In re Pittsford Polo Club, Inc., Bankruptcy No. 93-21185.
| Decision Date | 09 November 1995 |
| Docket Number | Bankruptcy No. 93-21185. |
| Parties | In re PITTSFORD POLO CLUB, INC., Debtor. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Western District of New York |
Warren H. Heilbronner, Rochester, NY, for Mortgagees Boylan, Brown, Code, Fowler, Vigdor & Wilson.
Michael E. O'Neill, of counsel, Phillips, Lytle, Hitchcock, Blaine & Huber, Rochester, NY, for Pittsford Polo Club, Inc., et al.
William C. Rieth, Rochester, NY, for Debtor.
DECISION & ORDER
On May 20, 1993, the debtor, Pittsford Polo Club, Inc. ("Pittsford Polo"), filed a petition initiating a Chapter 11 case. On its schedules, Pittsford Polo listed its ownership of four parcels of real property as being covered by a Note and first mortgage (the "Adams Group Mortgage"), dated March 11, 1992 and recorded in the Office of the Clerk of Monroe County on March 12, 1992. The four parcels covered by the Adams Group Mortgage were 3400 Clover Street ("Clover Street"), 122 North Wilmarth Road ("Wilmarth Road"), 134 Douglas Road ("Douglas Road") and vacant land in Farmington, New York (the "Farmington Property"). The schedules further indicated that the Adams Group Mortgage had an outstanding balance of approximately $800,000 and that Clover Street and Wilmarth Road, which were contiguous properties, had an aggregate value of $1,200,000, Douglas Road a value of $300,000 and the Farmington Property a value of $1,000,000.
On July 27, 1993, an Order (the "Clover Street Stay Order"), consented to in writing by the President of Pittsford Polo, Charles N. Bonora ("Bonora") and by its attorney, presented to the Court ex parte, was entered which modified the automatic stay provided by Section 362 to permit the holders of the Adams Group Mortgage to foreclose the Mortgage on the Clover Street and Wilmarth Road properties. However, the Clover Street Stay Order required a further Order of the Bankruptcy Court before the Adams Group could publish a notice of sale and conduct a foreclosure sale of the properties. No other restrictive or qualifying language was contained in the Order, and the motion papers did not advise the Court: (1) why the stay was not being modified to permit Douglas Road and the Farmington Property to be included in the foreclosure; or (2) the details of any overall agreement between the parties. The motion papers did indicate, however, that: (1) there was in excess of $932,000 then due to the Adams Group; (2) the proposed modification of the automatic stay would protect both the interests of the Adams Group and afford Pittsford Polo a further opportunity to sell Clover Street and Wilmarth Road, which it valued at $1,200,000, for an amount in excess of the liens on the properties; and (3) the Order was structured so that prior to any foreclosure sale, the issues of the valuation of the properties, the amounts due to the Adams Group and the necessity for the properties to be sold in the Chapter 11 case could be revisited.
On November 8, 1993, an Order was entered granting a Motion brought by the Office of the United States Trustee to convert the Pittsford Polo Chapter 11 case to a Chapter 7 case. Throughout its Chapter 11 case and in its opposition to the Motion to Convert, Pittsford Polo alleged that the Clover Street and Wilmarth Road properties had an aggregate value of between $800,000 and $1,000,000, as is, but that as an approved subdivision it would have a wholesale value of in excess of $2,000,000 and a value of in excess of $5,000,000 if building lots were sold individually. However, the town in which the properties were located had twice denied subdivision approval, and there was a pending proceeding in State Court (the "Article 78 Proceeding") contesting the denial. At the time of the hearings on the Motion to Convert, the Debtor had received an offer of $1,330,000 for the Clover Street and Wilmarth Road properties which was contingent upon subdivision approval.
On April 19, 1994, a motion (the "Clover Street Sale Motion") was filed on behalf of the Adams Group to permit it to publish a notice of sale and thereafter conduct a foreclosure sale of the Clover Street and Wilmarth Road properties. At the May 18, 1994 return date of the Motion, Pittsford Polo indicated that there was a sale scheduled for Douglas Road which would generate net proceeds of in excess of $150,000 which could be paid to reduce the amounts due on the Adams Group Mortgage, and that it was hopeful it would receive a favorable decision by mid-July in the Article 78 Proceeding. The hearing on the Clover Street Sale Motion was adjourned to July 13, 1994.
On July 13, 1994, a closing statement was filed with the Court which indicated that after a May 19, 1994 Order abandoning the property had been entered, the Adams Group had received $179,164.60 in connection with a June 8, 1994 sale of Douglas Road.
