In re Aulicino, 08-11865DWS.

• Decision Date: 03 December 2008
• Docket Number: No. 08-11865DWS.,08-11865DWS.
• Parties: In re John J. AULICINO, Marcella F. Aulicino, aka Marcella Frances Fuimano, aka Marcella F. Gerage, Debtors.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

400 B.R. 175

In re John J. AULICINO, Marcella F. Aulicino, aka Marcella Frances Fuimano, aka Marcella F. Gerage, Debtors.

No. 08-11865DWS.

United States Bankruptcy Court, E.D. Pennsylvania.

December 3, 2008.

COPYRIGHT MATERIAL OMITTED

Michael J. Halprin, Law Office of Michael J. Halprin, Philadelphia, PA, for Debtors.

MEMORANDUM OPINION

DIANE WEISS SIGMUND, Bankruptcy Judge.

Before the Court is the Motion by Former Spouse for Relief from Automatic Stay to Enforce Property Interest in State Court (the "Motion"). The Motion is opposed by the Chapter 7 trustee ("Trustee") who asserts that his interest in certain real property located at 2313 Mildred Street Philadelphia, Pennsylvania (the "Property") as a hypothetical bona fide purchaser pursuant to 11 U.S.C. § 544(a)(3) trumps the interest of John Angelo Fuimano ("Movant") arising from a 1997 Marital Separation Agreement that contemplated that Debtor would convey her interest in the Property to him. The facts are simple and not in dispute, and the parties have briefed their respective legal positions. For the following reasons, I agree with the Movant and will grant the Motion.

BACKGROUND

Movant and Debtor were married on February 1, 1988. Exhibit M-3. On October 25, 1993, they acquired the Property as tenants by entireties. Exhibit M-1 (recorded deed dated Oct. 25, 1993). Debtor filed for divorce in July 1994. Exhibit M-2. Through the efforts of their respective counsel, a Marital Separation Agreement (the "Agreement") was prepared and executed by the parties on July 3, 1997. Id. The Agreement was attached to and its terms and conditions were incorporated in the decree of divorce by the Order of the Court of Common Pleas, Philadelphia, Pennsylvania dated July 22, 1997, and both were contemporaneously filed with the Office of the Prothonotary. Id. Relevant to this contested matter is the following provision of Paragraph 6 of the Agreement relating to the division of property:

(a) REAL ESTATE

The parties are the owners of real property located at 2313 Mildred Street, Philadelphia, Pennsylvania. MARCELLA will convey and waives all rights and interest in this property and will, upon execution of the Agreement, relinquish control and possession to JOHN. JOHN will assume all mortgage responsibilities upon execution of this Agreement and agrees to indemnify and save MARCELLA harmless.

Id. Movant now resides in the Property, and Debtor resides at 2608 S. Jessup Street, Philadelphia, Pennsylvania with her present husband, the co-debtor herein.

Also relevant is paragraph 12 of the Agreement which dealt with the execution of other documents and provided as follows:

MARCELLA and JOHN shall each concurrently herewith or at any time hereafter at the demand of the other, execute any other documents or instruments, and do or cause to be done any other acts and things as may be necessary or convenient to carry out the intents and purposes of this Agreement.

Id. It is undisputed that save this Agreement, there is no document pertaining to the conveyance contemplated by the Agreement nor did Debtor take or Movant, prior to the filing of the Motion, demand any action be taken in furtherance of Debtor's agreement to transfer her interest in the Property to Movant. Movant now seeks relief from stay to file an action in the state court to compel Debtor to transfer her interest in the Property pursuant to the Agreement, an action that would be permitted but for the intervention of Debtor's bankruptcy case.

DISCUSSION

I.

While not raised at the hearing on the Motion, Movant raises three procedural issues that he believes are relevant to the resolution of the Motion. I turn to them before addressing the merits of the Motion.

A.

First, Movant contends that this Court must abstain from adjudicating non-core state law issues. In so stating, he misconstrues the nature of the matter he has brought before me as one seeking enforcement of the Agreement. It is no such thing. In seeking relief from stay, Movant has presented a core matter that is within the exclusive jurisdiction of the bankruptcy court. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d Cir.1991) ("Only the bankruptcy court with jurisdiction over a debtor's case has the authority to grant relief from the stay of judicial proceedings against the debtor.") In order to adjudicate his request for stay relief which arises under § 362(d)(2), I need to determine whether the Debtor has an equity in the Property.¹

Movant has contended that not only is there no equity but that the Debtor has no interest in the Property at all, and I should grant relief to allow him to exercise his rights under the Agreement. The Trustee has responded to the contrary, contending that the Debtor's failure to implement the Agreement provides him as a deemed bona fide purchaser for value with superior rights to Movant under the Agreement so that the estate has a very real interest in the Property. Notably not before the Court is enforcement of the Agreement as Movant alleges. What is before the Court is simply a motion for relief from the automatic stay to allow the Movant to press his claims to the Property without regard to the interests of the estate.

