In the Matter of Mary Veronica Santiago-Monteverde. Mary Veronica Santiago-Monteverde, Appellant,v.John S. Pereira,, Respondent.BriefN.Y.October 14, 2014 To Be Argued By: Ronald J. Mann Time Requested: 30 minutes CTQ-2014-00004 Court of Appeals STATE OF NEW YORK ————————————►►◄◄———————————— IN THE MATTER OF MARY VERONICA SANTIAGO-MONTEVERDE, Debtor, MARY VERONICA SANTIAGO-MONTEVERDE, Appellant, v. JOHN S. PEREIRA, Chapter 7 Trustee, Respondent. On a Question Certified by the United States Court of Appeals for the Second Circuit (USCOA Docket No. 12-4131-bk) BRIEF FOR APPELLANT Ronald J. Mann Of the Texas bar, admitted pro hac vice 435 W. 116th Street New York, NY 10027 (212) 854-1570 Date Completed: July 11, 2014 Kathleen G. Cully PLLC 180 Cabrini Boulevard, #128 New York, NY 10033 Telephone: (212) 447-9882 Facsimile: (800) 979-0423 (Kathleen G. Cully of counsel) Related Litigation Appellant’s bankruptcy case (Docket No. 11-15494 in the Bank- ruptcy Court of the Southern District of New York) is ongoing. While this case was pending in the United States Court of Appeals for the Second Circuit (the “Second Circuit”), the bankruptcy court entered an order for the sale of appellant’s interest in her lease (A355- A3591). Both that order and another were appealed to the federal district court (A370). On June 27, 2014, the district court entered an order remanding the case to the bankruptcy court for further find- ings (A371). In response, the bankruptcy court has scheduled a status conference for July 15, 2014. The Second Circuit granted a stay of the sale order “pending resolution of this appeal” (A369). Under Second Circuit Local Rule 27-2, the federal court of appeals “retains jurisdiction pending the state court’s response to the certified question.” Because this matter has been stayed in the Second Circuit “pending” this Court’s re- sponse (A324), the stay remains in effect while this Court considers the certified question. 1 References in this brief beginning with the letter “A” are to pages of the Appendix filed herewith. Table Of Contents Page Related Litigation ........................................................................................... i Jurisdictional Statement .............................................................................. 1 Question Certified To This Court .............................................................. 1 Statement Of The Case ................................................................................ 2 Statement Of Facts ........................................................................................ 3 Summary Of Argument ................................................................................ 5 Argument ........................................................................................................ 8 I. The Rent-Stabilization Program Implements Crucial Local Policies To Protect NYC Residents. .................................................. 8 II. The Rent-Stabilization Program Provides A “Local Public Assistance Benefit.” .......................................................................... 15 A. Section 282 (2) Exempts “Local Public Assistance Benefits” From Appellant’s Bankruptcy Estate. .................... 16 B. The Rent-Stabilization Program Provides “Local Public Assistance Benefits.” ................................................................... 17 Iii. It Would Be Incongruous To Permit Creditors To Profit From The Interest In A Rent-Stabilized Lease Of A Tenant In Bankruptcy When They Cannot Reach That Interest Under State Law. ................................................................................ 26 Conclusion .................................................................................................... 29 ii Table Of Authorities Page(s) Cases Braschi v. Stahl Assoc. Co., 74 NY2d 201 [1989] ........................................................................ passim Chatham Phenix Nat’l. Bank v Crosney, 251 NY 189 [1929] ................................................................................... 18 Federal Home Loan Mtge. Corp. v. New York State Div. of Hous. & Community Renewal, 87 NY2d 325 [1995] ................................................................................ 11 In re Wilson, 305 BR 4 [ND Iowa 2004] ....................................................................... 17 Kashi v. Gratsos, 712 F Supp 23 [SDNY 1989] ................................................................... 28 KLC, Inc. v. Trayner, 426 F3d 172 [2d Cir 2005] ..................................................................... 18 Manocherian v. Lenox Hill Hosp., 84 NY2d 385 [1994] ........................................................................ passim Marigo Corp. v. Lavian, 277 AD2d 148 [1st Dept 2000] ...................................................... 13, 27 Matter of Keil, 88 F2d 7 [2d Cir 1937] ............................................................................ 18 Matter of Longstreet, 246 BR 611 [Bankr SD Iowa 2000] ........................................................ 17 Matter of Lowe, 252 BR 614 [Bankr. W.D.N.Y. 2000] ...................................................... 18 Matter of Moulterie, 398 BR 501 [Bankr EDNY 2008] ............................................................ 18 Matter of Park W. Vil. v. Lewis, 62 NY2d 431 [1984] ..................................................................... 9, 11, 29 Matter of Tall Trees Constr. Corp. v Zoning Bd. of Appeals of Town of Huntington, 97 NY2d 86 [2001] ................................................................................... 16 Matter of Viemeister, 179 NY 235 [1904] ................................................................................... 14 iii People v Widmer, 137 AD 2d 929 [App Div 1988] ............................................................. 24 Schwartz v. Holzman, 69 F2d 814 [2d Cir 1934] ....................................................................... 18 State v. John S., ___ NY3d ___, 2014 NY Slip Op 03292 [2014] .................................... 15 Constitutional Provisions NY Constitution article VI, § 3 (b) (9) ........................................................ 