Roberto Robles, Jr.

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re: NOT FOR PUBLICATION

ROBERTO ROBLES JR.,

Debtor. Case No. 22-10828 (MG)

MEMORANDUM OPINION AND ORDER LIFTING THE AUTOMATIC STAY

MARTIN GLENN

CHIEF UNITED STATES BANKRUPTCY JUDGE

Pending before the Court is the motion of 53-63 Partners, L.P. (the “Owner”) seeking to lift

the automatic stay imposed in Roberto Robles, Jr.’s (the “Debtor”) bankruptcy case. (“Motion,”

ECF Doc. # 10.) The Owner of residential real property known as 63 Hamilton Terrace,

Apartment 37, New York, New York 10031 (the “Apartment”), requests entry of an order (1)

lifting the automatic stay as to the Apartment; (2) permitting the Owner to proceed with the

prosecution of the state court action in Civil Court, New York Country (the “Housing Court”)

captioned as 53-63 Partners, L.P. v. Roberto Robles, et al., Index No. L & T 306987/2021 (the

“State Court Action”), and (3) granting additional relief as the Court deems equitable. (Motion

¶ 1.) Attached to the Motion are: the property deed (“Deed,” ECF Doc. # 10-1); the initial lease and

last renewal lease for premises (ECF Doc. # 10-2); a petition and notice of petition in the State

Court Action (ECF Doc. # 10-3); a motion filed in the State Court Action by the Owner seeking to

vacate an administrative stay in the State Court Action (“Motion to Vacate,” ECF Doc. # 10-4); the

Debtor’s voluntary bankruptcy petition (“Bankruptcy Petition,” ECF Doc. # 10-5); the Debtor’s

Schedule G listing a sublease agreement between him and Margaret Dunbar and Katherine Dunbar

(“Schedule G,” ECF Doc. # 10-6); the summons and complaint issued by the Owner against

Margaret Dunbar and Katherine Dunbar (ECF Doc. # 10-7); and a third-party complaint asserted by

Margaret Dunbar and Katherine Dunbar against the Debtor (“Third-Party Complaint,” ECF Doc. #

10-8). Also included with the Motion is an affidavit from Mitchell Rothken (“Rothken Affidavit,”

ECF Doc. # 10 at 10), a manager for Beach Lane Management, Inc., the authorized and

registered managing agent employed by the Owner for the management of 63 Hamilton

Terrace, New York, New York 10031 (the “Building”) and a memorandum of law in support of

the Motion (“Memorandum in Support,” ECF Doc. # 10 at 14).

On July 13, 2022, the Chapter 7 trustee issued a report of no distribution noting that the

Debtor’s bankruptcy case was pending for one month, that there were: (i) $203.04 in abandoned

assets; (ii) no exempt assets; and (iii) $54,649.00 in claims scheduled to be discharged without

payment. (See Docket.)

The objection deadline was August 11, 2022, and there were no objections filed by that

date. A hearing we held on August 16, 2022. The Debtor made no appearance at the hearing. For

the reasons explained below, the Motion is GRANTED and the automatic stay is LIFTED.

I. BACKGROUND

A. The Motion to Lift the Stay

The Owner owns the Building pursuant to the recorded Deed. (Motion ¶ 3; see also Deed.)

The Owner and Mitchell Rothken assert the Debtor is not the tenant of the Apartment, and the

Debtor has no landlord-tenant relationship or privity with the Owner. (Motion ¶ 4; Rothken Aff. ¶

4.) The Owner states that it leased the Apartment to Margaret Dunbar, Catherine DiVicenzo, Denise

Ramirez, Katrina Feldcamp, and Katherine Dunbar pursuant to a lease agreement, dated July 10,

2014, for a one-year term commencing August 1, 2014, and expiring on July 31, 2015 (the

“Lease”). (ECF Doc. # 10-2). The Lease was renewed several times. (Id.) The last renewed lease,

dated March 17, 2020, was between Margaret H. Dunbar and Katherine Dunbar (the “Tenants”) and

the Owner for a one-year term commencing on August 1, 2020, and expiring on July 31, 2021. (Id.)

The Tenants entered into a surrender agreement with the Owner on January 12, 2021.

(Id. ¶ 5.) The Tenants agreed to vacate and surrender the Apartment by January 31, 2021. (Id.)

Indeed, the Tenants surrendered and vacated the Apartment on January 31, 2021. (Id.)

However, the Owner discovered that they left an illegal sublessee—the Debtor—in the

Apartment. (Id.) The Owner commenced the State Court Action, a licensee holdover

proceeding, against the Debtor in Civil Court, New York County (“Housing Court”). (Id.) The

State Court Action seeks to evict the Debtor from the Apartment and contends that the Debtor

was a licensee whose license to occupy the Apartment ended with the Tenants’ vacatur and

surrender on January 31, 2021. (Id.) The State Court Action is pending but has been stayed by

this bankruptcy case. (Id.)

