Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca2-12-04131/USCOURTS-ca2-12-04131-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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12‐4131‐bk

Santiago‐Monteverde v. Pereira

1 In the

2 United States Court of Appeals

3 For the Second Circuit

4 ________

5

6 August Term 2013

7

8 No. 12‐4131‐bk

9

10 IN RE: MARY VERONICA SANTIAGO‐MONTEVERDE,

11 Debtor.

12

13 MARY VERONICA SANTIAGO‐MONTEVERDE,

14 Debtor‐Appellant,

15

16 v.

17

18 JOHN S. PEREIRA, CHAPTER 7 TRUSTEE,

19 Trustee‐Appellee.

20 ________

21

22 Appeal from the United States District Court

23 for the Southern District of New York.

24 No. 12 CV 4238 ― P. Kevin Castel, Judge.

25 ________

26

27 ARGUED: SEPTEMBER 23, 2013

28 DECIDED: MARCH 2, 2015

29 ________

30

31 Before: SACK, PARKER, and RAGGI, Circuit Judges.

32 ________

Case 12-4131, Document 181-1, 03/02/2015, 1449259, Page1 of 5
1 Appeal from a decision of the United States District Court for the Southern

2 District of New York (P. Kevin Castel, J.) affirming the bankruptcy court’s order

3 striking the debtor’s claim that the value of her rent‐stabilized lease was exempt

4 from her bankruptcy estate as a “local public assistance benefit” within the

5 meaning of New York Debtor and Creditor Law § 282(2). We previously

6 concluded that the application of section 282(2) to New York’s rent stabilization

7 laws raised an unresolved question of New York law and certified the question

8 to the New York Court of Appeals. The Court of Appeals has now responded

9 that the value of a rent‐stabilized lease is a “local public assistance benefit” under

10 New York law. We therefore reverse the decision of the district court and remand

11 for further proceedings consistent with this opinion.

12 ________

13 RONALD J. MANN, Columbia University School of Law, New

14 York, NY, (Kathleen G. Cully, Kathleen G. Cully PLLC, New

15 York, NY, on the brief), for Debtor‐Appellant.

16 J. DAVID DANTZLER, JR. (John P. Campo, Eric L. Unis, on the

17 brief) Troutman Sanders LLP, New York, NY, for Trustee‐

18 Appellee.

19 Ira L. Herman, Thompson & Knight LLP, New York, NY, for

20 Amicus Curiae, New York City Bankruptcy Assistance Project,

21 supporting Debtor‐Appellant.

22 Carolyn E. Coffey (of counsel to Jeanette Zelhof), MFY Legal

23 Service, Inc., New York, NY, for Amicus Curiae, MFY Legal

24 Services, Inc., supporting Debtor‐Appellant.

25 ________

26

27

Case 12-4131, Document 181-1, 03/02/2015, 1449259, Page2 of 5
1 PER CURIAM:

2 Debtor‐Appellant Mary Santiago‐Monteverde appealed to this Court from

3 a decision of the district court affirming the bankruptcy court’s ruling that her

4 residential lease, rent‐stabilized under New York’s Rent Stabilization Code, N.Y.

5 Comp. Codes R. & Regs. tit. 9, §§ 2520 et seq., was not exempt from her

6 bankruptcy estate as a “local public assistance benefit” within the meaning of

7 New York Debtor and Creditor Law (“DCL”) § 282(2). We concluded that this

8 question was an important one of unsettled New York law and certified it to the

9 New York Court of Appeals, which accepted the certification. In re Santiago‐

10 Monteverde, 747 F.3d 153 (2d Cir. 2014), certified question accepted, 23 N.Y.3d 958

11 (2014). After considering the question, the Court of Appeals concluded that a

12 debtor’s interest in a rent‐stabilized lease is a local public assistance benefit under

13 the DCL. See In re Santiago‐Monteverde, 24 N.Y.3d 283 (2014). We assume the

14 parties’ familiarity with the underlying facts, procedural history, and issues on

15 appeal, which we briefly summarize below.