1 Statutes 11 USC § 522 (b) (3) ........................................................................... 2, 4, 16 11 USC § 522 (d) (10) (A) ........................................................................... 17 Administrative Code of City of NY § 26-405 (m) ............................. 3, 13 Administrative Code of City of NY § 26-511 (c) (9) ............................. 12 Administrative Code of City of NY § 26-512 (a) ................................... 12 Administrative Code of City of NY §§ 26-501-530 ................................ 3 CLS Uncons Laws of NY ch 249-A, § 5 [Local Emergency Housing Rent Control Act § 5, as added by L 1962, ch 21, sec 1, as amended] ................................................................................................... 12 CLS Uncons Laws of NY ch. 249-A, § 10 (1) [Local Emergency Housing Rent Control Act § 10 (1), as added by L 1962, ch 21, sec 1, as amended] ......................................................................................... 12 CPLR 5201 (b) ........................................................................................... 8, 28 Local Law No. 16 § 1 [2012] of City of NY ...................................... 10, 21 McKinney’s Uncons Laws of NY § 8622, [Emergency Tenant Protection Act of 1974 [ETPA] § 2, as added by L 1974, ch 576, sec 4, as amended] ................................................................................ 7, 9, 13 McKinney’s Uncons Laws of NY § 8623, [Emergency Tenant Protection Act of 1974 [ETPA] § 3, as added by L 1974, ch 576. sec 4, as amended] ..................................................................................... 9, 19 NY Real Property Law § 226-b (1) ............................................................ 27 Penal Law § 155.00 (7-b) ............................................................................ 23 Penal Law § 158.00 (a) ................................................................................ 23 Penal Law § 158.00 (c) ................................................................................ 23 Penal Law §§ 180.54 - .57 .......................................................................... 28 Rent Stabilization Code [9 NYCRR] § 2524.1 (a) ................................... 12 Rent Stabilization Code [9 NYCRR] § 2525.1 ........................................ 12 iv Rent Stabilization Code [9 NYCRR] § 2525.6 (b) .................................. 27 Rent Stabilization Code [9 NYCRR] § 2525.6 (d) .................................. 27 Rent Stabilization Code [9 NYCRR] part 2520 ........................................ 3 Rent Stabilization Law [Administrative Code of City of NY] .................................. 3, 10, 13, 27 Rules 22 NYCRR 500.27 .......................................................................................... 1 2d Cir R 27.2 .................................................................................................. 1 Treatises Antonin Scalia and Bryan A. Garner, Reading Law: The Interpretation of Legal Texts [2012] .................................................... 25 Daniel Finkelstein & Lucas A. Ferrara, Landlord and Tenant Practice in New York [West's NY Prac Series, vol F, 2010]). ............ 13 McKinney’s Cons Laws of NY, Book 1, Statutes ............................. 11, 15 Other Authorities American Heritage College Dictionary [3rd ed 1993] .......................... 19 Andrea Elliott, A Future Rests on a Fragile Foundation, NY Times, Dec. 9, 2013 ........................................................................... 14 Andrea Elliott, A Profound Divide in a Neighborhood Transformed, NY Times, Dec. 11, 2013 ........................................................................ 14 Andrea Elliott, Amid Repressed Hopes, Reasons to Dream, NY Times, Dec. 13, 2013 ........................................................................ 14 Andrea Elliott, At Council Hearing, Calls for New York to Offer Homeless Children and Families More Aid, NY Times, Feb. 27, 2014 ......................................................................... 14 Andrea Elliott, Finding Safety and Strength in the Bonds of Her Siblings, NY Times, Dec. 12, 2013 ........................................................................ 14 Andrea Elliott, Girl in the Shadow’s: Dasani’s Homeless Life, NY Times, Dec. 8, 2013 ........................................................................... 14 Ian Frazier, Hidden City, New Yorker, Oct. 28, 2013 ..................................................................... 14 Mireya Navarro, Homeless Tally Taken in January Found 13% Rise in New York, v NY Times, Nov. 21, 2013 ........................................................................ 14 Mireya Navarro, In New York, Having a Job, or 2, Doesn’t Mean Having a Home, NY Times, Sept. 17, 2013 ....................................................................... 14 Moon Wha Lee, Selected Initial Findings of the 2011 New York City Housing and Vacancy Survey [2012] ........................................... 12 Oxford English Dictionary [2014] ............................................................ 19 The New Oxford American Dictionary [2d ed 2005] ........................... 20 Uniform Exemptions Act [1976, as amended 1979] ............................ 17 vii Jurisdictional Statement This Court has jurisdiction over the certified question relating to the parties’ appeal pursuant to New York Constitution article VI, § 3 (b) (9), which permits the New York Court of Appeals to accept questions of law certified by “a court of appeals of the United States.” By order dated March 31, 2014, the United States Court of Appeals for the Second Circuit certified to this Court the question stated below pursuant to Local Rule 27.2 of that court (A334). By order dated May 13, 2014, this Court accepted the certified question pursuant to 22 NYCRR 500.27. Question Certified To This Court The following question was certified by the Second Circuit and accepted by this Court: Whether a debtor-tenant possesses a property interest in the protected value of her rent-stabilized lease that may be exempted from her bankruptcy estate pursuant to New York State Debtor and Creditor Law Section 282 (2)2 as a “local public assistance benefit”? 