Case No. 94-11204-MAM-13; Adv. No. 99-1230United States Bankruptcy Court, S.D. Alabama
July 11, 2000
Phillip M. Leslie, Mobile, Alabama, Attorney for the Debtor/Plaintiff.
Gary Paul Alidor, Mobile, Alabama, Attorney for the Defendant.
ORDER AND JUDGMENT VOIDING SALE, DENYING COMPLAINT FOR DAMAGES, DENYING WITHOUT PREJUDICE COMPLAINT TO REDEEM PROPERTY AND DISMISSING DEBTOR’S CASE
MAHONEY, Chief Judge
This matter is before the Court on the complaint of Andrew Joseph Curtis to void sale, enjoin Brad Crain from interfering with Curtis’ use of property, to redeem property, and for damages for violation of the automatic stay. The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334 and 157 and the Order of Reference of the District Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b) and the Court has the authority to enter a final order. For the reasons indicated below, the Court finds the tax sale conveying title of the subject property to the State of Alabama is void and request of debtor for an injunction and damages is denied.
FACTS
Based on the stipulations of the parties and the documents received as evidence, the Court makes the following findings of fact:
1. The real property located in Mobile County, Alabama, described as follows:
Parcel #: 0229113420000300000000
Legal Description: CRENSHAW LOT 3 BLK 6 BASCOMBE TRT DBK 128 PG 1 # SEC 34 T4S R1W#01 1-1 STY FR RES W/2 BTHS OP
(“the property”) was sold to Andrew Joseph Curtis (debtor) and Juanita Crenshaw by Eric Curtis in September 1984.
2. In 1988, the property was sold by the State of Alabama for taxes due from Amos A. Reed. Floyd Draine purchased the property at the 1988 tax sale.
3. The debtor Andrew Joseph Curtis filed for relief pursuant to chapter 13 of the Bankruptcy Code on June 2, 1994.
4. The tax sale to Floyd Draine was recorded February 21, 1995.
5. The property was again offered for sale for unpaid taxes on April 10, 1995. Andrew J. and Juanita Curtis were indicated by the State as the owners of the property and the parties liable for the unpaid taxes. No person having bid a sufficient sum for the property on the April 10, 1995 date of sale, the amount of the unpaid taxes, fees, costs and expenses were bid in for the State.
6. On June 1, 1995, the Probate Court of Mobile County entered a decree for the sale of the property for the taxes due from Andrew J. and Juanita Curtis.[1]
7. On August 7, 1995, Draine sold the property to Associates Financial Services Co. of Alabama. The sale was recorded that same day.
8. On June 2, 1999, the debtor’s chapter 13 case was dismissed for failure to make payments required by his confirmed plan.
9. The debtor died on or about June 4, 2000.
10. In July 1999, Brad Crain purchased the property from the State. Crain tendered a check for payment on July 8, 1999.
11. On July 15, 1999, the debtor’s chapter 13 case was reinstated.
12. On July 30, 1999, the State delivered to Brad Crain the deed to the property. The deed conveyed to Brad Crain “all right and title of the State of Alabama acquired by the tax sale” that occurred in 1995.
13. This adversary proceeding was filed October 19, 1999.
14. A hearing on this adversary complaint and the motion of Brad Crain to dismiss Curtis’ underlying bankruptcy case was held June 13, 2000. At this hearing, the Court orally dismissed Curtis’ bankruptcy case.
LAW
The debtor contends that the tax sale to the State and/or Brad Crain violated the automatic stay applicable to his case and those sales are therefore void. Mr. Crain essentially contends that the State’s actions in enforcing its lien and obtaining title to the property based on unpaid ad valorem property taxes[2] were excepted from the stay.
Section 362 of the Bankruptcy Code provides:
(a) except as provided in subsection (b) of this section, a petition filed under section 301, 302 or 303 of this title . . . operates as a stay, applicable to all entities, of —
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
Section 362(b) of the Code provides:
The filing of a petition under section 301, 302, or 303 of this title . . . does not operate as a stay —
(18) under subsection (a) of the creation or perfection of a statutory lien for an ad valorem property tax imposed by the District of Colombia, or a political subdivision of a State, if such tax comes due after the filing of a petition.
