In re Parker
| Decision Date | 07 June 2021 |
| Docket Number | Case No. 21-10619-SMG |
| Citation | 630 B.R. 653 |
| Court | U.S. Bankruptcy Court — Southern District of Florida |
| Parties | IN RE: Karlene S. PARKER Debtor. |
Orville M. McKenzie, Miami, FL, for Debtor.
Karlene S. Parker filed this Chapter 13 bankruptcy case after a sheriff's execution sale of real property she owned, but before the sheriff delivered a sheriff's deed to the purchaser. Because the deed had not been delivered as of her bankruptcy petition date, she contends the real property is property of her bankruptcy estate, and that the automatic stay prevented the sheriff from issuing the deed to the purchaser postpetition. Creditor Financial Asset Recovery Corp ("FARC") and purchaser Patrick's Custom Painting, however, both argue that the real property is not property of the estate because the execution sale was completed – and title passed to Patrick's Custom Painting – at the conclusion of the execution sale, upon payment of the purchase price. To determine the estate's interest in the real property as of the petition date – and the effect of the issuance of a sheriff's deed postpetition – the Court must examine Florida law on execution sales and Federal bankruptcy law on property of the estate and the automatic stay, as applied to the facts of this case.
The material facts are undisputed. On June 21, 2001, creditor First Select, Inc. ("First Select") obtained a default final judgment for $7,006.90 against Ms. Parker in the County Court in and for Broward County, Florida (the "County Court"), bearing interest at 11 percent per annum (the "Default Final Judgment"). First Select recorded the Default Final Judgment in the official records of Broward County, Florida on July 18, 2001. The Default Final Judgment has since been re-recorded and assigned to FARC.
On June 14, 2018, the County Court issued a writ of execution in respect of the Default Final Judgment. A few months later, then-Broward County Sheriff Scott J. Israel issued a Notice of Sheriff's Levy ("Notice of Levy"). The Notice of Levy stated that on October 23, 2018, a deputy sheriff levied upon all of the rights, title, and interest of Ms. Parker in and to the real property located at 2861 SW 88 Avenue, Miramar, FL 33025 (the "Real Property"), in order to satisfy the Default Final Judgment. The Notice of Levy also indicated that if the Default Final Judgment was not satisfied, the sheriff would sell the Real Property.
Sheriff Israel then issued a Notice of Sheriff's Sale, which scheduled an execution sale of the Real Property for January 8, 2019. For reasons not clear from the record, that sale never occurred. Then on November 30, 2020, new Broward County Sheriff Gregory Tony issued a second Notice of Sheriff's Sale (the "Second Sale Notice"), scheduling an execution sale for January 12, 2021. This execution sale went forward as scheduled, and Patrick's Custom Painting was the highest bidder for the Real Property at $45,000.00, which it paid at the conclusion of the auction. After payment in full of FARC's Default Final Judgment (with all accrued interest), as well as all costs and expenses associated with the execution sale, a surplus of $21,711.06 was returned to Ms. Parker.1
Ms. Parker then filed this bankruptcy case on January 25, 2021 (the "Petition Date"). Two days later – on January 27, 2021 – Sheriff Tony issued a sheriff's deed to Patrick's Custom Painting (the "Sheriff's Deed") relating back to the date of the execution sale, January 12, 2021. The Sheriff's Deed states, in relevant part, that the sheriff "hath granted, bargained, sold and conveyed, and by these presents doth grant, bargain, sell and convey unto Patrick's Custom Painting ... all the estate, right, title and interest, which [Ms. Parker] had on the day of 12th day of January A.D., 2021, or at any time afterwards, of, in and to" the Real Property. Shortly thereafter, Ms. Parker filed her Motion for Clarification that 88th Avenue is Property of the Bankruptcy Estate2 (the "Motion").
Ms. Parker argues that the Real Property is property of her bankruptcy estate under 11 U.S.C. § 541 because the Sheriff's Deed was not issued until after she filed for bankruptcy, and issuance of the deed therefore violated the automatic stay of 11 U.S.C. § 362(a). The bulk of her argument that the sale occurred postpetition is by analogy to Florida foreclosure sales and several cases holding that a foreclosure sale is not complete under Florida law until the state court clerk files a certificate of sale.3
FARC filed an initial response4 in which it argued that the sale occurred on January 12, 2021, when Patrick's Custom Painting paid the $45,000 purchase price to the sheriff at the execution sale. Unlike a foreclosure sale, an execution sale is not subject to a debtor's right of redemption, according to FARC. Thus, the sale is completed upon the conclusion of the auction and payment of the purchase price, and not when the sheriff issues a sheriff's deed.