2 References in this brief to Section 282 refer to Debtor and Creditor Law § 282. The Court should answer the certified question in the affirma- tive. Statement Of The Case This case arises out of the Chapter 7 bankruptcy proceeding of appellant, Mary Veronica Santiago-Monteverde. Appellant resides in a rent-stabilized apartment in New York City. Although she was not in default under her lease, the trustee in the bankruptcy proceeding decided to sell appellant’s interest under the lease to her landlord, in return for a monetary payment from the landlord to the bank- ruptcy estate. The sale of the lease would result in the termination of appellant’s tenancy under the lease and (in the landlord’s view) free the landlord from rent stabilization. Appellant argued in the federal courts that her rights under the rent-stabilization regime were a “local public assistance benefit” as defined in Section 282 (2) of the Debtor and Creditor Law, exempt from administration in bankruptcy under Section 522 (b) (3) of the bankruptcy code,3 and hence protected from sale. Although the bankruptcy court and the 3 References in this brief to the bankruptcy code refer to Title 11 of the United States Code. 2 district court disagreed, the federal court of appeals has certified the question for definitive resolution by this Court. Statement Of Facts 1. Appellant many years ago4 signed a lease5 with her hus- band, Hector, for an apartment at E. 7th Street in New York City, where she has resided ever since. Upon the enactment of New York’s Rent Stabilization Law (Administrative Code of City of NY) in 1969, the lease became rent-stabilized. Among other things, that law and related regulations subject rent increases and evictions of cov- ered tenants to the review and approval of New York’s Division of Housing and Community Renewal (A325, A355; see generally Ad- ministrative Code §§ 26-501-530; Rent Stabilization Code [9 NYCRR] part 2520). 2. After the death of her husband, appellant was unable to make minimum payments on her credit card accounts and accord- ingly sought relief under Chapter 7 of the bankruptcy code. During 4 Although the record does not indicate appellant’s precise age, it does show that she was at least 62 when the proceeding began, because she then was receiving senior citizen rent increase exemption (“SCRIE”) benefits under New York City law (A035; see Administrative Code § 26-405 (m)). 5 The lease is not in the record. 3 the pendency of bankruptcy proceedings, she has continued to pay her rent and has performed all her lease obligations. During the course of those proceedings, appellant’s landlord, approached re- spondent (the trustee of appellant’s bankruptcy estate), offering to buy appellant’s interest in the lease (A75-76). When respondent advised appellant that he planned to sell appellant’s interest in the lease, appellant claimed that the value of her rent-stabilization ben- efits were was exempt from her estate under Section 522 (b) (3) of the bankruptcy code (A67). 3. The bankruptcy court (Judge Peck) ruled that the exemp- tion was not available to appellant (A093-A100), suggesting that the value of the rent-stabilization regime to appellant “is a quirk of the regulatory scheme in the New York housing market, not an individ- ual entitlement” (A99). 4. The United States District Court for the Southern District of New York (Judge Castel) affirmed (A154-A157). Like the bank- ruptcy court, the district court founded its analysis on the view that the value of the rent-stabilization regime to appellant is merely “a collateral consequence of the regulatory scheme” (A156). 4 5. After receiving briefs and hearing oral argument, the United States Court of Appeals for the Second Circuit certified the question to this Court (A324-A333). The federal court of appeals noted that “neither the Court of Appeals nor lower New York courts have addressed” the meaning of the reference in Section 282 (2) to “local public assistance benefit” that is at issue in this case (A333). Because this “prevent[ed that court] from making any confident prediction of how the New York Court of Appeals would resolve this issue” (id.), it certified the question to this Court. 6. This Court accepted the certification in an order issued May 13, 2014. Summary Of Argument The analysis of the lower federal courts reflects a fundamental misapprehension about the proper course of statutory construction under the precedents of this Court. Those courts started from the premise that the State’s rent-stabilization regime is an anachronistic and ill-conceived interference in the market for rental housing in New York City. Reasoning from that premise, they concluded that it was inappropriate to apply Debtor and Creditor Law § 282(2) in accordance with its terms, exempting appellant’s “local public assis- 5 tance benefits” from administration by the bankruptcy court. The proper course of action would have been to look first to the natural reading of Section 282, and then to turn to external concerns of context and policy only to resolve any lack of clarity in the language that the legislature has chosen. To assist this Court in correcting the error of the lower federal courts, we start below from the same place as those courts – sum- marizing the role that the rent-stabilization regime plays under New York law. Contrary to the view of those courts, the legislature and this Court repeatedly have emphasized the role of that regime in responding to a continuing emergency involving the “widespread lack of suitable dwellings” in New York City (e.g., Manocherian v. Lenox Hill Hosp., 84 NY2d 385, 395 [1994]). The benefits of that regime for rent-paying tenants like appellant are neither “collateral” nor a “quirk” of happenstance. To the contrary the regime is explic- itly directed against the “profiteering” and “speculation” (McKinney’s Uncons Laws of NY § 8622, [Emergency Tenant Protec- tion Act of 1974 [ETPA] § 2, as added by L 1974, ch 576, sec 4, § 2, 6 as amended]) that would ensue were those premises routinely sub- ject to forced sale in the bankruptcy process. We turn then to the language of the exemption on which appel- lant relies, which ordinarily would be the clearest guide to the resolution of this