On October 14, 2021, the Housing Court scheduled the proceeding for November 5,

2021. (Id. ¶ 6.) The Debtor submitted a COVID-19 Hardship Declaration, staying the

Proceeding through January 15, 2022, pursuant to CEEPFA. (Id.) The Owner moved to vacate

the CEEPFA stay on the grounds that the Debtor was not the tenant. (Id.) The Debtor filed his

Bankruptcy Petition on June 21, 2022 (the “Petition Date”), the same date the Motion to Vacate

was set to be heard. (Id. ¶ 7.) Due to the bankruptcy case, the Motion to Vacate was

adjourned. (Id.)

The Debtor subsequently filed his schedules and other papers in his bankruptcy case.

(Id. ¶ 8.) The Owner notes that in Schedule G, the Debtor lists a sublease agreement between

him and the Tenants but does not list any lease or contract with the Owner. (Id.)

On March 4, 2022, the Owner commenced an action against the Tenants in Supreme

Court, New York County for use and occupancy, based upon their leaving an illegal subtenant

in the Apartment. (Id. ¶ 9.) The Tenants filed the Third-Party Complaint against the Debtor

based on breach of their sublease agreement. (Id.) In the Third-Party Complaint, the Tenants

state they entered into a sublease with the Debtor commencing on November 1, 2020, expiring

on January 31, 2021, that their lease with the Owner was terminated when they surrendered the

Apartment, and that the Debtor refused to vacate. (Id.)

The Tenants never sought or obtained the consent of the Owner to their sublease with the

Debtor, even though the Lease prohibited subletting without the Owner’s prior written consent. (Id.

¶ 10.)

The Owner asserts that the Debtor has no right to occupy the Apartment, that he has no

lease, privity, or contractual relationship with the Owner. (Id. ¶ 11.) The Owner states that the

Debtor entered into possession of the Apartment pursuant to an illegal sublease with the Tenants and

any rights to occupy the Apartment terminated when the Tenants vacated and surrendered the

Apartment on January 31, 2021. (Id.)

The Owner asserts that there is cause for relief from the automatic stay and that balancing

the harms supports lifting the stay. (Id. ¶ 12.) The Owner argues that lifting the stay is necessary to

protect the Owner by avoiding additional damages and that no prejudice would result because the

Motion bears no relationship to the purpose of the automatic stay. (Id. ¶¶ 13–14.) The Owner and

Mitchell Rothken, both note that the Debtor continues to occupy the Apartment without paying rent

for use and occupancy. (Id. ¶ 12; Rothken Aff. ¶ 11.)

B. The Owner’s Arguments

The Owner argues that the automatic stay should be lifted because six of the Sonnax Factors

(defined below) apply, and that the stay should be vacated pursuant to section 362(d)(2). (Motion at

17–18.)

1. The Sonnax Factors Applied by the Owner

The Owner argues that the following six Sonnax Factors apply:

• Whether relief would result in a partial or complete resolution of the issues;

• The lack of any connection with or interference with the bankruptcy case;

• Whether the other tribunal involves the Debtor as a fiduciary;

• Whether a specialized tribunal with the necessary expertise has been established to

hear the cause of action;

• Whether the parties are ready for trial in the other proceeding, and;

• The impact of the stay on the parties and the balance of harms.

(Id. at 17.)

The Owner argues that the Debtor has no colorable claim for his continued occupancy of the

Apartment because the Debtor has (i) no lease with the Owner, (ii) landlord-tenant relationship, or

(iii) privity with the Owner because the Debtor entered the Apartment as an unauthorized sublessee.

(Id. at 18.)

The Owner notes that the only executory contract alleged by the Debtor is his sublease with

the Tenants. (Id.) The Owner argues that the Debtor’s license to occupy the Apartment, if any, was

terminated when the Tenants vacated and surrendered the Apartment. (Id.) The Owner contends

that the Debtor’s occupancy of the Apartment has no connection with his bankruptcy case because

he has no landlord-tenant relationship with the Owner, and no contractual obligation to pay rent.

(Id.) Therefore, there is nothing to discharge with respect to the Owner. (Id.)

The Owner asserts that the Housing Court is a specialized tribunal with the expertise to

determine the Debtor’s status and his right, if any, to occupy the premises. (Id.) The Owner also

contends that the balancing of harms favors vacating the stay because the Owner has been harmed

by the Debtor’s continued occupation of the Apartment without any rental payments. (Id.)

