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IN RE RIVERVIEW PRODS.

January 13, 1940

In re RIVERVIEW PRODUCTS, Inc.


The opinion of the court was delivered by: THOMPSON

THOMPSON, Referee.

The Power City Trust Company filed two proofs of claim: One for $18,000.00, with interest; another for $12,065.14, which claims represent deficiencies remaining upon two mortgages which were in the course of foreclosure at the date of adjudication in bankruptcy. The Referee's Report of Sale in the foreclosure action was dated April 25, 1939, and showed a total deficiency on both mortgages of $30,941.71. On September 13, 1939, a deficiency judgment was entered in the foreclosure action against the bankrupt corporation in the amount of $12,065.14, representing the deficiency on the mortgage dated June 20, 1933.

The trustee filed objections to the allowance of both claims, on the ground that Chapter 510 of the Laws of 1938 of the State of New York, incorporated in Section 1083 of the Civil Practice Act, applies to these claims, and that since the claimant did not apply in the foreclosure proceeding, upon notice to the trustee, for deficiency judgments within ninety days after the report of the referee, that the provision of Section 1083 stating "no right to recover any deficiency in any action or proceeding shall exist" is a bar to the claims.

 In short, the Trustee contends that the claims are barred by claimant's failure to follow the requirements of Section 1083, whereas the bank contends that, while the well-reasoned opinion reported in Tompkins County Trust Company v. Herrick, 171 Misc. 929, 13 N.Y.S.2d 825, may require a finding that its deficiency judgment actually entered must be disregarded, this court is bound upon the authority of Matter of Rochester Pad & Wrapper Company, D.C., 20 F.Supp. 295, 34 A.B.R., N.S., 396 to follow the procedure laid down in Section 1083 and fix the fair and reasonable market value of the real property sold by foreclosure "by affidavit or otherwise" and allow its claims for the difference between the value so determined and the total amount of claimant's debts, regardless of the expiration of the ninety day period fixed by Section 1083.

 In the Rochester Pad & Wrapper Co. case, supra, where the claimant:

 (1) Filed a secured claim in bankruptcy court; and

 (2) Obtained the permission of said bankruptcy court to bring an action to foreclose its mortgage; and

 (3) Joined the trustee as a party defendant therein; and

 (4) Did not insert in its complaint or judgment of foreclosure and sale a provision for a deficiency judgment in said action; and

 (5) After the foreclosure sale offered in the bankruptcy court to submit proof as to the fair and reasonable market value of the foreclosed securities and to allow its claim to be fixed for the difference, Judge Knight held that it was the duty of the bankruptcy court so to proceed and that the failure of claimant to apply in the State Court foreclosure action for a deficiency judgment within ninety days after the consummation of the sale was immaterial.

 In the instant case there are several variations in fact from the Rochester Pad & Wrapper case, supra:

 1. Although claimant appeared at the first meeting of creditors, no formal secured claim was ever filed;

 2. Claimant did not apply to the bankruptcy court for permission to continue its ...


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