Amelia M Soto

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK FOR PUBLICATION
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In re: Chapter 7
AMELIA M. SOTO,
Case No. 13-13208 (BRL)
Debtor.
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APPEARANCES:
SEYFARTH SHAW LLP
620 Eighth Avenue
New York, NY 10018
Telephone: (212) 218-5500
Facsimile: (917) 344-1202
By: Pinchos N. Goldberg, Esq.
Counsel for Tausik Brothers LLC
LANCE ROGER SPODEK, P.C.
330 West 58 Street
Suite 306
New York, NY 10019
Telephone: (212) 586-8606
Facsimile: (212) 586-8624
By: Lance Roger Spodek
Counsel for the Debtor
Before: Hon. Burton R. Lifland
United States Bankruptcy Judge
MEMORANDUM DECISION SUSTAINING TAUSIK BROTHERS LLC’S OBJECTION
TO DEBTOR’S SECTION 362(l)(1) CERTIFICATION
Before the Court is the objection (the “Objection”) of Tausik Brothers LLC (“Tausik”) to
Amelia M. Soto’s (the “Debtor”) certification made pursuant to section 362(l)(1) of the United
States Bankruptcy Code (the “Code”). For the reasons set forth below and at the hearing, the
Objection is SUSTAINED.
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BACKGROUND
Tausik leased apartment 16-H/N of 301 East 21st Street, New York, NY (the
“Apartment”) to the Debtor pursuant to a lease (the “Lease”) which expired nearly two years ago
on December 31, 2011. See Objection (Dkt. No. 7), p. 1. After the Debtor failed to vacate the
Apartment in January 2012, Tausik commenced a summary holdover proceeding (the “Holdover
Proceeding”) against the Debtor before the Civil Court of the City of New York (the “State
Court”). See id. at p. 2. The State Court held a trial at which the Debtor put forth a defense on
the merits, which included the filing of multiple orders to show cause that were denied. See
Tausik Brothers LLC’s Reply in Further Support of Its Objection to Debtor’s Section 362(l)(1)
Certification [hereinafter the “Reply”] (Dkt. No. 14), p. 3. On March 5, 2013, the State Court
awarded Tausik a judgment of possession (the “Judgment”), but stayed execution of the warrant
of eviction until September 4, 2013. See Objection, p. 2. The Judgment thus gave the Debtor six
months to vacate the Apartment, but required her to pay Tausik for use of occupancy of the
Apartment during the stay of execution as well as nearly $40,000 in attorneys’ fees. See id.
During such time, the Debtor had the opportunity to move for a stay and perfect an appeal in
state court. Rather than vacate the Apartment, however, the Debtor filed for bankruptcy on
October 1, 2013. See id.
On the second page of her bankruptcy petition, the Debtor certified pursuant to section
362(l) of the Code (“Section 362(l)”) that (1) Tausik has the Judgment against her; (2) there are
circumstances under applicable non-bankruptcy law under which she would be permitted to cure
the entire monetary default giving rise to the Judgment; (3) she deposited with the court thirty
days post-petition rent; and (4) she served Tausik with the certification. See Voluntary Petition
(Dkt. No. 1), p. 2. Tausik filed the instant Objection to the Debtor’s certification on October 15,
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2013. The Debtor filed her opposition (the “Opposition”) to the Objection on October 22, 2013.
See Affirmation in Support of Continuation of Stay (Dkt. No. 9). Tausik then filed the Reply on
October 24, 2013. On October 25, 2013, the Clerk of the Court issued a notice to the Debtor and
Tausik stating that the debtor failed to satisfy the requirements of Section 362(l)(1)(B) and Local
Rule 4001-1.1. See Notice to Debtor and Landlord (Dkt. No. 11), p. 1.
