Grose v. City of Milwaukee (In re Grose), Case No. 20-25361-beh
| Decision Date | 14 July 2021 |
| Docket Number | Case No. 20-25361-beh,Adversary No. 20-02110-beh |
| Parties | In re: Trenna Michelle Grose, Debtor. Trenna Michelle Grose, Plaintiff, v. City of Milwaukee, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Wisconsin |
DECISION AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
The Chapter 13 debtor, Ms. Trenna Grose, filed her bankruptcy petition on July 31, 2020. Case No. 20-25361-beh, ECF No. 1. Shortly thereafter, on August 7, 2020, she filed this adversary proceeding to obtain a declaration that the defendant, the City of Milwaukee, engaged in a transaction that is voidable under 11 U.S.C. § 548(a)(1)(B) when it foreclosed real property to satisfy outstanding property tax obligations, and to set aside that transfer pursuant to § 522(h). ECF No. 1. The City of Milwaukee filed a timely motion to dismiss the adversary complaint, arguing that Ms. Grose lacks standing to pursue her claim. ECF No. 4. At the pre-trial conference, all parties consented to the conversion of the motion to dismiss to a motion for summary judgment. ECF No. 7. See Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998). For the reasons explained below, the Court denies the defendant's motion for summary judgment and finds that the plaintiff-debtor has standing to pursue her complaint to avoid a fraudulent transfer under 11 U.S.C. §§ 548 and 522(h).
The Court has jurisdiction under 28 U.S.C. § 1334 and the Eastern District of Wisconsin's July 16, 1984, order of reference entered under 28 U.S.C. § 157(a). This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (H). All parties consented to the Bankruptcy Court's jurisdiction and entry of final judgment under Bankruptcy Rule 7008(a).
FACTS
The following facts, taken from pleadings and exhibits, are undisputed unless otherwise noted.
On March 11, 2020, the City of Milwaukee filed a petition for tax foreclosure pursuant to Wis. Stat. sec. 75.521,1 regarding the property at 4871 N. 60th St., Milwaukee, Wisconsin 53218. ECF No. 4, ¶ 1; ECF No. 13, at 5.2 When the City filed its petition for foreclosure, the property owner of record was Ms. Sonereka Pernell. ECF No. 4, ¶ 2. On March 18, 2020, the City published its "Notice of Commencement of Proceeding In Rem to Foreclose Tax Liens." ECF No. 14-2, at 21. The Notice stated in part:
[A]ny person having or claiming to have any right, title or interest in or upon any such parcel or parcels may, on or before said 27thday of May, 2020, redeem delinquent tax liens by paying to the City Treasurer of the City of Milwaukee the amount of all such unpaid tax liens including assigned county tax liens and in addition thereto all interest and penalty which has accrued on said unpaid tax liens computed to and including the date of redemption.
Id. 4871 N. 60th St., Parcel 44, was one of the parcels included in the list of tax liens appended to the Notice. Id.
Also, on March 18, 2020, the City Treasurer sent Ms. Pernell a certified letter conveying essentially the same information as the Notice. ECF No. 13, at 7. The letter stated in part:
You have or may have an interest in the tax delinquent parcel listed above. If you wish to retain your interest, if any, in this property, the 2018 and prior year's delinquent taxes, plus accumulated interest and penalty charges and costs, must be paid to the City Treasurer. THE LAST DATE THIS OFFICE WILL ACCEPT PAYMENT IS May 27, 2020. . . . If the total amount due is not paid by May 27, 2020, the City of Milwaukee will take title to the property.
Id. (emphasis in original). Later, on May 11, 2020, the City Treasurer sent another letter to Ms. Pernell. ECF No. 14-4. It stated in part:
The certified letter addressed to you from the City Treasurer's Office, which was not claimed from the post office, said that the above parcel is in foreclosure proceedings in Milwaukee County Circuit Court. . . . Payment must be received by this office by June 26, 2020. Since the office is currently closed to the public due to the coronavirus COVID-19 pandemic, you may make your payment on-line or by mail. . . . If the 2018 and prior year's delinquent real estate taxes on this parcel are not paid in full on or before June 26, 2020, the City of Milwaukee will have no choice but to take your property.
Id. (emphasis in original).
On July 15, 2020, Ms. Grose recorded a quitclaim deed to the property. ECF No. 4, at ¶ 7. The quitclaim deed was dated June 1, 2020, was signed by Ms. Pernell as grantor, and identified Ms. Grose as the grantee. Id., at ¶ 7-8.3 After a hearing in Milwaukee County Circuit Court, the City obtained a written judgment for foreclosure on July 15, 2020, the same date that the quitclaim deed was recorded. Id., at ¶ 5-6.4 The City assessed the property at a fair market value of $56,000.00, while the debtor describes the property as worth $82,520.00. ECF Nos. 1-1, 1-2.
