Gallery Tower, LLC

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
GALLERY TOWER, LLC,
Debtor.
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Case No. 09-01014
(Chapter 11)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION RE MOTION OF
JEMAL/McCAFFERY RUDDEN, LLC FOR RELIEF FROM THE AUTOMATIC STAY
Jemal/McCaffery Rudden, LLC filed a motion seeking relief
from the automatic stay of 11 U.S.C. § 362(a) to permit it to
foreclose on the debtor’s real property. 	Jemal/McCaffery’s
motion will be denied except that if the debtor fails by March
31, 2010, to pay the property’s current real estate tax bill,
relief from the automatic stay will be in effect.
Jemal/McCaffery sought relief from the automatic stay based on 11
U.S.C. § 362(d) paragraphs (1), (2) and (3).
I
At the hearing on the motion, at the close of
Jemal/McCaffery’s evidentiary case, the court ruled in an oral
decision that the request under § 362(d)(2) should be dismissed
based on Jemal/McCaffery’s failure to carry its burden of showing
The document below is hereby signed.
Signed: March 08, 2010.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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that the property has no equity.
II
The request under § 362(d)(1) was based on the assertion
that the interest of Jemal/McCaffery is inadequately protected
based on:
(i) 	the 	Debtor's 	failure 	and 	inability 	to 	make 	debt
service 	payments 	to 	JMR, 	(ii) 	the 	Debtor's 	failure 	and
inability to pay postpetition real estate taxes accruing
against 	the 	Property, 	(iii) 	the 	Debtor's 	failure 	and
inability 	to 	pay 	postpetition 	interest 	on 	prepetition
real 	estate 	taxes, 	(iv) 	upon 	information 	and 	belief,
Debtor's 	failure 	to 	insure 	the 	Property 	and 	to 	carry
sufficient 	liability 	insurance 	with 	respect 	to 	the
Property, 	(v) 	the 	Debtor's 	failure 	to 	safeguard 	the
Property and halt its continuing physical deterioration,
and 	(vi) 	the 	Debtor's 	failure 	to 	maintain 	the 	Property
and to repair and make safe the Property, leading to the
Property's continued decline in value.
The evidence fails to establish these asserted grounds are a
basis for granting the motion at this time other than to require
payment of the current real estate tax bill by March 31, 2010, as
a condition to keeping the automatic stay in place.
The first five of these grounds needs little discussion.
The failure to make debt payments to Jemal/McCaffery is not a
basis for relief from the automatic stay. 	The debtor agreed that
upon a failure to pay the current real estate tax bill by the due
date of March 31, 2010, relief from the automatic stay would be
appropriate. 	Jemal/McCaffery failed to present a prima facie
case establishing that there is no equity in the property such as
to create a danger of erosion from above by reason of failure to
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pay interest on the superior prepetition real estate tax liens.
The debtor presented satisfactory evidence of insurance. 	The
property is vacant and its best use would be to demolish the
buildings, except for street facades, and erect new structures.
Any minor ongoing physical deterioration of the property thus
does not affect its value.
As to the sixth asserted ground, the parties presented
expert witness testimony regarding whether the property is unsafe
and in imminent danger collapsing. 	The testimony of the experts,
structural engineers, was in conflict. 	The debtor’s expert
prepared the drawings for shoring up the property and inspected
the property to assure that the shoring installed complied with
his design for assuring that the property was properly shored. 	I
credit his testimony that by reason of that shoring there is no
imminent danger that the property will collapse.
III
The request under § 362(d)(3), filed on January 19, 2010,
was premature and will be denied, without prejudice, on that
basis. 	By an order signed on January 18, 2010, and entered on
January 20, 2010, the court determined that “Debtor's estate
constitutes ‘single asset real estate’ within the meaning of 11
U.S.C. § 101(51B).” 	This made the debtor’s real property subject
to § 362(d)(3). 	Pursuant to § 362(d)(3) this entitled
Jemal/McCaffery to file a request for and obtain relief from the
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automatic stay “unless, not later than the date that is . . . 30
days after the court determine[d] that the debtor [was] subject
to [§ 362(d)(3)] . . . (A) the debtor has filed a plan of
reorganization that has a reasonable possibility of being
confirmed within a reasonable time; or (B) the debtor has
commenced [certain] monthly payments . . . .”
