Matter of Sulzer, Bankruptcy No. 80 B 20024

• Decision Date: 11 February 1980
• Docket Number: Adv. No. 2005.,Bankruptcy No. 80 B 20024
• Citation: 2 BR 630
• Parties: In the Matter of Wilmot E. SULZER and Jacqueline Sulzer, a/k/a Jacqueline A. Sulzer, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

2 B.R. 630 (1980)

In the Matter of Wilmot E. SULZER and Jacqueline Sulzer, a/k/a Jacqueline A. Sulzer, Defendants.

Bankruptcy No. 80 B 20024, Adv. No. 2005.

United States Bankruptcy Court, S.D. New York.

February 11, 1980.

Nancy P. Pichard, Scarsdale, N.Y., for Manufacturers Hanover Trust Co.

Netter, Dowd & Alfieri, New York City, for debtors.

DECISION ON COMPLAINT FOR RELIEF FROM AUTOMATIC STAY

HOWARD SCHWARTZBERG, Bankruptcy Judge.

This is an adversary proceeding commenced by a mortgagee in a case under Chapter 11 of the Bankruptcy Code for relief from the automatic stay imposed under Code § 362(a). The debtors are husband and wife who filed a voluntary joint petition for relief under Chapter 11 of the Code on January 17, 1980. Unless otherwise indicated, the husband will be referred to as the debtor. The mortgagee, Manufacturers Hanover Trust Company, holds a first mortgage on the debtor's home in the face amount of $64,000, dated February 7, 1973, which is in default and with respect to which the mortgagee has obtained a state court judgment of foreclosure and sale in the amount of $66,929.12, plus costs and allowances, as of November 8, 1979. The foreclosure sale was scheduled for January 21, 1980.

On January 22, 1980, the mortgagee filed a summons and complaint with this court requesting relief from the automatic stay on the ground that continuation of the stay will impair the mortgagee's security and that the debtors do not have any equity in the premises in question.

The matter came on for a preliminary hearing on January 29, 1980, which this court consolidated with the final hearing, as authorized under Code § 362(e), and continued on February 6th through 8th, 1980.

FINDINGS OF FACT

1. The debtor is a psychoanalyst with an office in New York City where he treats patients with emotional disorders through talking. He also maintains an office in his home for his professional services, and more recently he has tended to use the office in his home for his practice more than his New York City office, especially since he owes several months rent for the New York City office and the landlord is threatening to evict him.

2. A witness offered by the debtor as an expert real estate appraiser valued the property in question at $300,000, based upon the following description contained in his report: Exhibit # E

This is a contemporary house of individual design containing 15 rooms, 6 bedrooms, 4 bathrooms, 2 lavatories. There are many special features. There is a main house and a guest wing. The children\'s 4 bedrooms and central playroom are located on the lower level. The living and reception rooms are on the second level and the master bedroom suite is on the third level. The guest wing has 2 rooms and one bathroom.

The site offers a special view of Mianus River and the hills on the other side.

Greenwich Road is a busy street. To overcome any drawback this might have, the architect designed the house so that it faces the river. A screen of fast growing evergreens at inexpensive cost should be planted along the road frontage.

There are no windows on the street side of the house. The river is wide forming a lake on half of the subject property. It is good for swimming without chlorine and is a trout stream.

Many mirrored walls and special plexiglass shelves and fittings. Plexiglass wall coverings in children\'s rooms.

Wide pine diagonal flooring finished with polyurethane.

Built-in glass screen for 2 fireplaces. Vermont stone hearth.

Separate thermostat for each room or living area, controls heat and cooling system. Heating is by hot water. Cooling is by chilled water not refrigerated air. This is a sophisticated system.

Wet bars in living room. Bar sink, a refrigerator in guest suite. Spot lighting in many places.

Built-in stereo system with built-in speakers in all rooms.

Fitted closets in dining room and master bedroom.

Large deck with bar-b-que. Fir decking treated with Cuprinol for use of maintenance and wood preservation.

Birch hardwood staircase and handrail. 4 skylights, one of which is vented to release hot summer air.

Master motorized television direction finder antenna. Television outlets in all parts of the house.

Built-in vacuum cleaner system.

A.D.T. fire and burglar alarm.

Exterior spot lights on swimming area. Outside electrical outlets.

Bridge gallery to guest wing office needs sheetrock and flooring, estimated cost $350.

Family room with fireplace, living room with fireplace. Fireplace in children\'s living room.

2 sinks in one children\'s bathroom.

