In re Schulte-United

• Decision Date: 24 March 1931
• Docket Number: No. 50355.,50355.
• Parties: In re SCHULTE-UNITED, Inc.
• Court: U.S. District Court — Southern District of New York

50 F.2d 243 (1931)

In re SCHULTE-UNITED, Inc.

No. 50355.

District Court, S. D. New York.

March 24, 1931.

Allen C. Bragaw, of New York City, for Charfhays Corporation.

Davies, Auerbach & Cornell, of New York City, for Irving Trust Co.

PATTERSON, District Judge.

This is a petition by the mortgagee of real estate owned by the bankrupt for leave to commence a foreclosure in the New York Supreme Court.

The mortgage is a curious one, although valid in all respects. It is for the face amount of $204,000, payable without interest in equal monthly installments of $833.34 until April 1, 1949. There is a provision that upon the death of one Hayes the monthly payments shall drop to one-half the fixed amount, and upon the death of his wife thereafter shall cease altogether. Hayes is evidently the sole stockholder of the corporate mortgagee, and in selling the property to the bankrupt and taking a purchase-money mortgage desired that the consideration should be in effect an annuity. The petition shows that the mortgagor was adjudicated bankrupt on January 21, 1931; that the installment of $833.34 due February 1, 1931, has not been paid; that $182,333.16 is the present unpaid balance of the principal; and that the petitioner has duly elected, pursuant to an acceleration clause in the mortgage, to declare the entire amount now due and payable. It is also shown that the bankrupt has defaulted in paying interest on certain prior mortgages, and that the equity of redemption is worthless, the property having a value of only $110,000.

The trustee in bankruptcy resists the petition. It is pointed out that the transaction was one whereby the bankrupt acquired the property on what was virtually an annuity arrangement, that the real estate was never worth more than $110,000 in cash, and that the present value of the stipulated monthly payments, measured by the American Experience Tables of Mortality, is only $104,015. It is urged that the petition be denied, or, if granted, that it be on terms that the mortgagee be restrained from sharing in the assets of the bankrupt estate through any deficiency judgment.

I have no doubt that the petitioner is entitled to the relief asked for, without terms of any sort.

1. The contention that the bankruptcy court has jurisdiction over the real estate which cannot be interfered with by foreclosure suits later commenced in other courts is entirely sound. This is merely an application of the general principle that the jurisdiction of the court which first takes possession of property through its officers will be preserved, whether that court be a United States court (Murphy v. Hofman, 211 U. S. 562, 29 S. Ct. 154, 53 L. Ed. 327) or a state court (Harkin v. Brundage, 276 U. S. 36, 48 S. Ct. 268, 72 L. Ed. 457). But this does not mean that the bankruptcy court may not give...