IN RE HAIGHT, III, Bankruptcy No. 85 B 20015.

• Decision Date: 24 May 1985
• Docket Number: Bankruptcy No. 85 B 20015.
• Citation: 52 BR 104
• Parties: In re Oakley V. HAIGHT, III, Debtor, VILLAGE SAVINGS BANK, Movant, v. TOWN OF LEWISBORO, Respondent.
• Court: U.S. Bankruptcy Court — Southern District of New York

52 B.R. 104 (1985)

In re Oakley V. HAIGHT, III, Debtor VILLAGE SAVINGS BANK, Movant, v. TOWN OF LEWISBORO, Respondent.

Bankruptcy No. 85 B 20015.

United States Bankruptcy Court, S.D. New York.

May 24, 1985.

Taylor, McCullough, Goldberger & Geoghegan, Harrison, N.Y., for Village Sav. Bank.

Blum & Minicus, Katonah, N.Y., for Town of Lewisboro.

DECISION ON MOTION FOR ORDER STAYING SALE OF LIEN

HOWARD SCHWARTZBERG, Bankruptcy Judge.

Village Savings Bank, the holder of a first mortgage against the real property of the debtor, Oakley V. Haight, III, located in the Town of Lewisboro, New York, seeks to vacate the tax lien of the Town of Lewisboro and to enjoin the Town from disposing, assigning or enforcing the Town's tax lien with respect to the debtor's real estate on the ground that such conduct would violate the automatic stay imposed under 11 U.S.C. § 362. The Town of Lewisboro denies that its proposed tax lien sale infringes the proscription under 11 U.S.C. § 362.

FACTS

On January 12, 1984, the debtor executed a promissory note in favor of Village Savings Bank which was secured by a first mortgage in the sum of $109,000 on real property owned by the debtor as his residence in South Salem, Town of Lewisboro, New York. The Town of Lewisboro holds a tax lien against the debtor's real property for unpaid 1984/1985 school taxes in the amount of $4,457.22, plus interest and penalties, which tax became a lien on the debtor's real property on July 1, 1984, and was due and payable on September 1, 1984.

On January 11, 1985, the debtor, Oakley V. Haight, III, filed with this court his petition for relief under Chapter 13 of the Bankruptcy Code. Accordingly, the Town of Lewisboro's tax lien was validly obtained on July 1, 1984, before the debtor filed his Chapter 13 petition.

Pursuant to the Town's proposed sale of the tax lien, the Town will offer to sell its tax lien as an item of personal property to any potential purchaser at a price not less than the amount of the lien. In the event there are no interested purchasers, the Town will be required to bid the amount of the lien and will retain the tax lien against the debtor's real estate.

DISCUSSION

Pursuant to 11 U.S.C. § 362(a)(4), the filing of a bankruptcy petition operates as a stay applicable to all entities of "any act to create, perfect, or enforce any lien against property of the estate." The term entity is defined in 11 U.S.C. § 101(14) to include a "governmental unit." Hence, the Town of Lewisboro is not immune from the application of the automatic stay. This point is made clear under 11 U.S.C. § 106(c), where governmental sovereign immunity is expressly waived with respect to the operation of the automatic stay. Additionally, 11 U.S.C. § 362(a)(6) extends the stay to any act to collect a prepetition claim against the debtor.

The Town of Lewisboro argues that its proposed tax lien sale is not a foreclosure action and will not affect the debtor's title to the real estate to which the lien relates. Therefore, the Town contends that the proposed tax lien sale "is a sale of the personal property of said municipality and in no way affects the estate of the debtor nor does it create, perfect, or enforce any lien against the property of the debtor's estate." This position elides the fact that the proposed tax lien sale is a step along the road to the enforcement of the Town's prepetition tax claim by attempting to coerce the debtor into paying the delinquent taxes. Indeed, subsection (3) of § 283.391 of the Westchester Administrative Code specifically states:

3. If, notwithstanding such notice, the owner or owners shall refuse or neglect to pay such tax, assessment and penalties and the charges attending such notice and advertisement, it shall be lawful for the supervisor to cause such tax lien on such lands and tenements to be sold at public auction for the purpose and in the manner expressed in the advertisement, and such sale shall be made on the day and at the place for that purpose mentioned in such advertisement, and shall be continued from time to time, if necessary, until all the tax liens on the lands and tenements so advertised shall be sold.

(emphasis added).

In the case of In re Eisenberg, 7 B.R. 683 (Bkrtcy.E.D.N.Y.1980), it was held that a municipality's tax lien sale violated the automatic...