Supplementary quick electric heat in all bathrooms. Built-in hair dryer in children\'s bathroom.

Thermopane windows throughout.

The house is in good marketable condition, showing only ordinary signs of wear and tear. There are no observable structural defects.

3. One of the real estate appraisers offered by the mortgagee valued the property at $178,000, based on $45,000 for the land and $133,000 for the improvements. This expert valued the property at a cost new as $237,000, but made various adjustments for lack of garage, driveway, required repairs, lack of landscaping and the fact that the home amounts to an overimprovement for the site in question. Exhibit # 11

4. A second real estate appraiser for the mortgagee valued the property at $177,000, including $40,000 for the land and $137,000 for improvements. This expert recommended an asking price of $195,000, "which would permit sufficient leverage in securing estimated market value of $177,000." Exhibit # 12 The local assessment, which is based on the full value of the property, is $143,000.

5. Accepting the debtor's figures as the current amounts due on the five mortgages of record against the debtor's property, they are listed as follows:

                  First mortgage held by plaintiff   -     $68,825.45
                  Second mortgage of Computer Land Corp.    56,330.18
                  Third mortgage of H.U.D.                 9,204.06
                  Fourth mortgage of L. Kellner & Co.       34,716.12
                  Fifth mortgage of Marion Levy             27,572.52
                                                          ___________
                                     Total  ............  $196,648.33
                

In addition, there must be included the interest of $844.61 claimed by the Department of Housing and Urban Development on their $9240.06 mortgage, at the daily rate of $1.52. Therefore, the total mortgage indebtedness should be $197,492.94.

6. The debtor disputes the validity of the Second, Fourth and Fifth mortgages on the ground of usury. The debtor has asserted usury as a defense to the second mortgagee's foreclosure action that was pending in state court when the debtors filed for relief under the Bankruptcy Code. However, these mortgages have not as of this date been determined to be invalid and therefore continue of record against the property in question.

7. The mortgagee's title report Exhibit # 10 lists seven judgments recorded as liens against the property. However, the judgment by a Marion Levy relates to her previously listed mortgage and will therefore be disregarded as duplicative of her secured claim. The other six judgment liens with interest, as computed by the debtor's counsel, are as follows:

                  United States Trust Co.                 $38,863.46
                  Bank of Commerce                          2,397.68
                  European American Bank                    5,928.62
                  Bedford Chrysler-Plymouth Inc.            2,050.18
                  Bank of New York                          8,913.93
                  Bankers Trust New York Corp.              2,049.46
                                                          __________
                                Total ................... $60,203.33
                

8. The mortgagee's title report also reflects three federal tax liens in favor of Internal Revenue Service. There is also one New York State tax lien and one New York City tax lien, computed with interest and penalty interest as follows:

                  Internal Revenue Service 5/25/77  -     $ 7,501.13
                  Internal Revenue Service 9/19/78  -      14,289.61
                  Internal Revenue Service 8/11/79  -       2,803.44
                  N.Y.S. Tax Commission, 4/21/78    -       6,049.06
                  NYC Finance Administration        -         700.00
                                                          __________
                                Total ................... $31,343.24
                

9. To recapitulate, the five mortgages of record in the total sum of $197,492.94, the six judgment liens aggregating $60,203.33, and the five tax liens amounting to $31,343.24, reflect a total secured indebtedness against the property in question of $289,040.51.

10. In addition, the title report indicates that the school taxes due January 1, 1980, in the sum of $1771.98 have not been paid. If this item becomes a lien, the total secured indebtedness will amount to $290,812.49.

11. The debtor has made no payments in reduction of the first mortgage for approximately one and one-half years, during which time this mortgagee has paid taxes and insurance on the premises and will have to continue to make these payments in the future in order to protect its interests. The real estate taxes are in excess of $6000 per year.

12. I find that the mortgagee's appraisers have been understandably conservative in their estimates of the value of the debtor's premises. It is true that their figures of $178,000 and $177,000 more closely resemble the full value assessment of $143,000, but they do not give enough weight to the unique pastoral setting adjacent to a nearby stream that should produce some intangible value. Indeed, the mortgagee's first appraiser more closely approached the true value of the premises with a cost new figure of $237,000. However, this appraiser regarded the overimprovement feature from a negative aspect, whereas the debtor's appraiser, as one would expect, treated this subject as a positive value. On the other hand, the debtor's appraiser was unduly optimistic, making insufficient allowance for the fact that nearby competitive homes are marketed for lower amounts. This point is noted in his report as follows:

"A large subdivision named

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