Francis v. Scorpion Grp., LLC (In re Francis)

• Decision Date: 13 March 2013
• Docket Number: No. 12–73183–WLH.,12–73183–WLH.
• Citation: 489 B.R. 262
• Parties: In re Barbara K. FRANCIS, Debtor. Barbara K. Francis, Movant, v. Scorpion Group, LLC, Respondent. Scorpion Group, LLC, Movant, v. Barbara K. Francis, Respondent.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

489 B.R. 262

In re Barbara K. FRANCIS, Debtor.

Barbara K. Francis, Movant,

v.Scorpion Group, LLC, Respondent.

Scorpion Group, LLC, Movant,

v.Barbara K. Francis, Respondent.

No. 12–73183–WLH.

United States Bankruptcy Court,

N.D. Georgia,

Atlanta Division.

March 13, 2013.

Mario Marty L. Adkins, Atlanta, GA, for Debtor.

Julie M. Anania, Nancy J. Whaley, Standing Chapter 13 Trustee, Atlanta, GA, Trustee.

OPINION

CONTESTED MATTER

WENDY L. HAGENAU, Bankruptcy Judge.

Before the Court are several matters, all related to Scorpion Group, LLC (“Scorpion”) and the Debtor's right to pay to Scorpion through a Chapter 13 plan the redemption price payable to a purchaser at a tax sale under Georgia law. The pending motions are: Scorpion's Motion for Relief from Automatic Stay [Docket No. 20], the Debtor's Motion to Re–Impose the Stay, as amended [Docket No. 57, 61], the Debtor's Motion to Pay the Claim of Respondent Directly from Property of the Estate [Docket No. 66], and the Debtor's Motion to Determine the Secured Status of Scorpion's Claim, as amended [Docket Nos. 51 and 62] (collectively, the “Motions”). This Court has jurisdiction of the Motions pursuant to 28 U.S.C. § 1334 and the Motions are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (G), (L) and (O).

Facts

Scorpion purchased the property at 2298 Lancer Road (“Property”) for $9,500.00 on August 2, 2011 at a tax sale conducted by the Sheriff of DeKalb County. The levy and sale of the Property was for unpaid ad valorem taxes for 2010. The Debtor was the owner of the Property. At the time of the tax sale, Wells Fargo Bank, N.A. as successor to Wachovia Bank National Association held a security deed on the Property securing over $155,000, but it has recently released the security deed. The Debtor's schedules reflect the Property is rental property worth approximately $40,700, so, if the Property is the Debtor's or the Debtor can redeem it, there is equity in it for use in paying the unsecured creditors. The proof of claim filed by Scorpion [Claim No. 2–1] shows that the price to redeem the Property as of the petition date was $14,382.19, increasing over time with potential taxes and other premiums.

On August 3, 2012, the Debtor was served with a Notice of Foreclosure of Equity of Redemption (referred to herein as the “Barment Notice”). The Barment Notice stated that the right to redeem would expire on and after September 18, 2012. Scorpion also ran ads in the newspaper as required by O.C.G.A. § 48–4–45. The Debtor did not tender the redemption price, but instead filed a petition under Chapter 13 of the United States Bankruptcy Code on September 17, 2012. On the same day, the Debtor filed a Chapter 13 plan proposing to pay to Scorpion the redemption price “in full” over the 60–month applicable commitment period. The Debtor has not contested Scorpion complied with the barment process.

Scorpion filed a Motion for Relief from Stay on October 26, 2012 [Docket No. 20], arguing the stay should be lifted because the Debtor could not pay the redemption price through the plan and the Property was not property of the estate. After a hearing, the Court ruled that the stay would be lifted because, with Wells Fargo's security deed on the Property in the amount of over $155,000, there was no equity in the Property for the Debtor. Since the Property was rental property, the Court found it was not necessary for a reorganization. The Court entered an order on January 18, 2013 [Docket No. 52] granting the Motion for Relief from Stay. On January 25, 2013, the Debtor filed a Motion to Re–Impose the Stay [Docket No. 57], amended on January 29, 2013 [Docket No. 61] based on the Debtor's receipt of a notice from Wells Fargo that it had released the security deed. Since the release of the security deed created the possibility of equity in the Property, the Court granted the Motion to Re–Impose Stay by order entered February 27, 2013 [Docket No. 82]. The Debtor also filed a Motion to Determine the Secured Status of Scorpion's Secured Claim on January 7, 2013 [Docket No. 51], amended on January 29, 2013 [Docket No. 62], arguing that Scorpion had miscalculated the interest and charges due under O.C.G.A. § 48–4–42. Finally, the Debtor decided she could and wanted to tender the full redemption price to Scorpion, so she filed a Motion to Pay Claim of Respondent Directly from Property of the Estate on February 13, 2013 [Docket No. 66].

