Michael Levinson

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re
Case No.: 806-73344-478
MICHAEL LEVINSON,
Chapter 13
Debtor.
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MEMORANDUM DECISION AND ORDER
Appearances:
Pryor & Mandelup, L.L.P.
Attorneys for the Debtor
By: Scott A. Mandelup, Esq.
675 Old Country Road
Westbury, NY 11590
Berkman, Henoch, Peterson & Peddy, P.C.
Attorneys for R & E Property Corp.
By: Bruce D. Mael, Esq.
100 Garden City Plaza
Garden City, NY 11530
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Before the Court is a motion by the Debtor seeking to avoid a certain judicial lien
against the Debtor’s interest in real property located at 20 Meadow Drive, Woodmere,
New York (the “Property”) pursuant to 11 U.S.C. § 522(f)(1) on the basis that the judicial
lien impairs the Debtor’s homestead exemption (the “Motion”). At issue is the
appropriate method to value the individual Debtor’s interest in the Property for purposes
of 11 U.S.C. § 522(f) where the Property is held by the Debtor and his non-debtor spouse
as tenants by the entirety.
FACTS
The Debtor is an optometrist at Levinson & Klayman in which he owns a
partnership interest. The Debtor filed his petition (the “Petition”) for Chapter 13 relief on
December 20, 2006 (the “Petition Date”). The Debtor, along with his wife, owns the
homestead Property as tenants by the entirety. Prior to the Debtor’s bankruptcy filing,
the Debtor obtained an appraisal of the Property, dated October 31, 2006, which values
the Property at $900,000. There is no proposal to sell the Property and no divorce action
pending.
The Debtor has claimed his $50,000 homestead exemption in Schedule C to the
Petition under 11 U.S.C. § 522 pursuant to N.Y. Debt. & Cred. Law § 282 and N.Y.
C.P.L.R. § 5206(a) and there has been no objection to the Debtor’s homestead exemption.
Therefore, the Debtor’s homestead exemption is allowed.
On the Petition Date, there were 2 mortgages and 1 judgment lien recorded
against the Property. The Debtor has a $50,000 home equity credit line with Bank of
New York (“BONY”) with a balance due of $16,966.04 on the Petition Date. Chase had
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a $20,000 mortgage with a balance of $84.44 on the Petition Date which has since been
satisfied in full. The total mortgage liens are $17,050.48. R & E Property Corp. (“R &
E”) obtained a judgment against the Debtor, and not the wife, in the amount $346,945.45,
plus $81,622.34 in interest for a total of $428,576.79. The judgment was docketed on
October 10, 2006 in the Nassau County Clerk’s Office. Therefore, on the Petition Date,
the aggregate amount of the mortgages and R & E’s judgment lien totaled at least
$445,627.27.
Other than the secured creditors discussed above, the Debtor listed only 2 other
creditors in his Schedules to the Petition (the “Schedules”) – BONY and Verizon
Wireless with general unsecured claims of $7,500 and $345.11 respectively. According
to the Debtor’s statements of current income and expenses under Amended Schedules I
and J to the Petition, the Debtor has a monthly net income of $2,795.71. Based upon the
foregoing, it would appear that the Debtor’s only major creditor is R & E.
In support of his Motion, the Debtor obtained an actuarial report dated December
2, 2006 which states that based upon (i) the fact that the Debtor is 3 years older than his
wife, (ii) the rate of return on long term investments being at 6.5% as of November 2006
and (iii) the fact that neither the Debtor nor his spouse is receiving any disability
payments, the present value of the Debtor’s interest in the Property, using a valuation
date of November 1, 2006, is $103,706.10. Accordingly, based solely on this actuarial
report, the Debtor asserts that he only has an 11.52% interest in the Property rather than a
50% interest. Using a value of $103,706.20, the Debtor submits in his Motion that total
equity in the Property available to lien creditors after accounting for the 2 mortgages and
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his homestead exemption is $36,655.62. Therefore, R & E’s judgment lien should be
avoided to the extent the amount of the lien exceeds $36,655.62.
