In re Brown
Decision Date | 27 August 1982 |
Docket Number | Adv. Pro. No. 82 0066.,Bankruptcy No. 80 00405 |
Citation | 22 BR 844 |
Parties | In re Robert N. BROWN and Barbara Bex Brown, Debtors. Barbara Bex BROWN, Plaintiff, v. Virginia M. DELLINGER, Individually and d/b/a Dellinger Art & Antiques, Defendant. |
Court | U.S. Bankruptcy Court — Northern District of New York |
COPYRIGHT MATERIAL OMITTED
Laurence Sovik, Smith, Sovik, Kendrick, McAuliffe & Schwarzer, P.C., Syracuse, N.Y., for plaintiff.
Harold F. Simons, Hamilton, N.Y., for defendant.
MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
On March 15, 1982, Barbara Bex Brown (hereinafter, Debtor) filed a complaint in this Bankruptcy Court. The complaint seeks to have this Court declare that certain alleged "surplus funds" from a pre-bankruptcy foreclosure of real estate owned by the Debtor are funds which are free from any right, title, or interest now asserted by Virginia M. Dellinger (hereinafter, Judgment Creditor) under orders made by the Appellate Division, Fourth Department, of the New York Supreme Court. Because the New York state court orders were rendered subsequent to the Debtor's petition in bankruptcy, the Debtor seeks this Court to declare those state court decisions and orders of December 23, 1980 and January 29, 1982 (sic) pertaining to and disallowing the Debtor's rights in the surplus funds to be null and void. Furthermore, the Debtor seeks a declaration that the surplus funds are property of the Debtor subject only to any taxes due to the Internal Revenue Service.
The Judgment Creditor has admitted most of the Debtor's factual allegations. The Judgment Creditor's answer alleges as an affirmative defense that the New York Supreme Court is the court of original jurisdiction and being such (1) has ordered the full amount of the surplus funds to be paid to the Onondaga County Treasurer, and (2) has appointed a referee to ascertain and report the amounts due to the Judgment Creditor and any other party with a lien on the surplus funds. The answer also contains a counterclaim which alleges that the Debtor now illegally withholds the surplus funds from the Onondaga County Treasurer. The Judgment Creditor prays for judgment (1) dismissing the Debtor's complaint, (2) ordering the Debtor or her attorneys to pay the surplus funds to the County Treasurer and (3) lifting this Court's temporary restraining order of March 12, 1982 against the Judgment Creditor.
The parties' pleadings set forth numerous factual allegations which are neither directly nor implicitly disputed. The events of this case are as follows:
The dispute between the Debtor and the Judgment Creditor centers on the postbankruptcy petition rights of the Debtor to a "surplus moneys" fund which arose from a pre-petition foreclosure sale of the Debtor's New York real property. The Judgment Creditor contends that its docketed New York judgment lien operates to prevent the Debtor from having any legal or equitable interest in the fund as of the date of the bankruptcy petition. The Debtor's position is that the surplus funds were property of the Debtor at the date of the bankruptcy petition and has exempted such property from the bankruptcy estate by a duly authorized order to amend its claimed exemptions to the federal homestead exemption provision contained in § 522(d)(1) of the Bankruptcy Code. See 11 U.S.C. § 522(d)(1). Because there is no federal law of real property rights in foreclosure proceeds, i.e., surplus moneys funds, the Debtor's property rights in such a surplus must be determined by New York Real Property Law. Cf. In re Ford, 3 B.R. 559, 564-65, 6 B.C.D. 202, 203-04, 1 C.B.C.2d 840 (Bkrtcy. D. Md. 1980), aff'd, 638 F.2d 14 (4th Cir. 1981) (per curiam) ( ). The issue of whether the New York state court orders are in contravention of the United States Bankruptcy Court's exclusive jurisdiction1 is also entirely dependent on what, if any, property interests the Debtor possessed on the date she filed her petition.
Before the foreclosure sale, the Judgment Creditor possessed a lien on the Debtor's real property.2 It is well settled law that:
A lien may be defined as a charge upon property for the payment or discharge of a debt or duty. It is a right given by the law which may be exercised over the property covered by the lien to have the debt of the owner of the property satisfied out of it. But a lien, although a charge upon property, confers no general right of property or title upon the lienholder.
Marine Midland Bank v. Marcel Enterprises, Inc., 91 Misc.2d 810, 811, 398 N.Y.S.2d 782, 783 (Genesee Co. Ct. 1977), aff'd mem., 64 A.D.2d 812, 407 N.Y.S.2d 833 (4th Dep't 1978) (quoting 35 N.Y. Jur., Liens § 1) (Emphasis and brackets added). After the foreclosure sale, the Judgment Creditor's preforeclosure sale lien on the land simply3 is transferred to the surplus moneys. See Federal Land...
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