Mary Grace Diehl, U.S. Bankruptcy Court Judge.
The above-captioned case came before the Court on October 18, 2017 (the "Hearing") for confirmation of a Chapter 13 plan of reorganization (the "Plan") proposed by the Debtor. (Docket No. 14).
WCR Project asserts that it is the owner of real property located at 97 Delmoor Drive, Atlanta, Georgia (the "Property"), by virtue of a tax sale conducted on or around March 3, 2009. Through her Plan, the Debtor seeks, among other things, to redeem the Property. WCR Project further asserts that the Debtor cannot redeem property sold at a tax sale through a Chapter 13 plan. This Court holds that the Debtor can redeem the Property through the Plan, and will overrule WCR Project's Objection for the reasons outlined below.
Based on unpaid ad valorum property taxes on the Property, the Fulton County Tax Commissioner levied and sold the Property at a tax sale conducted by the Sheriff of Fulton County on or around March 3, 2009 for $2,576.75 (the "Tax Sale").
The Debtor filed this case on August 8, 2017 (the "Petition Date") under chapter 13 of title 11 of the United States Code (the "Bankruptcy Code"). (Docket No. 1). On the same day, the Debtor filed the first version of the Plan, exercising the right to redeem the Property and proposing to pay all of her debts (including the redemption amount) in full. (Docket No. 3). Prior to WCR Project filing a proof of claim, the Debtor estimated the redemption amount as $1,600, but had indicated that this is an extension plan, paying all debts in full.
On August 31, 2017, prior to filing the Objection, WCR Project filed a proof of claim, listing the amount of the claim as $5,189.50, categorized as secured by the Property. (Proof of Claim No. 2-1). Although, per the Barment Notice, the period to pay the redemption amount would have expired on September 1, 2017, because the Debtor filed for bankruptcy prior to that date, at a minimum, 11 U.S.C. § 108(b)
The issue before the Court is whether the Debtor can pay the Redemption Amount to WCR Project over the five-year applicable commitment period ("ACP") of her Plan.
Real property taxes in Georgia are assessed as of January 1 of each year, and the property owner is responsible for "returning" it as of that date. O.C.G.A. § 48-5-10. "[L]iens for all taxes due the state or any county or municipality in the state shall arise as of the time the taxes become due and unpaid and all tax liens shall cover all property in which the taxpayer has any interest from the date the lien arises until such taxes are paid." O.C.G.A. § 48-2-56(a).
If the taxes are not paid timely, the tax commissioner may issue an execution to the sheriff to levy upon the property of the taxpayer, after notice to the property owner. O.C.G.A. § 48-1-3 et seq. Once the property is sold at such a tax sale, O.C.G.A. § 48-4-40 provides
O.C.G.A. § 48-4-40 (the right to redeem under this section, the "Right of Redemption"). O.C.G.A. § 48-4-40 provides that any party with an interest in the property may redeem the property at any time until after the notice required by O.C.G.A. §§ 48-4-40 & 48-4-45, and the time required therein has expired (the "Redemption Deadline").
Per the Objection, the Barment Notice provided that the Right of Redemption expired on September 1, 2017. The Objection at *1-2, ¶ 3. The Debtor filed for bankruptcy prior to September 1, 2017, on
The Bankruptcy Code defines property of the estate as "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a). WCR Projects asserts that the Debtor is incorrect in asserting that she owns the Property, because WCR Project obtained legal title to the Property indirectly from the purchaser at the Tax Sale. The Objection at *1, ¶ 1. But, there are other factors to consider in determining property of the estate beyond legal title. Jimerson, 564 B.R. at 435-36 (citing Scorpion, 489 B.R. at 266). Aside from legal title and the Right of Redemption, there are other rights possessed by the "former owner" including, inter alia, the rights of possession, use, profits, and the ability to exclude others. Jimerson, 564 B.R. at 436 (citing Scorpion, 489 B.R. at 266-67). This is very similar to a deed to secure debt in Georgia, under which a mortgagor holds legal title, but the borrower otherwise possesses and retains all other rights to the property. Scorpion, 489 B.R. at 266 (citing Brown Inv. Group, LLC v. Mayor & Aldermen of City of Savannah, 289 Ga. 67, 68, 709 S.E.2d 214 (2011)). In cases with a deed to secure debt, there is no doubt that the subject property is property of the estate, even in spite of the debtor not holding legal title. Jimerson, 564 B.R. at 435-36; Scorpion, 489 B.R. at 266 (citing Citizens' & S. Bank v. Realty Sav. & Trust Co., 167 Ga. 170, 144 S.E. 893 (1928)). This is equally true in the context of a tax sale redemption prior to the expiration of the Right of Redemption. Jimerson, 564 B.R. at 435-36; Scorpion, 489 B.R. at 266. It does not make a practical difference that a tax sale purchaser's rights are created by statute and a mortgagor's rights by contract. Scorpion, 489 B.R. at 266-67.
