The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge
Presently before the Court is an appeal from a ruling by the United States Bankruptcy Court for the District of Columbia that certain post-petition acts taken by Appellees Plus Properties, LLC ("Plus Properties"), and the District of Columbia (the "District"), were not in violation of the automatic stay pursuant to 11 U.S.C. § 362(a). At issue is a question of first impression in this Circuit: whether the automatic stay is violated when post-petition steps are taken to secure and record a deed for property purchased through a prepetition tax foreclosure sale and for which the debtor's right of redemption has been foreclosed pursuant to a prepetition final judgment. Based on a searching review of the filings before the Court on appeal, the relevant statutes, regulations, and case law, and the record as a whole, the Court concludes that the post-petition actions at issue did not violate the automatic stay. The Court therefore affirms the Bankruptcy Court's ruling for the reasons that set forth below.
This appeal arises from the sale of certain real property owned by Appellant Foskey at the District's annual tax sale in July 2002. In particular, the parties' arguments on appeal focus on Appellees' post-petition conduct in completing payment and executing, delivering, and recording a deed for the subject property. To understand the parties' present positions, it is useful to first review the District's laws governing the sale of real property via a tax foreclosure sale. The Court therefore begins its discussion with a brief review of the relevant statutory provisions governing the sale of property at tax sales in the District and the various legal protections afforded owners of such property before then turning to consider the factual and procedural background underlying the present appeal.
The Mayor of the District of Columbia is authorized, after complying with various statutory requirements, to sell all real property in the District on which the tax is in arrears.
See D.C. Code § 47-1332.*fn1 District law provides, however, that the prevailing purchaser of property at a tax sale does not immediately gain title. Rather, the owner of property sold by the District at a tax sale retains the right to redeem the real property "at any time until the foreclosure of the right of redemption is final." Id. § 47-1360.*fn2 There is a mandatory "6-month waiting period" imposed following the date of the tax sale, within which the purchaser of the property may not move to foreclose the owner's right of redemption and the owner remains free to exercise his right of redemption. See id. § 47-1370(a). Only after the 6-month waiting period has expired may the purchaser then file suit in the Superior Court of the District of Columbia to foreclose the owner's right of redemption. Id. An owner's right of redemption continues until the D.C. Superior Court has issued a judgment foreclosing the right of redemption and such judgment has become final. Id. § 47-1370(d). By statute, a judgment issued by the D.C. Superior Court foreclosing an owner's right of redemption is deemed "final and conclusive on the defendants, their heirs, devisees, and personal representatives and they, or any of their heirs, devisees, executors, administrators, assigns, or successors in right, title, or interest, shall be bound by the judgment as if they had been named in the action and personally served with process." Id. § 47-1368. The judgment may not be reopened "except on the grounds of lack of jurisdiction or fraud in the conduct of the action to foreclose." Id. § 47-1379.
While the judgment foreclosing the owner's right to redemption ends their equitable interest in the property, legal title to the subject property does not vest in the tax sale purchaser by operation of the final judgment alone. Rather, by statute, a final judgment foreclosing the right of redemption must "direct the Mayor to execute and deliver a deed to the purchaser in fee simple on payment to the Mayor of the amount" required under the relevant statutes. See id. § 47-1382(a). "No deed shall be executed before such payment is received. " Id. The final judgment must also "direct the Mayor to enroll the purchaser in fee simple as the owner of the real property." Id.
Accordingly, until the deed is transferred pursuant to the procedure outlined in D.C. Code § 47-1382(a), the original owner of the property continues to hold legal title to the property, but no longer has the right to redeem the property at their option.
Although D.C. Code § 47-1382(a) does not specify a particular time period within which the purchaser must complete payment to the District and record the deed once it is executed and delivered by the District, the statute does separately provide that failure to take either action in a timely manner may risk opening the final judgment to attack. Specifically, D.C. Code § 47-1382(f) provides that if the purchaser fails to pay to the Mayor the amount required within 30 days of the final judgment or if the purchaser does not record the deed in the Recorder of Deeds within 30 days of the execution of the deed, "the final judgment may be vacated as void by the Superior Court on the motion of any party." Id. § 47-1832(f).