R &E objected to the Debtor’s Motion on the basis that, inter alia, the Debtor’s
use of actuarial values to determine the interest of a tenant by the entirety in property was
improper and grossly undervalues the Debtor’s interest in the Property. R & E argues
that the Debtor’s interest in the Property is 50% or $450,000 because the interests of
tenants by the entireties are equal as set forth in Popky v. United States, 419 F.3d 242 (3d
Cir. 2005). In Popky, the Third Circuit rejected the use of life expectancies derived from
actuarial tables in calculating the interest of a tenant by the entirety in real property as
speculative and held that under Pennsylvania law, the interest of a tenant by the entirety
in proceeds from the sale of property is 50%. Under this argument, should R & E’s
judgment lien with respect to the Property be avoided, the judgment lien should be
reduced only by $45,627.27 ($445,627.27 + $50,000 - $450,000), leaving R & E with a
judicial lien in the amount of $382,949.52. In any event, R & E argues that its judgment
lien should not be avoided at all even if its judgment lien exceeds the Debtor’s equity in
the Property under the § 522(f) calculations because the Debtor has non-exempt personal
property to which the judgment lien can attach.
In his Reply, the Debtor noted that the Popky decision dealt with the
determination of a debtor’s interest in property under Pennsylvania law and not New
York real property law nor did the case arise in New York. Moreover, the Debtor argues
that courts in the Second Circuit have rejected the principle that a tenancy by the entirety
interest should be valued at 50% and have used actuarial analysis to value a debtor’s
tenancy by the entirety interest in property although such analyses are in the context of a
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debtor’s interest in proceeds arising from a sale of property under 11 U.S.C. § 363(h).
According to the Debtor, the use of actuarial tables under § 363(h) should be applied to a
§ 522(f) calculation because (1) no buyer will be willing to purchase his interest in the
tenancy by the entirety property because his non-debtor spouse remains in possession of
the Property and (2) it is likely that his spouse will succeed to the entire interest in the
Property because the spouse would likely survive the Debtor based upon the actuarial
tables. Even if the Debtor did survive his spouse, given the general life expectancies in
the United States, R & E would need to wait some 15 or 20 years because a judgment lien
creditor cannot sell the Property held by tenancy by the entirety when the judgment is
only against one spouse and the creditor cannot sell the Debtor’s possessory interest in
the Property. Accordingly, the Debtor argues that he only has a survivorship interest in
the Property which is valued at 11.52%.
A hearing on the Motion was held on June 26, 2007 at which counsel for the
Debtor and R &E appeared. There was no evidence presented as to the facts in the event
a § 363(h) hearing would apply. This memorandum decision memorializes and modifies
the Court’s decision on the Motion delivered at the hearing.
DISCUSSION
I. 	Jurisdiction
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(a) and
(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (K), and (O).
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II. 	Avoidance of Lien
Under 11 U.S.C. § 522(f), a debtor may avoid the fixing of a judicial lien on an
interest of the debtor in property to the extent such lien impairs the debtor’s homestead
exemption. Section 522(f)(2)(A) provides that a lien shall be considered to impair an
exemption to the extent that the sum of:
(i) 	the lien;
(ii) 	all other liens on the property; and
(iii) 	the amount of the exemption that the debtor could claim if there were no
liens on the property;
exceeds the value that the debtor’s interest in the property would have in
the absence of any liens.
