In re Hellenschmidt, Bankruptcy No. 80 K 0642.

• Citation: 5 BR 758
• Decision Date: 10 September 1980
• Docket Number: Bankruptcy No. 80 K 0642.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Colorado
• Parties: In re Richard Joseph HELLENSCHMIDT, d/b/a CMJ Construction, CMJ Dry Wall and Painting, and Shirley Whitcomb Hellenschmidt, Debtors. COLUMBINE P & S FUND, INC., a Colorado Corporation, Plaintiff, v. Richard J. HELLENSCHMIDT, Shirley W. Hellenschmidt, and Jo L. Fleming, Public Trustee in and for the County of Arapahoe and State of Colorado, Defendants.

5 B.R. 758 (1980)

In re Richard Joseph HELLENSCHMIDT, d/b/a CMJ Construction, CMJ Dry Wall and Painting, and Shirley Whitcomb Hellenschmidt, Debtors.

COLUMBINE P & S FUND, INC., a Colorado Corporation, Plaintiff, v. Richard J. HELLENSCHMIDT, Shirley W. Hellenschmidt, and Jo L. Fleming, Public Trustee in and for the County of Arapahoe and State of Colorado, Defendants.

Bankruptcy No. 80 K 0642.

United States Bankruptcy Court, D. Colorado.

September 10, 1980.

Eugene F. Costello, Denver, Colo., for Mile-Hi Kitchens, Inc.

John D. Saviers, Aurora, Colo., for Columbine P & S Fund, Inc.

MEMORANDUM AND ORDER DETERMINING EFFECT OF AUTOMATIC STAY AND DENYING EXTENSION OF TIME FOR REDEMPTION

GLEN E. KELLER, Jr., Bankruptcy Judge.

Mile-High Kitchens, Inc. ("Mile-Hi") seeks a determination of its rights as a junior lienor to redeem certain Colorado real property after a public trustee's sale. The instant motion arises out of an adversary proceeding instituted by the beneficiary of a deed of trust seeking relief from the automatic stay so that foreclosure and redemption might proceed. The facts are essentially undisputed.

On January 11, 1979, the Debtors, Richard J. Hellenschmidt and Shirley W. Hellenschmidt, gave their deed of trust on Lot 27, Block 26, Hoffman Town Third Filing, Arapahoe County, Colorado, to secure a $15,000.00 note payable to Columbine P & S Fund, Inc. ("Columbine"). The deed of trust was promptly and properly recorded in the Arapahoe County land records. After the Debtors' default, Jo L. Fleming, the Public Trustee of Arapahoe County, recorded a notice of election and demand on behalf of Columbine on September 27, 1979. On October 25, 1979, Mile-Hi obtained a judgment for $1,589.74 against Richard Hellenschmidt in the District Court of Arapahoe County and recorded a transcript thereof on November 8, 1979. On November 21, 1979, and in compliance with 1973 C.R.S. § 38-39-101, et seq., Jo L. Fleming sold the property to Columbine and issued her public trustee's certificate of purchase. Pursuant to § 38-39-102(1), the Debtors had 75 days, or until February 4, 1980, to redeem the property, but their bankruptcy intervened on February 1, 1980. On March 19, 1980, Columbine filed its complaint for relief from stay against the Debtors and the Public Trustee. A hearing was held on April 16, 1980, at which Columbine was granted relief from the stay imposed by 11 U.S.C. § 362. They stipulated, however, that the Debtors might have 60 days in which to pay redemption value and thus recover the property. That time expired June 16, 1980. The Court entered its Order in conformity with the stipulation on May 1, 1980.¹ On April 21, 1980, Mile-Hi filed its notice of intention to redeem with the Public Trustee and has subsequently deposited the appropriate sum of money for that purpose. On June 15, 1980, Mile-Hi filed the instant motion in this proceeding without having intervened. Neither the Trustee in bankruptcy nor the Debtors have ever redeemed the property.

The Court could dispose of the motion on the ground that Mile-Hi has not properly intervened. See Rule 724 F.R.B.P. Nevertheless, Mile-Hi will be treated as having properly intervened because of the lack of objection by any other party and because Mile-Hi would have been entitled to intervene had it followed the appropriate procedure. Rule 24(a) F.R.C.P.

Had no bankruptcy occurred, Mile-Hi's rights under Colorado law were clear. If it had filed its notice of intent to redeem by February 4, 1980, and if the Debtors failed to redeem by that date, Mile-Hi could have redeemed within the following 10 days.² See 1973 C.R.S. §§ 38-39-103(1) and (2). If Mile-Hi failed to timely file its notice of intent to redeem, it would have no statutory right of redemption. 1973 C.R.S. § 38-39-103(2); Storke and Sears, Statutory Redemption in Colorado, 30 Dicta 79 (1953). Mile-Hi contends that the Debtors' bankruptcy automatically stayed it from filing its notice of intention to redeem pursuant to 11 U.S.C. § 362(a) and, thus, that its filing on April 21, 1980, should be given effect.³ The Court disagrees.

The automatic stay imposed by 11 U.S.C. § 362(a) restrains any action against the debtor, the debtor's property, or "property of the estate." "Property of the estate" is generally defined in § 541(a)(1) as "all legal or equitable interests of the debtor in property as of the commencement of the case." Under Colorado law, the only interest retained by an owner is a statutory right of redemption after a public trustee's sale.⁴ Accordingly, that right became "property of the estate" upon the filing of the bankruptcy petition. The real property itself did not. 4 Collier on Bankruptcy, ¶ 541.073 (15th Ed. 1979); In re Butchman, 4 B.R. 379, 6 B.C.D. 403, 2 C.B.C.2d 174 (S.D.N.Y.1980); In re Bush Gardens, Inc., 5 B.C.D. 1023, 1 C.B.C.2d 134 (D.N.J. 1979). The filing of notice of intent to redeem by a junior lienor does not affect or prejudice the estate's right to redeem. Neither does it affect any right (e.g., possession) the debtor may have with respect to the property. It merely lays the foundation for a subsequent redemption if the estate's right expires unexercised. The conclusion...