Matter of First Dade Corp., Bankruptcy No. 81-2312.

• Decision Date: 03 March 1982
• Docket Number: Bankruptcy No. 81-2312.
• Parties: In the Matter of FIRST DADE CORPORATION, Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida

17 B.R. 887 (1982)

In the Matter of FIRST DADE CORPORATION, Debtor.

Bankruptcy No. 81-2312.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

March 3, 1982.

Albert I. Gordon, Tampa, Fla., for debtor.

Irving M. Wolff, Miami, Fla., for First State Bank of Miami and City Nat. Bank of Miami.

ORDER ON MOTION TO ABSTAIN OR IN THE ALTERNATIVE MOTION TO DISMISS and ORDER ON MOTION FOR CHANGE OF VENUE

ALEXANDER L. PASKAY, Bankruptcy Judge.

THIS IS a business reorganization case commenced on December 14, 1981 by a petition for relief under Chapter 11 of the Code by First Dade Corporation d/b/a Granada Gardens Condominiums (First Dade). The matters under consideration are a Motion to Abstain pursuant to 11 U.S.C. § 305 or, in the alternative, a Motion to Dismiss pursuant to 11 U.S.C. § 1112(b) for "lack of good faith." The Motions were filed by First State Bank of Miami (FSB) and the City National Bank of Miami (CNB), (the Banks), secured creditors who held a first and a second mortgage respectively on real property once owned by First Dade. The Banks also filed a Motion for Change of Venue pursuant to Bankruptcy Rule 116(b)(1), (2) on the ground of improper venue.

At the duly noticed hearing, the evidence presented in support of and in opposition to the Motions reveal the following:

First Dade is a Florida corporation whose principal place of business is located in Pinellas County, Florida. At the time pertinent to this controversy, First Dade was the owner of an apartment house complex known as Granada Gardens located in Opa Locka, Florida. The apartment complex was encumbered by several mortgages. The first dated August 31, 1979 was recorded in due course in the public records of Dade County, Florida. This mortgage was granted to secure an indebtedness due to FSB in a principal amount in excess of $800,000. The second mortgage was executed in favor of CNB on March 18, 1981 also properly recorded and was to secure an indebtedness in excess of $950,000. In addition, the apartment complex is also encumbered by a third mortgage, but this is not a factor to be considered at this time inasmuch as the holder of the third mortgage does not seek any relief and is not involved in the present hearing.

First Dade is also the 50% stockholder in a corporation known as First Pinellas Corporation who owns a tract of land located in Pinellas County, Florida comprising four acres, fronting on U.S. 19, a major thoroughfare. It also has an interest in a contract to purchase a complex known as La Playa Apartment Hotel located in Pinellas County, Florida. First Dade has one stockholder and currently is not actively engaged in the conduct of any business in a conventional sense.

Prior to November 17, 1981, FSB filed an action to foreclose its mortgage in the Eleventh Judicial Circuit in and for Dade County, Florida, Civ. Action No. 81-11888 CA 15. On November 16, 1981, the Circuit Judge in this foreclosure action entered a Summary Final Judgment and after having determined that there was due and owing to FSB an unpaid principal balance of $800,000 plus accrued interest in the amount of $36,285.95 from June 1, 1981 to September 1, 1981 at the rate of 18% per annum and interest from September 1, 1981 to November 16, 1981 in the amount of $42,192.15 plus insurance premiums advanced and other miscellaneous expenses including attorney fees, entered a final judgment in favor of FSB in the amount of $900,860.15. In the same action, the Circuit Court also determined that there was due and owing on the second mortgage to CNB, $918,406 plus interest and costs or the sum of $1,035,325.45.

The Summary Final Judgment directed that unless the sums found to be due to FSB and CNB are paid within three days from the date of entry of the Summary Judgment, the Clerk of the Circuit Court shall proceed to sell the subject property to the highest bidder at a public sale on the 9th day of December, 1981. The Clerk proceeded pursuant to the direction of the Summary Final Judgment and conducted a sale on that date, at which time the holder of the second mortgage, CNB, in order to protect its interest, bid in and purchased the subject property. The Clerk promptly filed his Certificate of Sale as required by the Statute § 45.031 et seq., however, before the Certificate of Title was issued First Dade filed its petition for relief in this Court which, ostensibly brought the entire foreclosure proceeding to a screeching halt, much to the chagrin of the Banks. It further appears from the record, although it is not substantiated by proof, that the Debtor is supposed to have a readily available refinancing source, a source which is supposed to make available more than sufficient funds to satisfy both judgments in full, i.e. the judgments of FSB and of CNB. According to the testimony of the president of First Dade, the funds will be available as soon as the Debtor is able to obtain an approval by the Court to consummate the proposed refinancing arrangement. It should be noted at this point that so far no application has been presented by the Debtor for this Court's approval to borrow funds. There is evidence in this record to warrant the finding that if the complex is converted to a condominium project, and the units are sold at retail, it is possible to produce more than $4 million, more than enough to satisfy all outstanding obligations due to all parties of interest including the claims of unsecured creditors.

The Motion to Abstain is filed pursuant to § 305 of the Bankruptcy Code and is based on the proposition that the entire proceeding was instituted solely for the purpose of frustrating the holders of the first and second mortgages and to prevent them from enforcing their rights not only under the original mortgage, but also under the non-appealable final judgment of a court of competent jurisdiction.

Section 305 of the Code is a codification of a long recognized concept of a right of a court to abstain and decline the exercise of jurisdiction under appropriate circumstances. The Code expressly sets forth the conditions which would warrant abstention. It requires that before the Bankruptcy Court may abstain, the Court must be satisfied that abstention would be in the best interest of creditors and the Debtor alike and that the abstention would best serve the interest of all parties of interest rather than the interest of a particular creditor or a particular class of creditors. There is no doubt that an abstention in the present instance would be in the best interest of the moving parties, that is, the Banks. On the other hand, there is hardly any question that it would not be in the interest of this Debtor nor in the interest of the third mortgage holder and in the interest of the unsecured creditors of the Debtor whose claims appear to be in excess of $400,000. This...