Jimerson, 564 B.R. at 436 (citing Scorpion, 489 B.R. at 266-67).
It is these other rights in the "bundle" that are retained by the Debtor that distinguish this case (and Jimerson and Scorpion) from Commercial Fed. Mortg. Corp. v. Smith (In re Smith).
WCR Project argues that, because it holds legal title and because the Debtor did not pay the Redemption Amount in full prior to the final date set forth in the barment notice (extended by 60 days by § 108(b)), the Property is fully vested in WCR Project, and therefore the Property is not property of the estate. Like WCR's arguments, the courts in Edward and Callaway also only recognized the Right of Redemption as being possessed by the debtor; neither case addressed the other rights that were retained by the debtor on each's petition date. See Edwards, at *5-7 ("The sale divested the Debtor of title to the Property, leaving Debtor with a right to redeem property"); Callaway, at *11 ("First, Appellant had only a right to redemption in the Property at the time that he filed for bankruptcy, as title to the Property had passed when the [tax sale purchaser] purchased the tax deed."). Neither WCR nor the courts in Edwards or Callaway gave any explanation for this absence. See Edwards (passim); Callaway (passim); Doc. 12 (passim). As discussed above, however, these other rights in the "bundle" possessed by the Debtor on the Petition Date are crucial to the analysis. Just like a borrower under a deed to secure debt, on the Petition Date, the Debtor in this case possessed all the rights to the property except legal title. In light of the foregoing, this Court finds that the Property is property of this Debtor's Chapter 13 estate.
Courts in this District are also split as to whether a debtor who files a Chapter 13 bankruptcy case between the delivery of a barment notice under by O.C.G.A. § 48-4-45 and the deadline for redemption arising from that barment notice can pay the redemption amount over time pursuant to a Chapter 13 plan, or whether instead the debtor must pay the redemption amount in full by a date that is no later than sixty (60) days
Even if WCR Project had not filed a proof of claim, this Court agrees with the holdings in Jimerson and Scorpion, and would still have found that WCR Project has a secured claim for the purposes of the Bankruptcy Code and chapter 13.
The Bankruptcy Code defines a claim as:
11 U.S.C. § 101(5). Additionally, "claim" is to be interpreted broadly. See Pa. Dep't of Public Welfare v. Davenport, 495 U.S. 552, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990); Johnson v. Home State Bank, 501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991); Jimerson, 564 B.R. at 437; Scorpion, 489 B.R. at 267-68. The analysis and facts in Johnson are most applicable here.
Johnson involved a chapter 13 debtor that owned property subject to a mortgage; however, the debtor's personal liability was discharged in a previous Chapter 7 case. Johnson, 501 U.S. at 80, 111 S.Ct. 2150. Therefore, the debt was non-recourse. Id. at 83, 111 S.Ct. 2150. Despite the argument that a non-recourse loan claimant has no right to payment as referred to in § 101(5), the Supreme Court held first that the right to proceeds from the sale of the property is a "right to payment" and, second that § 101(5)(B) also includes equitable remedies, such as the right to foreclose. Id. at 84, 111 S.Ct. 2150. The courts in Jimerson, Scorpion, and several other cases following Johnson, have likewise found that the interest possessed by a non-recourse mortgagee is almost identical to the interest that a tax sale purchaser possesses. Jimerson, 564 B.R. at 437-38 (collecting cases). Therefore, like in Johnson and Jimerson, WCR Project holds a "claim" as defined in the Bankruptcy Code.
In the instant case, WCR filed a proof of claim categorizing the debt as a secured debt, and further, the Debtor has an obligation to pay the Redemption
This Court agrees with the analysis set forth in Jimerson and Scorpion. The Property is property of the estate; WCR Project holds a claim in this case secured by the Property; and, as set forth below, that secured claim can be modified pursuant to § 1322(b).