matter. With little effort to examine the actual language, both of the lower federal courts concluded that the rent- stabilization program does not provide a “local public assistance benefit” to covered residents. A close reading of the actual language, however, compels a contrary conclusion: the benefit is locally estab- lished, provided by the public, and provided to assist and benefit those who receive it. Whatever other purposes rent stabilization might serve, the lower courts erred in overlooking the central pur- pose of that program to provide a “benefit” to the covered residents. More generally, the conclusion that creditors of a bankrupt can force a sale for their benefit of the tenant’s interest in a rent- stabilized lease cannot be reconciled with the State’s parallel pro- cesses for collection of debts outside of bankruptcy under State law. Because the tenant of a rent-stabilized lease cannot transfer her interest to a third party, her rights under that lease indisputably are 7 protected from creditors pursuing the state-law collection process under CPLR 5201 (b) )). Against that backdrop, it would be particu- larly incongruous to read the straightforward language of Section 282 as reflecting an intent to force a contrary resolution in the bankruptcy process – allowing a sale of rent-stabilized premises to raise money to pay creditors in bankruptcy that no creditor could force under state law. The simplest course for this Court is to apply the language of Section 282 as written, protecting appellant’s prem- ises from the reach of her creditors. Argument I. The Rent-Stabilization Program Implements Crucial Local Policies To Protect NYC Residents. The error of the lower federal courts was rooted in their deni- gration of the crucial role New York’s rent-stabilization program plays in the lives of New York residents. Those courts treated the program as something between a fortuitous convenience and a disagreeable and outmoded example of market intervention. But what is relevant for this Court is not the perspective of the lower federal court judges on the propriety of rent stabilization, but ra- 8 ther the purposes and effects of the program the legislature has adopted. There can be no doubt of “the legislative recognition of the plight of residential tenants residing in New York City” (Matter of Park W. Vil. v. Lewis, 62 NY2d 431, 436 [1984]). With respect to the covered residences, the legislature has concluded that rent stabiliza- tion is necessary [t]o prevent speculative, unwarranted and abnormal increases in rents, . . . to forestall profiteering, speculation and other dis- ruptive practices tending to produce threats to the public health, safety and general welfare, . . . and to prevent uncer- tainty, hardship and dislocation. (ETPA § 2). Nor does the program continue solely as a matter of inertia. On the contrary, the legislation mandates ongoing market analysis, so that rent-stabilization continues in any particular mu- nicipality only upon public findings of a current emergency (id. § 3). As relevant here, the rent-stabilization program continues in New York City upon the determination of the New York City Council “that a serious public emergency continues to exist in the housing of a considerable number of persons within the City of New York” 9 (Local Law No. 16 § 1 [2012] of City of NY (amending Administrative Code § 26-502 to include the quoted language)). The contrast between the jaundiced perspective of the lower federal courts and the perspective of this Court is striking. Most obviously, in its most detailed consideration of the program, this Court lauds “[t]he central, underlying purpose of the Rent Stabiliza- tion Law . . . to ameliorate the dislocations and risk of widespread lack of suitable dwellings” (Manocherian, 84 NY2d 385 at 395). This Court plainly understands the obvious: that the legislation is de- signed to and in fact does benefit the residents whom it shelters (see id. at 389 (emphasizing the “intractable housing emergency” that motivated the State to “protect dwellers who could not compete in an overheated rental market”)). In contrast to the courts below, which saw the benefits to ap- pellant as a “quirk” or “collateral consequence,” this Court has emphasized the “remedial nature” of the program, because of which that Court has “repeatedly interpreted laws regulating rents broadly to effectuate their intended purpose” (Federal Home Loan Mtge. Corp. v. New York State Div. of Hous. & Community Renewal, 87 10 NY2d 325, 332 [1995]). This Court justified that practice in detail in an earlier case: Statutes are ordinarily interpreted so as to avoid objectionable consequences and to prevent hardship or injustice. Hence, where doubt exists as to the meaning of a term, and a choice between two constructions is afforded, the consequences that may result from the different interpretations should be con- sidered. . . . [S]ince rent-control laws are remedial in nature and designed to promote the public good, their provisions should be interpreted broadly to effectuate their purposes. (Braschi v. Stahl Assoc. Co., 74 NY2d 201, 208 [1989]. See also Park W. Vil., 62 NY2d at 436 (explaining that “the problems associated with the acute shortage of residential housing in New York City demand that tenants be afforded more protection than would be available under an unduly restrictive interpretation of [the stat- ute].”); McKinney’s Cons Laws of NY, Book 1, Statutes § 341 (“Generally, statutes promoting the public good are liberally con- strued.”).) The rent-stabilization regime is a central pillar of the market for residential housing in the nation’s largest city. Although it is limited to tenants that fall below certain income or rent thresholds,6 6 See McKinney’s Uncons Laws of NY (Rent Act of 2011 § 9, as added by L 2011, ch 97, pt B); Administrative Code §§ 26-501.1-.3. As of 2010, the median income of tenants benefiting from rent-stabilized leases ($36,000) was consid- 11 it applied as of 2011 to more than 45% of the city’s rental housing inventory, or almost a million residences (Moon Wha Lee, Selected Initial Findings at 2 & Tab. 3 [2012]). The most well-known provi- sions limit unilateral rent increases (CLS Uncons Laws of NY ch 249- A, § 