Georgia Law on Tax Sales

Under Georgia law, taxes are assessed against real property as of January 1 of each year, and the taxpayer holding the property as of January 1 is responsible for “returning” it. O.C.G.A. § 48–5–10. “Liens for all taxes due the state or any county or municipality in the state shall arise as of the time the taxes become due and unpaid and all tax liens shall cover all property in which the taxpayer has any interest from the date the lien arises until such taxes are paid.” O.C.G.A. § 48–2–56(a). If taxes are not timely paid, the tax commissioner may, after notice to the property owner, issue executions ¹ to the sheriff to levy upon the property of the taxpayer. O.C.G.A. § 48–3–1 et seq.² The statute provides that:

Whenever any real property is sold under or by virtue of an execution [ fi fa ] issued for the collection of state, county, municipal, or school taxes or for special assessments, the defendant in fi. fa. or any person having any right, title, or interest in or lien upon such property may redeem the property from the sale by the payment of the redemption price or the amount required for redemption, as fixed and provided in Code Section 48–4–42:

(1) At any time within 12 months from the date of the sale; and

(2) At any time after the sale until the right to redeem is foreclosed by the giving of the notice provided for in Code Section 48–4–45.

O.C.G.A. § 48–4–40. Under this statute then, the Debtor (who is the defendant in fi fa ) had an absolute right to redeem the Property for the first year after the tax sale. After that, the right to redeem could be foreclosed by the purchaser at the tax sale through the barment procedure set out in O.C.G.A. § 48–4–45. This section provides,

After 12 months from the date of a tax sale, the purchaser at the sale ... may terminate, foreclose, divest, and forever bar the right to redeem the property from the sale by causing a notice or notices of the foreclosure, as provided for in this article ...

The notices must be served on those with an interest in the property and must be published in the newspaper in the applicable county once a week for four consecutive weeks. The specific form of notice is set out in O.C.G.A. § 48–4–46, and Scorpion used the form in this case. Further, O.C.G.A. § 48–4–42 spells out the amount to be paid on redemption, including certain redemption premiums. The “redemption price”, as defined in O.C.G.A. 48–4–42, is to be paid to the purchaser at the tax sale. Lastly, O.C.G.A. § 48–4–43 provides, “When property has been redeemed, the effect of the redemption shall be to put the title conveyed by the tax sale back into the defendant in fi fa, subject to all liens existing at the time of the tax sale....”

The parties here do not dispute the giving of the barment notice, but they dispute when the right to redeem expired. The Debtor argues the right to redeem expired on September 18, 2012, the date identified in the barment notice. Scorpion argues the right to redeem expired at 11:59 p.m. on September 17, 2012 because the barment notice states that the Debtor's right to redeem will expire “on and after September 18, 2012”. The Debtor filed her petition under the Bankruptcy Code on September 17, 2012, at 9:14 a.m., so under either argument, the Debtor's right to redeem had not expired as of the filing of the petition. The Court must then consider what rights the Debtor possessed at the time the petition was filed that became property of the estate.

Property of the Estate

Section 541(a) of the Bankruptcy Code defines “property of the estate” broadly as “all legal or equitable interests of the debtor in property as of the commencement of the case”. Whatever rights the Debtor had after the tax sale, legally or equitably, came into the estate.

Under Georgia law, a tax sale purchaser holds an inchoate or defeasable title to the property purchased. Brown Inv. Group, LLC v. Mayor & Aldermen of City of Savannah, 289 Ga. 67, 709 S.E.2d 214 (2011). The tax sale purchaser is not entitled to rent or possession during the period of redemption, Small v. Irving, 291 Ga. 316, 729 S.E.2d 323 (2012); the defendant in fi fa is—here, the Debtor. If Scorpion had come onto the Property, it would have been liable for trespass. Brown Inv. Group, 289 Ga. at 68, 709 S.E.2d 214. The Georgia Supreme Court has held that a tax deed purchaser has no more right to go on or use property purchased at a tax sale than a stranger to the title. Brown Inv. Group, 289 Ga. at 68, 709 S.E.2d 214. In Brown Inv. Group, the Supreme Court held the purchaser at a tax sale could not recover from the city for demolishing a building on property sold to the purchaser at a tax sale without notice to the purchaser. Only the debtor in fi fa has standing to sue for trespass until the right of redemption is terminated.

Scorpion emphasizes it already holds legal title to the Property as a result of the tax sale and therefore the Property is not property of the estate. Holding legal title is an important factor, but not the determinative factor as to whether the Property or any interest therein is property of the estate. For example, the holder of a security deed in Georgia holds legal title to the property. O.C.G.A. § 44–14–60. The interest retained by the grantor is an equitable title with a right of redemption, Citizens' & Southern Bank v. Realty Savings & Trust Co., 167 Ga. 170, 144 S.E. 893 (1928), much like an owner after a tax sale. Courts consistently view property subject to a security deed as property of the...