In Re: Anzelmo

Background

John Anzelmo, proceeding without a lawyer, appealed an order from the Southern District of New York Bankruptcy Court in his Chapter 7 bankruptcy case. The dispute concerned property at 27 Hillside Avenue, Suffern, New York.

Rockland County obtained a default judgment on May 16, 2016, in a New York tax-lien foreclosure proceeding concerning the property. The judgment directed the County’s officials to prepare, execute, and record a deed conveying full title to the County. It also stated that, upon execution of the deed, all persons with rights or interests in the property would be barred and permanently prevented from asserting them.

In June 2018, the executor of the estate of Anzelmo’s sister gave Anzelmo a deed that purported to transfer the property to him. On May 7, 2019, two days before a scheduled public auction of the property, Anzelmo filed a Chapter 7 bankruptcy petition. The County had asserted a claim for unpaid property taxes and later amended that claim to include taxes assessed for 2020.

The County moved under 11 U.S.C. § 362(d) for relief from the automatic stay—the bankruptcy protection that generally pauses collection and enforcement actions against property of the bankruptcy estate. The Bankruptcy Court granted the motion on January 7, 2021. Anzelmo appealed.

Issues and arguments

The District Court understood Anzelmo’s appeal to raise two issues: whether the property was part of his Chapter 7 bankruptcy estate under New York law, and whether the Bankruptcy Court properly granted the County relief from the automatic stay. The District Court said it only needed to decide whether the property was part of the bankruptcy estate, because relief from the stay is available when the debtor has no equity in the property.

Anzelmo argued that New York Real Property Tax Law § 1136(3) and the foreclosure judgment required the County to execute a deed before the County’s interest in the property could vest. Because the County had not executed the deed and Anzelmo had received a deed in 2018, he argued that he held an interest in the property when he filed for bankruptcy.

Court’s analysis

A Chapter 7 bankruptcy estate generally includes the debtor’s legal or equitable interests in property when the bankruptcy case begins. The District Court therefore applied New York law to determine what interest, if any, Anzelmo had in the property when he filed for bankruptcy.

The court explained that, in a New York tax-lien foreclosure proceeding, a default judgment bars the non-appearing tax debtor’s rights and right to redeem the property. Although § 1136(3) directs an enforcing officer to prepare, execute, and record a deed, courts have treated the recording of that deed as a ministerial act rather than the event that transfers ownership. Under the cited New York authorities, title passes when the foreclosure judgment extinguishes the debtor’s right to redeem, not when the deed is recorded.

Here, the non-appearing tax debtor in 2016 was the executor of the estate of Anzelmo’s sister. The executor did not move to reopen the default judgment within the one-month period allowed by § 1131. The District Court concluded that, as of May 16, 2016, the executor had no legal interest in the property to convey. The deed given to Anzelmo in June 2018 therefore did not give him a legal interest in the property.

Disposition

The District Court concluded that the property was not part of Anzelmo’s Chapter 7 bankruptcy estate. It also concluded that the Bankruptcy Court did not err in granting the County relief from the automatic stay, because the stay’s protections did not apply to property outside the bankruptcy estate.

The court affirmed the Bankruptcy Court’s decision in its entirety and directed the Clerk of Court to close the case and mail a copy of the opinion and order to Anzelmo.