Santiago-Monteverde v. Pereira (In re Santiago-Monteverde)
747 F.3d 153
2d Cir.2014Background
- Debtor Mary Veronica Santiago‑Monteverde held a rent‑stabilized lease in NYC that became subject to New York’s Rent Stabilization Code (RSC) after the 1974 law; she filed Chapter 7 bankruptcy after financial difficulties.
- The apartment’s owner offered the Chapter 7 trustee money to purchase the debtor’s interest in the lease; the trustee intended to accept and the debtor then amended her schedules to claim an exemption for the lease’s value under N.Y. Debt. & Cred. Law § 282(2) as a “local public assistance benefit.”
- The bankruptcy court struck the exemption, concluding the rent‑stabilization benefits are regulatory market effects, not a personal entitlement like social security or unemployment.
- The district court affirmed, holding the value of terminating rent‑stabilization protections is a collateral regulatory consequence, not a § 282(2) local public assistance benefit.
- The Second Circuit panel concluded New York’s highest court is better suited to resolve unsettled state‑law questions: whether RSC protections create an exempt “local public assistance benefit,” whether those protections are property or personal rights, and what effect assignment by a trustee has on RSC protections.
- The Second Circuit certified the determinative question to the New York Court of Appeals and retained jurisdiction pending that court’s answer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the protected value of a rent‑stabilized lease is a “local public assistance benefit” under N.Y. DCL § 282(2) | Santiago‑Montverde: RSC protections create added value in the lease that is traceable to a local public assistance benefit and thus exemptible. | Trustee/Landlord: The below‑market rent is a regulatory market effect, not an individualized public assistance payment or entitlement within § 282(2). | Not decided on merits; question certified to NY Court of Appeals for authoritative state‑law interpretation. |
| Whether tenants’ rights under the RSC are property interests (transferable/part of estate) or mere statutory/personal rights | Tenant: Rights have value and can constitute property or an interest exemptible under state law. | Trustee: Trustee may assume/assign the lease under 11 U.S.C. § 365 and obtain the value from elimination of protections. | Not decided; NY Court of Appeals certified to clarify. |
| Whether trustee assumption and assignment can eliminate RSC protections and thus realize that value for the estate | Trustee: Assumption/assignment can remove tenant protections, allowing sale to landlord for that value. | Tenant: Assignment may not nullify statutory protections or the rights may be nonassignable personal rights. | Not decided; certified to NY Court of Appeals. |
| Whether existing New York precedent governs interpretation of “local public assistance benefit” in § 282(2) | Tenant: Argues statutory language and RSC purpose support exemption. | Trustee: Points to absence of legislative intent and analogous exemptions being payment‑based. | Court found no controlling NY precedent; certified the question. |
Key Cases Cited
- Manocherian v. Lenox Hill Hosp., 84 N.Y.2d 385 (N.Y. 1994) (explaining purpose of rent stabilization to protect dwellers and address housing emergency)
- Resolution Trust Corp. v. Diamond, 18 F.3d 111 (2d Cir. 1994) (describing RSC regulation of rent and lease duration and anti‑eviction protections)
- In re Thelen LLP, 736 F.3d 213 (2d Cir. 2013) (standards for certifying state‑law questions to New York Court of Appeals)
- Quebecor World (USA) Inc., 719 F.3d 94 (2d Cir. 2013) (standard of review for bankruptcy appeals)
- CFCU Cmty. Credit Union v. Hayward, 552 F.3d 253 (2d Cir. 2009) (New York’s opt‑out of federal exemptions and state exemption scheme under DCL § 282)