The purpose of § 522(f) is to protect a debtor’s exemption, his discharge and his fresh
start by permitting him to avoid a judicial lien on any property to the extent that the
property could have been exempt in the absence of the lien. S. Rep. No. 95-989, at 76
(1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5862; H.R. Rep. No. 95-595, at 126-127
(1977), as reprinted in 1978 U.S.C.C.A.N. 5963, 6087-6088. 	However, lien avoidance
is not an “all or nothing matter.” In re Barrett, No. 06-20294, 2007 WL 1544658, at *2
(Bankr. D. Me. May 29, 2007). Rather, “[t]o the extent that a judicial lien does not
impair a debtor’s exemption, it cannot be avoided.” In re Barreto, No. CV 06-
04591(ADS), 2007 WL 1827425, at *5 (E.D.N.Y. June 25, 2007) (citing In re Barrett,
2007 WL 1544658, at *2). See also, FDIC v. Finn (In re Finn), 211 B.R. 780, 783
(B.A.P. 1st Cir. 1997); Bank of American Nat’l Trust and Sav. Ass’n. v . Hanger (In re
Hanger), 217 B.R. 592, 596 (B.A.P. 9th Cir. 1997).
While § 522(f) does not specify the operative date for purposes of applying the
formula to determine whether a lien impairs an exemption, 11 U.S.C. § 522(a) defines
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“value” for purposes of § 522 as “fair market value as of the date of the filing of the
petition....” Accordingly, the petition date has been held to be the operative date for all §
522(f) determinations, including determinations regarding the value of the debtor’s
property and the value of the liens. In re Wilding, 475 F.3d 428, 432 (1st Cir. 2007); In
re Bradley, No. 01-35118, 2007 WL 1492457, *3 (Bankr. S.D.N.Y. 2007); In re
Pacheco, 342 B.R. 352, 357 (Bankr. D.N.M. 2006)(stating that the value of the liens, the
value of the property and the amount of the exemption are all measured as of the petition
date); In re Salanoa, 263 B.R. 120, 123 (Bankr. S.D. Cal. 2001) (“The Court must value
the residence and the Debtor’s entitlement to an exemption on the petition date. As the
amount of the liens is relevant to these determinations, it makes sense to value the liens
on the same date.”). In performing the mathematical calculation under § 522(f), “all
numbers in the calculation should have the same operative date.” 	In re Blue, Slip Copy
No. 04-03781-PCW7, 2006 WL 3077418, *3 (Bankr. E.D. Wash. 2006). 	Accordingly,
the value of the Debtor’s interest in the Property for purposes of § 522(f) should be
calculated based upon the fair market value of the Debtor’s interest in the Property
determined on the Petition Date.
The determination of the value of the Debtor’s interest in the Property, however,
is a function of New York law as the Property is located in this state. Butner v. United
States, 440 U.S. 48, 99 S.Ct. 914 (1979). The bundle of rights associated with a tenancy
by the entirety is rooted in ancient common-law principles. “Tenancy by the entirety has
always been a form of real property ownership available only to those who were actually
married at the time of conveyance. At common law, husband and wife were deemed a
single legal entity, and a conveyance of property to both created an indivisible interest so
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that both parties were deemed seized of the whole.” V.R.W., Inc. v. Klein, 68 N.Y.2d
560, 563, 510 N.Y.S.2d 848, 850, 503 N.E.2d 496, 498 (1986)(internal citations omitted).
A tenant by the entirety has a “right to the use of an undivided half of the property during
the joint lives of a husband and wife and a survivorship right to the entire fee. Each
tenant by the entirety is said ‘to be seized of the whole estate, and [such tenants] do not
take by moieties…’” Community Nat’l Bank and Trust Co. of New York v. Persky (In re
Persky), 893 F.2d 15, 19 (2d Cir. 1989) (citing Hiles v. Fisher, 144 N.Y. 306, 312, 39
N.E. 337 (1895)). As long as the marriage remains legally intact, the husband and wife
continue to be seized of the whole, and the death of one merely results in the defeasance
of the deceased spouse’s co-extensive interest in the property. V.R.W., Inc. v. Klein, 68
N.Y.2d at 564, 510 N.Y.S.2d at 850, 503 N.E.2d at 498. Where husband and wife hold
property in a tenancy by the entirety as if they were one person and one person dies, the
surviving spouse takes the entire estate, not because of any right of survivorship, but
because that spouse remains seized of the whole. In re Rerisi, 172 B.R. 525, 529 (Bankr.
