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In re Plumeri

August 2, 2010

IN RE SAUNDRA PLUMERI, DEBTOR.


The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

Bankruptcy debtor Saundra Plumeri ("Debtor") and her attorney, Richard D. Lamborn ("Lamborn"), appeal from an Order of the Honorable Martin Glenn, United States Bankruptcy Judge, imposing sanctions against Lamborn and awarding attorney's fees to appellee 64th Street-Third Avenue Associates, LLC (the "Landlord"). The reason for the sanctions is that Lamborn failed to disclose, as required by 11 U.S.C. § 362(l)(5), that the Landlord had an outstanding judgment of possession against the Debtor for the apartment in which she resided at the time that she filed for Chapter 13 bankruptcy. For the following reasons, the Order of the Bankruptcy Court is affirmed.

BACKGROUND

The following facts are taken from the designated bankruptcy record, the Bankruptcy Court's March 25, 2010 Order (the "Sanctions Order"), pertinent state court filings,*fn1 and the parties' submissions on appeal, and are undisputed unless otherwise noted.

I. Statutory Background

This appeal concerns Lamborn's failure to disclose the Debtor's pre-petition judgment of possession as required by § 362(l)(5) of the Bankruptcy Code.*fn2 In order to understand the procedural history of the litigation between the parties to this appeal, and in order to evaluate properly the Bankruptcy Court's decision to impose sanctions, it is necessary to begin by reviewing the applicable statutory scheme.

As a general matter, until recently, the filing of a federal bankruptcy petition by a residential tenant-debtor would halt any pending or potential eviction proceedings by that tenant-debtor's landlord. The basis for this rule is the "automatic stay" provision of the Bankruptcy Code. Subsection 362(a) of the Bankruptcy Code provides:

Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title . . . operates as a stay, applicable to all entities, of --

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate[.]

11 U.S.C. § 362(a)(3). Although a lessor could obtain relief from the automatic stay if it could demonstrate the existence of certain statutorily defined circumstances, the lessor would first be required to appear in the debtor's bankruptcy proceedings and petition the bankruptcy court in order to do so.

In 2005, however, Congress revised the Bankruptcy Code's interaction with the field of landlord-tenant law by enacting the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA").*fn3 Among other things, the BAPCPA amended the Bankruptcy Code to exempt from the operation of the automatic stay all non-bankruptcy enforcement proceedings undertaken by a lessor related to a pre-petition judgment of possession obtained by the lessor against a residential tenant-debtor. As amended, subsection 362(b)(22) provides:

The filing of a petition under section 301, 302, or 303 of this title . . . does not operate as a stay --

(22) subject to subsection (l), under subsection (a)(3), of the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor[.]

11 U.S.C. § 362(b)(22) (emphasis added).

Although § 362(b)(22) appears to exempt all eviction proceedings from the operation of the automatic stay, it must be read in conjunction with § 362(l), another provision added by the BAPCPA. Subsection (l) provides, in turn, that a debtor may, by fulfilling certain requirements at the time of filing for bankruptcy, obtain a brief stay of eviction proceedings by postponing for thirty days the date on which § 362(b)(22) becomes effective. Specifically, the BAPCPA amends § 362 to provide:

Except as otherwise provided in this subsection, subsection (b)(22) shall apply on the date that is 30 days after the date on which the bankruptcy petition is filed, if the debtor files with the petition and serves upon the lessor a certification under penalty of perjury that --

(A) under non-bankruptcy law applicable in the jurisdiction, there are circumstances under which the debtor would be permitted to cure the entire monetary default that gave rise to the judgment for possession, after that judgment for possession was entered; and

(B) the debtor . . . has deposited with the clerk of the court, any rent that would become due during the 30-day period after the filing of the bankruptcy petition.

11 U.S.C. § 362(l)(1). Thus, in order for a debtor to avoid the immediate application of § 362(b)(22) and thereby stay eviction, the debtor must: (1) reside in a jurisdiction in which the debtor is able to "cure the entire monetary default that gave rise to the judgment for possession"; (2) certify that that circumstance is applicable to the debtor (i.e., that the judgment of possession was premised on a monetary, rather than a non-monetary, default); and (3) deposit with the clerk of the bankruptcy court "any rent that would become due during the 30-day period" after filing for bankruptcy. Id.

Subsection (l) also imposes an independent duty on bankruptcy debtors to disclose the existence of a pre-petition judgment for possession. In particular, § 362(l)(5)(A) provides:

Where a judgment for possession of residential property in which the debtor resides as a tenant under a lease or rental agreement has been obtained by the lessor, the debtor shall so indicate on the bankruptcy petition and shall provide the name and address of the lessor that obtained that pre-petition judgment on the petition and on any certification filed under this subsection. (Emphasis added). Likewise, § 362(l)(5)(B) specifies:

The form of certification filed with the petition, as specified in this subsection, shall provide for the debtor to certify, and the debtor shall certify --

(i) whether a judgment for possession of residential rental housing in which the debtor resides has been obtained against the debtor before the date of the filing of the petition; and

(ii) whether the debtor is claiming under paragraph (1) that under non-bankruptcy law applicable in the jurisdiction, there are circumstances under which the debtor would be permitted to cure the entire monetary default that gave rise to the judgment for possession, after that judgment of possession was entered, and has made the appropriate deposit with the court. (Emphasis added). Moreover, for cases filed within the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"), the Bankruptcy Court has further specified the precise method by which a bankruptcy debtor seeking to prevent the operation of 11 U.S.C. § 362(b)(22) must make her § 362(l) certification. See In re Procedures for Payment and Cure of Pre-Petition Judgment of Possession Involving Residential Property, General Order M-385 (Bankr. S.D.N.Y. Nov. 24, 2009) (amending General Order M-352) (effective December 1, 2009).*fn4

Assuming that a bankruptcy debtor has complied with §§ 362(l)(1) and (5) and gained the benefit of the 30-day stay, the BAPCPA provides a further process by which the debtor can postpone the applicability of § 362(b)(22) indefinitely. To extend the stay, the debtor must file with the court and serve upon the lessor a further sworn certification "that the debtor . . . has cured, under nonbankrupcty [sic] law applicable in the jurisdiction, the entire monetary default that gave rise to the judgment under which possession is sought by the lessor." Id. § 362(l)(2).

Nevertheless, in enacting the BAPCPA, Congress contemplated that many debtor-tenants with outstanding judgments of possession against them will, when filing for bankruptcy, not be able to meet the § 362(l) certification and rent-deposit requirements. As such, § 362(l)(4) provides:

(4) If a debtor, in accordance with paragraph (5), indicates on the petition that there was a judgment for possession of the residential rental property in which the debtor resides and does not file a certification under paragraph (1) or (2) --

(A) subsection (b)(22) shall apply immediately upon failure to file such certification, and relief from the stay provided under subsection (a)(3) shall not be required to enable the lessor to complete the process to recover full possession of the property; and

(B) the clerk of the court shall immediately serve upon the lessor and the debtor a certified copy of the docket indicating the absence of a filed certification and the applicability of ...


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