court on December 14, confirmed and approved the sale to Defendant for $275,000 upon the terms set forth in the Notice of Sale and the Memorandum of Sale signed by Defendant on November 17, copies of both of which were attached to the application which was served with the Notice on Defendant on November 30. The Notice of Sale recited that "the Real Properties are being sold `ASIS' and `WHEREIS' without representations and/or warranties of any kind, nature or description, by the Trustee, the Auctioneer, and/or their agents except as may be expressly stated herein." The Order stated in its final decretal paragraph that "the closing of the Sales shall take place within thirty (30) days after the entry of this Order becomes final in all respects. . . ." Defendant made no objection to the proposed Order Confirming Sales, did not appear at...