In re Lawyers Title & Guaranty Co.

Frankenthaler, J. This is a proceeding under the Schackno Act for the readjustment of the rights of certificate holders in a mortgage of $98,000 covering the property at 323-331 East Seventy-first street, borough of Manhattan, New York city. These premises consist of five five-story cold water tenement houses, which are presently entirely vacant and which are structurally unsafe because they have been completely gutted. The mortgage has been foreclosed and the property bid in at the foreclosure sale. [535] The proposed plan is promulgated by the City Bank Farmers Trust Company and the National City Bank of New York, in various fiduciary capacities. It provides for the designation of the former as trustee. It also provides that the trustee may borrow from time to time upon the security of the mortgaged premises sums not exceeding the amount of $25,000 in the aggregate. It is proposed to use the borrowed money to clear up real estate taxes and water charges now in arrears, as well as unpaid foreclosure expenses, which will require a total of from $15,000 to $16,000. As most of this item consists of unpaid taxes, the penalty interest which is being incurred is substantial and it is, of course, desirable that the imposition of these penalties be stopped as soon as possible. The balance of the total sum of $25,000 will be advanced as needed to pay taxes for four or five years in the future and these advances will also save a considerable amount of penalty interest. The evidence establishes that it is advisable that the braidings on the premises be demolished as soon as possible. It is anticipated that this will be done without cost to the certificate holders by the tenement house commissioner, who will use C. W. A. labor. The plot is approximately 125 feet front by 100 feet deep and is suitable for a six-story or larger apartment house. The premises have substantial land value, which, the testimony at the hearing showed, should appreciate considerably within the next few years, when it is likely that they then may be sold at a satisfactory price. The promulgators control, in fiduciary capacities, all of the outstanding certificates. These banks have expressed their readiness to extend the necessary credit as needed, subject to the court’s approval. On previous applications for leave to mortgage other properties held on behalf of certificate holders, special provision has customarily been made in order that their interests would not be jeopardized by the possibility of the foreclosure of a relatively small senior mortgage. In those instances, unless the prospective lender agreed not to foreclose while the net income was being applied to the payment of his interest, it was arranged that satisfactory assurance be given by one or more of the larger certificate holders that they would protect the interests of all the holders in the event of a threatened foreclosure. In the present case the property produces no income and the certificate holders are all fiduciaries. The investors will be protected because of the assurance that the banks are to advance the moneys to pay taxes for a number of years and that there will not be any foreclosure of the loan during that time. This will make the possibility of successful liquidation of this issue substantially greater than it is at the present time. [536] In view of all the circumstances involved, the advancement of the credit will be approved upon the terms and conditions proposed. The City Bank Farmers Trust Company will be designated as trustee and, except as herein indicated, the proposed plan will be modified so as to conform with that approved in series BX 19 (154 Misc. 447). Settle order and plan on three days’ notice.