506 B.R. 174
N.D.N.Y.2013Background
- Debtors Jeffrey A. Cook and Sherrie A. Cook filed a Chapter 13 petition on July 5, 2012, listing their residence at 2733 Franklin Street, Weedsport, NY, with equity after exemptions.
- The property value was $129,000 with two mortgages: Nationstar Mortgage, LLC ($59,000) and First Niagara Bank ($56,120).
- The Cooks claimed a homestead exemption of $22,880 in the property.
- Before filing, the residence had been foreclosed and sold to Huey for $66,000 during a foreclosure sale.
- The foreclosure occurred on the morning of July 5, 2012, prior to the petition, and the motion to enforce stay was filed August 19, 2012.
- The bankruptcy court denied the stay relief on September 11, 2012, and this appeal followed, with the court affirming the denial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the residence is part of the bankruptcy estate subject to the automatic stay. | Cooks contend equitable possessory interests at filing bring property into estate. | Huey (defendant) is not bound by stay since foreclosure predated petition; no estate-interest remained. | No; foreclosure pre-petition divested legal/equitable interests, not brought into estate. |
| Whether the Cooks’ equitable interests post-foreclosure could invoke the automatic stay. | Equitable redemption or possessory rights may be brought into estate after petition. | After sale, equitable interests were extinguished; stay cannot revive past acts. | No; once foreclosure occurred, no equitable interest remained to bring into estate for stay protection. |
Key Cases Cited
- United States v. Whiting Pools, Inc., 462 U.S. 198 (U.S. 1983) (filing may transform equitable interest into estate possessory right)
- Weber v. SEFCU, 719 F.3d 72 (2d Cir. 2013) (equitable interests may be considered in estate post-petition)
- In re Onio’s Italian Rest. Corp., 42 B.R. 319 (Bankr.S.D.N.Y. 1984) (equitable interest in unexpired leasehold entered estate after filing)
- Norwest Mortgage, Inc. v. Brown, 35 A.D.3d 682 (N.Y. App. Div. 2006) (equitable redemption right extinguished after foreclosure sale)
- Piccolo v. Dime Savings Bank of N.Y., 145 B.R. 753 (N.D.N.Y. 1992) (automatic stay does not retroactively invalidate past acts)