County of Imperial Treasurer-Tax Collector v. Stadtmueller (In Re RW Meridian LLC)

564 B.R. 21, 2017 Bankr. LEXIS 324, 63 Bankr. Ct. Dec. (CRR) 190
CourtUnited States Bankruptcy Appellate Panel for the Ninth Circuit
DecidedFebruary 3, 2017
DocketBAP SC-16-1227-JuFY; Bk. 16-00629-MM7
StatusPublished
Cited by6 cases

This text of 564 B.R. 21 (County of Imperial Treasurer-Tax Collector v. Stadtmueller (In Re RW Meridian LLC)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Appellate Panel for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
County of Imperial Treasurer-Tax Collector v. Stadtmueller (In Re RW Meridian LLC), 564 B.R. 21, 2017 Bankr. LEXIS 324, 63 Bankr. Ct. Dec. (CRR) 190 (bap9 2017).

Opinion

OPINION

JURY, Bankruptcy Judge:

Appellant, County of Imperial Treasurer-Tax Collector (County), scheduled a tax sale of real property owned by RW Meridian, LLC (Debtor) by an internet auction on February 6, 2016, due to the non-payment of taxes. Under Cal. Rev. & Tax Code (Tax Code) § 3707(a)(1), Debtor’s right to redeem the tax defaulted property expired at 5:00 p.m. on Friday, February 5, 2016. Debtor’s right to redeem lapsed and the sale by auction began as scheduled.

On February 8,2016, Debtor filed a chapter 7 1 petition. Aware of Debtor’s filing, the County completed the auction on February 9, 2016, by selling the property to the highest bidder for $343,000. The County then filed a motion for a comfort order, 2 asserting that the automatic stay was not applicable to its postpetition acts under Tracht Gut, LLC v. County of Los Angeles (In re Tracht Gut, LLC), 503 B.R. 804 (9th Cir. BAP 2014), aff'd, 836 F.3d 1146 (9th Cir. 2016), since Debtor’s right to redeem the property lapsed prepetition.

The bankruptcy court disagreed that Tracht Gut was binding precedent under these circumstances. The court found that although- Debtor’s right to redeem the property had expired prepetition, Debtor still held valuable rights in the property at the time of its bankruptcy filing, including title, possession, and contingent redemption rights. Accordingly, the bankruptcy court found that the property was property of Debtor’s estate under § 541. As a result, the court concluded that the County’s postpetition completion of the tax sale violated § 362(a)(3), (4), and (6) and thus was void. The court entered an order denying the County’s motion for a comfort order. This appeal followed.

For the reasons set forth below, we agree with the bankruptcy court’s conclusion that Tracht Gut did not address a circumstance where the redemption rights had lapsed but the sale had not been completed prior to the bankruptcy filing. Therefore, its holding is not binding under the facts of this case. We hold that the County’s postpetition completion of jdie sale violated the automatic stay under § 362(a)(3), (4), and (6). Accordingly, we AFFIRM.

I. FACTS

A. Prepetition Events

The underlying facts are undisputed. As of February 6, 2016, Debtor was the owner of 58.53 acres of unimproved land located in Imperial County, California. Debtor had not paid the property taxes for more than five years and was delinquent in the approximate amount of $167,000. As a result, the tax collector scheduled the property for sale by auction commencing on Satur *26 day, February 6, 2016. By statute, Debt- or’s right to redeem the property expired at 5:00 p.m. on Friday, February 5, 2016. Debtor’s right to redeem lapsed and the auction began on February 6, 2016, as scheduled.

B. Postpetition Events

On February 8, 2016, Debtor filed a chapter 7 petition. Appellee, Ronald E. Stadtmueller, was appointed the chapter 7 trustee (Trustee). Aware of the bankruptcy filing, the County, relying on the Panel’s decision in Tracht Gut, completed the auction postpetition by selling the property to the highest bidder for $343,000.

On February 11, 2016, the County filed a motion for a comfort order requesting confirmation that the completion of the auction had not violated the automatic stay and that the further act of recording the tax deed would not be a stay violation as it was a “ministerial act.” Trustee opposed, contending that the property was property of the estate which he could administer for the benefit of the creditors and estate. After a hearing and further briefing, the bankruptcy court took the matter under submission.

On July 5, 2016, the bankruptcy court issued its decision in In re RW Meridian LLC, 553 B.R. 807 (Bankr. S.D. Cal. 2016). The court concluded that it was not bound by the holding in Tracht Gut because in that case both the debtor’s right to redeem expired and the sale occurred prepetition and all that was left in the sale process was the recording of the tax deed. The bankruptcy court reasoned that until the sale, Debtor retained rights in the property because equitable and legal title had not transferred. The bankruptcy court also found that Debtor had a contingent right of redemption under California law, which became property of the estate. Finally, the bankruptcy court held that the County’s discretion regarding the conduct of the sale eliminated the ministerial act exception to the automatic stay.

Relying on the broad reach of the automatic stay espoused in 40235 Washington Street Corp. v. W.C. Lusardi (In re Lusardi), 329 F.3d 1076 (9th Cir. 2003), and other case law, the bankruptcy court found the sale violated § 362(a)(3), (4), and (6) and thus was void. The court denied the County’s motion for a comfort order and entered an order consistent with its decision. The Country filed a timely notice of appeal from that order.

C. Post-appeal Events

The County then filed an emergency motion for a stay pending appeal. Trustee opposed, contending that he had received an offer from third parties to purchase the property for $500,000, an amount which would satisfy all claims in the bankruptcy case, including the County’s tax lien. According to Trustee, this was the third offer he had received and any further delay would impede the sale of the property. A motions panel denied the stay motion.

On October 14, 2016, the California State Association of Counties and the California Association of County Treasurer and Tax Collectors filed a motion for leave to file an Amicus Brief. The parties contended that the issue involved in this appeal was “vital to the administration of property tax collection” and that the decision, “if sustained,” would “seriously impair the ability of counties and their tax collectors to ensure the collection of real property taxes [and] subject the counties to a finding by the courts that they violated the automatic stay.”

Around the same time, Trustee filed an objection to Melissa Johnson’s declaration, which was included in the County’s appendix and not part of the record on appeal. *27 The County submitted Ms. Johnson’s declaration to “remove any uncertainty as to the relevant dates of the events” in Lusar-di, since the bankruptcy court found that the facts in this case were “nearly identical” to those in Lusardi. 3 Although Lusardi involved a postpetition tax sale, the County submitted Ms. Johnson’s declaration to show that the debtor had filed a chapter 11 petition prior to the expiration of its redemption right. Ms. Johnson, the Chief Deputy Treasurer-Tax Collector for Riverside County, authenticated the tax records associated with the real property in the Lusardi case showing the sequence of events. In its opening brief, the County asked the Panel to take judicial notice of those tax records.

A motions panel granted the motion for leave to file the Amicus Brief and accepted it for filing, sustained Trustee’s objection to Ms. Johnson’s declaration, and denied the County’s request for judicial notice. 4

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Cite This Page — Counsel Stack

Bluebook (online)
564 B.R. 21, 2017 Bankr. LEXIS 324, 63 Bankr. Ct. Dec. (CRR) 190, Counsel Stack Legal Research, https://law.counselstack.com/opinion/county-of-imperial-treasurer-tax-collector-v-stadtmueller-in-re-rw-bap9-2017.