475 B.R. 391
Bankr. S.D.N.Y.2012Background
- City moved to dismiss or vacate stay; court granted stay relief but denied dismissal without prejudice until transfer of the Property.
- Debtor 51-53 West 129th Street HDFC owns low‑income housing at the Property; purchased from City in 1985 for $6,000; substantial tax and water/sewer arrears.
- City foreclosed the Property in rem in 2011; Debtor filed Chapter 11 after foreclosure judgment; Redemption Period and Transfer Period under NYC Admin. Code § 11-412.1 applicable.
- Debtor attempted a sale to Tal Bar-Or in 2010–2011; HPD denied approval; Supreme Court denied approval; state courts held sale contravened NPCL and Deed restrictions.
- Redemption Period expired June 23, 2011; Debtor did not redeem or file a plan; as of petition, taxes and water/sewer liens remained; Debtor’s sole rehabilitation route relied on sale.
- Court held stay relief appropriate to facilitate rehabilitation by a not‑for‑profit transferee; dismissal denied without prejudice pending transfer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state-law sale restrictions bar the Debtor's proposed sale | City argues sale violates NPCL and Deed restrictions | Debtor argues sale is permissible under context of DPFR and transfer procedures | Proposed sale violates NPCL and Deed restrictions |
| Whether § 362(d)(1) relief from stay is warranted | City contends lack of adequate protection and rehabilitation prospects justify relief | Debtor contends potential rehabilitation via sale | Stay relief granted under § 362(d)(1) due to lack of rehabilitation and insufficient protection |
| Whether stay relief is warranted under § 362(d)(2) and § 362(d)(3) | City asserts equity and Timbers standards support relief; no plan filed | Debtor contends potential reorganization, plan, and payments | Relief warranted under § 362(d)(2) and § 362(d)(3); equity and absence of a plan negate reorganization |
| Whether the case may be reviewed to overturn state court determinations | State court rulings support City’s position | Debtor seeks reconsideration under bankruptcy review | Rooker-Feldman and res judicata preclude reconsideration of state court determinations |
| Whether the Debtor has any post‑petition rights to avoid liens or secure rehabilitation | City argues liens and inability to rehabilitation foreclose rights | Debtor argues potential nonbankruptcy remedies and recourse | No viable post‑petition plan or equity to support continuation; stay relief to transfer |
Key Cases Cited
- Sadie Haynes, 283 B.R. 147 (Bankr.S.D.N.Y. 2002) (in rem foreclosure and redemption mechanics under NYC Admin. Code § 11-412.1)
- In re 523 East Fifth Street Housing Preservation Development Fund Corp., 79 B.R. 568 (Bankr.S.D.N.Y. 1987) (covenants restricting use and obligations run with the land; enforceability against bankruptcy sales)
- In re Diplomat Elecs. Corp., 82 B.R. 688 (Bankr.S.D.N.Y. 1988) (Timbers / need for plan confirmation to justify necessity of property for reorganization)