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January 28, 1957

In the Matter of STEVENS ENTERPRISES, Inc., Debtor

The opinion of the court was delivered by: DUSEN

This case arises on a petition to modify an order entered on November 30, 1956, restraining the mortgagee from proceeding with a previously instituted legal action to foreclose a mortgage on all the properties of the debtor who filed its petition for reorganization under Bankr.Act, Chapter X, 11 U.S.C.A. ยง 501 et seq. on November 30, 1956. The mortgagee has also filed an answer to the petition for reorganization, asking that it be dismissed with costs.

On November 4, 1954, the debtor entered into an agreement to buy all the real properties now owned by the debtor for the purpose of building an apartment house on Rittenhouse Square in Philadelphia, except for premises known as 1911, 1913 and 1919 Rittenhouse Street (see Exhibit M-6). On or before approximately December 31, 1954, the debtor entered into an agreement to buy premises 1911, 1913 and 1919 Rittenhouse Street. The debtor has been trying to secure mortgage financing for an apartment building on the tract shown on Exhibit M-6, *fn1" since April 1955 and has had no success in securing financing of apartment house construction deemed suitable for this site by its officers. Since approximately December 1955, it has been very difficult to secure mortgage funds of the size required (about $ 4,000,000.) to finance an apartment of the type feasible on this site.

 In September 1955 (after several modifications in the terms of the original agreement of sale of November 4, 1954), *fn2" the debtor made settlement for the property covered by that agreement by executing a $ 425,000, 5% mortgage, with principal due on September 7, 1956, or when accelerated by default, and paying $ 100,000. in cash. This mortgage was a lien on all the properties shown on Exhibit M-6, but it was a second lien on premises 1911, 1913 and 1919 Rittenhouse Street, which were then subject to first mortgages aggregating $ 56,000, and a first lien on all the other properties comprising this tract. The first default occurred under this mortgage on July 11, 1956, for failure to pay the 1956 taxes and water rents, which were due on June 30, 1956. The second default occurred on August 7, 1956, when the interest due was not paid and the principal and interest due on September 7, 1956, were not paid.

 By letter of October 12, 1956 (Exhibit M-1), the mortgagee confirmed its warning to the debtor that unless taxes and accrued interest were paid by October 30, 1956, judgment would be entered on the bond and warrant. These sums were not paid and judgment was entered in the appropriate state court against the debtor on the bond and warrant attached to the mortgage in the amount of $ 453,852.75 on November 5, 1956 (see Exhibit M-4). Proceedings instituted on this judgment on November 8, 1956, caused the property to be listed for Sheriff's sale on Monday, December 3, 1956. On ex parte application of the debtor's counsel on Friday, November 30, 1956, after filing of the above-mentioned petition under Chapter X, an order to stay the sale was entered and a hearing on the petition was set for January 24, 1957. An able businessman, familiar with, and respected by, the financial institutions in the Philadelphia-New York area, was named trustee and he has at all times been available to assist the debtor in arranging financing for its apartment house project.

 The debtor acquired title to premises 1911, 1913 and 1919 Rittenhouse Street on or before October 1, 1955, pursuant to the above-mentioned agreement of sale. The first mortgages on these premises are now in the amounts of $ 20,000, $ 12,508, and $ 15,220. These mortgages on 1911, 1913 and 1919 Rittenhouse Street are all now in default, since they have matured. 1956 taxes and water rents on 1911 Rittenhouse Street are unpaid. The fair market value of the abovedescribed tract shown on Exhibit M-6 for its highest and best use (a hightype apartment building) is between $ 525,000 and $ 600,000. At Sheriff's sale on the pending foreclosure suit, it might only bring $ 525,000. This would not be sufficient to satisfy the outstanding judgment of $ 453,852.75 entered November 5, 1956, after paying these expenses required to give a purchaser a clear title: Principal of mortgage on 1911 Rittenhouse St. $ 20,000.00 Principal of mortgage on 1913 Rittenhouse St. 12,508.00 Principal of mortgage on 1919 Rittenhouse St. 15,222.00 Unpaid 1956 real estate taxes 11,990.33 Unpaid water and sewer rent 709.28 Insurance instalment due 976.02 Real estate transfer taxes 10,500.00 Cost of Sheriff's distribution policy 2,615.00 Cost of Sheriff's poundage 2,640.00 Total $ 77,160.63


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