As Movant argues elsewhere in his Memorandum of Law Sur Motion by Former Spouse for Relief from Stay to Enforce Property Interest in State Court ("Movant's Mem"), interests in the Property are determined by state law. Movant's Mem at 10. Thus, in order to determine whether relief is appropriate this Court must in the first instance consider state law. Since only this Court can provide Movant relief from stay to enforce the Agreement, I am at a loss to understand how abstention will further his cause. Moreover, I am unpersuaded by his application of the factors determinative of mandatory abstention under 28 U.S.C. § 1334(c)(2). Specifically, there has been no motion for mandatory abstention made but rather one for relief from stay, and relief from stay is expressly a core matter. 28 U.S.C. § 157(e). In misconstruing the matter before me, Movant has misapplied well settled law. For these reasons, abstention is inappropriate.

B.

Movant next invokes § 362(e)(2) which provides for the termination of the automatic stay 60 days after a request for relief is made by a party in interest unless (a) a final decision is rendered during that period, (2) such period is extended, (3) the parties agree otherwise, or (4) the court provides for such specific period of time as is required for good cause. The Motion was filed on September 8, 2008, and a hearing was held on October 7, 2008. At the conclusion of the hearing, arguments were made. I pressed the Movant to point to any evidence that supported his view that under state law his interest in the Property would be superior to the Trustee's rights as a bona fide purchaser for value under § 544(a)(3). When he kept insisting that his position arose as a matter of law, I allowed him to supplement his pleadings by filing a brief. Mindful of my statutory duty to decide a motion for relief in limited time, I advised that with the consent of the parties, I would not start the time running until the briefs were filed. Tr. at 32. Movant did not object and proceeded to agree to a court-ordered briefing schedule. Movant now argues that the stay terminated by reason of § 362(e)(2). I respectfully disagree.

Assuming Movant's counsel forgot that I expressly stated that the statutory period would not run during the briefing schedule, common sense should have reminded him. What would have been the point of ordering a 30 day briefing schedule if the stay was to expire almost immediately. It is counterintuitive for Movant to submit a 58-page brief and expect the court in the interests of justice to rule in a matter of days absent which the stay would terminate by operation of law. Even had I not expressly dealt with this issue on the record, I would deem him to have consented to the tolling of the period until his brief was received on November 4, 2008. In re Ramos, 357 B.R. 669, 671 n. 2 (Bankr.S.D.Fla.2006) (viewing lender's request to brief as a consent to hold a final hearing beyond the thirty day statutory deadline).² In short, the stay has not been terminated by operation of § 362(e)(2).

C.

Finally Movant argues that even assuming the Trustee is correct about his ability to utilize § 544(a)(3), he has not filed an adversary proceeding seeking to avoid Movant's interest which he claims at this date is fatal to his cause. The basis for this contention is the Movant's assumption that an adversary proceeding is required and his erroneous view that § 108 governs this issue. I see no reason to spend any time discussing § 108 which deals with extension of time under non-bankruptcy law. It is plainly not applicable here. Rather there is a specific statute of limitations for commencing an action under § 544 if one is required.³ However, the Trustee is not seeking to avoid an interest but rather to assert the rights of a bona fide purchaser for value.⁴ Thus, this procedural impediment urged by Movant is likewise rejected.

II.

I turn now to the merits of this contested matter. In opposing the Motion, the Trustee's argument is simple. First, a trustee in bankruptcy has the rights and powers of a bona fide purchaser of real property ("BFP") that has perfected a transfer at the time of commencement of the case, whether or not such a purchaser exists. 11 U.S.C. § 544(a)(3).⁵ Movant does not nor could he refute that clear statement of bankruptcy law.

Next, the Trustee argues that in that capacity, he has the right to avoid an obligation incurred by the debtor that is voidable by a BFP so long as he had neither actual or constructive notice of Movant's rights. The parties concur that application of this principle is a matter of substantive state law, in this case that of Pennsylvania where the Property is located. Midlantic National Bank v. Bridge (In...