In re: PATRICIA MARTINEZ, Debtor.



Case No.: 08-71123-478, Chapter  7



UNITED STATES BANKRUPTCY COURT  FOR THE EASTERN DISTRICT OF

NEW  YORK



392 B.R. 530; 2008 Bankr. LEXIS 2186





August 18, 2008, Decided





COUNSEL: For Debtor: Paul H. Rethier,  Esq., Sound Beach, New York.



Trustee: Kenneth Kirschenbaum, Esq.,  Kirschenbaum & Kirschenbaum, Garden 

City,New York.



JUDGES:  Dorothy Eisenberg, United States Bankruptcy Judge.



OPINION BY: Dorothy  Eisenberg



OPINION





MEMORANDUM DECISION AND  ORDER



Before this Court is the Chapter 7 Trustee's  objection to the Debtor's claim

for a homestead exemption pursuant to N.Y.  C.P.L.R. § 5206 with respect to the

Debtor's residence (the "Property") on  the basis that the Debtor lacks legal

title to the Property in the form of a  deed. At issue is whether the Debtor had

as of the date of this bankruptcy  filing an ownership interest in the Property

for purposes of N.Y. C.P.L.R. §  5206 despite the absence of a recorded deed.



This Court  has jurisdiction of this matter pursuant to 28 U.S.C. § 1334. This

contested  matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), and

(O), 11  U.S.C. § 552, N.Y. C.P.L.R. § 5206 and Rule 4003 of the Federal Rules  of

Bankruptcy Procedure. The Court finds the Debtor's claim for a  homestead

exemption to be proper and the Trustee's objection is overruled.  The following

constitutes the Court's findings of fact and conclusions of law  as mandated by

Rule 7052 of the Federal Rules of Bankruptcy  Procedure.



On March 10, 2008, the Debtor filed a  voluntary Chapter 7 petition. Kenneth

Kirschenbaum, Esq. was appointed as the  Chapter 7 Trustee. Subsequent to the

bankruptcy filing, the Debtor timely  filed her Schedule C to the petition, which

claimed a homestead exemption  pursuant to N.Y. C.P.L.R. § 5206 (McKinney 

2005)

in the sum of $ 50,000.00  with respect to the Property where she resides. In

response, the Trustee  filed a timely objection to the Debtor's claim of a

homestead exemption based  on his conclusion that the Debtor did not have 

legal

title to the Property  (the "Objection") on May 22, 2008. A hearing on the

Trustee's Objection was  held on July 15, 2008. In the period between the

Trustee's filing of an  objection to the Debtor's claim for a homestead 

exemption

and the hearing,  the Debtor received her discharge. The Trustee and the 

Debtor

each submitted  post-hearing memorandum of law.



STATEMENT OF  FACTS



The Debtor's father died intestate in September  1978 and the Property where

the Debtor lives represents the main asset of the  decedent's estate. The 

Debtor

and her three siblings are the heirs to her  father's decedent estate. The 

Debtor

resided at the Property from 1963  through 1981. After the death of her 

husband,

the Debtor moved back to the  Property with her children in 2002 and has since

occupied it continuously as  her primary residence. On December 22, 2004, 

Darlene

Murch, the Debtor's  sister, was appointed Administrator to the decedent's 

estate

(the  "Administrator"), which has not yet been settled. The last recorded deed

with  respect to the Property is a Quitclaim Deed from the County of Suffolk  

to

Darlene Murch as Administrator of the decedent's estate, dated May 10,  2005, 

as

a result of a satisfaction of a tax lien against the Property by  the

Administrator.



DISCUSSION



New York State  has opted out of the federal exemptions as allowed pursuant to

11 U.S.C. §  522 (b) and N.Y. DEBT. & CRED. LAW § 284 (McKinney's 2001).

Therefore,  New York law governs claims for exemptions relating to real and

personal  property of the Debtor's bankruptcy estate.



New York  law provides a homestead exemption for real property "not exceeding

fifty  thousand dollars in value above liens and encumbrances, owned and 

occupied

as  a principal residence." N.Y. C.P.L.R. § 5206(a) (emphasis added). The  

Trustee

has the burden of proving that the exemption is not properly claimed.  Fed. 