E.D.N.Y. 1994); Matter of Estate of Violi, 65 N.Y.2d 392, 395, 492 N.Y.S.2d 550, 553,
482 N.E.2d 29, 32 (1985) (emphasis added).
In New York, “each tenant may sell, mortgage or otherwise encumber his or her
right in the property, subject to the continuing rights of the other.” V.R.W., Inc. v. Klein,
68 N.Y.2d at 565, 510 N.Y.S.2d at 851, 503 N.E.2d at 499. See also Goldman v.
Goldman, 95 N.Y.2d 120, 122 (N.Y. 2000). Accordingly, because their respective
interests are the same and equal during their joint lives as husband and wife, each is
entitled to an equal share in the consideration given for the deed and entitled to one-half
of the proceeds of the sale of the real property. Secrist v. Secrist, 284 A.D. 331, 334, 132
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N.Y.S.2d 412, 415 (N.Y. App. Div. 4th Dep’t 1954), aff’d, 308 N.Y. 750, 125 N.E.2d
107 (N.Y. 1955) (finding that the wife was entitled to 50% of the proceeds of sale even
though the husband contributed the entire purchase price). Thus, the interest of a tenant
by the entirety in real property continues even if the other tenant divests or encumbers his
or her interest in the property without the consent of the former.
Because a tenant by the entirety is “seized” of the whole estate as of the time of
the conveyance and tenancy by the entirety survives the filing of a petition in bankruptcy
under New York law, this Court has previously found that a debtor that holds real
property by tenancy of the entirety holds an interest in the entire property on the petition
date. In re Rerisi, 172 B.R. at 529 (finding that a debtor was “seized” of the whole estate
in four properties held by tenancy by the entirety at the time of conveyance, a date prior
to the petition date, and that the debtor’s interest in those properties passed to the Chapter
7 Trustee as of the petition date, notwithstanding the death of the non-debtor spouse ten
months after the petition date). Accordingly, under New York law, the Debtor is
“seized” of the entire Property and for purposes of § 522(f), the value of his interest in the
Property, in the absence of any liens, is equal to the fair market value of the Property or
$900,000.
This result is consistent not only with New York law, but also with the decisions
of other courts which have analyzed this issue in the context of § 522(f) where the
relevant states have similar laws concerning tenancy by the entirety. In Brinley v. LLP
Mortgage, Ltd. (In re Brinley), 403 F.3d 415 (6th Cir. 2005), cert. denied, 126 S.Ct. 1164
(2006), the debtor appealed the District Court’s decision which avoided a judgment lien
in full under § 522(f) on the ground that the District Court erred by considering the entire
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value of his property when making the § 522(f) calculations because he owned the
property as a tenant by the entirety with his non-debtor spouse and the court should have
only attributed half of the value of the property to him. In analyzing tenancy by the
entirety under Kentucky law, the Sixth Circuit stated that a tenancy by the entirety “is an
estate in land shared by husband and wife, whereby at the death of either the survivor is
entitled to full fee simple ownership. The survivor takes the entire estate at the death of
the deceased co-tenant not by virtue of that death, but because, in law, each was viewed
as to own the entire estate from the time of its creation.” 403 F.3d at 420 (internal
citations omitted). Accordingly, the Sixth Circuit held that the debtor was properly
charged with the full value of the property when the District Court conducted the lien
avoidance calculation under § 522(f).
