IN RE BROWN (Bankr.W.D.N.Y. 5-5-2010)

In re: IAN R. BROWN, Debtor.

CASE NO. 09-22585.United States Bankruptcy Court, W.D. New York.
May 5, 2010

DECISION ORDER
JOHN NINFO II, Chief Judge

BACKGROUND
On November 17, 2009, Ian R. Brown (the “Debtor”) filed a motion (the “Pond Motion”) pursuant to Section 506(a)(1)[1] and the Decision of the United States Court of Appeals for the Second Circuit (the “Second Circuit”) in In re Pond, 252 F.3d 122 (2d Cir. 2001) (“Pond”). The Pond Motion requested that the Court determine that a May 18, 2007 mortgage on the Debtor’s residence at 7213 Baptist Hill Road, Bloomfield, New York (the “Residence”), held by Eastman Savings Loan Federal Credit Union (“ESL”), with an

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outstanding balance of $25,136.56 (the “ESL Mortgage”), be determined to be fully unsecured, because the Residence at the time of his petition had a value of only $47,000.00, pursuant to an attached market analysis, while the first mortgage on the Residence, held by Canandaigua National Bank, had a balance as of the date of the filing of $74,000.37 (the “CNB Mortgage”).

A trial to determine whether the ESL Mortgage was fully unsecured was conducted by the Court on April 28, 2010 (the “Trial”).

At the Trial, D.J. Sperano (“Sperano”), a New York State licensed real estate appraiser, testified on behalf of the Debtor as to his opinion of the fair market value of the Residence, which testimony was supported by a March 17, 2010 written appraisal that valued the Residence at $65,000.00.

Also at Trial, Stephen L. Squirrell (“Squirrell”), a New York State licensed real estate appraiser, testified on behalf of ESL as to his opinion of the fair market value of the Residence, which testimony was supported by February 13, 2010 written appraisal that valued the Residence at $110,000.00, with a quick sale value of $95,000.00.

After hearing the witnesses at Trial and judging their credibility, and reviewing: (1) the evidence produced and admitted at Trial; and (2) all of the facts and circumstances in the

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Debtor’s case and a related bankruptcy case filed by his spouse, the Court denies the Pond Motion for the following reasons:

1. The Court believes that the Residence has a value of at least
$75,000.00, and realistically would probably sell for a
purchase price in the low $80,000.00 range, which means that
the ESL Mortgage is not wholly unsecured, and therefore cannot
be avoided.

2. The tax assessment for the Residence is $74,500.00, based upon
a fair condition, which also is higher than the balance due on
the CNB Mortgage, and the Court believes from the testimony at
Trial, particularly the testimony of Squirrell, that the
condition is somewhat better than fair.

3. Sperano, who testified on behalf of the Debtor, indicated that
the range of value for the Residence was between $60,000.00
and $75,000.00, so that the top end of the range for the
Debtor’s expert is in excess of the CNB Mortgage, and the
Court believes that for this Residence and this Pond Motion
the top end of the value range is appropriate.

4. The Court found the testimony of Squirrell credible and
persuasive that the actual square footage of the Residence, as
hand measured by Squirrell, is 288 square feet more than the
square footage set forth in the Sperano appraisal, and 368
square feet more than the the tax rolls, which even Sperano

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indicated would, if correct, raise the value of his appraisal
by approximately $5,000.00. That would bring the top end of
his range of value to $80,000.00, a value higher than the
balance due on the CNB Mortgage.

5. Although homeowners are not experts with respect to the value
of their residences, the Debtor did apply for the ESL Mortgage
in 2007 obviously believing that the Residence was worth more
than the $74,000.00 due on the CNB Mortgage when he obtained
it in 2005, presumably because of the improvements that he had
made to it and, when the Debtor’s spouse filed bankruptcy in
April of 2008, she valued the Residence at $100,000.00.

6. Although the Court believes that a septic system easement held
by a neighbor and the floor beam problems clearly do
negatively impact the value of the Residence, the facts
indicate a value higher than the balance due on the CNB
Mortgage, namely that: (a) the Residence has a two-car
garage; and (b) significant improvements were made by the
Debtor since his purchase of the Residence in 2005, including
a new metal roof, well water pump, boiler and septic system.

7. The Court finds the comparables used by Sperano were
significantly distant from the Residence, and not as credible
as the comparables utilized by Squirrell, although no one

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comparable utilized by either appraiser in the Court’s opinion
was truly comparable to the Residence.

8. Squirrell performed an appraisal for ESL in 2007 in connection
with the ESL Mortgage, so he was very familiar with the
Residence and the improvements that the Debtor had made to the
property, and overall, the Court found his testimony to be
more credible than Sperano’s testimony, although clearly both
are expert appraisers and both were credible.

CONCLUSION
The Pond Motion is in all respects denied.

IT IS SO ORDERED.

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Notice Recipients

District/Off: 0209-2 User: tacy Date Created: 5/5/2010

Case: 2-09-22585-JCN Form ID: pdfattch Total: 4

Recipients of Notice of Electronic Filing:

tr George M. Reiber trustee13@roch13.com, greiber@roch13.com

aty David L. Rasmussen drasmussen@davidsonfink.com, vbillups@davidsonfink.com

aty John F. McKeown johnf.mckeown@gmail.com

TOTAL: 3

Recipients submitted to the BNC (Bankruptcy Noticing Center):

db Ian R. Brown 7213 Baptist Hill Rd. Bloomfield, NY 14469

TOTAL: 1

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NOTICE OF ENTRY PLEASE TAKE NOTICE of the entry of an Order, duly entered in the within action in the Clerk’s Office of the United States Bankruptcy Court, Western District of New York on May 5, 2010. The Clerk of Court of the United States Bankruptcy Court, Western District of New York, hereby certifies that a copy of the subject Order was sent to all parties in interest herein as required by the Bankruptcy Code, The Federal Rules of Bankruptcy Procedure.

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Notice Recipients

District/Off: 0209-2 User: tacy Date Created: 5/5/2010

Case: 2-09-22585-JCN Form ID: ntcentry Total: 5

Recipients of Notice of Electronic Filing:

tr George M. Reiber trustee13@roch13.com, greiber@roch13.com

aty David L. Rasmussen drasmussen@davidsonfink.com, vbillups@davidsonfink.com

aty John F. McKeown johnf.mckeown@gmail.com

TOTAL: 3

Recipients submitted to the BNC (Bankruptcy Noticing Center):

db Ian R. Brown 7213 Baptist Hill Rd. Bloomfield, NY 14469

Lacy, Katzen, LLP 130 East Main Street Rochester, NY 14614

TOTAL: 2

[1] Section 506(a) provides that:

(a)
(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

11 U.S.C. § 506 (2010).