The opinion of the court was delivered by: Seybert, District Judge
On August 12, 2007, pro se Appellant Mohamed Ismail Elmasri ("Appellant") filed an appeal of a May 24, 2007 order issued by Bankruptcy Judge Joel B. Rosenthal. On November 26, 2007, Appellant withdrew his appeal. Thereafter, Appellant returned to Bankruptcy Court and sought relief before United States Bankruptcy Judge Jerome Feller. Pursuant to the law of the case doctrine, and because Appellant failed to appeal Judge Rosenthal's Order, Judge Feller upheld the findings in Judge Rosenthal's Order. Thereafter, Appellant moved before this Court to reinstate his appeal of Judge Rosenthal's Order, and additionally appealed Judge Feller's Order. The Court considers both appeals in tandem.
This case has a tortured history stemming from a contentious divorce between Appellant and Appellee Rupp; the Court is now left with the difficult task of unraveling the multiple layers of bankruptcy filings and appeals.
Elmasri and Rupp divorced in August of 2000. Pursuant to a Judgment of Divorce, Elmasri was required to pay $337.21 per week in child support. On October 11, 2002, Rupp received a judgment against Elmasri for $61,931.54 in child support arrears. On March 3, 2003, the judgment was filed as a lien on Elmasri's property.
Appellee England was the law guardian appointed for the two children borne out of Elmasri and Rupp's marriage. On September 12, 2001, the Supreme Court of the State of New York, County of Suffolk entered a judgment of $8,771.17 against Elmasri awarding England fees for serving as Law Guardian. On September 24, 2001, the State Court entered a second judgment for $4,130.00 for England.
Elmasri filed numerous bankruptcy proceedings after the judgment of divorce. On October 10, 2005, Elmasri filed his sixth bankruptcy proceeding via a voluntary petition under Chapter 7 of the Bankruptcy Code. During that proceeding, Elmasri claimed a homestead exemption pursuant to N.Y. Civ. Law 5206(a). Elmasri thereafter filed two adversary proceedings against both England and Rupp, seeking an order that Appellant's obligations to Rupp and England were dischargeable.
On July 28, 2006, the Honorable Melanie L. Cyganowski issued an order declaring that two state court judgments granted to England were non-dischargeable pursuant to Section 523(a)(5) of the Code, and on January 3, 2007, Judge Cyganowski entered a judgment in favor of Rupp holding that Rupp's judgments were also non-dischargeable under the Code. Neither judgment was appealed.
In June of 2006, the Trustee sold Elmasri's home, located at 41 Tremont Avenue, Patchogue, New York (the "Property"). Prior to the closing of the sale, Rupp filed an order to show cause seeking to restrain the Trustee from distributing $50,000 in homestead monies to Elmasri from the proceeds of the sale. On August 29, 2006, Judge Cyganowski ordered that the homestead monies be held in escrow by the Trustee and not be released to Elmasri. The funds remain in escrow. The crux of this appeal is a dispute over which party is entitled to the homestead monies.
After the submission of various motions on the issue of entitlement to the homestead monies, Judge Rosenthal issued the May 2007 Order. Judge Rosenthal held that "where a properly perfected lien against a debtor's homestead supports a Section 523(a)(5) judgment, such a judgment lien should be paid out of the proceeds of a Trustee's sale in the same priority as it would have been paid under state law. This is so even if it means that the debtor's homestead exemption would be impaired." Rupp v. Elmasri (In re Elmasri), 369 B.R. 96, 100 (Bankr. E.D.N.Y. 2007). Judge Rosenthal stated that the record before the Bankruptcy Court was not clear on whether Rupp or England had properly perfected liens against the Property; thus, the Bankruptcy Court held "that to the extent Ms. Rupp and/or Ms. England had a valid lien against the Debtor's interest in the Property prior to the Trustee's sale, the Trustee is directed to pay that lien out of the estate's share of the sale proceeds in the same priority as it would have been paid under state law, even if that would mean impairment of the homestead exemption." Id.
The Bankruptcy Court did not rule on whether the homestead exemption did not apply to enforce child support arrears. Rather, the Bankruptcy Court specifically stated, "because of the important public policy arguments made by Ms. Rupp in favor of excepting alimony and support obligations from the homestead exemption, and because this issue appears to be unsettled under New York case law, this Court will, in the exercise of its discretion, abstain from deciding the issues presented in Ms. Rupp's adversary proceeding complaint. Id. at 103. Judge Rosenthal directed the parties to seek relief in the state courts on the issue of whether alimony and support obligations are exempt from the homestead exemption.
Thereafter, Appellees did not seek a determination in state court because Rupp and England believed that they both had valid liens, and in accordance with Judge Rosenthal's Order, properly perfected liens would be paid out of the estate's share of the sale proceeds in the same priority as it would have been paid under state law.
In December of 2007, all parties filed various motions to compel the Trustee to turn over the homestead funds to them. On March 20, 2008, the Honorable Jerome Feller held a hearing and ruled that under the law of the case doctrine, Judge Rosenthal's May 2007 Order governed the issues raised by the parties. Judge Feller further found that Rupp and England had valid liens against the Property, and thus ordered the Trustee to turn over the homestead exemption funds to Rupp and England. Pursuant to a Stipulation of Settlement entered between Rupp and England, and approved by the Bankruptcy Court on February 7, 2006, Judge Feller directed the Trustee to remit $33,500.00 to Rupp and $16,500.00 to England. Judge Feller memorialized his holdings in a written Order, dated April 28, 2008 ("April 2008 Order").