Similarly, in Snyder v. Rockland Trust Company (In re Snyder), 249 B.R.40, 46
(B.A.P. 1st Cir. 2000), the Bankruptcy Appellate Panel (the “Panel”) affirmed the
bankruptcy court’s ruling that for purposes of § 522(f), the debtor’s interest in tenancy by
the entirety property under Massachusetts law should be valued at 100% where the non-
debtor spouse did not join in the petition. Under Massachusetts law, as set forth in
Snyder:
[a] tenancy by the entirety is a form of concurrent
ownership that can exist only between co-owners who are
husband and wife. In such a tenancy, husband and wife
‘are seised of the estate so granted as one person, and not as
ordinary joint tenants or tenants in common.’ Therefore,
husband and wife hold the property not as ‘two tenants by
the entirety,’ but as one person, in one tenancy. The point
is more than semantic; it underscores that a tenancy by the
entirety is a ‘unitary title’: a title in which the interests of
both husband and wife extend to the whole of the property,
not merely to some fractional interest that the other does
not also hold.
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Each spouse’s interest in and rights as to the whole are
well-protected from compromise by the other. For as long
as the marriage continues, the estate cannot be severed,
terminated, or partitioned by either spouse without the
assent of the other. Either spouse may convey or encumber
his or her own interest, but the interest so conveyed would
be subject to the continuing rights of the other in the
property such that the interest conveyed would, among
other things, be wholly defeasible upon the death of the
conveying spouse and survivorship of the other….A
tenancy by the entirety ‘continues during the existence of
the marital relationship and cannot be changed except by
death, divorce, a deed of both parties of a deed of one
spouse to the other.’… [T]he extent of one spouse’s interest
in property held in a tenancy by the entirety is not fixed but
contingent on (among other things) future events that
determine how the tenancy is terminated and when it is
liquidated.
249 B.R. at 44-45 (citing In re Snyder, 231 B.R. 437, 441-443 (Bankr. D.
Mass. 1999)(internal citations omitted).
The Panel found “that a hearing on a motion to avoid a lien pursuant to section
522(f), much like a hearing on a motion for relief from the automatic stay, should be a
summary proceeding susceptible to a quick and binding resolution. To adopt a procedure
for actuarially analyzing the [debtor’s] interest in the tenancy by the entirety does not fit
into this mold, and the Panel rejects it. Indeed, such a procedure would require in each
instance a determination of the [debtor’s] interest based on age, sex, health and all other
factors that go into making that type of actuarial determination of value.” Id., 249 B.R. at
46. In addition, “[o]ne of the principal tenants of bankruptcy is finality in order to insure
the honest debtor a fresh start.” Id. By fixing the value, the calculation under § 522 will
not be subject to a possible subsequent hearing when an event occurs which would
terminate the tenancy. Accordingly, the Panel agreed that the debtor’s interest in tenancy
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by the entirety property should be valued at 100% for purposes of § 522(f). See also, In
re Strandberg, 253 B.R. 584, 589 (Bankr. D.R.I. 2000)(following Snyder in holding that
a debtor’s interest in tenancy by the entirety property under Rhode Island law is 100% for
purposes of §522(f)).
Although the Panel also considered the possibility of treating a tenancy by the
entirety as if it were a tenancy in common in which the debtor and non-debtor spouse
each has a 50% interest in the property, the Panel rejected the 50% valuation because it
did not comport with Massachusetts law which holds that a tenancy by the entirety
guarantees that each spouse has an equal right to the whole. Id. (citing, Coraccio v.
Lowell Five Cents Sav. Bank, 415 Mass. 145, 612 N.E.2d 650 (1993)).
In Popky, the United States Internal Revenue Service had assessed taxes against
Sheila Popky for unpaid employment taxes attributable to her business and filed a notice
of tax lien. Shortly thereafter, Ms. Popky sold her property which she held with her
husband as tenants by the entirety. The Popkys argued that Ms. Popky’s interest in the
proceeds of sale should not be valued at 50% but at a percentage based upon some
variation of their life expectancies. Rejecting the use of actuarial values, the Third
Circuit valued the interests of tenants by the entireties equally under Pennsylvania
common law and held that Ms. Popky’s interest in the proceeds of sale was 50%. This
result is consistent with general New York tenancy by the entirety law where a spouse is
entitled to one half of the proceeds of sale if the tenancy by the entirety is terminated by a
sale of both tenants’ interest in the property.