The relevant facts underlying this bankruptcy appeal are undisputed. Appellant, Isiah Foskey, and his wife owned real property located at 3115 E Street. S.E., Washington, D.C. Appellant's Br. at 2; Appellee District of Columbia's Br. at 1. Foskey failed to pay the real property taxes on the subject property, and the property was sold to Appellee, Plus Properties, at the District's annual tax in July of 2002. Appellant's Br. at 2; Appellee District of Columbia's Br. at 1. Pursuant to District law, a mandatory 6-month waiting period followed Plus Properties' purchase of the subject property. Foskey did not exercise his right of redemption during that time, and Plus Properties subsequently filed suit in the District of Columbia Superior Court to foreclose Foskey's right of redemption. Appellant's Br. at 2; Appellee District of Columbia's Br. at 1; see also Plus Properties, LLC v. Foskey et al., 2003 CA 001869(RP). Despite being timely and properly served, Foskey failed to file an answer or otherwise respond to the suit. On July 20, 2005, Magistrate Judge Evelyn Coburn issued a Final Judgment and Final Order foreclosing Foskey's rights of redemption. Docket No. [1-4] at 21-25 (07/20/05 D.C. Superior Court J. and Order) (ordering that "any and all persons who have or claim to have any right, title, claim, lien, interest or equity of redemption in the Property are hereby extinguished"). As required, the final judgment directed the Mayor "to execute and deliver a deed to [Plus Properties] in accordance with D.C. Code § 47-1382." Id. at 21.
On August 30, 2005, Foskey filed a Motion for Reconsideration, which Magistrate Judge Coburn denied on August 30, 2005. Appellee District of Columbia's Br., Ex. A (01/06/10 D.C. Ct. of Appeals Mem. Op. and J.) at 1. Thereafter, on September 13, 2005, Foskey filed a Motion for Clarification and Reconsideration of Magistrate Judge Coburn's August 30 order denying his initial motion for reconsideration. Id. at 2. Before Magistrate Judge Coburn could rule on that latter motion, Foskey filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the District of Columbia on September 20, 2005, thereby imposing an automatic stay. Appellant's Br. at 3; Appellee District of Columbia's at Br. 1-2. The record indicates that Foskey failed to advise Magistrate Judge Coburn that he had filed the bankruptcy petition, and on November 16, 2005, apparently unaware of the Bankruptcy Court action, Magistrate Judge Coburn denied Foskey's Motion for Clarification and Reconsideration on November 16, 2005. Appellee District of Columbia's Br., Ex. A (01/06/10 D.C. Ct. of Appeals Mem. Op. and J.) at 2. At no time did Foskey move the D.C. Superior Court to stay the July 20, 2005 final judgment foreclosing his right of redemption.
a. Execution, Delivery, and Recordation of the Tax Deed
On January 25, 2006, after the filing of Foskey's bankruptcy petition on September 20, 2005, the Mayor executed and delivered the subject property's deed to Plus Properties in compliance with the final judgment and order issued by Magistrate Judge Coburn. Appellee District of Columbia's Br. at 2. Plus Properties subsequently recorded the deed at the Recorder of Deeds on March 3, 2006. Appellee District of Columbia's Br. at 2.
b. The Bankruptcy Court's June 12, 2007 Order
On April 18, 2007, Plus Properties filed a Motion for Relief from the Automatic Stay Nunc Pro Tunc. See Docket No. [1-4] at 18-20 (Mot. for Relief from the Automatic Stay). In light of the post-petition actions taken by Plus Properties and the District to secure and record the deed to the subject property, Plus Properties moved the Bankruptcy Court to lift the automatic stay nunc pro tunc from September 20, 2005, to permit the recordation of the deed, or, alternatively, to rule that the automatic stay had not been violated in the first instance as the property at issue was not subject to the stay. See id. In response, on April 24, 2007, Foskey filed an Emergency Motion to Sell Property Free and Clear of Liens. Docket No. [1-4] at 40-44 (Emer. Mot. to Sell Property). As set forth therein, Foskey alleged that the post-petition actions taken by Plus Properties and the District did in fact violate the automatic stay and Plus Properties' ...