DISCUSSION
Section 362(b)(22) of the Code (“Section 362(b)(22)”) terminates the automatic stay as to
residential eviction proceedings by lessors that have obtained a prepetition judgment for
possession of property. 11 U.S.C. § 362(b)(22). However, Section 362(l) provides a safe harbor
from the operation of Section 362(b)(22) if the debtor (1) certifies that circumstances exist under
applicable non-bankruptcy law that would allow the debtor to cure the entire monetary default;
and (2) deposits with the bankruptcy court clerk all rent due to the landlord within the thirty-day
period following the bankruptcy filing. 11 U.S.C. § 362(l). Local Rule of Bankruptcy Procedure
4001-1.1 (“Local Rule 4001-1.1”) further provides that a debtor is deemed to comply with
Section 362(l)(1) by (1) checking the appropriate boxes on the petition; and (2) delivering to the
clerk of the bankruptcy court a certified cashier’s check or money order payable to the lessor in
the amount of thirty days post-petition rent as well as a copy of the judgment of possession.
L. R. Bankr. P. 4001-1.1. If the debtor satisfies these requirements, the stay is re-imposed for
thirty days to allow the debtor to cure the entire default and file a second certification that it has
done so. 11 U.S.C. § 362(l); see also In re Williams, 371 B.R. 102, 106–07 (Bankr. E.D. Pa.
2007). If a debtor fails to perform either certification or the court upholds the lessor's objection
to a certification, “subsection (b)(22) shall apply immediately,” and “relief from the stay
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provided under subsection (a)(3) shall not be required to enable the lessor to complete the
process to recover full possession of the property.” 11 U.S.C. §§ 362(l)(3)(B)(i), (l)(4)(A).
The Objection presents the issue of whether the Debtor’s certification meets the
requirements of Section 362(l)(1) so as to circumvent Section 362(b)(22) and thereby
temporarily re-impose the automatic stay. The Court finds that the Debtor’s certification fails for
two reasons. First, the Debtor cannot certify that there are circumstances under applicable non-
bankruptcy law under which the debtor would be permitted to cure the entire monetary default
giving rise to the Judgment as required by Section 362(l)(1)(A). Second, the Debtor did not
deposit with the Clerk of the Court thirty days post-petition rent as required by Section
362(l)(1)(B) and Local Rule 4001-1.1. Moreover, the Court finds no basis to invoke its equitable
powers under section 105(a) of the Code (“Section 105(a)”) to waive the requirements of Section
362(l).
I. The Debtor Cannot Comply With Section 362(l)(1)(A) Because the Judgment
Arose from a Non-Monetary Default
Section 362(l)(1)(A) requires the Debtor to certify that “under nonbankruptcy law
applicable in the jurisdiction, there are circumstances under which the debtor would be permitted
to cure the entire monetary default that gave rise to the judgment for possession, after that
judgment for possession was entered.” 11 U.S.C. § 362(l)(1)(A) (emphasis added). Here, the
Judgment did not arise from a monetary default. Rather, it arose from the expiration of the
Lease, a non-monetary default. Section 362(l) of the Code does not prevent the operation of
Section 362(b)(22) where the judgment of possession is based on a non-monetary default. See In
re Griggsby, 404 B.R. 83, 88–89 (Bankr. S.D.N.Y. 2009) (holding that Section 362(l) does not
apply where the judgment of possession is based on a non-monetary default); In re Harris, 424
B.R. 44, 54 (Bankr. E.D.N.Y. 2010) (“Section 362(l) does not protect a debtor from the
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operation of Section 362(b)(22) when a landlord's underlying judgment of possession is based on
a non-monetary default.”); In re Alberts, 381 B.R. 171, 177 n.5 (Bankr. W.D. Pa. 2008) (holding
that Section 362(l)’s safe harbor does not apply where the “judgment [of possession] arose from
the Debtor's continued occupancy of the Premises as a holdover tenant after her right of
occupancy expired . . .”). Thus, the Debtor’s certification fails because the Judgment was not
based on a monetary default as is required for Section 362(l) to apply. Moreover, because the
Debtor defaulted by remaining in the Apartment past the expiration of the Lease, even if Section
362(l) did apply to nonmonetary defaults, the Debtor could only cure by vacating the Apartment.