16 I.

17 Santiago‐Monteverde has lived in a rent‐stabilized apartment in Lower

18 Manhattan for over forty years. After her husband’s death, she experienced

19 financial difficulties and, in November 2011, filed for Bankruptcy protection

20 under Chapter 7. On Schedule G of her petition, she listed her apartment simply

21 as an “unexpired lease.” The Bankruptcy Trustee, John S. Pereira, determined

22 that she had no assets. Shortly after he did so, Santiago‐Monteverde’s landlord,

23 East 7th Street Development Corporation, approached the Trustee and offered to

24 buy the lease to Santiago‐Monteverde’s apartment under terms that would

25 permit her to remain in the apartment but would cause the apartment to lose its

26 rent stabilized status.

27 Upon learning that the Trustee planned to accept the offer, Santiago‐

28 Monteverde amended her filing, treating the value of her rent‐stabilized lease as

Case 12-4131, Document 181-1, 03/02/2015, 1449259, Page3 of 5
1 personal property and claiming an exemption for the property as a “local public

2 assistance benefit” under 11 U.S.C. § 522(b)(3) and DCL § 282(2).

3 The Trustee moved to strike this claim of exemption. The bankruptcy court

4 granted the motion on the ground that a rent stabilized lease did not qualify as a

5 “local public assistance benefit,” but was instead “a quirk of the regulatory

6 scheme in the New York housing market.” In re Santiago–Monteverde, 466 B.R.

7 621, 624‐25 (Bankr. S.D.N.Y. 2012). Santiago‐Monteverde appealed to the district

8 court. The district court affirmed, concluding that the rent stabilized lease was

9 “the collateral consequence of a regulatory scheme” rather than a local public

10 assistance benefit. In re Santiago–Monteverde, Nos. 12‐CV‐4238 (PKC), 11‐15494

11 (JMP), 2012 WL 3966335 *2 (S.D.N.Y. Sept. 10, 2012).

12 Santiago‐Monteverde appealed to this Court contending that her rent‐

13 stabilized lease does qualify as such a benefit when one takes into account the

14 protections afforded by the rent‐stabilization program and the value they create

15 in a lease. The Trustee, who had obtained permission from the bankruptcy court

16 to purchase and assign the lease, argued that the legislature had never intended

17 that “local public assistance benefit” be read so broadly.

18 II.

19 In our prior opinion, we noted that, although New York courts had

20 addressed related questions, none had decided whether a debtor can prevent the

21 assumption and assignment of a rent‐stabilized lease on the ground that it is a

22 “local public assistance benefit” within the meaning of DCL § 282(2). Because

23 resolution of that issue determines the outcome of this appeal and because the

24 issue is a matter of significant public importance, we certified the following

25 question to the New York Court of Appeals:

26 Whether a debtor‐tenant possesses a property interest in the protected

27 value of her rent‐stabilized lease that may be exempted from her

28 bankruptcy estate pursuant to New York State Debtor and Creditor Law

29 Section 282(2) as a “local public assistance benefit”?

Case 12-4131, Document 181-1, 03/02/2015, 1449259, Page4 of 5
1 The New York Court of Appeals accepted the certification and held that a

2 rent‐stabilized lease qualified as a local public assistance benefit. In re Santiago‐

3 Monteverde, 24 N.Y.3d 283 (2014). In the Court of Appeals’ view, “[w]hen the

4 rent‐stabilization regulatory scheme is considered against the backdrop of the

5 crucial role that it plays in the lives of New York residents, and the purpose and

6 effect of the program, it is evident that a tenantʹs rights under a rent‐stabilized

7 lease are a local public assistance benefit.” Id. at 289. Rejecting the Trustee’s

8 argument that “benefits” should be limited to cash payments, the court further

9 noted that the rent‐stabilization program had “all of the characteristics of a local

10 public assistance benefit” under the statute. Id. at 290. Finally, the Court of

11 Appeals explained that its interpretation was consistent with the purpose of

12 creating exemptions in section 282(2), which involve the protection of a debtor’s

13 essential needs, including housing. Id. at 292.

14 In light of the New York Court of Appeals’ opinion, we hold that Santiago‐

15 Monteverde’s interest in her rent‐stabilized lease is a local public assistance

16 benefit within the meaning of DCL § 282(a). As a result, she is allowed to claim it

17 as an exemption from her bankruptcy estate.

18 CONCLUSION

19 We REVERSE the decision of the district court and REMAND for further

20 proceedings consistent with this opinion.

21

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