10 (1) [Local Emergency Housing Rent Control Act [LEHRCA] § 10 (1), as added by L 1962, ch 21, sec 1, as amended]; Administra- tive Code § 26-512 (a); Rent Stabilization Code § 2525.1. But the statute also obligates a landlord (with very narrow exceptions) to renew any covered lease as long as the tenant wishes to stay (LEHRCA § 5; Administrative Code § 26-511 (c) (9); Rent Stabiliza- tion Code § 2524.1 (a)). Thus, it ensures that a law-abiding tenant can remain in an apartment as long as the required rent is paid. In sum, however much a landlord might desire to regain control of covered apartments so as to sell them free and clear of rent- stabilized leases, New York law categorically forbids any such ac- tion. (See generally Daniel Finkelstein & Lucas A. Ferrara, Landlord erably lower than the median income of tenants in non-regulated apartments ($52,260, 145% of that of rent-stabilized households) or homeowners ($75,000, 208% of that of rent-stabilized households) (see Moon Wha Lee, Selected Initial Findings of the 2011 New York City Housing and Vacancy Survey of the 2011 New York City Housing and Vacancy Survey 5 & Tab 10 [2012]). 12 and Tenant Practice in New York §§ 2:129, 11:444 et seq. [West's NY Prac Series, vol F, 2010]).7 Given the factual context of this particular case, it also is rele- vant to note how clearly New York courts have recognized the legislature’s desire “to forestall profiteering, speculation and other disruptive practices tending to produce . . . uncertainty, hardship and dislocation” (Braschi, 74 NY2d at 208 (quoting ETPA § 2)). As the First Department pointedly put it, the “Rent Stabilization Law . . . was never intended ‘to create a class of mini-landlords who can profiteer in housing units placed under the law’s protection’” (Mari- go Corp. v. Lavian, 277 AD2d 148, 151 [1st Dept 2000] (quoting Rima 106 v Alvarez, 257 AD2d 201, 205 [1st Dept 1999])). Treating the tenant’s interest as an asset subject to the bankruptcy process would create – with this case a salient example – just such a class. 7 New York’s SCRIE program provides even stronger protections to appel- lant based on her advanced age (see A035 (notation that she is receiving SCRIE benefits). Because those benefits depend upon (and respond to) the more oner- ous hardships of the elderly, it is even harder to conclude that the program does not provide “benefits” to appellant than it would be in the case of a younger individual in a rent-stabilized apartment. (See Administrative Code § 26-405 (m) (discussing the particular hardship on the elderly of the New York City housing shortage and the consequent need for special protections for elderly tenants).) 13 In sum, this Court’s previous encounters with the State’s rent- stabilization regime document its understanding of the crucial role those statutes continue to play in the lives of so many of those who live in New York City.8 8 If it were relevant, this Court should take judicial notice, as a matter of indisputable “common knowledge” (Matter of Viemeister, 179 NY 235, 240-41 [1904]), of the continuing housing crisis in New York City (e.g., Mireya Navarro, In New York, Having a Job, or 2, Doesn’t Mean Having a Home, NY Times, Sept. 17, 2013 [Note: online edition] (discussing the increasing prevalence in New York City of “employed homeless” who, “given the shortage of subsidized housing,” cannot “escape the shelter system” even if they have jobs); Ian Fra- zier, Hidden City, New Yorker, Oct. 28, 2013 [Note: online edition] (“If all the homeless people who now live in New York City used the stadium for a gather- ing, several thousand of them would have to stand. More people in the city lack homes than at any time since . . . the Great Depression.”); Mireya Navarro, Homeless Tally Taken in January Found 13% Rise in New York, NY Times, Nov. 21, 2013 [Note: online edition] (explaining how the rise of homelessness in New York City “buck[s] a national trend” of declining homelessness, despite major efforts by the administration of Mayor Bloomberg to reduce homelessness)). The topic has received increasing public attention in 2014, as the City Coun- cil has turned to the topic in direct response to a Polk-award winning New York Times series on the plight of homeless children (see Andrea Elliott, At Council Hearing, Calls for New York to Offer Homeless Children and Families More Aid, NY Times, Feb. 27, 2014 [Note: online edition] (discussing hearings held in re- sponse to Andrea Elliott, Girl in the Shadow’s: Dasani’s Homeless Life, NY Times, Dec. 8, 2013 [Note: online edition]; Andrea Elliott, A Future Rests on a Fragile Foundation, NY Times, Dec. 9, 2013 [Note: online edition]; Andrea Elliott, A Profound Divide in a Neighborhood Transformed, NY Times, Dec. 11, 2013 [Note: online edition]; Andrea Elliott, Finding Safety and Strength in the Bonds of Her Siblings, NY Times, Dec. 12, 2013 [Note: online edition]; Andrea Elliott, Amid Repressed Hopes, Reasons to Dream, NY Times, Dec. 13, 2013 [Note: online edition])). 14 II. The Rent-Stabilization Program Provides A “Local Public Assistance Benefit.” Whatever the habits of the lower federal courts, the practices of New York courts interpreting statutes are plain and beyond con- troversy: “It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intent of the legislature. The start- ing point is always to look to the language itself and where the language of a statute is clear and unambiguous, courts must give effect to its plain meaning” (State v. John S., ___ NY3d ___, 2014 NY Slip Op 03292 [2014]). Indeed, this is not merely a matter of judicial preference or convenience, but a mandate of the legislature itself: “Where words of a statute are free from ambiguity and express plainly, clearly and distinctly the legislative intent, resort may not be had to other means of interpretation” (McKinney’s Cons Laws of NY, Book 1, Statutes § 76). To that end, “words are not to be reject- ed as superfluous,” but rather “statutes relating to the same subject matter must be construed together unless a contrary legislative intent is expressed, and courts must harmonize the related provi- sions in a way that renders them compatible” (Matter of Tall Trees 15 Constr. Corp. v Zoning Bd. of Appeals of Town