II. The Debtor Did Not Comply With Section 362(l)(1)(B) and Local Rule 4001-1.1
Furthermore, Section 362(l)(1)(B) requires that “the debtor . . . deposit[] with the clerk of
the court, any rent that would become due during the 30-day period after the filing of the
bankruptcy petition.” 11 U.S.C. § 362(l)(1)(B). Local Rule 4001-1.1(a)(2) requires the Debtor
to “deliver[] to the Clerk, together with the Voluntary Petition (or within one day of the filing, if
the Voluntary Petition is filed electronically): (A) a certified or cashier’s check or money order,
made payable to the lessor, in the amount of any rent that would become due during the thirty-
day period after the filing of the petition; and (B) a copy of the judgment of possession.” L. R.
Bankr. P. 4001-1.1(a)(2). If the debtor does so and the lessor does not object to the certification
within fourteen days, the Clerk of the Court then transmits the check to the lessor. See 11 U.S.C.
362(l)(5)(D); L. R. Bankr. P. 4001-1.1(b).
The Debtor did not comply with these requirements. The Debtor asserts that she
attempted to file a bank check with the Clerk of the Court for thirty days post-petition rent. See
Opposition, p. 2. However, the check was refused because it was made payable to the Clerk of
the Court rather than to Tausik (the lessor) as required by Local Rule 4001-1.1. See Objection,
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p. 4; see also L. R. Bankr. P. 4001-1.1 (requiring the post-petition rent check to be made payable
to the lessor and then transmitted by the Clerk of the Court to the lessor). In any event, the bank
check was not filed nor turned over to Tausik. Further, there is no indication that the Debtor
attempted to file a copy of the Judgment with the Clerk of the Court. Indeed, on October 23,
2013, the Clerk of the Court issued to the Debtor and Tausik a notice that the debtor failed to
satisfy the requirements of Section 362(l)(1)(B) and Local Rule 4001-1.1, along with a certified
copy of the docket report. See Notice to Debtor and Landlord (Dkt. No. 11); Certified Copy of
Docket Report (Dkt. No. 12).
III. It Is Inappropriate For The Court To Invoke Section 105(a) To Waive The
Requirements Of Section 362(l)
The Debtor argues that the particular circumstances of this case provide a basis for this
Court to invoke its equitable powers under Section 105(a) to continue the stay for a limited
period of time. However, “it is not appropriate to employ section 105(a) when doing so would
subvert the clear provisions of sections 362(b)(22) and 362(l) and would impair rights or create
additional rights that are not provided by the Code.” In re Tucker, No. 05-15001, 2005 WL
5607595 (Bankr. N.D. Ga. Nov. 18, 2005); see also Norwest Bank Worthington v. Ahlers, 485
U.S. 197, 206 (1988) (finding that “whatever equitable powers remain in the bankruptcy courts
must and can only be exercised within the confines of the Bankruptcy Code.”); In re Smart
World Technologies, LLC, 423 F.3d 166, 183–84 (2d Cir. 2005) (“This Court has long
recognized that Section 105(a) limits the bankruptcy court's equitable powers, which must and
can only be exercised within the confines of the Bankruptcy Code.”) (quotations omitted).
Indeed, Section 105(a) is “not a license for a court to disregard the clear language and meaning
of the bankruptcy statutes and rules.” Official Comm. of Equity Sec. Holders v. Mabey, 832 F.2d
299, 302 (4th Cir. 1987).
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Here, re-imposing the stay would prevent Tausik from exercising its substantive rights
under Section 362(b)(22). Tausik has been entitled to possession of the apartment for nearly two
years. The Debtor has had the full opportunity to defend on the merits in the Holdover
Proceeding. Indeed, the State Court denied the Debtor’s multiple orders to show cause
challenging the Judgment. Moreover, the Judgment stayed execution of the warrant of eviction
for six months, providing the Debtor the opportunity to seek to vacate the warrant and appeal the
Judgment. Accordingly, the Court finds no basis to employ its equitable powers under Section
105(a) under these circumstances.
CONCLUSION
In light of the foregoing, the Objection is SUSTAINED. Tausik is directed to submit an
order consistent with this Bench Memorandum.
Dated: October 29, 2013
New York, New York
/s/ Burton R. Lifland
______________________________
Burton R. Lifland
United States Bankruptcy Judge
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