Under § 362(d)(3), the 30-day mark after the court
determined that the debtor’s real property was “single asset real
estate” was either February 17 or February 19, 2010, depending on
whether the date of signing or the date of entry of the order
triggered the running of the 30-day period. 	Jemal/McCaffery’s
request under § 362(d)(3) was filed on January 19, 2010, but
could properly be filed no earlier than the day after the 30-day
mark had been reached. 	Accordingly, Jemal/McCaffery’s
§ 362(d)(3) request was premature by either 30 or 32 days. 	As of
January 19, 2010, the date that the motion was filed, it could
have been denied out of hand because the 30-day mark had not yet
passed.
The request must be denied even though the hearing on the
motion was held on February 24 and March 4, 2010, after the 30-
day mark had been reached on either February 17 or February 19,
2010. 	Requiring the debtor to be prepared as early as seven days
after the 30-day mark was reached to prove it comes within the
safe harbor of § 362(d)(3)(A) or (B) is inconsistent with the
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statutory scheme. 	The premature filing of the motion required
the debtor to devote resources to address the premature request.
Given the paucity of decisions addressing the prematurity issue,
the debtor could not afford to assume that the request would be
dismissed as premature. 	The request came at a time that the
debtor was preparing its Chapter 11 plan and disclosure
statement. 	Attending to addressing the premature § 362(d)(3)
request necessarily diverted the debtor’s full attention to
preparing and filing a plan and disclosure statement. 	A creditor
ought not be allowed to file a § 362(d)(3) motion prematurely and
thereby to deprive the debtor of its breathing period to work
towards coming within the safe harbor of § 362(d)(3)(A) or (B).
The motion is without merit at the time of its filing. 	The
expectation that once the 30-day mark of § 362(d)(3) has passed
the debtor will not be able to come within either of the safe
harbors of § 362(d)(3)(A) and (B) is insufficient to warrant
permitting the filing of a premature motion that is meritless at
the time of its filing and that diverts the debtor from
undertaking steps to come within one of those safe harbors. 	See
In re National/Northway Ltd. P’ship, 279 B.R. 17, 22 (Bankr. D.
Mass. 2002); see also In re Hope Plantation Group, LLC, 393 B.R.
98, 102 (Bankr. D.S.C. 2007).
Because the motion was premature, the cleanest approach is
to deny it without prejudice, with any hearing on a renewed
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1 	The evidence may turn out to be the same, but I have no
way of knowing whether the debtor might attempt to present new
evidence to buttress its evidence on the § 362(d)(3)(A) safe
harbor issue.
2 	The debtor has not yet filed its disclosure statement,
and the timing of filing a disclosure statement necessarily
affects whether a plan can be confirmed “within a reasonable
period of time” under § 362(d)(3)(A). 	But where a creditor’s
premature request under § 362(d)(3) has diverted the debtor’s
efforts, any delay caused by that request being filed prematurely
ought not count against the debtor in the determination of
whether a plan can be confirmed “within a reasonable period of
time.”
6	O:\TEEL\Judge Temp Docs\Gallery Tower - Mem Dec re First MFRS.wpd
motion to take into account the evidentiary record established at
the hearing of the premature motion. 1 	This will delay
Jemal/McCaffery’s having a § 326(d)(3) request heard beyond the
date that it would have been heard had it waited until the 30-day
mark had passed before filing its motion, but Jemal/McCaffery has
only itself to blame for filing a premature motion. 	Given the
disruptions the premature motion caused, I think it fair to
require Jemal/McCaffery to start anew. 2
An order follows.
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Office of United States
Trustee; Daniel Litt, Esq.
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