United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: RW MERIDIAN LLC, Debtor. COUNTY OF IMPERIAL TREASURER-TAX COLLECTOR, Appellant,
RONALD E. STADTMUELLER, Trustee; RW MERIDIAN LLC, Appellees. Bk. No. 16-00629-MM7
and Submitted on January 19, 2017 at San Diego, California
from the United States Bankruptcy Court for the Southern
District of California Honorable Margaret M. Mann, Bankruptcy
Lee Hyde, Schwartz Hyde & Sullivan, LLP, argued for
appellant County of Imperial Treasurer-Tax Collector;
Richard Girgado, Office of the County Counsel, County of Los
Angeles, argued for Amici The California State Association of
Counties and The California Association of County Treasurers
and Tax Collectors;
A. Kretsch argued for appellee Ronald E. Stadtmueller,
chapter 7 trustee.
Before: JURY, FARIS, and YUN, [*] Bankruptcy Judges.
County of Imperial Treasurer-Tax Collector (County),
scheduled a tax sale of real property owned by RW Meridian,
LLC (Debtor) by an internet auction on February 6, 2016, due
to the non-payment of taxes. Under Cal. Rev. & Tax Code
(Tax Code) § 3707(a)(1), Debtor's right to redeem
the tax defaulted property expired at 5:00 p.m. on Friday,
February 5, 2016. Debtor's right to redeem lapsed and the
sale by auction began as scheduled.
February 8, 2016, Debtor filed a chapter 7 petition. Aware
of Debtor's filing, the County completed the auction on
February 9, 2016, by selling the property to the highest
bidder for $343, 000. The County then filed a motion for a
comfort order,  asserting that the automatic stay was not
applicable to its postpetition acts under Tracht Gut, LLC
v. County of Los Angeles (In re Tracht Gut, LLC), 503
B.R. 804 (9th Cir. BAP 2014), aff'd, 836 F.3d
1146 (9th Cir. 2016), since Debtor's right to redeem the
property lapsed prepetition.
bankruptcy court disagreed that Tracht Gut was
binding precedent under these circumstances. The court found
that although Debtor's right to redeem the property had
expired prepetition, Debtor still held valuable rights in the
property at the time of its bankruptcy filing, including
title, possession, and contingent redemption rights.
Accordingly, the bankruptcy court found that the property was
property of Debtor's estate under § 541. As a
result, the court concluded that the County's
postpetition completion of the tax sale violated §
362(a)(3), (4), and (6) and thus was void. The court entered
an order denying the County's motion for a comfort order.
This appeal followed.
reasons set forth below, we agree with the bankruptcy
court's conclusion that Tracht Gut did not
address a circumstance where the redemption rights had lapsed
but the sale had not been completed prior to the bankruptcy
filing. Therefore, its holding is not binding under the facts
of this case. We hold that the County's postpetition
completion of the sale violated the automatic stay under
§ 362(a)(3), (4), and (6). Accordingly, we AFFIRM.
underlying facts are undisputed. As of February 6, 2016,
Debtor was the owner of 58.53 acres of unimproved land
located in Imperial County, California. Debtor had not paid
the property taxes for more than five years and was
delinquent in the approximate amount of $167, 000. As a
result, the tax collector scheduled the property for sale by
auction commencing on Saturday, February 6, 2016. By statute,
Debtor's right to redeem the property expired at 5:00
p.m. on Friday, February 5, 2016. Debtor's right to
redeem lapsed and the auction began on February 6, 2016, as
February 8, 2016, Debtor filed a chapter 7 petition.
Appellee, Ronald E. Stadtmueller, was appointed the chapter 7
trustee (Trustee). Aware of the bankruptcy filing, the
County, relying on the Panel's decision in Tracht
Gut, completed the auction postpetition by selling the
property to the highest bidder for $343, 000.
February 11, 2016, the County filed a motion for a comfort
order requesting confirmation that the completion of the
auction had not violated the automatic stay and that the
further act of recording the tax deed would not be a stay
violation as it was a "ministerial act." Trustee
opposed, contending that the property was property of the
estate which he could administer for the benefit of the
creditors and estate. After a hearing and further briefing,
the bankruptcy court took the matter under submission.
5, 2016, the bankruptcy court issued its decision in In
re RW Meridian LLC, 553 B.R. 807 (Bankr. S.D. Cal.
2016). The court concluded that it was not bound by the
holding in Tracht Gut because in that case both the
debtor's right to redeem expired and the sale occurred
prepetition and all that was left in the sale process was the
recording of the tax deed. The bankruptcy court reasoned that
until the sale, Debtor retained rights in the property
because equitable and legal title had not transferred. The
bankruptcy court also found that Debtor had a contingent
right of redemption under California law, which became
property of the estate. Finally, the bankruptcy court held
that the County's discretion regarding the conduct of the
sale eliminated the ministerial act exception to the
on the broad reach of the automatic stay espoused in
40235 Washington Street Corp. v. W.C. Lusardi (In re
Lusardi), 329 F.3d 1076 (9th Cir. 2003), and other case
law, the bankruptcy court found the sale violated §
362(a)(3), (4), and (6) and thus was void. The court denied
the County's motion for a comfort order and entered an
order consistent with its decision. The Country filed a
timely notice of appeal from that order.
County then filed an emergency motion for a stay pending
appeal. Trustee opposed, contending that he had received an
offer from third parties to purchase the property for $500,
000, an amount which would satisfy all claims in the
bankruptcy case, including the County's tax lien.
According to Trustee, this was the third offer he had
received and any further delay would impede the sale of the
property. A motions panel denied the stay motion.
October 14, 2016, the California State Association of
Counties and the California Association of County Treasurer
and Tax Collectors filed a motion for leave to file an Amicus
Brief. The parties contended that the issue involved in this
appeal was "vital to the administration of property tax
collection" and that the decision, "if sustained,
" would "seriously impair the ability of counties
and their tax collectors to ensure the collection of real
property taxes [and] subject the counties to a finding by the
courts that they violated the automatic stay."
the same time, Trustee filed an objection to Melissa
Johnson's declaration, which was included in the
County's appendix and not part of the record on appeal.
The County submitted Ms. Johnson's declaration to
"remove any uncertainty as to the relevant dates of the
events" in Lusardi, since the bankruptcy court
found that the facts in this case were "nearly
identical" to those in Lusardi. Although
Lusardi involved a postpetition tax sale, the County
submitted Ms. Johnson's declaration to show that the
debtor had filed a chapter 11 petition prior to the
expiration of its redemption right. Ms. Johnson, the Chief
Deputy Treasurer-Tax Collector for Riverside County,
authenticated the tax records associated with the real
property in the Lusardi case showing the sequence of
events. In its opening brief, the County asked the Panel to
take judicial notice of those tax records.
motions panel granted the motion for leave to file the Amicus
Brief and accepted it for filing, sustained Trustee's
objection to Ms. Johnson's declaration, and denied the
County's request for judicial notice.
bankruptcy court had jurisdiction pursuant to 28 U.S.C.
§§ 1334 and 157(b)(2)(G). We have jurisdiction
under 28 U.S.C. § 158.