R. of

Bankr. P. 4003(c). In order to be entitled to a homestead  exemption, N.Y.

C.P.L.R. § 5206 requires evidence of two things: an ownership  interest in 

real

property and residency by the Debtor in that  property.



It is undisputed that the Debtor occupies the  Property as her principal

residence and did so at the time she filed for  bankruptcy. The Trustee, 

however,

asserts the Debtor does not have an  ownership interest in the Property 

because

N.Y. REAL PROP. LAW §  290(3)(McKinney's 2006) requires ownership of property 

to

be conveyed by  written deed and there is no recorded deed in the Debtor's 

name.

Section  290(3) of N.Y. REAL PROP. LAW sets forth the term "conveyance"  to

include:





every written  instrument, by which any estate or interest in real

property is created, transferred, mortgaged or assigned, or by which

title to any real property may be affected, including an instrument  in

execution of a power, although the power to be one of  revocation only,

and an instrument postponing or  subordinating a mortgage lien; except

a will, a lease for  a term not exceeding three years, an executory

contract  for the sale or purchase of lands, and an instrument

containing a power to convey real property as the agent or attorney

for the owner of such property.





There is generally no  written instrument of transfer when a distributee 

obtains

an interest in real  property by intestacy pursuant to N.Y. EST. POWERS & 

TRUSTS

LAW § 4-1.1  (McKinney's 1998). While N.Y. EST. POWERS & TRUSTS LAW § 1-2.15

defines  "property" to be anything that may be the subject of ownership, and 

is

real  or personal property", it does not discuss the meaning of "ownership".  

In

addition, the definition of "distributee" under N.Y. EST. POWERS &  TRUSTS 

LAW §

1-2.5 does not hold that property vests in a distributee upon  the death of an

intestate owner but only states that a "distributee is a  person entitled to 

take

or share in the property of a decedent under the  statues governing descent 

and

distribution." Accordingly, the Trustee argues  that the Debtor's interest in 

the

Property as a distributee of her father's  estate is insufficient to meet the

ownership requirement of N.Y. C.P.L.R. §  5206 without a deed. The Trustee

asserts that the requirement of a deed  showing an ownership interest is

consistent with New York being a "title  state" for purposes of providing 

notice

to creditors and that the only way  the Debtor can come into title is if and 

when

the Administrator executes and  delivers a deed to the Debtor. Accordingly, 

the

Trustee argues that the  Debtor is not entitled to a homestead exemption for  

the

Property.



While the Court finds that the cases  relied upon by the Debtor are

distinguishable, the Trustee's decision to look  solely to N.Y. REAL PROP. 

LAW §

290 for a definition of ownership in real  property is also misplaced. Bankru

ptcy

courts have interpreted N.Y. C.P.L.R.  § 5206 to require an ownership 

interest in

the property, but not necessarily  a written deed. See, e.g., In re Nye, 250 

B.R.

46, 49 (Bankr. W.D.N.Y 2000)  (holding that New York's homestead exemption

applies to the extent of the  Debtor's ownership interest in the residence).

While one court, In re de  Kleinman, 172 B.R. 764, 771-72 (Bankr. S.D.N.Y. 

1994),

has interpreted N.Y.  C.P.L.R. § 5206 to require "good legal title" by the 

debtor

for her to be  entitled to a homestead exemption, this Court notes that the 

court

in de  Kleinman based its holding on an old edition of Black's Law  Dictionary

defining ownership as: "[t]he complete dominion, title, or  property right in 

a

thing or claim." BLACK'S LAW DICTIONARY 1106 (6th ed.  1990)("Black's"). 

Black's

current edition, however, no longer defines  ownership in the context of 

title.

See BLACK'S LAW DICTIONARY 1138 (8th ed.  2004). Moreover, it would be 

improper

to apply de Kleinman's unique holding  here, because in de Kleinman the debtor

had no ownership interest in her  condominium apartment because the 

condominium

board of directors had voided  her purchase of the apartment; whereas in this

case, the Debtor obtained her  interest in the Property through state laws

concerning  intestacy.



