In re Jenkins
| Decision Date | 15 April 1982 |
| Docket Number | Bankruptcy No. 81-K-1812.,Civ. A. No. 81-K-1591 |
| Citation | 19 BR 105 |
| Parties | In re Jack Warren JENKINS and Eleanor Ann Jenkins, Debtors. Jack W. JENKINS and Eleanor Ann Jenkins, individuals, Plaintiffs-Appellants, v. Trudi PEET; Aspen Chateaux Mortgage Company, Inc., a Colorado corporation; Bank of Roaring Fork: Megapolitan Mortgage Co.; Public Trustee of Garfield County; and Public Trustee of Pitkin County, Defendants-Appellees. |
| Court | U.S. District Court — District of Colorado |
John A. Meininger, Sterling & Simon, Denver, Colo., for Jenkins.
Carl A. Eklund, DiManna, Eklund & Jackson, Denver, Colo., for Peet & Bank of Roaring Fork.
Marcia Krieger, Mason, Reuler & Peek, Denver, Colo., Ronald Austin, Aspen, Colo., for Aspen Chateaux Mortg.
This bankruptcy appeal is brought by the debtors-in-possession, the Jenkins, to review an order of Bankruptcy Judge Glen E. Keller, Jr., dismissing the Jenkins' complaint for enforcement of an automatic stay under 11 U.S.C. § 362(a) regarding four deeds of trust in the final stages of foreclosure. This court has subject-matter jurisdiction to hear this appeal under Pub.L.No.95-598, title IV, § 405(c)(1)(C), 92 Stat. 2549, 2685 (1978). I find the conclusions of law erroneous, reverse and remand.
The Jenkins were the owners of four separate parcels of realty in Pitkin and Garfield Counties, Colorado that were subject to deeds of trust for the benefit of certain appellees. After foreclosure proceedings, public sales and issuance of certificates of purchase to those appellees, the Jenkins filed a Chapter 11 bankruptcy petition, on July 6, 1981, and an order of relief was issued.
At the time of filing their petition, the Jenkins' right of redemption, pursuant to C.R.S. § 38-39-102(1), had expired on one of the parcels for which a public trustee's deed had already issued. The bankruptcy court's decision regarding that parcel was not appealed. The redemption period had also run on the second parcel, a platted lot, but the purchaser at the sale had not yet applied for a public trustee's deed. On a third property, labelled Parcel A in the bankruptcy court and known as St. Finnbarr Farm, the redemption period was to expire on the day the Chapter 11 petition was filed, July 6, 1981. On the fourth parcel, the Jenkins' residence, labelled Parcel B in the bankruptcy court, the redemption period was to expire on August 10, 1981.
On August 6, 1981, the Jenkins filed their complaint in the bankruptcy court for enforcement of the automatic stay, as provided by 11 U.S.C. § 362(a), of creditor enforcement of liens. The Jenkins alleged that, as debtors in possession, they were possessed of a substantial equity in the properties,1 that those appellees foreclosing deeds of trust were adequately protected by their security, and that the Jenkins' equity in the properties was essential to any effective reorganization under Chapter 11. They asserted that the automatic stay provision of 11 U.S.C. § 362(a)(1) tolled the redemption period. They further asserted that the appellees holding certificates of purchase remained mere lienholders within the meaning of 11 U.S.C. § 362(a)(4) and were consequently automatically stayed from applying for public trustee's deeds.
Appellees contended that nothing in Section 362 tolls the running of the redemption period beyond the 60-day period of 11 U.S.C. § 108, which has now expired, and that their application for deeds and the issuance of deeds by the public trustee are not acts "to create, perfect, or enforce any lien against property of the estate" that are stayed by 11 U.S.C. § 362(a)(4).
In re Jenkins, 13 B.R. 721, 726 (Bkrtcy.D. Colo.1981). The court therefore found the automatic stay provision of 11 U.S.C. § 362 inapplicable, and dismissed the Jenkins' complaint. Id. at 726.