Crain contends that § 362(b)(18) excepts the tax sale proceedings from the stay applicable to Curtis’ case. Even assuming the § 362(b)(18) covers tax sales, it did not become effective until October 22, 1994. Pub.L. 103-394, § 702(a), October 22, 1994, 108 Stat. 4106. Curtis filed this chapter 13 case June 2, 1994, prior to the effective date of § 362(b)(18). Therefore, § 362(b)(18) is not applicable to this proceeding.
The tax deed issued by the State to Crain provides that the State purchased the property in 1995 for the payment of taxes due from the owners of the property, Andrew and Juanita Curtis. As an owner, Curtis had an interest in the property and it became property of his bankruptcy estate subject to the automatic stay when he filed this case June 2, 1994 or when he became the owner. 11 U.S.C. § 541(a), 1306(a)(1). The State did not obtain or request relief from the stay to conduct the 1995 tax sale. The stay applies to “all entities,” including the County and State. 11 U.S.C. § 101(15), 362(a). Thus, the 1995 tax sale violated the automatic stay and is therefore void. Phoenix Bond Indemnity Co. v. Shamblin (In re Shamblin), 890 F.2d 123 (9th Cir. 1989) (postpetition tax sale violated stay); Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306 (11th Cir. 1982) (acts in violation of stay are void); United States v. Eagle Investment Co. (In re Crosby), 109 B.R. 195 (Bankr.S.D.Miss. 1989) (property tax sale conducted postpetition violated stay).
Since Brad Crain purchased “all right and title of the State of Alabama acquired by” the void tax sale, his title is probably void too. Any rights he may have in the property are defined by state law. Butner v. United States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). Crain may have rights against the State, Mr. Curtis’ estate or Ms. Crenshaw to receive any amounts paid to redeem or for reimbursement for improvements he made, see, Ala. Code §§ 40-10-70 et. seq. (rights and remedies of purchaser at a tax sale), but this is not the proper forum to determine these rights. Curtis’ bankruptcy case has been dismissed. Any recovery will not benefit his bankruptcy estate. Moreover, neither the State nor any other potential owners or mortgagees of the property (e.g., Floyd Draine and Associates Financial) were notified of this proceeding. Any determination of Mr. Curtis’ right to redeem will affect these parties’ interests in the property. Therefore, the Court is not determining if Mr. Curtis may redeem the property and is limiting its opinion to stay violation issues.
The debtor requested damages from Brad Crain for violating the stay pursuant to 11 U.S.C. § 362(h). First, Mr. Crain purchased the property from the State on July 8, 1999, after the dismissal of the debtor’s case on June 2, 1999. The tax deed was not delivered until after debtor’s case was reinstated, but the act of sale occurred while the stay was not in effect. Thus, it would appear that Crain’s actions were outside the scope of the stay applicable to this case. Even if the sale violated the stay, Crain did not know of the bankruptcy until after the deed was delivered. The debtor did not prove a willful violation. Therefore, the debtor is not entitled to damages for any stay violation of Brad Crain.
THEREFORE, IT IS ORDERED AND ADJUDGED:
1. The sale of the property described as:
Parcel #: 0229113420000300000000
Legal Description: CRENSHAW LOT 3 BLK 6 BASCOMBE TRT DBK 128 PG 1 # SEC 34 T4S R1W#01 1-1 STY FR RES W/2 BTHS OP
to the State of Alabama in 1995 is VOID.
2. The request for damages against Brad Crain pursuant to 11 U.S.C. § 362(h) is DENIED;
3. The request of Andrew J. Curtis to redeem the property and enjoin Brad Crain from interfering with the use of enjoyment of the property by Curtis is DENIED WITHOUT PREJUDICE.
4. The bankruptcy case of Andrew J. Curtis (No. 94-11204-MAM-13) is DISMISSED.