Having determined that the Property is property of the estate and that WCR Project has a secured claim, the Court now turns to the treatment of that claim. Generally, a secured claim can be modified pursuant to § 1322(b), unless the claim is secured by the principal residence of the Debtor. See Scorpion, 489 B.R. at 269. As regarding tax redemptions, however, some courts have held that § 108(b) provides the only extension of time associated with redemption, while other courts have held that § 1322(b) can be used to permit the redemption amount to be paid over time, like any other claim, and is not foreclosed by § 108. See Jimerson, 564 B.R. at 438 (comparing cases). This Court holds that § 1322(b)(2) allows a debtor to pay a tax redemption amount over the course of that chapter 13 plan based on the analysis set forth below, and therefore, the Debtor may pay WCR Project's claim over the Debtor's Plan.
Section 1322(b)(2) provides that a debtor may "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims." 11 U.S.C. § 1322(b)(2). As set forth above, WCR Project possesses a claim secured by a lien (in the form of a conditional title) on the Property. The Debtor does not reside in the Property, and therefore it is not her principal residence, as used in § 1322(b)(2). Consequently, WCR Project's claim can be modified under § 1322(b)(2) unless the application of § 1322(b)(2) is foreclosed by § 108(b).
The courts that have precluded the application of § 1322(b), such as Callaway and Edwards, held that only § 108(b) could extend the redemption period, limited to sixty (60) days from the petition date. Callaway, at *11-12; Edwards, at *14. They held that property rights granted by state law can only be modified to the extent the Bankruptcy Code explicitly allows, such as by § 108(b), and the right of redemption is granted by state law. Callaway,
In contrast to those cases, the courts in Jimerson and Scorpion held that the tax sale purchaser held a secured claim. Jimerson, 564 B.R. at 438; Scorpion, 489 B.R. at 269. In that context, those courts compared §§ 108 and 1322, and held that although § 108(b) was an expansion of state law rights by Congress, it was not intended to limit the applicability of any other provision of the Bankruptcy Code. Scorpion, 489 B.R. at 269 (citing In re Bates, 270 B.R. 455, 466 (Bankr. N.D. Ill. 2001)); see also In re Pittman, 549 B.R. 614, 629-30 (Bankr. E.D.Pa. 2016).
To prevent an irreconcilable conflict, the canons of statutory interpretation posit that two statutes should be interpreted in a way that avoids that conflict. See Johnson v. Midland Funding, 823 F.3d 1334, 1340 (11th Cir. 2016) (citing J.E.M. Ag. Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 143-44, 122 S.Ct. 593, 605, 151 L.Ed.2d 508 (2001); Walthour v. Chipio Windshield Repair, LLC, 745 F.3d 1326, 1331 (11th Cir. 2014) (citing Morton v. Mancari, 417 U.S. 535, 550-51, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974); Pittman, 549 B.R. at 629). If conflict is unavoidable, as a general principle, a specific-application statute should control over a general-application one. Gilbert v. U.S., 640 F.3d 1293, 1308 (11th Cir. 2011) (citing Morton, 417 U.S. at 550-51, 94 S.Ct. 2474). This applies to the Bankruptcy Code as much as any title. In re Cox, 338 F.3d 1238, 1243 (11th Cir. 2003) (citing Morton, 417 U.S. at 550-51, 94 S.Ct. 2474; see also Pittman, 549 B.R. at 629 (citing Bank of Commonwealth v. Bevan, 13 B.R. 989, 994 (E.D. Mich. 1981) (citing Richards v. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 7 L.Ed.2d 492 (1962))). As between §§ 108(b) and 1322(b)(2), § 1322(b)(2) has more specific application and should govern over § 108(b), but there is also a way to interpret these statutes to avoid any conflict entirely.