N.Y. EST. POWERS & TRUSTS LAW is as  effective as N.Y. REAL PROP. LAW and more

applicable under the facts and  circumstances of this case for purposes of

determining ownership in real  property. Indeed, New York state and bankruptcy

courts have found ownership  in real property vests in a distributee 

immediately

upon an intestate death  by operation of statutory authority pursuant to N.Y.

EST. POWERS & TRUSTS  LAW § 4-1.1. See, e.g., Burg v. City of Buffalo, 295 

B.R.

698, 702 (Bankr.  W.D.N.Y. 2003) ("[T]itle to real estate upon the death of 

the

owner vests  immediately in his heirs and devisees." (quoting Kingsland v. 

Murray

, 133  N.Y. 170, 174, 30 N.E. 845, 846 (N.Y. 1892))); In re Estate of Fry, 28

Misc.  2d 949, 950, 218 N.Y.S.2d 755, 757 (N.Y. Sur. Ct. 1961)("On death, 

title

to  all real property of a decedent which is not disposed of by will,  vests

immediately in the distributees entitled to take under the statute.").  Cf.

Kraker v. Roll, 100 A.D.2d 424, 429, 474 N.Y.S.2d 527, 531 (N.Y. App.  Div. 

1984)

("[V]esting by descent occurred by operation of law, irrespective  of the

apparent failure to appoint an administrator or to file new deeds."  (citing

Singer v. Levine, 15 Misc.2d 785, 786-87, 181 N.Y.S.2d 699, 701 (N.Y.  Sup. 

Ct.

1958)). The law's desire to avoid any "hiatus of ownership," In re  Williams'

Estate, 162 Misc. 507, 509, 295 N.Y.S. 56, 58 (N.Y. Sur. Ct. 1937),  aff'd, 

254

A.D. 741, 4 N.Y.S.2d 467 (N.Y. App. Div. 1938), goes so far as to  immediately

vest ownership of property in anyone, even the State, if there is  an 

intestate

death without heirs. See, In re Estate of Clark, 69 Misc. 2d  498, 499, 329

N.Y.S.2d 995, 997 (N.Y. Sur. Ct. 1972) ("Upon death the title  to real 

property

never lapses but vests in someone -- distributee, specific  legatee, residuary

legatee, trustee, or in the case of intestate death  without heirs the 

State.").

Accordingly, an ownership interest, sufficient to  satisfy N.Y. C.P.L.R. § 

5206,

vests in a distributee immediately upon an  intestate death.



While the deed to the Property is in  the name of the Administrator, under New

York law, representatives in the  form of administrators or executors, receive

"possession or management" of  the property strictly "for certain limited

purposes if the circumstances so  require." In re Baker, 164 Misc. 92, 93, 298

N.Y.S. 261, 264 (N.Y. Sur. Ct.  1937). What rights the administrator may 

exercise

as a fiduciary with respect  to real property is limited to the rights set 

forth

in N.Y. EST. POWERS &  TRUSTS LAW § 11-1.1. See, Singer v. Levine, 15 Misc.2d 

at

786-87, 181  N.Y.S.2d at 701 (N.Y. Sup. Ct. 1958). While the Administrator was

not  appointed until 2004 and the decedent's estate has not yet been  settled,

these factors do not contradict the Debtor's receipt of an ownership  interest to

the Property upon her father's death and she continues to hold an  ownership

interest in the Property. Although the Trustee has alleged that the  delay in

settling the estate has negatively affected at least two judgment  creditors, no

evidence that these creditors exist or that the delay has  adversely affected

them has been presented to this Court. In any event,  whatever legal rights these

alleged judgment creditors have as secured  creditors, if any, are not affected

by this  decision.



In this case, as of the date of the filing of  this bankruptcy petition, the

Debtor clearly had a legal ownership interest  in the Property by operation of

N.Y. EST. POWERS & TRUSTS LAW § 4-1.1 as  well as the required residency in the

Property pursuant to N.Y. C.P.L.R. §  5206.



CONCLUSION



Based upon the foregoing, the  Debtor is entitled to claim a homestead

exemption under N.Y. C.P.L.R. § 5206  with respect to the Property. The 

Trustee's

Objection is  overruled.



Dated: Central Islip, New  York



August 18 2008



/s/  Dorothy Eisenberg



Dorothy  Eisenberg



United States Bankruptcy Judge