Second Circuit Decision: 2005 New York State Homestead exemption increase retroactive Peter R. Scribner, Esq. Attorneys Rochester New York

Second Circuit Decision: 2005 New York State Homestead exemption increase retroactive: Hayward

Posted by: Peter Scribner
November 17, 2009
Topic: Recent Cases in the bankruptcy Court Western District of New York

CFCU Community Credit Union v. Hayward (Scribner as trustee); WDNY Bk#07-4369bk; 552 F.3d 253; Second Circuit Court of Appeals decision January 9, 2009: The NY homestead exemption was increased from $10,000 to $50,000 in August 2005, and the Haywards filed Chapter 7 shortly thereafter. CFCU, by Attorney Edward Crossmore, argued that the $40,000 increase should only apply to debts incurred after the law went into effect. The WDNY, EDNY, and NDNY bankruptcy courts disagreed, as did the District Court in WDNY and NDNY. CFCU appealed to the Second Circuit. Held: as an interpretation of New York law, the increase in the homestead was retroactive to debts incurred before the law was modified. Specific holdings: 1) The Commerce Clause of the U.S. Constitution (forbidding the impairment of contracts) was not infringed. The change did not substantially impair the contractual expectations of the parties, and even if it did, the changes was constitutionally justified as furthering a “significant and legitimate public purpose.” 2) Other than the Commerce Clause issue, this was a matter of New York law interpretation, not federal law interpretation. The Supreme Court decision in Owen v. Owen did not apply. Owen was a Florida case where a creditor obtained a judgment against the debtor’s condo, Florida then changed its exemption laws to include condos as homesteads but the change specifically excluded pre-change judgment liens; the debtor then filed bankruptcy and sought to avoid the judicial lien. The Supreme Court allowed the judgment to be avoided because the property being exempted - the condo - was exempt property and Florida’s limitation on that exemption - excluding older judgments - did not carry into bankruptcy. Somehow the Hayward court concluded that “Owen holds no sway here.” 3) Under New York law remedial legislation can apply retroactively and the legislative history here, especially the sponsoring legislator’s memorandum, indicated that the legislature intended that the change would be retroactive.

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Second Circuit Decision: 2005 New York State Homestead exemption increase retroactive: Hayward

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