In re Greer, Bankruptcy No. BK 84-30084
| Citation | 89 BR 757 |
| Decision Date | 18 August 1988 |
| Docket Number | Bankruptcy No. BK 84-30084,Adv. No. 88-0053. |
| Parties | In re Marian B. GREER and Barbara Greer, Debtors. Marian B. GREER and Barbara Greer, Plaintiffs, v. PERRY COUNTY, ILLINOIS, a body politic, Don Hirsch, County Clerk of Perry County, Frank Magnin, County Collector of Perry County, F.B. Trust, Belle-East, D.D. Ballinger, and James McRoberts, Defendants. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Southern District of Illinois |
Marian B. and Barbara Greer, pro se.
Gene Gross, Pinckneyville, Ill., for Perry County, Don Hirsch and Frank Mangin.
Alan D. Bourey, Decatur, Ill., for D.D. Ballinger.
Winston C. Throgmorton, Marion, Ill., for F.B. Trust.
Raymond Nester, Belleville, Ill., for Belle-East.
Wm. Kopis, Belleville, Ill., for McRoberts.
On February 15, 1984, plaintiffs Marian and Barbara Greer filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code. Twelve days later, on February 27, 1984, Frank Magnin, County Collector of Perry County, Illinois (County), conducted a tax sale in which the 1982 taxes on plaintiffs' real estate were sold to defendants F.B. Trust, Belle-East and D.D. Ballinger. The County neither sought nor obtained relief from the automatic stay before conducting the tax sale. Subsequently, on February 27, 1985, an order was entered dismissing plaintiffs' Chapter 11 bankruptcy petition for cause pursuant to 11 U.S.C. § 1112, and the case was closed on April 30, 1985.
On February 26, 1986, one day prior to expiration of the two year period for redemption from the tax sale (see Ill.Rev. Stat., ch. 120, § 734), plaintiffs redeemed the tax sale certificates by paying their 1982 taxes with interest and penalties. On that same date, plaintiffs filed a complaint in state court seeking a declaration that the tax sale of their property was void ab initio as being in violation of the automatic stay of 11 U.S.C. § 362 (Count I) and, additionally, seeking damages from the various defendants for the alleged violation of the automatic stay (Count II). After dismissal of their complaint in state court, plaintiffs filed the instant complaint, which is virtually identical to their original complaint, in the federal district court on December 23, 1987, and the cause was subsequently transferred to this Court.
Defendants Perry County, Illinois, Don Hirsch, Frank Magnin, F.B. Trust, Belle-East, D.D. Ballinger and James McRoberts have filed motions to dismiss plaintiffs' complaint, alleging that the complaint fails to state a claim upon which relief may be granted and that it is untimely because it was filed after this Court had lost jurisdiction following dismissal and closing of plaintiffs' bankruptcy case. Defendant McRoberts, who was plaintiffs' attorney during their Chapter 11 proceeding, alleges further that he should be dismissed as a defendant because the stay under § 362 is not meant to bind the debtor's attorney but, rather, is intended to enjoin actions by a creditor or a creditor's attorney.
The Court finds initially that Attorney McRoberts' objection to plaintiffs' complaint is well taken and that the complaint should be dismissed as to him. Plaintiffs' allegation against McRoberts that he failed to take any action to protect their legal rights after their property was sold for taxes in violation of the automatic stay is essentially an allegation of negligence. Such an allegation is not properly before this Court in plaintiffs' action for violation of the automatic stay. Accordingly, defendant McRoberts' motion to dismiss plaintiffs' complaint against him will be granted.
The Court additionally finds that, contrary to the position taken by some of the remaining defendants, a tax sale held after the filing of a bankruptcy petition to satisfy a prepetition obligation constitutes a violation of the automatic stay. In re Young, 14 B.R. 809 (Bankr.N.D.Ill.1981); see Richard v. City of Chicago, 80 B.R. 451 (N.D.Ill.1987); In re Eisenberg, 7 B.R. 683 (Bankr.E.D.N.Y.1980). In considering the effect of a tax sale conducted pursuant to Illinois statute, the Young court stated:
The tax sale was manifestly within the parameters of section 362(a) since it was a judicial proceeding which attempted to collect payment of a pre-petition debt.
The automatic stay, by its terms, binds "all entitles" (11 U.S.C. § 362(a)), which includes "governmental units" (11 U.S.C. § 101(14)). The County, moreover, cannot claim that it was immune from the automatic stay by reason of sovereign immunity, as 11 U.S.C. § 106(c) specifically precludes such a defense. See In re Eisenberg; In re Haight, 52 B.R. 104 (Bankr.S. D.N.Y.1985); see also Matter of Ballentine Bros., Inc., 86 B.R. 198 (Bankr.D.Neb. 1988): tax sales do not come within the exemption from automatic stay of § 362(b)(4) regarding regulatory functions of state and local authorities. Thus, the County's tax sale conducted in violation of the automatic stay was void and without legal effect regardless of whether the participants had notice or knowledge of the existence of the stay. See In re Young; see also Richard v. City of Chicago.
Defendants assert, however, that plaintiffs' complaint seeking redress for violation of the automatic stay is untimely and that this Court is without jurisdiction to hear the complaint filed more than two years after plaintiffs' bankruptcy petition was dismissed and their case closed. It is axiomatic that the bankruptcy court is divested of jurisdiction over property of the estate and disputes relating to that property once the bankruptcy case is closed. While § 350(b) of the Bankruptcy Code provides for reopening of a bankruptcy proceeding to, among other things, "accord relief to the debtor" (11 U.S.C. § 350(b)), the decision to reopen a case is within the sound discretion of the court, and a case will be reopened only upon demonstration of compelling circumstances justifying it. Matter of Gratrix, 72 B.R. 163 (D.Alaska 1984); In re Rediker, 25 B.R. 71 (Bankr. Tenn.1982).
In the instant case, defendants argue that any claim for...
To continue reading
Request your trial