12-4131-bk Santiago-Monteverde v. Pereira In the 1 United States Court of Appeals 2 For the Second Circuit 3 4 5…

12‐4131‐bk
Santiago‐Monteverde v. Pereira
In the 1
United States Court of Appeals 2
For the Second Circuit 3
________ 4
5
August Term 2013 6
7
No. 12‐4131‐bk 8
9
I N RE: MARY V ERONICA SANTIAGO‐MONTEVERDE, 10
Debtor. 11
12
MARY V ERONICA SANTIAGO‐MONTEVERDE, 13
Debtor‐Appellant, 14
15
v. 16
17
J OHN S. PEREIRA , CHAPTER 7 TRUSTEE, 18
Trustee‐Appellee. 19
________ 20
21
Appeal from the United States District Court 22
for the Southern District of New York. 23
No. 12 CV 4238 ― P. Kevin Castel, Judge. 24
________ 25
26
ARGUED: SEPTEMBER 23, 2013 27
DECIDED: MARCH 2, 2015 28
________ 29
30
Before: SACK , PARKER , and RAGGI , Circuit Judges. 31
________ 32

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Appeal from a decision of the United States District Court for the Southern 1
District of New York (P. Kevin Castel, J.) affirming the bankruptcy court’s order 2
striking the debtor’s claim that the value of her rent‐stabilized lease was exempt 3
from her bankruptcy estate as a “local public assistance benefit” within the 4
meaning of New York Debtor and Creditor Law § 282(2). We previously 5
concluded that the application of section 282(2) to New York’s rent stabilization 6
laws raised an unresolved question of New York law and certified the question 7
to the New York Court of Appeals. The Court of Appeals has now responded 8
that the value of a rent‐stabilized lease is a “local public assistance benefit” under 9
New York law. We therefore reverse the decision of the district court and remand 10
for further proceedings consistent with this opinion. 11
________ 12
RONALD J. MANN , Columbia University School of Law, New 13
York, NY, (Kathleen G. Cully, Kathleen G. Cully PLLC, New 14
York, NY, on the brief), for Debtor‐Appellant. 15
J. DAVID DANTZLER , J R . (John P. Campo, Eric L. Unis, on the 16
brief) Troutman Sanders LLP, New York, NY, for Trustee‐ 17
Appellee. 18
Ira L. Herman, Thompson & Knight LLP, New York, NY, for 19
Amicus Curiae, New York City Bankruptcy Assistance Project, 20
supporting Debtor‐Appellant. 21
Carolyn E. Coffey (of counsel to Jeanette Zelhof), MFY Legal 22
Service, Inc., New York, NY, for Amicus Curiae, MFY Legal 23
Services, Inc., supporting Debtor‐Appellant. 24
________ 25
26
27

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PER CURIAM : 1
Debtor‐Appellant Mary Santiago‐Monteverde appealed to this Court from 2
a decision of the district court affirming the bankruptcy court’s ruling that her 3
residential lease, rent‐stabilized under New York’s Rent Stabilization Code, N.Y. 4
Comp. Codes R. & Regs. tit. 9, §§ 2520 et seq., was not exempt from her 5
bankruptcy estate as a “local public assistance benefit” within the meaning of 6
New York Debtor and Creditor Law (“DCL”) § 282(2). We concluded that this 7
question was an important one of unsettled New York law and certified it to the 8
New York Court of Appeals, which accepted the certification. In re Santiago‐ 9
Monteverde, 747 F.3d 153 (2d Cir. 2014), certified question accepted, 23 N.Y.3d 958 10
(2014). After considering the question, the Court of Appeals concluded that a 11
debtor’s interest in a rent‐stabilized lease is a local public assistance benefit under 12
the DCL. See In re Santiago‐Monteverde, 24 N.Y.3d 283 (2014). We assume the 13
parties’ familiarity with the underlying facts, procedural history, and issues on 14
appeal, which we briefly summarize below. 15
I. 16
Santiago‐Monteverde has lived in a rent‐stabilized apartment in Lower 17
Manhattan for over forty years. After her husband’s death, she experienced 18
financial difficulties and, in November 2011, filed for Bankruptcy protection 19
under Chapter 7. On Schedule G of her petition, she listed her apartment simply 20
as an “unexpired lease.” The Bankruptcy Trustee, John S. Pereira, determined 21
that she had no assets. Shortly after he did so, Santiago‐Monteverde’s landlord, 22
East 7th Street Development Corporation, approached the Trustee and offered to 23
buy the lease to Santiago‐Monteverde’s apartment under terms that would 24
permit her to remain in the apartment but would cause the apartment to lose its 25
rent stabilized status. 26
Upon learning that the Trustee planned to accept the offer, Santiago‐ 27
Monteverde amended her filing, treating the value of her rent‐stabilized lease as 28