ARGUMENTS
The City asserts that when Ms. Pernell failed to redeem the property by the statutory date of redemption, she was divested of all interest in the property. The City maintains that the redemption deadline was May 27, 2020,5 and therefore the June 1 deed was invalid because Ms. Pernell possessed no interest to transfer to Ms. Grose. In support of its argument, the City relies on the statutory interpretation invoked in Bank of Commerce v. Waukesha Cty., 89 Wis. 2d 715, 279 N.W.2d 237 (1979).
The debtor argues that it is not the redemption deadline that operates to divest ownership interest, but rather, the date of the judgment of foreclosure. Because the judgment of foreclosure was entered a month and a half after the deed execution, Ms. Grose received and held an ownership interest before thatjudgment was entered. In support of her argument, the debtor cites the statutory analysis of Leciekewski v. Sedlak, 116 Wis. 2d 629, 342 N.W.2d 734 (1984). Alternatively, the debtor argues that even if the redemption deadline serves to divest the owner's interest, the City's May 11, 2020 letter6 extended the time to redeem through June 26, 2020, which also is after the date of deed execution. The City responds that the Bank of Commerce decision, as it applies Wis. Stat. sec. 75.521(5), does not brook any extension of the redemption deadline.
DISCUSSION
The taking of land by the government from an individual for failure to pay taxes on the land is "a very drastic measure." Topps v. Cty. of Walworth, 2003 WI App 30, ¶ 19, 260 Wis. 2d 225, 659 N.W.2d 177 (citing Waukesha Cty. v. Young, 106 Wis. 2d 244, 249, 316 N.W.2d 362 (1982)) ( that jurisdiction to enter foreclosure judgment requires strict compliance with statutory procedures). The issue presented here is one of standing: under the applicable statutes, did the debtor, Ms. Grose, have an interest in the property within two years of her bankruptcy petition date, such that the City's in rem tax foreclosure ultimately may constitute a constructively fraudulent transfer under 11 U.S.C. § 548(a)(1)(B)?
As an initial matter, even though the record lacks a copy of the deed, there is no real dispute that the formal requisites for real estate conveyanceunder Wis. Stat. sec. 706.02(1)(a)-(g)7 were met. Accordingly, the quitclaim deed conveyed whatever interest Ms. Pernell possessed in the real estate to Ms. Grose at the time she delivered the deed—on or about June 1, 2020.
But the City argues that the quitclaim deed is of no effect, because as of June 1, 2020, Ms. Pernell had no interest in the real estate to transfer to the debtor. The City contends that Wis. Stat. sec. 75.521(5) mandates that Ms. Pernell lost her interest when she failed to redeem the property by May 27, 2020. The Court turns its analysis to that statutory scheme.
To find a statute's meaning, the Court first consults the text. In re Saxe, 491 B.R. 244, 253 (Bankr. W.D. Wis. 2013) (citing Armor All Prods. v. Amoco Oil Co., 194 Wis. 2d 35, 50, 533 N.W.2d 720 (1995)). Individual provisions are considered against the context of the full statute and related sections. Id.(citing Dubis v. GMAC, 238 Wis. 2d 608, 612, 618 N.W.2d 266 (Ct. App. 2000)). An interpretation or construction "which would make part of a statute superfluousshould be avoided whenever possible." Winebow, Inc. v. Capitol-Husting Co., Inc., 867 F.3d 862, 868 (7th Cir. 2017) (citing Ziegler Co., Inc. v. Rexnord, Inc., 147 Wis. 2d 308, 433 N.W.2d 8, 12 (1988)). But if the meaning is clear from the text, the analysis concludes. Id.
Once a property owner has been sufficiently delinquent in paying property taxes such that the county or City has included the land in a tax certificate, the municipality may commence a proceeding to foreclose its tax lien. Under Wis. Stat. sec. 75.521(3), the treasurer may file a list of such delinquent parcels in the office of the clerk of the local circuit court, and provide notice to the property owners, by certified letter8 and by publication.9
Pursuant to Wis. Stat. sec. 75.521(6), the redemption deadline must be "at least eight weeks from the date of the first publication of this notice" of foreclosure proceedings. Here, the notice was published in The Daily Reporter on March 18, 2020 and reported the redemption deadline as May 27, 2020. ECF No. 14-2, at 21. The second response option for a property owner involves a later date. Under Wis. Stat. sec. 75.521(5), the property owner may file an answer to the foreclosure proceeding "within 30 days after the date mentioned in the notice published pursuant to sub. (6)," or by June 26, 2020.10
Even though Ms. Pernell did not undertake either option, she retained the right at least to file an answer to the foreclosure complaint up until June 26, and then to have it ruled upon by the state court. According to Wis. Stat. sec. 75.521(8),11 the state court shall render final judgment vesting themunicipality with the estate in fee simple absolute if two things happen: (1) the property owner fails to redeem the property or answer the proceedings,...
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