As stated above, if two statutes conflict, the general rule of statutory construction provides that the specific governs over the general. Gilbert, 640 F.3d at 1308 (11th Cir. 2011) (citing Morton, 417 U.S. at 550-51, 94 S.Ct. 2474); Cox, 338 F.3d at 1243 (citing Morton, 417 U.S. at 550-51, 94 S.Ct. 2474); In re Frazer, 377 B.R. 621, 632 (9th Cir. BAP 2007) (citing D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 208, 52 S.Ct. 322, 76 S.Ct. 704 (1932)); see also Dubov v. Read (In re Read), 692 F.3d 1185 (11th Cir. 2014). Section 1322(b)(2) does not apply to all bankruptcy cases, it
Additionally, § 108(b) was added to the Bankruptcy Code in 1978, based on a predecessor section, Section 11(e), that was added in 1938. See McKinney, 341 B.R. at 899. Section 108(b), and its predecessor, were intended to provide the trustee or similarly situated party a brief extension to preserve any asset for the estate that might otherwise be lost under applicable non-bankruptcy law.
Having found that WCR Project has a claim secured by property that is not the Debtor's principal residence, § 1322(b) applies. Section 1322 controls over § 108, and the Debtor can thus modify WCR Project's rights to the extent that the Redemption Amount can paid in full, with interest, over the term of the Debtor's Plan.
Alternatively, §§ 108 and 1322 are not actually in conflict in this case. The Debtor argues that she has effectively exercised her Right of Redemption by proposing a Chapter 13 plan prior to the expiration of § 108(b)'s sixty-day period that proposes to pay the redemption amount in full,
Jimerson, 564 B.R. at 440 (citing Pittman, 549 B.R. at 617-18, 22, & 30-31).
It is a well-established principle that the Bankruptcy Code supersedes state law. Pittman, at 629-30 (citing Vanston Bondholders Protective Comm. v. Green, 329 U.S. 156, 162-63, 67 S.Ct. 237, 91 S.Ct. 162 (1946)). Although the applicable state law might require a lump-sum payment, chapter 13 of the Bankruptcy Code allows a debtor to pay debts over time, superseding state law. Jimerson, 564 B.R. at 440; see Scorpion, 489 B.R. at 269-70 (citing Bates, 270 B.R. at 466). Other than complying with Chapter 13, no action other than filing a plan proposing to pay the redemption amount is required. Jimerson, 564 B.R. at 440 (citing Pittman, 549 B.R. at 630-31 (holding that Fed. R. Bankr. P. 6008 only applies to Chapter 7 and that § 108 does not require any specific action)). Based on cases setting forth similar reasoning, the court in Scorpion also held that, as applied to a redemption of property subject to a tax deed, § 1322(b)(2) allowed the redemption amount to be paid in full over the length of a chapter 13 plan and was not limited by § 108(b). Scorpion, 489 B.R. at 269-70 (citations omitted).
In the instant case, the Debtor's proposed plan is an extension plan, filed prior to the date the Right of Redemption would have expired under the extension provided by § 108(b). The Debtor proposes to pay Redemption Amount in full, plus interest. Therefore, the Debtor has timely exercised her Right of Redemption within the extension granted by § 108(b) by filing an extension plan proposing to pay the Redemption Amount in full. Because the Right of Redemption has been properly exercised by the Debtor by the affirmative step of filing the Plan,
On the Petition Date, the Debtor possessed an unexpired Right of Redemption and the rights to use, possession, and all
Accordingly, it is
The Clerk is directed to serve copies of this Order upon all scheduled creditors and the attached distribution list.
Nechanta Denise Alexander 5816 Wind Gate Lane Lithonia, Georgia 30058
Peter John Batalon The Semrad Law Firm, LLC 303 Perimeter Center North Suite 201 Atlanta, Georgia 30346
Huixin Hou The Semrad Law Firm, LLC 303 Perimeter Center North Suite 201 Atlanta, Georgia 30346
Michael John Chase McCallum The Semrad Law Firm, LLC 303 Perimeter Center North Suite 201 Atlanta, Georgia 30346
WCR Project, LLC c/o James P. Blum, Jr. The Law Office of James P. Blum, Jr., LLC 3000 Langford Road Building 100 Peachtree Corners, Georgia 30071
Albert Clark Guthrie Mary Ida Townsend, Chapter 13 Trustee 191 Peachtree Street NE Suite 2200 Atlanta, Georgia 30303
Guy G. Gebhardt Acting United States Trustee 75 Ted Turner Drive SW Suite 362 Atlanta, Georgia 30303
Jimerson, 564 B.R. at 434, n. 14 (citing Greyfield Resources, Inc. v. Drummer and Goodman (In re Drummer), 457 B.R. 912 (Bankr. N.D.Ga. 2011)(Sacca, J.)).
