Patricia Martinez

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
EASTERN DISTRICT OF NEW YORK
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In re:
Case No.: 08-71123-478
PATRICIA MARTINEZ,
Chapter 7
Debtor.
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MEMORANDUM DECISION AND ORDER
Appearances:
Paul H. Rethier, Esq.
Attorney for Debtor
33 Rosedale Road
P.O. Box 307
Sound Beach, New York 11789
Kenneth Kirschenbaum, Esq.
Chapter 7 Trustee
Kirschenbaum & Kirschenbaum
200 Garden City Plaza
Suite 500
Garden City, New York 11530
Hon. Dorothy Eisenberg, United States Bankruptcy Judge
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Before this Court is the Chapter 7 Trustee’s objection to the Debtor’s claim for a
homestead exemption pursuant to N.Y. C.P.L.R. § 5206 with respect to the Debtor’s residence
(the “Property”) on the basis that the Debtor lacks legal title to the Property in the form of a
deed. At issue is whether the Debtor had as of the date of this bankruptcy filing an ownership
interest in the Property for purposes of N.Y. C.P.L.R. § 5206 despite the absence of a recorded
deed.
This Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334. This contested
matter is a core proceeding under 28 U.S.C. § 157(b)(A), (B), and (O), 11 U.S.C. § 552, N.Y.
C.P.L.R. § 5206 and Rule 4003 of the Federal Rules of Bankruptcy Procedure. The Court finds
the Debtor’s claim for a homestead exemption to be proper and the Trustee’s objection is
overruled. The following constitutes the Court’s findings of fact and conclusions of law as
mandated by Rule 7052 of the Federal Rules of Bankruptcy Procedure.
On March 10, 2008, the Debtor filed a voluntary Chapter 7 petition. Kenneth
Kirschenbaum, Esq. was appointed as the Chapter 7 Trustee. Subsequent to the bankruptcy
filing, the Debtor timely filed her Schedule C to the petition, which claimed a homestead
exemption pursuant to N.Y. C.P.L.R. § 5206 (McKinney 2005) in the sum of $50,000.00 with
respect to the Property where she resides. In response, the Trustee filed a timely objection to the
Debtor’s claim of a homestead exemption based on his conclusion that the Debtor did not have
legal title to the Property (the “Objection”) on May 22, 2008. A hearing on the Trustee’s
Objection was held on July 15, 2008. In the period between the Trustee’s filing of an objection
to the Debtor’s claim for a homestead exemption and the hearing, the Debtor received her
discharge. The Trustee and the Debtor each submitted post-hearing memorandum of law.
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STATEMENT OF FACTS
The Debtor’s father died intestate in September 1978 and the Property where the Debtor
lives represents the main asset of the decedent’s estate. The Debtor and her three siblings are the
heirs to her father’s decedent estate. The Debtor resided at the Property from 1963 through 1981.
After the death of her husband, the Debtor moved back to the Property with her children in 2002
and has since occupied it continuously as her primary residence. On December 22, 2004, Darlene
Murch, the Debtor’s sister, was appointed Administrator to the decedent’s estate (the
“Administrator”), which has not yet been settled. The last recorded deed with respect to the
Property is a Quitclaim Deed from the County of Suffolk to Darlene Murch as Administrator of
the decedent’s estate, dated May 10, 2005, as a result of a satisfaction of a tax lien against the
Property by the Administrator.
DISCUSSION
New York State has opted out of the federal exemptions as allowed pursuant to 11 U.S.C.
§ 522 (b) and N.Y. DEBT . & CRED . LAW § 284 (McKinney’s 2001). Therefore, New York law
governs claims for exemptions relating to real and personal property of the Debtor’s bankruptcy
estate.
New York law provides a homestead exemption for real property “not exceeding fifty
thousand dollars in value above liens and encumbrances, owned and occupied as a principal
residence.” N.Y. C.P.L.R. § 5206(a) (emphasis added). The Trustee has the burden of proving
that the exemption is not properly claimed. Fed. R. of Bankr. P. 4003(c). In order to be entitled
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to a homestead exemption, N.Y. C.P.L.R. § 5206 requires evidence of two things: an ownership
interest in real property and residency by the Debtor in that property.