of Huntington, 97 NY2d 86, 91 [2001]). Against that interpretive frame, the decisions of the courts be- low cannot withstand scrutiny. Far from any clear expression of an intent to upset New York’s long-standing rent-stabilization program, the text of Section 282 accommodates that regime so plainly that only a tortured and wooden application of the statutory text could countenance the conclusions of the lower federal courts. A. Section 282 (2) Exempts “Local Public Assistance Benefits” From Appellant’s Bankruptcy Estate. The specific question of statutory interpretation certified to this Court is the meaning of Debtor and Creditor Law § 282 (2). Section 282 sets forth a number of exemptions from a debtor’s estate in bankruptcy,9 including in particular: The debtor’s right to receive or the debtor’s interest in: (a) a social security benefit, unemployment compensation or a local public assistance benefit; (b) a veterans’ benefit; (c) a disability, illness, or unemployment benefit; (d) alimony, support, or sep- arate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor; and (e) all payments under a stock bonus, pension, profit sharing, or 9 Section 522 (b) (3) (A) of the bankruptcy code permits a debtor to ex- empt property that is exempt under applicable state law. Section 282 is the applicable New York statute, and thus governs the exemptions available to appellant in her bankruptcy proceeding. 16 similar plan or contract on account of illness, disability, death, age, or length of service. There is nothing unusual about that provision, which is in substance quite similar to exemptions federal law provides in Section 522 (d) (10) (A) of the bankruptcy code,10 and also to subsection 5 (3) of the Uniform Exemption Act promulgated by the Uniform Law Commission.11 B. The Rent-Stabilization Program Provides “Local Public Assis- tance Benefits.” The next question, in turn, is whether the rent-stabilization program provides “local public assistance benefits.” At the outset, we note, as a matter of statutory interpretation, reflecting the hu- manitarian bases of exemptions in debtor-creditor law, that the State and federal courts of New York have a decided practice of 10 That provision exempts “[t]he debtor’s right to receive—a social securi- ty benefit, unemployment compensation, or a local public assistance benefit.” Bankruptcy courts have construed “public assistance benefit” to mean “gov- ernment aid to needy, blind, aged, or disabled persons and to dependent children” (e.g., Matter of Longstreet, 246 BR 611, 614 [Bankr SD Iowa 2000] (citing Merriam Webster’s Collegiate Dictionary [10th ed 1994]); In re Wilson, 305 BR 4 [ND Iowa 2004] (analyzing legislative history of bankruptcy code)). The “determination of which classes of people qualified as needy [is left] to the federal, state and local governments” (Wilson at 15). 11 That provision exempts “benefits the individual has received or is enti- tled to receive under federal social security or state unemployment compensation, or under federal, state, or local public assistance legislation” (Uniform Exemptions Act [1976, as amended 1979] § 5 (3) (not adopted in New York)). 17 construing exemption statutes liberally in favor of the debtor (see Chatham Phenix Nat’l. Bank v Crosney, 251 NY 189, 196 [1929] (requiring “a liberal construction” of exemption statute); Schwartz v. Holzman, 69 F2d 814, 815 [2d Cir 1934] (explaining that an exemp- tion statute “is to be given a liberal interpretation”); Matter of Keil, 88 F2d 7, 8 [2d Cir 1937] (“Exemption statutes are to be liberally construed.”)).12 But this Court need not rely on that practice of liberal con- struction, nor on the interpretive lens drawn from this Court’s persistent recognition of the legislature’s solicitude for the rent- stabilization regime (supra, pp. 10-11). Rather, a straightforward analysis of the four relevant words of the statute’s text compels the conclusion that appellant’s rights under the rent-stabilization re- gime are exempt: • First, the rent-stabilization program plainly is “local.” As summa- rized above, it depends on a periodic determination by local 12 See also KLC, Inc. v. Trayner, 426 F3d 172, 176 (2d Cir 2005) (applying that “well established canon of interpretation” in a case involving Connecticut law); Matter of Moulterie, 398 BR 501, 504 (Bankr EDNY 2008) (applying canon to interpret New York statute); Matter of Lowe, 252 BR 614, 621-22 (Bankr. W.D.N.Y. 2000) (quoting similar canon from 31 Am Jur 2d, Exemptions § 17). 18 authorities as to the continuing existence of an emergency in the particular jurisdiction (EPTA § 3). • Nor can there be any doubt that the program is “public”; the program is an enactment of the New York Legislature, imple- mented by public determinations of legislative and administrative bodies at both the state and local level. Whatever this might be, it is the antithesis of “private” eleemosynary activity. • It is similarly uncontroversial that the statute provides “assis- tance” to residents. To use this Court’s words, the program is designed to “protect dwellers who could not compete in an over- heated rental market, through no fault of their own” and to “ameliorate the dislocations and risk of widespread lack of suita- ble dwellings,” Manocherian, 84 NY2d 385 at 395. • Finally, the program undoubtedly provides a “benefit” to eligible residents. Standard definitions of the term include, among other things, any “advantage” (see, e.g., Oxford English Dictionary [2014] (Note: online version) (defining “benefit” as “[a]dvantage, profit, good”); American Heritage College Dictionary 127 [3rd ed 1993] (defining benefit as “[s]omething that promotes or enhanc- 19 es well-being; an advantage”); The New Oxford American Diction- ary 152 [2d ed 2005] (defining benefit as “an advantage or profit gained from something” and offering as a sample usage “tenants bought their houses with the benefit of a discount”)). This Court’s view that the rent-stabilization regime “is a means of protecting a certain class of occupants from the sudden loss of their homes” (Braschi, 74 NY2d at 209) should establish beyond dispute that the provisions provide material benefit directly to the residents they affect. The reasoning of the lower