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Bankruptcy Exchange, Inc. v. Langlands

September 10, 2009

BANKRUPTCY EXCHANGE, INC., APPELLANT,
v.
ELEANOR LANGLANDS, APPELLEE.



The opinion of the court was delivered by: William M. Skretny United States District Judge

DECISION AND ORDER

I. INTRODUCTION

This is an appeal from an order of the Bankruptcy Court, Western District of New York, setting aside the sale of Debtor Deborah J. Langlands' undivided interest in her residence. The Chapter 7 Trustee sold Deborah J. Langlands' interest in her residence, which she co-owned with her mother, Appellee Eleanor Langlands, (hereinafter "Langlands") to Appellant Bankruptcy Exchange, Inc. (hereinafter "Bankruptcy Exchange"). The Bankruptcy Court found that Eleanor Langlands was entitled to notice of the sale by virtue of being rendered a "creditor" by the combination of 11 U.S.C. § 101(5), § 101(10), § 102(2) and New York law. Because this Court agrees, it will affirm the decision of the Bankruptcy Court.

II. BACKGROUND

Deborah Langlands (hereinafter "Debtor"), filed her Chapter 7 Bankruptcy Petition on May 11, 2005. On Schedule A of that petition, Debtor listed her interest in her residence located at 1450 Orchard Park Road, West Seneca, New York, held jointly with her mother, Appellee Eleanor Langlands.*fn1

On March 22, 2006, the Chapter 7 Trustee filed a Notice of Intent to Sell, pursuant to which the Trustee sought to sell the Debtor's interest in her residence, subject to certain encumbrances, to Bankruptcy Exchange. Of the $12,500.00 sales price, $10,000.00 was applied to the Debtor's homestead exemption, leaving $2,500.00 of the sales price available for distribution to the Debtor's creditors. Eleanor Langlands was not listed as a party to be served with the Trustee's notice of his intention to sell the property.*fn2

On November 9, 2007, Langlands filed a motion seeking to vacate the sale of the residence based on the Trustee's failure to give her notice of the proposed sale. The Bankruptcy Court held several hearings and provided the parties with numerous opportunities for written submissions and responses to address the issue of whether or not Langlands was entitled, as co-owner of the Debtor's residence, to notice of the Trustee's sale of the Debtor's undivided interest in the co-owned property.*fn3

On April 2, 2008, the Bankruptcy Court entered its Opinion and Order, joined in for the sake of uniformity by the Honorable Carl Bucki, Chief Bankruptcy Judge for the Western District of New York.

III. DISCUSSION

A. Standard of Review

Under its appellate jurisdiction, this Court will conduct a de novo review of the law, as the facts are essentially undisputed. In re Porges, 44 F.3d 159, 162 (2d Cir. 1995); Teufel v. Schlant, No. 02-CV-81S, 2002 WL 33008689, *4 (W.D.N.Y. Sept. 25, 2002).

B. Appellate Standing of Eleanor Langlands

Bankruptcy Exchange challenges Langlands' standing to move to set aside the Bankruptcy Court's order. Bankruptcy Exchange argues that Langlands is neither an interested party nor a creditor and was not injured by the sale of the Debtor's interest in the co-owned real property.

Standing is "the threshold question in every federal case, determining the power of the court to entertain the suit." Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2205 (1975). The Bankruptcy Court below found that, as a creditor, Langlands was entitled by statute to notice of the Trustee's sale and that she did not receive such notice. As such, Langlands' motion to set aside the Trustee's sale fell within the zone of interests protected by the law at issue. See Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc.,454 U.S. 464, 475, 102 S.Ct. 752, 760 (1982)(to have standing, plaintiff's complaint must fall within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question). Because Fed. R. Bankr. P. 2002(a)(2) applicable through Fed. R. Bankr. P. 6004, states that "creditors" ...


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