United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit February 13, 2006
Charles R. Fulbruge III
Clerk
No. 05-30052
In the Matter of: SUZANNE BRUNAZZI PAXTON,
Debtor,
* * * * * * * *
MARVIN EDWARD HERRINGTON, ANNETTE KNIGHTEN HERRINGTON,
Appellants,
VERSUS
THOMAS A. GRANT, III, COBA, L.L.C., JOE BAILEY GRANT, GAIL GRANT,
Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
Before DAVIS, SMITH and DENNIS, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
Appellants, Marvin and Annette Herrington, appeal a district
court judgment setting aside a tax sale of the interest of Joe
Bailey Grant, one co-owner of the property, for lack of sufficient
notice of the sale and as to the interest of Thomas A. Grant, the
other co-owner, for violation of an automatic stay. We uphold the
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district court’s judgment setting aside the tax sale of Joe Bailey
Grant's interest for lack of sufficient notice. However, for the
reasons that follow, we vacate the court’s order setting aside the
sale of Thomas A. Grant's interest for violation of the automatic
stay and remand for further proceedings.
I.
Two brothers and their wives owned in indivision a 36-acre
tract of immovable property in Richland Parish, Louisiana. Thomas
A. Grant (“T.A. Grant”) and his wife, Suzanne Brunazzi Grant Paxton
(“Suzanne”), owned one half of the property, and T.A’s brother, Joe
Bailey Grant (“J.B. Grant”) and his wife, Gail Grant, owned the
other one half. In 1990, Suzanne declared bankruptcy after a
divorce from T.A. Grant. In 1994, the bankruptcy court ruled that
the interest in the property owned by Suzanne and her ex-husband
was properly included in the bankruptcy estate and was owned by the
Bankruptcy Trustee, Allen Harvey (“Bankruptcy Trustee” or
“Trustee”).
In June of 1996, J.B. and Gail Grant executed a special
mortgage in favor of the Central Bank in Monroe, Louisiana,
burdening fifteen different properties, including their half
interest in the property at issue.
In December of 1996, the Richland Parish sheriff’s office
followed the same procedure it had followed in earlier years, and
sent a single bill for all ad valorem taxes due on the property by
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certified mail to T.A. Grant’s law office. All of the previous
bills had been paid. The 1996 bill, however, was not paid, and in
May of 1997, the Sheriff sent a delinquency notice to the same
address by certified mail, advising of the tax delinquency and the
impending tax sale if the taxes remained unpaid. The tax bill
remained unpaid.
During bankruptcy proceedings, T.A. Grant testified that he
did not remember receiving the notices and could not find them in
his records. Although the notices had been sent by certified mail,
there was no evidence that T.A. Grant had signed for the notices.
The Bankruptcy Trustee also testified that he had no record of
receiving the notices, although T.A. Grant would normally have sent
them to him. There was also no evidence that notices had been
sent to the Trustee, J.B. and Gail Grant, or to Central Bank. The
Sheriff did, however, publish notice of the impending tax sale in
the Richland Parish newspaper.
The taxes remained unpaid, and the property was sold to the
Herringtons at the tax sale in May 1997. The property was
estimated to be worth more than $70,000; the taxes owed were
$118.19, and the Herringtons bought the property for a total of
$227.63. The Sheriff then sent a notice of the sale by first class
mail to T. A. Grant at the same address, stating that the property
could be redeemed under state law. T.A. Grant did not respond, and
no evidence was provided that T. A. Grant received this notice or
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that this notice was sent to the Bankruptcy Trustee, J.B. and Gail
Grant, or to Central Bank or its successors.
In 2001, T.A. Grant bought the Bankruptcy Trustee’s interest
in the 15 parcels of land, including the property at issue. He
purchased the property by a non-warranty deed for a total of
$15,000.
At some point after the tax sale, Bank One, N.A. (“Bank One”)
became the legal successor to Central Bank through a series of
corporate mergers, thus giving it a security interest in J.B.
Grant’s interest. In 2002, Bank One assigned its interest in the
J.B. Grant mortgage to Coba, LLC.
In March 2003, T.A. Grant filed suit in bankruptcy court
against the Herringtons, seeking to annul the tax sale. He also
added Coba and J.B. Grant as additional defendants. Coba filed a
cross-claim against the Herringtons. Following trial, the court
rendered judgment against the Herringtons and declared the tax sale
null because it was held in violation of the automatic stay, and
also because of inadequate notice of the sale, it violated the due
process rights of J.B. Grant, Coba, and T.A. Grant, as the assignee
of the Bankruptcy Trustee.
On appeal, the district court agreed with all aspects of the
bankruptcy court’s ruling except it concluded that the Bankruptcy
Trustee’s interest in the property was not recorded or otherwise
reasonably identifiable to the taxing authorities; thus,
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publication of the sale in the parish newspaper was sufficient
notice as to the Trustee. The district court also found that only
T.A. Grant, as the Trustee’s assignee, and not J.B. Grant or Coba,
had “statutory standing” to assert that the sale was null as a
violation of the automatic stay. The district court then declared
the sale of T.A. Grant’s interest in the property void for
violation of the stay.
Based on the district court’s judgment, the sale of J.B.