federal courts could not stand even against the plain language of the statute and ordinary principles of construction, but it is wholly inadequate when measured against the interpretive norms summarized above. Without citation of any case other than Manocherian, the district court rejected the exemption based on its conclusion that any “value” flowing to the tenant under rent-stabilization laws is “a collateral consequence and not a bene- fit” (A156). But that conclusion ignores the descriptions of the program by New York’s legislative and judicial branches summa- rized above, both of which describe the overriding purpose as 20 responding to the difficulties all but the most wealthy face in find- ing housing in New York City (see, e.g., Local Law No. 16 § 1 (conclusion of New York City Council “that a serious public emer- gency continues to exist in the housing of a considerable number of persons within the City of New York”) (amending Administrative Code § 26-502 to include the quoted language); Manocherian, 84 NY2d at 389 (emphasizing the “intractable housing emergency” that motivated New York to “protect dwellers who could not compete in an overheated rental market, through no fault of their own”). It is of course easy to find scattered snippets and quotations that identify a variety of overlapping justifications for and beneficial effects of rent stabilization. But that is true of any public assistance program. Is the sole purpose of social security to give money to the individuals that receive the benefits or is it also part of a larger effort to manage work-force transitions and the societal conse- quences of aging? The truth is that rent regulation, like any program of public assistance, has broader social effects that supplement the benefits that flow directly to the covered individuals. But the reality of the broader positive effects of any well-designed assistance pro- 21 gram is wholly irrelevant to the simple question before this Court: whether one of the effects of rent stabilization is to provide a “ben- efit” to the covered individuals. Because it plainly does provide such a benefit, the reasoning of the district court is insupportable. The bankruptcy court’s approach was quite different, and even less supportable. That court reasoned that, because some of the specific items listed in Section 282 involve “the right to receive a stream of future exempt payments that provide monthly support for an individual,” it should construe the more general term “public assistance benefit” to be similarly limited (A098). But that narrow- ing13 construction has several problems. Most obviously, as the text of the bankruptcy court’s opinion demonstrates, the reading is in direct tension with the natural meaning of the word “benefit,” which the bankruptcy court repeatedly used to describe the effect of the public assistance program on eligible residents.14 13 Even the district court recognized that the bankruptcy court effectively concluded that the term “local public assistance benefit” should be read to mean less, not more, than its constituent terms (A155-56). 14 See A098-99 (describing “the benefits derived from living in an apart- ment unit that happens to be ‘rent-stabilized’”), A099 (“That personal benefit is a privilege enjoyed by certain New Yorkers . . . .”), A099 (referring to “the bene- fit of affordable housing”), A099 (discussing “the benefit of paying below market rent”), A099 (“Rent stabilization has allowed certain individuals to benefit from below market rent . . . .”), A099 (discussing the “right to benefit 22 A second problem with the view that the periodic-payment at- tribute of some of the “benefits” listed in the statute should trump the natural meaning of “local public assistance benefits” is that it ignores the modern reality of social welfare programs, including the programs that Section 282 describes. The courts below assumed that the baseline norm of social welfare programs is a periodic cash payment, and that because this particular program does not provide such payments it falls outside the general class defined by the items in clauses a), b), and c) of Section 282 (2). But that ignores the marked shift over the last quarter century from unrestricted cash payments as the standard method of providing “welfare” to the much more common modern reality of non-cash payments – food stamps, vouchers, medical care, discounted prescriptions, and the like.15 Is it plausible, for example, that the legislative description of from this favorable spread in monthly rent”), A099 (describing appellant as “a sympathetic individual of limited means who benefits each month by paying less than fair market rent for the right to occupy her apartment”). 15 Consistent with the usage in Section 282, the New York penal code reg- ularly uses the phrase “public assistance benefits” to define property and services that are not delivered as periodic payments (e.g., Penal Law § 155.00 (7-b) (including medical assistance card and food stamp assistance card in list of devices that can be fraudulently used to obtain “public assistance benefits”); Penal Law § 158.00 (a) (same); Penal Law § 158.00 (c) (defining “pub- lic assistance benefits” to mean “money, property or services provided directly or indirectly through programs of the . . . government”); see also People v Wid- 23 “veteran’s benefits” was designed to carve a veteran’s right to medi- cal care out of the list of protected assets? Against the modern heterogeneity of government assistance programs, the exclusion of rent stabilization benefits from the protections of Section 282 simp- ly because they are not rental subsidy payments would plainly be anachronistic. This Court’s past practice of taking due notice of developing social circumstances in its interpretation of the rent- stabilization regime (see, e.g., Braschi, 74 NY2d at 211-13 (interpret- ing “family” to include life partners)) counsels against the niggardly understanding of “assistance benefits” proffered by the lower fed- eral courts. The factual reality of modern assistance programs helps to clarify the specific error in the statutory construction of the bank- ruptcy court. To be sure, it does in some circumstances make sense to limit a catch-all item in a list to a category evidenced by preced- ing items in a list. But it is much less clear that this make sense when, as here, the item the court is narrowing appears in the middle mer, 137 AD 2d 929 [App Div 1988] (affirming conviction for fraudulent pro- curement of public assistance benefits based on access to free meals at school)). 