2. The Stay Should be Vacated Pursuant to 362(d)(2)

The Owner next asserts that there are separate and independent grounds to vacate the

automatic stay under section 362(d)(2) of the Bankruptcy Code. (Id.) The Owner argues that the

stay should be vacated because the Debtor does not have equity in the Apartment and the Apartment

is not necessary to an effective reorganization. (Id.)

The Owner notes that a Chapter 7 case does not provide the Debtor with an opportunity to

conduct a reorganization, because reorganization is not implicated by a Chapter 7. (Id. at 19.)

Therefore, the only remaining issue is whether the Debtor has equity in the property. (Id.) The

Owner asserts that the Debtor does not have any equity in the property because he has no lease or

landlord-tenant relationship with the Owner. (Id.)

II. LEGAL STANDARD

Section 362(a)(1) of the Bankruptcy Code imposes an automatic stay of “the

commencement or continuation” of all litigation against a debtor upon the debtor’s filing of a

bankruptcy petition. See 11 U.S.C. § 362(a)(1); In re Project Orange Assocs., LLC, 432 B.R. 89,

101 (Bankr. S.D.N.Y. 2010).

Under section 362(d), a party in interest can seek relief from the automatic stay. Section

362(d), in relevant part, provides:

On request of a party in interest and after notice and a hearing, the court shall grant

relief from the stay provided under subsection (a) of this section, such as by

terminating, annulling, modifying, or conditioning such stay—

(1) for cause, including the lack of adequate protection of an interest in property

of such party in interest;

(2) with respect to a stay of an act against property under subsection (a) of this

section, if –

(A) the debtor does not have an equity in such property; and

(B) such property is not necessary to an effective reorganization;

11 U.S.C. § 362(d).

To prevail on a motion to lift the automatic stay under section 362(d), a movant must

establish its prima facie case that there is cause to lift the stay. “Neither section 362(d)(1) nor the

legislative history” related thereto defines what constitutes “cause” for relief from the automatic

stay. In re Touloumis, 170 B.R. 825, 828 (Bankr. S.D.N.Y. 1994). “‘Cause’ is an intentionally

broad and flexible concept which must be determined on a case-by-case basis.” Project Orange,

432 B.R. at 103 (quoting In re Brown, 311 B.R. 409, 412-13 (E.D. Pa. 2004)) (internal citation

omitted). The decision whether to grant relief from the automatic stay falls within the discretion of

the bankruptcy court. Burger Boys, Inc. v. S. St. Seaport Ltd. P’ship (In re Burger Boys, Inc.), 183

B.R. 682, 687–688 (S.D.N.Y. 1994).

Courts in the Second Circuit consider the twelve factors established in the Court of Appeals

decision in Sonnax Industries, Inc. v. Tri-Component Products Corp. (In re Sonnax Indus., Inc.), 907

F.2d 1280 (2d Cir. 1990), to determine, on a case-by-case basis, whether relief from the automatic

stay is appropriate. See, e.g., In re Lehman Bros. Holdings Inc., 435 B.R. 122, 138 (S.D.N.Y. 2010),

aff’d sub nom Suncal Cmtys. I LLC v. Lehman Commercial Paper, Inc., 402 F. App’x 634 (2d Cir.

2010) (“Sonnax . . . is routinely referenced as the leading relief from stay precedent in this

Circuit.”). In determining cause to lift the stay, courts consider the following factors (the “Sonnax

Factors”):

(1) whether relief would result in a partial or complete resolution of the issues;

(2) lack of any connection with or interference with the bankruptcy case;

(3) whether the other proceeding involves the debtor as a fiduciary;

(4) whether a specialized tribunal with the necessary expertise has been established to hear

the cause of action;

(5) whether the debtor’s insurer has assumed full responsibility for defending it;

(6) whether the action primarily involves third parties;

(7) whether litigation in another forum would prejudice the interest of other creditors;

(8) whether the judgment claim arising from the other action is subject to equitable

subordination;

(9) whether movant’s succession to other proceeding would result in a judicial lien avoidable

by the debtor;

(10) the interests of judicial economy and the expeditious and economical resolution of

litigation;

(11) whether the parties are ready for trial in the other proceeding; and

(12) impact of the stay on the parties and the balance of harms.

In re Sonnax Indus., Inc., 907 F.2d at 1286.

Not all of the Sonnax factors are relevant in every case. Spencer v. Bogdanovich (In re

Bogdanovich), 292 F.3d 104, 110 (2d Cir. 2002) (citing Mazzeo v. Lenhart (In re Mazzeo), 167 F.3d

139, 143 (2d Cir. 1999)). The Court need not assign equal weight to each factor. In re

Keene Corp., 171 B.R. 180, 183 (Bankr. S.D.N.Y. 1994) (citing In re Anton, 145 B.R. 767, 770

(Bankr. E.D.N.Y. 1992)).