It is undisputed that the Debtor occupies the Property as her principal residence and did
so at the time she filed for bankruptcy. The Trustee, however, asserts the Debtor does not have
an ownership interest in the Property because N.Y. REAL PROP . LAW § 290(3)(McKinney’s
2006) requires ownership of property to be conveyed by written deed and there is no recorded
deed in the Debtor’s name. Section 290(3) of N.Y. REAL PROP . LAW sets forth the term
“conveyance” to include:
every written instrument, by which any estate or interest in real
property is created, transferred, mortgaged or assigned, or by
which title to any real property may be affected, including an
instrument in execution of a power, although the power to be one
of revocation only, and an instrument postponing or subordinating
a mortgage lien; except a will, a lease for a term not exceeding
three years, an executory contract for the sale or purchase of lands,
and an instrument containing a power to convey real property as
the agent or attorney for the owner of such property.
There is generally no written instrument of transfer when a distributee obtains an interest in real
property by intestacy pursuant to N.Y. E ST . POWERS & TRUSTS LAW § 4-1.1 (McKinney’s 1998).
While N.Y. EST . POWERS & TRUSTS LAW § 1-2.15 defines “property” to be anything that may be
the subject of ownership, and is real or personal property”, it does not discuss the meaning of
“ownership”. In addition, the definition of “distributee” under N.Y. EST . POWERS & TRUSTS
LAW § 1-2.5 does not hold that property vests in a distributee upon the death of an intestate
owner but only states that a “distributee is a person entitled to take or share in the property of a
decedent under the statues governing descent and distribution.” Accordingly, the Trustee argues
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that the Debtor’s interest in the Property as a distributee of her father’s estate is insufficient to
meet the ownership requirement of N.Y. C.P.L.R. § 5206 without a deed. The Trustee asserts
that the requirement of a deed showing an ownership interest is consistent with New York being
a “title state” for purposes of providing notice to creditors and that the only way the Debtor can
come into title is if and when the Administrator executes and delivers a deed to the Debtor.
Accordingly, the Trustee argues that the Debtor is not entitled to a homestead exemption for the
Property.
While the Court finds that the cases relied upon by the Debtor are distinguishable, the
Trustee’s decision to look solely to N.Y. R EAL PROP . LAW § 290 for a definition of ownership in
real property is also misplaced. Bankruptcy courts have interpreted N.Y. C.P.L.R. § 5206 to
require an ownership interest in the property, but not necessarily a written deed. See, e.g., In re
Nye, 250 B.R. 46, 49 (Bankr. W.D.N.Y 2000) (holding that New York’s homestead exemption
applies to the extent of the Debtor’s ownership interest in the residence). While one court, In re
de Kleinman, 172 B.R. 764, 771-72 (Bankr. S.D.N.Y. 1994), has interpreted N.Y. C.P.L.R. §
5206 to require “good legal title” by the debtor for her to be entitled to a homestead exemption,
this Court notes that the court in de Kleinman based its holding on an old edition of Black’s Law
Dictionary defining ownership as: “[t]he complete dominion, title, or property right in a thing or
claim.” BLACK ’ S LAW DICTIONARY 1106 (6th ed. 1990)(“Black’s”). Black’s current edition,
however, no longer defines ownership in the context of title. See BLACK ’ S LAW DICTIONARY
1138 (8th ed. 2004). Moreover, it would be improper to apply de Kleinman’s unique holding
here, because in de Kleinman the debtor had no ownership interest in her condominium
apartment because the condominium board of directors had voided her purchase of the
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apartment; whereas in this case, the Debtor obtained her interest in the Property through state
laws concerning intestacy.