At the July 13, 1994 adjourned date for the Clover Street Sale Motion, the Court was advised that no decision had been issued in the Article 78 Proceeding. The attorneys for the Adams Group further advised the Court that in April a Judgment of Foreclosure and Sale had been entered in the State Court foreclosure proceeding for $1,025,000 and that an appraisal prepared for the Adams Group in January of 1994 indicated that without subdivision approval the Clover Street and Wilmarth Road properties had an aggregate value of only $665,000.
On July 20, 1994, an Order was entered permitting the holders of the Adams Group Mortgage to publish a Notice of Sale and conduct a foreclosure sale of the Clover Street and Wilmarth Road properties in the pending State Court foreclosure proceeding.
On November 7, 1994, a motion (the "Farmington Stay Motion") was filed on behalf of the Adams Group. The Motion requested that the automatic stay provided by Section 362 be modified to permit the Adams Group to foreclose its mortgage on the Farmington Property. The Motion further indicated that: (1) after the application of the net proceeds from the foreclosure sale of Clover Street and Wilmarth Road in the amount of $573,873.44 and the voluntary sale of Douglas Road, there remained in excess of $337,000 due on the Adams Group Mortgage; (2) there were unpaid real property taxes due on the Farmington Property of in excess of $24,000; and (3) an attached appraisal set the fair market value of the Farmington Property at $550,000.
There was no opposition to the Farmington Stay Motion. On November 28, 1994, in accordance with the Court's default procedure, an Order (the "Farmington Stay Order") was entered without a hearing modifying the automatic stay to allow the Adams Group to commence a mortgage foreclosure proceeding for the Farmington Property and providing that the Trustee's interest in the Property was abandoned except for any surplus monies generated in connection with any foreclosure sale.
On August 4, 1995, a motion (the "Deficiency Judgment Motion") was filed on behalf of the Adams Group which requested that the automatic stay provided by Section 362 be modified to permit it to move for a deficiency judgment in New York State Supreme Court in connection with its foreclosure of the Clover Street and Wilmarth Road properties.
The Deficiency Judgment Motion alleged that: (1) the Clover Street and Wilmarth Road properties had been sold at foreclosure sale on September 30, 1994 and there remained a deficiency on the Adams Group Mortgage of $337,408.00 after the application of the proceeds of the foreclosure sale and the Douglas Road sale; (2) after the entry of the Farmington Stay Order, the Adams Group commenced a mortgage foreclosure proceeding in New York State Supreme Court and Bonora took the position that the Adams Group was barred from further pursuing its Mortgage by the provisions of Section 1371 of the New York Real Property Actions and Proceedings Law1 ("Section 1371"); (3) the Clover Street Stay Order did not authorize the Adams Group to seek a deficiency judgment against Pittsford Polo in the New York State mortgage foreclosure proceeding authorized to be commenced by the Order; (4) without such authorization, the Adams Group would have been in violation of the automatic stay had it sought such a deficiency; and (5) the Adams Group was now requesting authorization to seek a deficiency judgment in connection with the Clover Street and Wilmarth Road foreclosure proceeding.
On August 11, 1995, opposition to the Deficiency Judgment Motion was filed on behalf of Pittsford Polo, a second mortgage holder and Bonora (the "Deficiency Judgment Opposition"). The Opposition alleged that: (1) the April 14, 1994 Judgment of Foreclosure and Sale (the "Foreclosure Judgment"), entered by Justice L. Paul Kehoe ("Justice Kehoe") in the New York State mortgage foreclosure proceeding for Clover Street and Wilmarth Road, which was prepared by the attorneys for the Adams Group, provided that:
"and that if the proceeds of such sale be insufficient to pay the amount reported due the plaintiff, with interest and costs as aforesaid, the whole deficiency or so much thereof as the Court may determine to be just and equitable of the mortgaged premises and the application of the proceeds thereof, provided a motion for a deficiency judgment shall be made as prescribed by Section 1371 of the Real Property Actions and Proceedings Law within the time limited therein, and the amount thereof is determined and awarded by order of this Court as provided for in said action;"
(2) the Adams Group had failed to move for a deficiency judgment within the time provided for by Section 1371 and the Foreclosure Judgment; (3) Pittsford Polo and the other defendants in the mortgage foreclosure proceeding commenced by the Adams Group to foreclose the Farmington Property had plead as an affirmative defense, the failure of the Adams Group to make a timely motion for a deficiency judgment; and (4) the Bankruptcy Court's Decision in In re Tyler, 166 B.R. 21 (Bankr.W.D.N.Y.1994),...
To continue reading
Request your trial