After a preliminary hearing, the Court requested further briefing and entered a briefing order.5 Ms. Parker then timely filed a memorandum of law6 in which she expounded upon the arguments raised in her Motion. FARC and Patrick's Custom Painting timely filed memoranda in opposition to the Motion.7 Both argued the sale was completed at the conclusion of the auction when Patrick's Custom Painting paid the bid price, that title passed to Patrick's Custom Painting at that time, and that the subsequent issuance of the Sheriff's Deed was a ministerial act that related back to the auction date and therefore did not violate the automatic stay. Although the Court's briefing order did not require a reply brief, Ms. Parker nevertheless filed one.8 Her reply included many of the same arguments from her Motion and her memorandum of law. But this time she also added a substantive argument challenging service of the Second Sale Notice. As discussed below, however, the Court will not consider this argument because Ms. Parker previously waived it, and then impermissibly raised it for the first time in a reply brief.
The commencement of a bankruptcy case creates an estate comprised of all legal or equitable interests of the debtor in property as of the commencement of the case.9 Those property interests, though, "are created and defined by state law," unless a federal interest requires a different result.10 To determine what interest (if any) Ms. Parker's bankruptcy estate had in the Real Property as of her Petition Date, the Court must look to Florida law – the law of the state where the Default Final Judgment was entered and enforced, and where the Real Property is located.11 If the Court determines Ms. Parker had an interest in the Real Property as of the Petition Date, then Federal bankruptcy law would determine whether that interest constituted property of the estate.12 And if that interest constituted property of the estate, bankruptcy law would likewise dictate whether the postpetition issuance of the Sheriff's Deed violated the automatic stay of Bankruptcy Code section 362(a), which stays, among other acts, (1) the commencement or continuation of a prepetition legal proceeding against the debtor; (2) the enforcement of a prepetition judgment against the debtor or against property of the estate; (3) acts to obtain possession of property of the estate or to exercise control over property of the estate; (4) acts to create, perfect, or enforce a lien against property of the estate; (5) acts to create, perfect, or enforce a prepetition lien against property of the debtor; and (6) acts to collect on prepetition claims against the debtor.13
A determination of what interest (if any) Ms. Parker had in the Real Property as of the Petition Date requires an understanding of Florida judgment collection procedures. Under Florida law, there are multiple ways to collect a money judgment,14 including by writ of garnishment,15 by proceedings supplementary,16 and by execution.17
One of the first steps is usually to obtain a judgment lien on the judgment debtor's real18 or personal property.19 To obtain a judgment lien on real property, the judgment creditor must record a certified copy of the judgement in the official records or judgment lien records of the county in which a judgment debtor's real property is located.20 To obtain a judgment lien on personal property, a judgment creditor must file a judgment lien certificate with the Florida Department of State.21 Upon recording, a judgment lien on real property will be valid for an initial period of ten years.22 That lien may be extended for an additional ten years if it is re-recorded in accordance with Florida Statute § 55.10(2).23 The judgment lien will expire twenty years after the judgment was entered, or earlier upon satisfaction of the judgment.24
Once a judgment creditor obtains a judgment lien, it then has a number of ways to enforce that lien to seek payment of its judgment. One option is to take no action and simply wait for the property to be sold, in which case the judgment lien would be paid if there are sufficient proceeds from the sale to satisfy the lien. Another choice is for the judgment lien creditor to file a new lawsuit to foreclose its judgment lien and ultimately seek a judicial sale of the property. Yet another method is to attempt collection through execution.25
Execution is a type of final process under Florida law used to enforce a judgment.26 Florida courts have described "execution" as " ‘[t]he act of carrying into effect the final judgment or decree of a court; the writ which directs and authorizes the officer to carry into effect such judgment.’ "27 To obtain an execution, a judgment creditor must first record its final...
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