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personal property and claiming an exemption for the property as a “local public 1
assistance benefit” under 11 U.S.C. § 522(b)(3) and DCL § 282(2). 2
The Trustee moved to strike this claim of exemption. The bankruptcy court 3
granted the motion on the ground that a rent stabilized lease did not qualify as a 4
“local public assistance benefit,” but was instead “a quirk of the regulatory 5
scheme in the New York housing market.” In re Santiago–Monteverde, 466 B.R. 6
621, 624‐25 (Bankr. S.D.N.Y. 2012). Santiago‐Monteverde appealed to the district 7
court. The district court affirmed, concluding that the rent stabilized lease was 8
“the collateral consequence of a regulatory scheme” rather than a local public 9
assistance benefit. In re Santiago–Monteverde, Nos. 12‐CV‐4238 (PKC), 11‐15494 10
(JMP), 2012 WL 3966335 *2 (S.D.N.Y. Sept. 10, 2012). 11
Santiago‐Monteverde appealed to this Court contending that her rent‐ 12
stabilized lease does qualify as such a benefit when one takes into account the 13
protections afforded by the rent‐stabilization program and the value they create 14
in a lease. The Trustee, who had obtained permission from the bankruptcy court 15
to purchase and assign the lease, argued that the legislature had never intended 16
that “local public assistance benefit” be read so broadly. 17
II. 18
In our prior opinion, we noted that, although New York courts had 19
addressed related questions, none had decided whether a debtor can prevent the 20
assumption and assignment of a rent‐stabilized lease on the ground that it is a 21
“local public assistance benefit” within the meaning of DCL § 282(2). Because 22
resolution of that issue determines the outcome of this appeal and because the 23
issue is a matter of significant public importance, we certified the following 24
question to the New York Court of Appeals: 25
Whether a debtor‐tenant possesses a property interest in the protected 26
value of her rent‐stabilized lease that may be exempted from her 27
bankruptcy estate pursuant to New York State Debtor and Creditor Law 28
Section 282(2) as a “local public assistance benefit”? 29

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The New York Court of Appeals accepted the certification and held that a 1
rent‐stabilized lease qualified as a local public assistance benefit. In re Santiago‐ 2
Monteverde, 24 N.Y.3d 283 (2014). In the Court of Appeals’ view, “[w]hen the 3
rent‐stabilization regulatory scheme is considered against the backdrop of the 4
crucial role that it plays in the lives of New York residents, and the purpose and 5
effect of the program, it is evident that a tenantʹs rights under a rent‐stabilized 6
lease are a local public assistance benefit.” Id. at 289. Rejecting the Trustee’s 7
argument that “benefits” should be limited to cash payments, the court further 8
noted that the rent‐stabilization program had “all of the characteristics of a local 9
public assistance benefit” under the statute. Id. at 290. Finally, the Court of 10
Appeals explained that its interpretation was consistent with the purpose of 11
creating exemptions in section 282(2), which involve the protection of a debtor’s 12
essential needs, including housing. Id. at 292. 13
In light of the New York Court of Appeals’ opinion, we hold that Santiago‐ 14
Monteverde’s interest in her rent‐stabilized lease is a local public assistance 15
benefit within the meaning of DCL § 282(a). As a result, she is allowed to claim it 16
as an exemption from her bankruptcy estate. 17
CONCLUSION 18
We REVERSE the decision of the district court and REMAND for further 19
proceedings consistent with this opinion. 20
21

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