III. DISCUSSION

A. The Sonnax Factors Favor Lifting the Stay

The applicable Sonnax Factors weigh in favor of lifting the automatic stay.

First, Sonnax Factor 1—whether relief would result in a partial or complete resolution of the

issues—favors lifting the stay. Here, the eviction of the Debtor is the sole issue in the State Court

Action. (Motion ¶ 5.) Lifting the stay would permit the Owner to pursue that eviction and would

fully resolve the State Court Action.

Second, Sonnax Factor 2—the lack of any connection with or interference with the

bankruptcy case—favors lifting the stay. Here, it does not appear that permitting the stay to be

lifted would impact this case given that (i) the Debtor does not have a lease or contract with the

Owner and (ii) any interest the Debtor had in the Apartment terminated when the Tenants vacated

the Apartment on January 31, 2022. (Id.¶¶ 4, 9–11.)

Third, Sonnax Factor 3—whether the other tribunal involves the Debtor as a fiduciary—

favors lifting the stay. Here, the Debtor has a fiduciary relationship with the Owner as the Debtor

would be required to pay any rent obligations that are owed to the Owner, assuming the Debtor has

any interest in the Apartment and a landlord-tenant relationship existed. Both the Owner and

Mitchell Rothken assert that the Debtor continues to occupy the Apartment without paying any

rental obligations. (Id. ¶ 12; Rothken Affidavit ¶ 11.)

Fourth, Sonnax Factor 4—whether a specialized tribunal with the necessary expertise has

been established to hear the cause of action—is neutral towards lifting the automatic stay. Here, the

Owner asserts that the Housing Court is a specialized tribunal with the expertise to determine the

Debtor’s right, if any, to occupy the Apartment. (Motion at 18.) While the Housing Court handles

these matters more often, the Bankruptcy Court is equally positioned to make such a determination.

Fifth, Sonnax Factor 11—whether the parties are ready for trial in the other proceeding—is

neutral towards lifting the automatic stay. Even though the Owner filed his Motion to Vacate, that

is not indicative of the parties being ready for a trial, but merely that a hearing was set to be held

that had to be adjourned due to the imposition of the automatic stay. (Id. ¶ 7.)

Sixth, Sonnax Factor 12—the impact of the stay on the parties and the balance of harms—

overwhelmingly favors lifting the automatic stay. The Debtor has been living, possibly illegally, in

the Apartment without paying any rental obligations since at least January 31, 2021. (Id. ¶¶ 5, 12.)

This period is more than a year prior to the Petition Date of June 23, 2022. The Owner has been

seriously harmed by this situation and would continue to be harmed were the Debtor permitted to

continue living in the Apartment rent free.

Of course, not all Sonnax Factor will be relevant in every case. See In re Bogdanovich, 292

F.3d at 110. Additionally, the Court need not assign equal weight to each factor. In re Keene Corp.

171 B.R. at 183. Here, the above Sonnax Factors implicated by the Motion weigh in favor of lifting

the stay or, at worst, are neutral towards lifting the stay. Therefore, the Owner has provided

sufficient cause to lift the stay.

B. There is Cause to Lift the Stay Because the Debtor Lacks Equity in the

Apartment and It Is Not Necessary for a Reorganization

Section 362(d)(2) of the Bankruptcy Code permits a moving party to lift the stay of an act

against property provided the debtor lacks equity in the property and the property is unnecessary for

reorganization. 11 U.S.C. § 362(d)(2). Here, there is sufficient cause to lift the automatic stay

because the Debtor does not have equity in the Apartment, and the Apartment is unnecessary for a

successful reorganization. (Motion at 18–19.)

First, a Chapter 7 case is not one in which a debtor would reorganize. Moreover, the

Chapter 7 trustee’s report of no distribution, filed on July 13, 2022 (see Docket), foreclosed any

form of a successful reorganization were one to occur. The report of no distribution signifies that

this case is coming to an end and that there is little need for a stay to remain in place.

Second, the Debtor lacks privity of contract with the Owner and, any interest in property the

Debtor had in the Apartment terminated when the Tenants vacated the Apartment on January 31,

2021. (Motion ¶ 11.)

In light of the above, the Owner has shown that cause exists to lift the automatic stay under

section 362(d)(2) of the Bankruptcy Code.

IV. CONCLUSION

For the reasons explained above, the Motion is GRANTED and the automatic stay is

LIFTED.

IT IS SO ORDERED.

Dated: August 16, 2022

New York, New York

Martin Glenn

_____ ____________

MARTIN GLENN

Chief United States Bankruptcy Judge