Nimai Kumar Ghosh v. Financial Federal Savings & Loan Ass'n (In Re Nimai Kumar Ghosh)Nimai Kumar Ghosh v. Financial Federal Savings & Loan Ass'n (In Re Nimai Kumar Ghosh)
I
FACTS
The debtor, Nimai Kumar Ghosh, was in default on mortgage installment payments due on his personal residence owned by him and his wife. As a consequence of this default, a valid judgment of foreclosure in the amount of $47,376.90 was obtained on November 15, 1982 by the mortgagee of this property, Financial Federal Savings & Loan Association. In order to thwart an imminent foreclosure sale the debtor, acting pro se, filed a Chapter 7 petition in bankruptcy in this Court on December 3, 1982. At the moment оf the filing he came under the protection of the automatic stay provisions of the Bankruptcy Code which bar a creditor from taking legal action against a debtor without leave of the bankruptcy court. 11 U.S.C. Section 362.
Subsеquent to this filing, the debtor procured the assistance of
pro bono
counsel who advised him to convert his Chapter 7 case to one under Chapter 13 in order to retain possession of his home, since under Chapter 13 a debtor is permitted to reinstate a foreclosed mortgage and cure any pre-petition defaults over a three to five year period. 11 U.S.C. Section 1322(b)(3), (5) and (c).
In re Taddeo,
On February 18, 1983 the mortgagee objected to the debtor’s proposed plan of repayment. The debtor then filed an amended plan on March 21, 1983 in order to satisfy the objections of the mortgagee. However, after a determination that the debtor lacked sufficient funds to carry out his proposed amended plan, this Court, with the consent of the debtor, entered an order dated July 26, 1983, converting the case back to Chapter 7, pursuаnt to Section 1307 of the Code which states that a debtor may convert a case under that chapter to one under Chapter 7 at any time.
The mortgagee thereafter sought relief from the automatic stay in order to сontinue its foreclosure proceedings. The facts elicited during the motion proceedings revealed that there was a balance of about $54,000 under the mortgage. In light of the interest of the debtor’s spouse in the proрerty to the extent of one-half of the equity and the amount of the debtor’s homestead exemption, 2 the balance remaining for the estate was minimal based upon the trustee’s evaluation of the property’s worth. As a rеsult he abandoned his interest in it. 11 U.S.C. Section 554(a). After due consideration, this Court, on October 19, 1983 granted the motion of the mortgagee to lift the stay. The debtor did not appeal from that order.
The foreclosure sale was thereаfter conducted on November 30,1983 at which time it was bought by one George Andreadis for $103,000, an amount significantly higher than either the trustee’s appraisal or the balance due under the mortgage. It is abundantly clear that after transfer of title, the trustee would revive his interest in the property which he had abandoned and the net surplus remaining would be divided equally between the debtor’s spouse and the trustee, subject to the debtor’s homestead exemption in the trusteе’s share of the surplus as already noted above. The closing of title as well as the transfer of the foreclosure referee’s deed was scheduled for January 6, 1984. On the application of the debtor, the closing and transfеr
II
ISSUES
A. Was the debtor’s interest in the property terminated by the foreclosure sale even though the formal transfer of the deed to the property had not as yet occurred at the time the temporary stay was issued?
B. May the debtor convert his Chapter 7 case to a Chapter 13 case in light of the fact that one such conversion had previously taken place?
III
DISCUSSION AND CONCLUSIONS
A
The first issue the debtor asks the Court to address is not novеl. Bankruptcy courts in this circuit have been confronted with a nearly identical question on at least two prior occasions and in both instances concluded that under New York law a debtor loses all equitable and legal interest in real property validly sold at foreclosure whether or not the deed to that property has been delivered to the purchaser.
In re Smith,
The holdings in
Smith
and
Butchman
are based on an analysis of New York law which finds “that a valid judgment and sale in a mortgage foreclosure action entitle the purchaser at the sale to receive a deed to the premises upon compliance with the terms of the sale and that the mortgagor has no right to redeem the premises after the sale but before the purchaser has received a deed.”
Butchman
at 380 citing
Belsid Holding Corp. v. Dahm,
The debtor expressly questions the holdings in
Smith
and
Butchman
and relies on the case of
Long Island Savings Bank v. Schoon,
The
Schoon
court held that the perfecting of a foreclosure sale requires the delivery of a deed to the purchaser. In finding that anything short of passing of title by delivery of the deed does not constitute a sale, but merely an agreement to sell,
Schoon
cites
Neponsit Holding Corp. v. Ansorge,
The fact that bankruptcy courts in other jurisdictions have recognized the right of a debtor to reinstate a mortgage after a sale but prior to the passing of a deed,
see, e.g., In re Ivory,
The law governing the debtor’s intеrest in real property is determined by local law.
See, Haas v. Rendleman,
A debtor’s right to reinstate a mortgage in a Chapter 13 case must always be gauged according to his interest in the property as defined by state law.
See, Matter of Valente,
B
The debtor seeks to convert his pending Chapter 7 case to one under Chapter 13. As previously stated, his purpose in seeking this conversion is to reinstate the mortgage on his home and cure the arrearages in order to retain possession of the home. Although it has been determined that the debtor lacks any legal or equitаble interest in the home, the question of his right of conversion to a Chapter 13 remains open.
As noted earlier, the debtor initially filed a Chapter 7 petition, had it converted to a Chapter 13 petition pursuant to 11 U.S.C. Section 706, аnd then had it reconverted to Chapter 7 under the authority of 11 U.S.C. Section 1307.
Unfortunately, for the debtor, the language of Section 706 clearly bars a debtor from converting a case from Chapter 7 to Chapter 13 more than onсe. Subsection (a) of that section states in relevant part that a “debtor may convert a case under this chapter to a case under Chapter 11 or 13 of this title at any time, if the case has not been converted undеr Section 1112 or 1307 of this title.”
5
The language of this statute is not discretionary. By its plain meaning it bars the debtor from this second attempt at conversion. Moreover, there is no case law supporting a discretionary right. At least one other bankruptcy court has arrived at this conclusion,
In re Bumpass,
IT IS SO ORDERED.
Notes
. Section 706. Conversion
(a) The debtor may cоnvert a- case under this chapter to a case under Chapter 11 or 13 of this title at any time, if the case has not been converted under section 1112 or 1307 of this title. Any waiver of the right to convert a case under this subsection is unenfоrceable.
. In New York, debtors are entitled to a f 10,000 homestead exemption pursuant to N.Y.Debt. & Cred.Law Section 282 (McKinney) and N.Y.Civ. Prac.Law & Rules Section 5206(a) (McKinney).
. Section 541 states in relevant part that the commencement of a case under title 11 of the United States Code creatеs an estate that consists of all the debtor’s legal and equitable interest in property as of the commencement of the case.
. The right of a mortgagor to redeem from a foreclosure sale has long been аbolished in New York. The Mortgage Redemption Act, which provides that the mortgagor had the right to redeem from a mortgage foreclosure sale for a period of one year, as in the case of a sale upon an execution, was repealed in 1838. North River Ins. Co. v. Snediken, 10 How.Pr. 310.
. See Note 1, supra.