Court Opinion

ID: 8907878
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:08:27.059455+00
Date Added: 2024-06-11T17:08:20.289677
License: Public Domain

LUMBARD, Circuit Judge
(dissenting):
I dissent from my brothers’ conclusion that Bergman stands as the legal or equita*1180ble owner of the Park Crescent Nursing Home and is therefore eligible to invoke the procedures of Chapter XII of the Bankruptcy Act. Bergman’s highly unusual position with respect to the Park Crescent property is the result of his indictment in 1975 for fraud in connection with Medicaid and state welfare reimbursements. Following his indictment, Bergman entered into a plea agreement which required, among other things, that he return $2.5 million to the State. Pursuant to the agreement, Bergman and his wife assigned “all right, title and interest held by us, directly or indirectly, in all property, real and personal” to New York’s Office of the Special Prosecutor (OSP), the latter being authorized to sell as much of the Bergmans’ property as necessary to satisfy the $2.5 million obligation.
Although the majority is right to state that the only issue before us is whether the bankruptcy court has the power to proceed, I believe it misconceives the nature of that court’s jurisdiction when it suggests that we need not consider Bergman’s ability to propose a workable plan. To be eligible for the provisions of Chapter XII a petitioner must qualify as a “debtor,” defined in part by § 406(6) of the Bankruptcy Act as “a legal or equitable owner” of real property. This limitation “is correlated with the requirement [of § 406(1)] that a plan have ‘for its primary purpose the alteration or modification of the rights of creditors or of any class of them, holding debts secured by real property . . . ’” Collier on Bankruptcy, f 2.07, at 763. Thus, if a petitioner lacks sufficient interest in real property to accomplish a reorganization of the debts secured by such property, he does not qualify as a debtor within the meaning of § 406(6). See In re Chalkley, 34 F.Supp. 969, 970 (E.D.Tenn.1940). Since Bergman by the terms of his assignment to the OSP is without any right, title or interest in the Park Crescent property pending satisfaction of his $2.5 million debt to the State, he will be without power, absent the consent of the OSP, to surrender title, possession, or income from the property or to otherwise effect the plan of reorganization contemplated by § 406(1). It follows that Bergman cannot be regarded as the legal or equitable owner of the Park Crescent property and that the bankruptcy court lacks subject matter jurisdiction over Bergman’s petition.
In cases, such as the instant one, where there is substantial doubt concerning a petitioner’s status as a debtor under Chapter XII, we should hesitate to rule that the bankruptcy court has jurisdiction. As appellant Chase Manhattan Mortgage and Realty Trust has indicated, the provisions of Chapter XII can be severe for the secured creditor trying to protect himself from losses. In the present case, for example, Chase Manhattan’s sizeable investment has been in jeopardy for some time. Further delay will only increase its possible losses. I therefore see no reason why we should strive to interpret Bergman’s assignment to the OSP, the absolute nature of which Bergman has affirmed in other proceedings, as leaving him with sufficient interest in the Park Crescent property to invoke the procedures of Chapter XII.
I would reverse the order of the district court and direct it to dismiss Bergman’s petition.