N.Y. EST . POWERS & TRUSTS LAW is as effective as N.Y. REAL PROP . LAW and more
applicable under the facts and circumstances of this case for purposes of determining ownership
in real property. Indeed, New York state and bankruptcy courts have found ownership in real
property vests in a distributee immediately upon an intestate death by operation of statutory
authority pursuant to N.Y. EST . POWERS & TRUSTS LAW § 4-1.1. See, e.g., Burg v. City of
Buffalo, 295 B.R. 698, 702 (Bankr. W.D.N.Y. 2003) (“[T]itle to real estate upon the death of the
owner vests immediately in his heirs and devisees.” (quoting Kingsland v. Murray, 133 N.Y.
170, 174, 30 N.E. 845, 846 (N.Y. 1892))); In re Estate of Fry, 28 Misc. 2d 949, 950, 218
N.Y.S.2d 755, 757 (N.Y. Sur. Ct. 1961)(“On death, title to all real property of a decedent which
is not disposed of by will, vests immediately in the distributees entitled to take under the
statute.”). Cf. Kraker v. Roll, 100 A.D.2d 424, 429, 474 N.Y.S.2d 527, 531 (N.Y. App. Div.
1984) (“[V]esting by descent occurred by operation of law, irrespective of the apparent failure to
appoint an administrator or to file new deeds.” (citing Singer v. Levine, 15 Misc.2d 785, 786-87,
181 N.Y.S.2d 699, 701 (N.Y. Sup. Ct. 1958)). The law’s desire to avoid any “hiatus of
ownership,” In re Williams’ Estate, 162 Misc. 507, 509, 295 N.Y.S. 56, 58 (N.Y. Sur. Ct. 1937),
aff’d, 254 A.D. 741, 4 N.Y.S.2d 467 (N.Y. App. Div. 1938), goes so far as to immediately vest
ownership of property in anyone, even the State, if there is an intestate death without heirs. See,
In re Estate of Clark, 69 Misc. 2d 498, 499, 329 N.Y.S.2d 995, 997 (N.Y. Sur. Ct. 1972) (“Upon
death the title to real property never lapses but vests in someone -- distributee, specific legatee,
residuary legatee, trustee, or in the case of intestate death without heirs the State.”).
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Accordingly, an ownership interest, sufficient to satisfy N.Y. C.P.L.R. § 5206, vests in a
distributee immediately upon an intestate death.
While the deed to the Property is in the name of the Administrator, under New York law,
representatives in the form of administrators or executors, receive “possession or management”
of the property strictly “for certain limited purposes if the circumstances so require.” In re Baker,
164 Misc. 92, 93, 298 N.Y.S. 261, 264 (N.Y. Sur. Ct. 1937). What rights the administrator may
exercise as a fiduciary with respect to real property is limited to the rights set forth in N.Y. E ST .
POWERS & TRUSTS LAW § 11-1.1. See, Singer v. Levine, 15 Misc.2d at 786-87, 181 N.Y.S.2d at
701 (N.Y. Sup. Ct. 1958). While the Administrator was not appointed until 2004 and the
decedent’s estate has not yet been settled, these factors do not contradict the Debtor’s receipt of
an ownership interest to the Property upon her father’s death and she continues to hold an
ownership interest in the Property. Although the Trustee has alleged that the delay in settling the
estate has negatively affected at least two judgment creditors, no evidence that these creditors
exist or that the delay has adversely affected them has been presented to this Court. In any event,
whatever legal rights these alleged judgment creditors have as secured creditors, if any, are not
affected by this decision.
In this case, as of the date of the filing of this bankruptcy petition, the Debtor clearly had
a legal ownership interest in the Property by operation of N.Y. EST . POWERS & TRUSTS LAW § 4-
1.1 as well as the required residency in the Property pursuant to N.Y. C.P.L.R. § 5206.
CONCLUSION
Based upon the foregoing, the Debtor is entitled to claim a homestead exemption under
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N.Y. C.P.L.R. § 5206 with respect to the Property. The Trustee’s Objection is overruled.
Dated: Central Islip, New York
August 18, 2008
s/ Dorothy Eisenberg_______
Dorothy Eisenberg
United States Bankruptcy Judge
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