Opinion
Bankruptcy No. 80-1102
January 14, 1981
[Digest of Opinion]
This Chapter 11 debtor was the owner of real property, located in Virginia, and consisting of approximately 613 acres. In 1977, the debtor proposed a property exchange with a Panamanian Corporation. Due to the inability of the buyer to furnish title, the debtor foreclosed its interest and recovered ownership of the property. Sometime prior to April, 1980, the creditorbank sued the debtor in the state of Georgia and obtained a judgment in the amount of $386,046.72. Thereafter, the creditor sued on the Georgia judgment in the Commonwealth of Virginia and obtained a judgment from a Circuit Court for the County of Culpeper.
The record revealed that the real estate taxes on the subject property were delinquent, had not been paid since 1973, and were presently outstanding against the property. The total amount due on the judgment was $397,159.86. Further, according to the expert called by the creditor, the property was worth $840.00 per acre or had a current fair market value of $516,090. (As noted earlier, this property was sold in 1977 for $1,000,000 although it was not a conventional sale but merely an exchange of property.)
The creditor seeks a vacation of the automatic stay pursuant to Section 362(d)(2)(A) and (B), which provides, that on request of a party in interest, the court shall grant relief if the debtor does not have an equity in such property and such property is not necessary to effect a reorganization. The requirements under this section are in the conjunctive and before a party seeking relief from the stay can prevail, he must first establish lack of equity. If he fails to do so, he cannot prevail even though the property may not be absolutely necessary to a successful reorganization.
In this case, it was evident that the creditor failed to carry the burden imposed by Section 362(g)(1) of the Code. The evidence showed that the current fair market value of the property was $516,090. The judgment lien of the creditor was $397, 159.86. Further, the mortgage had been satisfied and the taxes, although not paid, would be so shortly. Accordingly, with more than $100,000 equity in the subject property, the automatic stay was not lifted.