On appeal the Jenkins present two issues:
1. What property interest did they have in the three parcels at the time of filing the petition? and,
2. Did the automatic stay provision of 11 U.S.C. § 362 apply to protect that interest?
All parties to this appeal agree that Colorado property law determines what property forms the estate under 11 U.S.C. § 541, and is therefore protected by the bankruptcy code. Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 917-918, 59 L.Ed.2d 136 (1979). The Jenkins argue that, under Colorado law, a mortgagor's title in his property continues, subject only to the mortgagee's lien, until a public trustee's deed is issued following foreclosure. The appellees, on the other hand, contend that a mortgagor's title divests at the foreclosure sale, subject only to possible revestment if the mortgagor pays the sale price within the redemption period, or if the purchaser fails properly to obtain a deed to the property. Accordingly, the appellees argue, during the redemption period the mortgagee's only interest in the property is the right to redeem, and this interest expires automatically at the end of the redemption period.
In Green v. Hoefler, 115 Colo. 287, 289-90, 173 P.2d 208, 209 (1946), the Colorado Supreme Court addressed this issue:
Whatever may have been the legal status of a certificate of purchase prior to the enactment of the amendment of 1937, under that statute the holder of a certificate of purchase does not have equitable title to the property, requiring only the ministerial act of the proper officer to become a legal title; instead, he has a lien thereon with right to receive the redemption money or, if no redemption is made, the right, upon demand, to receive official deed thereto. Under that act it is provided that it shall be deemed that such lien became due and payable on the date that the person became entitled to such deed, and that upon the issuance and delivery of the deed, and not until then, title should vest in the grantee. `. . . the general rule is that the issuance of the certificate, although it operates to extinguish the mortgage lien, and, in some jurisdictions, itself creates a statutory lien in favor of the purchaser, is not a deed and does not pass a title to the land itself, nor does it divest the mortgagor of his title, so that if a deed is not executed and delivered to the holder of the certificate within the time limited by statute, . . . the mortgagor . . . is never divested of his title.\'
(emphasis added, quoting 42 C.J. 279, § 1948). This language appears clearly to support the Jenkins' argument that the mortgagor retains title until the public trustee's deed is issued. The bankruptcy judge noted this, but reached the opposite conclusion, relying on two recent Colorado Court of Appeals decisions that he found had "refined" Green v. Hoefler. In re Jenkins, at 725.
In the first of these cases, Baber v. Baber, 28 Colo.App. 530, 474 P.2d 630 (1970), the court considered a dispute between a purchaser at a sheriff's sale following the foreclosure of a senior lien and a junior lienholder. In determining their respective rights the court stated:
When the owner\'s right of redemption expires, all of his right, title and interest in and to the land is extinguished. See Ross v. Nichols, 25 Colo.App. 409, 138 P. 1013 (1914); Plains Loan, Realty & Investment Co. v. Hood, 76 Colo. 322, 230 P. 1008 (1924). This same rule applies to the interests of lien holders who have a right to redeem.
474 P.2d at 631. The court then concluded that the junior lienholder's rights completely expired at the end of his redemption period, which follows the owner's redemption period. Id. See generally C.R.S. § 38-39-103.
The bankruptcy judge in the present case extended the rule enunciated in the first sentence of this quotation, concluding that most of an owner's rights are extinguished at the beginning of the redemption period. In re Jenkins, at 725-726. During the redemption period, the bankruptcy judge concluded, the owner has "only the rights to redeem and, failing that, of expectancy in the event of the laches of the mortgagee." Id. at 726. The bankruptcy judge further concluded, after the redemption period expires, "the only avenue for revestment of full ownership in the property . . . is for the passage of a period of 15 months with no action being taken by the holder of the certificate of purchase." Id.
I reject these conclusions. First, the bankruptcy judge incorrectly extended the Baber statement when he concluded that most of an owner's rights expire at the beginning of the redemption period, rather than at the end. Second, I believe that the Baber statement incorrectly applies Green v. Hoefler, which clearly stated that the owner's title is not divested until the public trustee's deed is issued.2
In the second case relied on by the bankruptcy judge, Emerick v. Greene, 40 Colo.App. 246, 575 P.2d 441 (1977), the court resolved a conflict between the property rights of a landowner3 and a purchaser at a foreclosure sale. The court repeated the previously quoted statement of Baber v. Baber and defined the issue as whether any rights are reinstated where, as here, the purchaser at the foreclosure sale fails to obtain a sheriff's deed in compliance with the statute.
575 P.2d at 442. Although the court considered the issue one of reinstatement of rights, it held:
In interpreting what is now § 38-39-111, C.R.S.1973, our Supreme Court held that issuance of the certificate of purchase was not equivalent to a conveyance of title to land, and that...
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