In re Taub, Bankruptcy No. 08-44210-ess.

• Decision Date: 21 September 2009
• Docket Number: Adversary No. 09-1277-ess.,Bankruptcy No. 08-44210-ess.
• Citation: 417 B.R. 186
• Parties: In re Chana TAUB, Debtor. Chana Taub, Plaintiff, v. Tommy Hershkowitz, Zvi Dressler, Chaim Fuchs, John Doe, and Jane Doe, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of New York

417 B.R. 186

In re Chana TAUB, DebtorChana Taub, Plaintiff, v.Tommy Hershkowitz, Zvi Dressler, Chaim Fuchs, John Doe, and Jane Doe, Defendants.

Bankruptcy No. 08-44210-ess.

Adversary No. 09-1277-ess.

United States Bankruptcy Court, E.D. New York.

September 21, 2009.

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Dennis Houdek, Esq., New York, NY, Attorney for Chana Taub.

Jacob Silver, Esq., Brooklyn, NY, Attorney for Zvi Dresler and Chaim Fuchs.

MEMORANDUM DECISION ON MOTION TO ABSTAIN

ELIZABETH S. STONG, Bankruptcy Judge.

Chapter 11 debtor in possession and landlord Chana Taub commenced this adversary proceeding against Tommy Hershkowitz, Zvi Dresler, and Chaim Fuchs, who are tenants in an apartment building in Brooklyn.She alleges that the Defendants have not paid the rent and seeks an accounting, the payment of the unpaid rent, and if the rent is not paid, an order of eviction.The Defendants deny that they are liable for any back rent, and assert counterclaims for relief including compensatory and punitive damages.

Before the Court is a motion by two of the defendants, Mr. Dresler and Mr. Fuchs, asking this Court to abstain from deciding the Debtor's claims pursuant to 28 U.S.C. §§ 157,1334(c)(1), and1334(c)(2), on grounds that they are fundamentally in the nature of claims arising under the New York Rent Stabilization Law of 1969(the "Rent Stabilization Law"), and should be decided not by this Court, but by New York City Civil Court's Housing Part (the "Housing Court").¹

This Abstention Motion calls upon the Court to decide whether it should take the unusual step of declining to decide a matter that is properly brought before it.It requires consideration of the grounds for statutory permissive or mandatory abstention in the specialized context of New York's complex laws and procedures that govern residential landlord and tenant relations and the specialized state courts that hear such matters.And it presents the question of whether deferring to a special proceeding in New York City's Housing Court to resolve disputes arising under the Rent Stabilization Law between tenants and a debtor landlord will help or harm the administration of a Chapter 11 estate.

Here, the Debtor-landlord complains of unpaid rent and seeks payment, an accounting, and eviction.The Defendants complain of hazardous and deplorable conditions, including vermin, broken locks, a leaky roof, and an obstructed fire escape, and seek repairs and punitive and treble damages.

The Court concludes that Housing Court is the more appropriate forum for resolving these disputes and that deferring to the Housing Court will help, not harm, the administration of this Chapter 11 estate, due to that court's expertise in the applicable law and procedures.That is, the grounds for permissive abstention—the interest of justice, interest of comity with state courts, and respect for state law— are met.As a result, it is not necessary to reach the question of whether mandatory abstention is appropriate.For these reasons, the Abstention Motion is granted.

Jurisdiction

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b)and157(b)(1), and over this Abstention Motion pursuant to 28 U.S.C. § 157(b)(3).

Procedural History

The Debtor's Bankruptcy Case

The Debtor commenced this Chapter 11 bankruptcy case on July 1, 2008, by filing a voluntary petition for relief.She continues to operate and manage her business and property as a debtor in possession in accordance with 11 U.S.C. §§ 1107and1108.

The Adversary Proceeding

The Debtor, as landlord, filed this adversary proceeding on June 4, 2009, seeking an order directing each of the Defendants, who are tenants at 1259 52nd Street, Brooklyn, New York (the "52nd Street Property"), to turn over the unpaid pre-petition rent or alternatively, to be subject to eviction.She also seeks an order directing each of the Defendants to provide an accounting of the pre-petition rent, to turn over the unpaid pre-petition rent, or alternatively, to turn over possession of the apartment.

Two of the Defendants, Mr. Dresler and Mr. Fuchs, filed an Answer to the Complaint and a Counterclaim on July 27, 2009.They deny the material allegations of the Complaint and assert several affirmative defenses, including that the Debtor is charging rent in an amount that violates the Rent Stabilization Law, and that the Debtor has not maintained the 52nd Street Property in accordance with the requirements of the New York City Housing Code and the warranty of habitability by failing to provide hot water or heat or to make necessary repairs.These Defendants also claim that the Debtor has charged rent in an amount that violates the Rent Stabilization Law and that she has done so intentionally and fraudulently.They seek injunctive relief, disgorgement of rent payments made, and treble damages.

