Matter of Silverman, Bankruptcy No. 77 B 2988.
| Decision Date | 24 April 1981 |
| Docket Number | Bankruptcy No. 77 B 2988. |
| Citation | 10 BR 734 |
| Parties | In the Matter of Isaac SILVERMAN, Bankrupt. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Weil, Gotshal & Manges, New York City, for Leucadia, Inc.
Erwin L. Corwin, New York City, for bankrupt.
DECISION ON OBJECTION TO CLAIM OF LEUCADIA, INC.
The above-named bankrupt has objected to the claim filed by Leucadia, Inc. in the amounts of $18,533,310.43 and $404,373.30. The bankrupt asserts that both amounts are secured by a single blanket consolidated mortgage held by Leucadia, who elected not to include certain mortgaged properties located in Westchester County, New York, in Leucadia's foreclosure action in the Supreme Court, New York County. The bankrupt further argues that since Leucadia "has not attempted to collect its entire debt from all the land pledged, it has no right to a deficiency judgment." From this position the bankrupt concludes that since Leucadia allegedly cannot obtain a deficiency judgment with respect to the omitted properties in Westchester County, it follows that these properties will be available to pay all of the unsecured creditors in full and that there will be a surplus available for the bankrupt and, hence, the bankrupt has standing to object to Leucadia's claim. This bootstrap argument does not carry sufficient weight to support the bankrupt's standing to maintain it.
It is hornbook law that a bankrupt is restricted to objecting to creditors' claims only in cases where there is no trustee who could properly object or where a disallowance of the claim objected to would produce a surplus for the bankrupt. 3 Collier on Bankruptcy, ¶ 57.17, p. 276. Since there is a trustee in this case, the bankrupt asserts that he has standing because, if successful, there will be a surplus left for him.
The bankrupt had originally filed a petition for a real estate arrangement under Chapter XII of the former Bankruptcy Act on December 23, 1977, which was aborted by an adjudication in bankruptcy on May 12, 1978. Leucadia, Inc., formerly known as James Talcott, Inc., held a blanket mortgage against the bankrupt's properties in Westchester County, New York and three properties in New York City. Additionally, Leucadia also obtained by assignment from Chase Manhattan Mortgage and Realty Trust on March 4, 1975, a mortgage on the Westchester properties superior to the blanket mortgage. Leucadia's foreclosure actions in New York City and Westchester were stayed by the commencement of the Chapter XII proceeding, but were permitted to continue after the bankrupt's adjudication on May 12, 1978. A judgment of foreclosure in the principal amount of $2,537,995.78 was entered in favor of Leucadia in the Supreme Court, Westchester County, on October 25, 1978 with respect to the superior Chase Manhattan mortgage covering the Westchester properties.
Leucadia also proceeded to foreclose the blanket mortgage against the New York City properties in the Supreme Court, New York County. The complaint in that action contained two claims for relief; one claim for foreclosure of the Chase Manhattan mortgage covering the White Plains properties (which was also the subject of the judgment of foreclosure in Westchester County) and a second claim with respect to the blanket mortgage. On May 22, 1979, Leucadia obtained a judgment of foreclosure from the Supreme Court, New York County in the principal sum of $8,974,801.05 with respect to the blanket mortgage. In this foreclosure action, Leucadia omitted from the judgment the properties in Westchester County, which were foreclosed upon under the separate and superior Chase Manhattan mortgage in Westchester County.
It is mathematically correct to conclude that the $2,537,995.78 principal amount under the assigned senior Chase Manhattan foreclosed mortgage covering the Westchester properties and the...
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