In the case before this Court, the Debtor filed for bankruptcy relief under Chapter
13 which allows him to pay down his prepetition arrears through a Chapter 13 plan while
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retaining possession and use of the Property. Because a sale of the Property has not
occurred and the tenancy by the entirety remains intact, the valuation under Popky is not
applicable. As in Snyder, the Court finds a 50% valuation of the Debtor’s interest in the
Property to be contrary to New York law which provides that an individual holding
property by tenancy by the entirety is “seized” of the entire property at the time of
conveyance.
Therefore, this Court adopts the reasoning in Snyder and finds the use of present
value determination of the Debtor’s interest in the Property in the context of § 522(f) to
be improper as it not only fails to comport with New York law but it is also flawed and
inappropriate for the additional reasons discussed below.
While the Debtor argues that he only has a contingent survivorship interest in the
Property because the non-debtor spouse would presumably survive him, the Court does
not have any information regarding the health of the Debtor and the non-debtor spouse to
determine whether the actuarial values accounted for any known, pre-existing medical
condition which would warrant a discount of the Debtor’s interest in the Property. The
Debtor’s use of actuarial tables only attempts to estimate as to the present value of what
the judgment lien creditor might recover at future date should the Debtor survive the non-
debtor spouse. However, the means by which the Debtor’s interest as a tenant by the
entirety may terminate, whether by death, divorce, or sale, have not been determined as
of the Petition Date. Any valuation based upon contingent future events is merely
speculation that has no place in the context of § 522(f) because § 522(f) is not a
prospective provision that takes into consideration future contingencies that may occur
after the petition date.
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Similarly, the Debtor’s reliance on § 363(h) factors while seeking relief pursuant
to § 522(f) of the Bankruptcy Code is misdirected and inapplicable given the differences
in the purpose and framework between these two provisions of the Bankruptcy Code.
Using an actuarial report for the purpose of § 522(f) is like using a crystal ball to
prognosticate the future for the Debtor and his spouse; and therefore, it is inapplicable to
§ 522(f). In addition, while some courts in this district have permitted the use of actuarial
values under § 363(h), such values were considered in determining the detriment to the
non-debtor spouse as a result of a sale of tenancy by the entirety property free and clear
of such spouse’s interest. In re Waxman, 128 B.R. 49 (Bankr. E.D.N.Y. 1991); In re
Levenhar, 30 B.R. 976 (Bankr. E.D.N.Y. 1983). In the context of § 522(f), where the
debtor and the non-debtor spouse are retaining possession and use of the property, the
non-debtor spouse does not suffer from any detriment that needs to be compensated as he
or she would be under § 363(h). 	Moreover, while the bankruptcy estate generally
benefits from any post-petition increase in the value of the property under § 363(h), the
non-debtor spouse and the bankruptcy estate would not receive any benefit with respect
to any such post-petition increase under § 522(f) because the amount of a judicial lien
impairing a homestead exemption would be fixed by the value of the property on the
petition date. Accordingly, an actuarial valuation under § 363(h) should not be
superimposed onto a § 522(f) determination.
Under the calculations of § 522(f), the aggregate amount of R & E’s lien and the
mortgages ($445,627.27) plus the Debtor’s $50,000 homestead exemption total
$495,627.27. Because this amount does not exceed $900,000, the fair market value of
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the Debtor’s interest in the Property on the Petition Date, R & E’s judgment lien does not
impair the Debtor’s homestead exemption.
Accordingly, the Court need not consider R & E’s alternative argument that its
judgment lien should not be avoided on the basis that the Debtor has other personal
property to which the lien could attach even though no lien appears to have been
perfected against such property before the Petition Date.
CONCLUSION
For the reasons set forth above, the Debtor’s Motion to avoid R & E’s judgment
lien under 11 U.S.C. § 522(f) is denied.
So ordered.
Dated: Central Islip, New York
July 24, 2007
/s/ Dorothy Eisenberg________________
Dorothy Eisenberg
United States Bankruptcy Judge
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