24 of the list. See Antonin Scalia and Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 203-05 [2012]. That is particularly true in a case like this one, where at least one of the items on the list defines a category that is largely composed of “benefits” that are not payments (see Section 282 (2) (b) (exempting a “veterans’ bene- fit”)). If the New York legislature intended the exemption to apply only to periodic monthly payments, it would have much more natu- rally used the term “payment” in the relevant clauses of Section 282 (2). Given the legislature’s choice to grant a broader exemption for “benefits,” there is no justification for the bankruptcy court’s decision to exclude non-payment benefits from the statute. At bottom, the relevant interpretive question is whether the legislature’s designation of an exemption for “local public assistance benefits” reflects an intention to make rent-stabilized leaseholds available to creditors. Given the air-tight protections New York law provides for those tenants in other contexts (discussed below), and taking account of the special protection New York law provides for elderly tenants like appellant (see note 4, supra), it is impossible to 25 attribute any such intention to the legislature, much less to infer such an intention from the broad phrasing of Section 282. To put it another way, the Court cannot logically derive an in- tent to allow a forced sale of appellant’s premises in the bankruptcy process from a statutory regime designed to provide “a means of protecting a certain class of occupants from the sudden loss of their homes” (Braschi, 74 NY2d at 209). The Court in this specific context has recognized as a canon of statutory interpretation that “the gen- eral purpose is a more important aid to the meaning than any rule which grammar or formal logic can lay down” (id. at 207-08). Read- ing Section 282 (2) in light of the purposes of the rent-stabilization regime only buttresses the propriety of reading Section 282 (2) liter- ally, to protect appellant’s interest in her rent-stabilized lease. I . It Would Be Incongruous To Permit Creditors To Profit From The Interest In A Rent-Stabilized Lease Of A Tenant In Bankruptcy When They Cannot Reach That Interest Under State Law. The oddest effect of reading Section 282 as leaving appellant’s interest in her rent-stabilized lease within her bankruptcy estate is that it would create an odd juxtaposition: creditors using state pro- 26 cesses to collect a debt could never reach that interest, but the bankruptcy trustee could. The inability of creditors to reach the interest of a rent- stabilized tenant under New York law arises out of the overlapping effects of several enactments. First, as with all residential leases, she could not transfer her interest in the apartment without the consent of her landlord (NY Real Property Law § 226-b (1)). Indeed, although Section 226-b (1) permits ordinary residential tenants to gain a right to assign their premises by the terms of the lease, a rent-stabilized tenant cannot freely assign the premises even if the lease purports to permit that (Marigo, 277 AD2d at 151). As the Marigo court ex- plained, “such a free-assignment clause . . . is incompatible with the underlying Rent Stabilization Law” (id.). Thus, any effort by the tenant to transfer the premises in satisfaction of a preexisting debt would be both unenforceable and criminal (Braschi, 74 N.Y.2d at 209 (“The regulation does not create an alienable property right that could be sold, assigned or otherwise disposed of”); see Rent Stabili- zation Code § 2525.6 (d) (even if a tenant sublets, rent-stabilization rights remain with the tenant); id. § 2525.6 (b) (prohibiting tenant 27 from subletting premises in exchange for payment beyond legally permitted rental); Penal Law §§ 180.54 - .57 (criminalizing a contract to accept rent beyond the legal limit).) If the tenant’s interest in a rent-stabilized lease cannot volun- tarily be transferred, in payment of a preexisting debt or otherwise, it follows even more easily that a creditor could not take that inter- est without the consent of the tenant. This is because New York restricts a creditor’s rights to enforce a money judgment to “proper- ty that could be assigned or transferred” (CPLR 5201 (b)). For that reason, to the limited extent creditors previously have attempted to reach those interests, they have been rebuffed (e.g., Kashi v. Gratsos, 712 F Supp 23, 26 [SDNY 1989]). There is no plausible reason for attributing to the legislature an unexpressed intent to submit the tenant’s interest in a rent- stabilized lease to the bankruptcy process, when the parallel collec- tion process under state law explicitly exempts all residential leases. The incongruity of such a reading only underscores the propriety, urged above, of reading Section 282 (2) in accordance with its terms, 28 to exclude appellant's "local public assistance benefit" from her bankruptcy estate. Conclusion This Court has had no difficulty rejecting constructions of New York's legislation that "would render meaningless the protections intended to be afforded by law to [tenants in rent-stabilized homes]" (Park W. Vil., 62 NY2d at 43 7). A holding that the legislature intended to permit a forced sale of the interest of a rent-paying tenant's interest in her home would do just that. The Court should hold that Section 282 (2) of the Debtor and Creditor Law exempts a tenant's right to receive benefits under New York's rent-stabilization regime. Dated: New York, New York July 11, 2014 Respectfully submitted, �q.VJM�,��� . � 11.§ cat"'�·�-� --- RONALD J. MANN' J� Of the Texas bar, admitted pro hac vice 435 W. 116th Street New York, NY 10027 (212) 854-1570 29 KATHLEEN G. CULLY PLLC By: � ,8.� Kathleen G. ' cully P 180 Cabrini Boulevard, #128 New York, NY 10033-1167 (212) 447-9882 Attorneys for Mary Veronica Santiago-Monteverde, Appellant 30