In re Garsal Realty, Inc., Bankruptcy No. 81-00173. 84-CV-275.
| Decision Date | 23 May 1984 |
| Docket Number | Bankruptcy No. 81-00173. 84-CV-275. |
| Parties | In re GARSAL REALTY, INC., Debtor. GARSAL REALTY, INC., Sally Gross, as Trustee of the Trust for Karen Rosenthal, Sally Gross, as Sole Stockholder of Garsal Realty, Inc., Sally Gross as Sole Officer of Garsal Realty, Inc., and Sally Gross as Sole Director of Garsal Realty, Inc., Appellants, v. The TROY SAVINGS BANK and John J. Curran, Receiver, Respondents. |
| Court | U.S. District Court — Northern District of New York |
Smith Sovik Kendrick Schwarzer & Sugnet, Syracuse, N.Y., for appellants; Laurence Sovik, Syracuse, N.Y., of counsel.
Pattison Sampson Ginsberg & Griffin, Troy, N.Y., for respondent, Troy Sav. Bank; Joseph Ball, Troy, N.Y., of counsel.
Ali, Pappas & Cox, Syracuse, N.Y., for respondent, John J. Curran, receiver; C. Andrew Pappas, Syracuse, N.Y., of counsel.
Appellant, Garsal Realty, Inc. "Garsal" or "debtor", appeals from a decision of United States Bankruptcy Judge Leon J. Marketos issued December 16, 1983. Judge Marketos denied Garsal's motions seeking a continuance of the automatic stay, an extension of the time to exercise an option to purchase an interest in certain property, and summary judgment on the issue of receiver's and attorneys' fees. For the reasons set forth below, the decision of Judge Marketos is affirmed.
Garsal is the owner of a large apartment complex valued in excess of $750,000. Respondent Troy Savings Bank "Troy" or "Bank" holds the first mortgage on the complex. In April, 1979 Garsal was in default of its mortgage payments and the Bank exercised its right to accelerate the loan.1 When Garsal continued to default, the Bank brought a foreclosure action in New York State Supreme Court. The state court appointed respondent John J. Curran as receiver for the benefit of Troy. On February 11, 1981, the debtor filed a bankruptcy petition under Chapter 11 which stayed the foreclosure, but not before the state court had held that the Bank was entitled to the foreclosure, that the money that the debtor owed to the Bank included attorneys' fees incurred in collection, and that the debtor's defenses were frivolous.2
After the commencement of the bankruptcy proceeding the parties entered into extensive negotiations in an attempt to agree on a plan of reorganization. The negotiations were protracted with the parties reaching agreement on several occasions, only to have one of the parties repudiate the "settlement".
In November, 1982 the parties entered into a stipulation under which all of the debtor's purported defenses and counterclaims were dismissed with prejudice, the statutory automatic stay was vacated, debtor was given until January 14, 1983 to have a plan acceptable to the Bank confirmed, and the Bank was free to foreclose if such a plan was not confirmed by that date. A judgment implementing the stipulation was signed on December 1, 1982. The Reorganization Plan "Plan" was finally confirmed by Judge Marketos on January 18, 1983.
The Reorganization Plan provided for payment in full of the Bank's claim which consisted of the unpaid principal balance of $544,159.44, designated in the Plan as the "A" Principal, and the interest and other charges due to the Bank, designated in the Plan as the "B" Principal. The "B" Principal was subdivided into the "interest portion", consisting of interest accrued from the debtor's default in 1979 through the date of confirmation of the Plan, and the "non-interest portion", consisting of stated dollar amounts for late charges, attorneys' fees and disbursements, and other charges and expenses relating to the underlying foreclosure action and the bankruptcy proceeding itself.
The Plan also granted Sally Gross, as Trustee for the Trust of Karen Rosenthal, one of the proponents of the Plan and one of the appellants here, a six-month option to purchase the Bank's mortgage at an agreed-upon price. The price included the "A" Principal, with interest thereon from the date of confirmation, plus the "non-interest portion" of the "B" Principal.
The Plan provided that the receivership would continue until the Plan was confirmed, that the receiver would then submit his account to the bankruptcy court, that the receiver's commissions would be paid from the receivership funds, and that the debtor would offer no objection to the settlement of the receiver's account or to the discharge of the receiver. The Plan also provided that the receivership funds would be used to pay the fees of the debtor's attorney.
At the confirmation hearing held on January 7, 1983 certain minor modifications of the Plan were made.3 Garsal was the chief proponent of the Plan and seemed eager to have it confirmed. Garsal raised no objections to the Plan and the bankruptcy court approved the Plan as modified.
Thereafter the debtor let the option to purchase the mortgage expire. In October, 1983, several months after the option had expired, the debtor attempted to exercise the option to buy the mortgage. The Bank refused to honor the debtor's request but indicated that it would discuss offers for the purchase of its mortgage.
Garsal then brought the motions before Judge Marketos seeking to extend the deadline to exercise the option. Garsal alleged that Troy had attempted to "tack on" its attorneys' fees to the purchase price of the mortgage option, that the receiver was not entitled to any fees, that the bankruptcy court should have fixed Troy's attorneys' fees after notice and opportunity to be heard, that the receiver should file a final accounting and that the automatic stay should be reinstated. Judge Marketos denied all of the debtor's motions and this appeal ensued.
As a preliminary matter the court notes that the debtor has characterized its motions as "in aid of administration" presumably to bring itself within the language set forth in the Plan governing reapplication to the court. The Plan states:
Any interested party may at any time apply to the Court for...
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