The Debtor filed a Reply to the Counterclaim asserted by Mr. Dresler and Mr. Fuchs on August 24, 2009, in which she denies the material allegations of the Counterclaim and asserts several affirmative defenses.

The third Defendant, Mr. Hershkowitz, filed a Pro Se Answer and Counterclaims on August 26, 2009.Like the other defendants, he denies the material allegations of the Complaint and asserts several affirmative defenses, including that the Debtor has not maintained the 52nd Street Property in accordance with the requirements of the New York City Housing Code and the warranty of habitability by failing adequately to maintain the apartment's shower and bath, toilet, walls, and ceiling.And Mr. Hershkowitz alleges that he has made rental payments to Simon Taub, the Debtor's estranged husband.Mr. Hershkowitz also asserts counterclaims against the Debtor, including that the Debtor has wilfully withheld services, resulting in an actual partial eviction and breach of the warranty of habitability, and that the Debtor's failure to maintain services amounts to gross negligence and wanton misconduct entitling him to a rent abatement, damages, and punitive damages.

The Debtor filed a Reply to the Counterclaims asserted by Mr. Hershkowitz on September 17, 2009, in which she denies the material allegations of the Counterclaims, asserts several affirmative defenses, and seeks judgment dismissing the Counterclaims with prejudice.

The Abstention Motion

Mr. Dresler and Mr. Fuchs filed this Motion for Abstention on July 27, 2009, and ask this Court to abstain from hearing the claims in this action.²The Defendants invite this Court to abstain on permissive or mandatory grounds pursuant to 28 U.S.C. §§ 1334(c)(1) and (c)(2), because "the Adversary Proceeding [is] a Non-Core proceeding wholly seeking relief under New York State Law and pursuant to the [Rent Stabilization Law], for the payment of rents by the Defendants, or in the alternative for their eviction, as well as other related relief."Motion for Abstention¶ 3.They argue:

This proceeding involves serious health and safety risks to the defendants who reside at the premises.The defendants are requesting pursuant to New York State Law, that the court order the plaintiff to ameliorate these dangerous conditions so that the premises can continue to be inhabited by the defendants.This in itself will require many applications to this court to obtain the compliance of the [Debtor] in correcting these dangerous conditions that have been ongoing.

...

Additionally, the defendants have defenses and have Counterclaims based upon their claims of being overcharged, pursuant to the [Rent Stabilization Law].This Code in itself is extremely complicated, and [its] complexity has been cited by more than one court as a basis for exercising Discretional Abstention.

Motion for Abstention¶¶ 5-6.

The Defendants also submit a Building Registration Summary Report for the 52nd Street Property drawn from the New York City Department of Housing Preservation and Development database that shows some 59 violations of various types at the premises.The listed violations include vermin; broken or defective plastered surfaces; problems with smoke and carbon monoxide detectors; accumulations of refuse and rubbish; broken locks, intercoms, and stairs; leaks in the roof; and an obstructed fire escape.

The Debtor filed an Affirmation in Opposition of Dennis Houdek, Esq., the Debtor's counsel(the "Pltf's Opp. Affirm."), and an Affirmation of the Debtor, on August 4, 2009.The Debtor argues that the Abstention Motion is marked by numerous procedural defects, and based on factual misstatements.She notes that the Defendants' unpaid rent is property of the estate under Bankruptcy Code Section 541, and that this Court plainly has jurisdiction to adjudicate disputes that concern estate property.The Debtor also observes that Bankruptcy Code Section 542 allows her to seek the turnover of estate property.And the Debtor argues that the claims asserted here are in the nature of a core proceeding, or at a minimum, within the Court's non core, "related-to" jurisdiction.The Debtor also states that common law principles require courts with jurisdiction to exercise that jurisdiction, and that mandatory abstention is not available with respect to a core proceeding.

The Court held a preliminary conference on the Abstention Motion on August 6, 2009, at which counsel for the Defendants, counsel for the Debtor, and the creditor Esther Newhouse appeared and were heard.The Court set a schedule for further briefing and on August 8, 2009, the Court entered an order permitting the Debtor to file supplemental opposition and the Defendants to file a supplemental reply, and setting a discovery deadline in the adversary proceeding of October 9, 2009.The parties did not file any further submissions.

This Court held a hearing on the Abstention Motion on September 8, 2009, at which counsel for the defendants Mr. Dresler and Mr. Fuchs, counsel for the Debtor, and the defendantTommy Hershkowitz appeared and were...