Grant’s interest was invalid because he received insufficient
notice of the tax sale. His mortgage holder, Coba, similarly
retains its interest because of insufficient notice. The sale of
T.A.’s interest was invalid because the tax sale violated the
automatic stay. The Herringtons were therefore left without any
interest in the property.
II.
A.
Appellants first argue that the bankruptcy and district courts
erred in finding that J.B. and Gail Grant were not given sufficient
notice of the tax sale to satisfy the procedural due process
requirements set forth in Mennonite Board of Missions v. Adams, 462
U.S. 791 (1983). The district court found that the notice to T.A.
Grant’s address “simply does not satisfy the Mennonite requirement
of notice reasonably calculated to apprise a party [J.B. and Gail
Grant] of a proceeding which adversely affected that party’s
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property interest.”
Second, appellants contend that the district court erred in
finding that Coba, as assignee of Bank One, could pursue the due
process claims of its assignor. The district court found that “a
valid assignment confers upon the assignee standing to sue in place
of the assignor.”
Third, appellants argue that COBA lacks standing because it
has not proven injury. The district court held that the tax sale,
if recognized, would divest Coba of its interest in the collateral,
resulting in a harm that is both concrete and actual.
After reviewing the record, we are persuaded that the
bankruptcy court and district court committed no reversible error
in arriving at their factual findings and legal conclusions on the
above issues.
B.
Appellants also argue that when T.A. Grant purchased the
property from the Bankruptcy Trustee, this sale did not convey the
Trustee’s statutory authority to avoid the tax sale for violation
of the automatic stay. T.A. Grant, on the other hand, argues that
when the Bankruptcy Trustee assigned to him the Trustee’s rights in
the property, this included an assignment of the Trustee’s rights
under 11 U.S.C. § 362 to avoid the tax sale for violation of the
automatic stay.
Although T.A. Grant contends that the Trustee’s authority to
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set aside the sale is found in § 362, this section on its face does
not give the trustee the right to set aside a transfer, and
appellants cite no persuasive authority that the Trustee has that
power under § 362. The section of the Bankruptcy Code that gives
the Trustee the authority to avoid a post-petition transfer is 11
U.S.C. § 549, which provides:
(a) Except as provided in subsection (b) or (c) or this
section, the trustee may avoid a transfer of property of
the estate--
(1) that occurs after the commencement of the case; and
.....
(2)(B) that is not authorized under this title or by the
court.
.....
This is consistent with our decision in In re Pointer, 952
F.2d 82 (5th Cir.1992). The issue presented in Pointer was whether
ad valorem tax liens, which attach post-petition to property of a
bankruptcy estate, violate the automatic stay. Before reaching
that issue, however, the court addressed the question of whether “a
creditor has standing to seek relief for an alleged violation of
the automatic stay.” Id. at 85. The court concluded that Pointer,
a creditor, lacked standing under the Bankruptcy Code to avoid the
post-petition tax liens as violative of the stay because standing
to enforce the stay violation was granted solely to the trustee or
debtor-in-possession under § 549. Id. at 87-8.
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In determining whether Pointer could establish statutory
standing, the court “turn[ed] to two sections in the Bankruptcy
Code which address the question of standing to bring suit for
violations of the automatic stay.” Id. at 86. The court initially
concluded that Pointer was not seeking relief under § 362(h), which
allows recovery of actual damages, including costs and attorney’s
fees, for willful violations of the stay;1 but rather, Pointer
sought to invalidate the post-petition liens as violative of the
automatic stay. The court stated that “the Code specifically
addresses standing to enforce this type of alleged stay
violation–unauthorized post-petition transfers of property–in §
549.” Id. at 86-7. After finding that the attachment of a lien on
property is a transfer of property, the court concluded that § 549
grants an avoidance power solely to the trustee or debtor-in-
possession. Id. at 87. Because Pointer was neither the trustee
nor the debtor-in-possession, she was not entitled to avoid the
post-petition transfer.
Applying the reasoning in Pointer, the Trustee’s right to
avoid post-petition transfers in this case is granted by § 549.
Thus, the analyses of the bankruptcy court and district court of
whether the Trustee’s assignee had the right under § 362 to avoid
the tax sale is flawed. Whatever authority the Trustee had to set
1
Section 362(h) provides that “[a]n individual injured by any willful
violation of a stay provided by [§ 362] shall recover actual damages, including
costs and attorneys’ fees, and, in appropriate circumstances, may recovery
punitive damages.”
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aside the sale emanates from § 549, and we must remand this case to
the district court with instructions to remand to the bankruptcy
court for that court to consider:2 (1) Whether § 549 gave the
Trustee the right to set aside the tax sale to the Herringtons.
(2) If so, whether that right was transferred to T.A. Grant as part
of Grant’s purchase of the property from the Trustee. (3) Assuming
that right was transferred to T.A. Grant, is his claim time barred
under § 549.3
CONCLUSION
We affirm the district court order to the extent it
invalidates the tax sale of the interests of J.B. Grant and Coba in
the property based upon insufficient notice of the tax sale to
those parties.4 However, we vacate the district court’s judgment
to the extent that it set aside the tax sale of the interest of
T.A. Grant in the property based on violation of the automatic
stay. We remand this case to the district court with instructions
2
The bankruptcy court and the district court may answer these questions in
whatever order they deem appropriate and only the questions necessary to a
resolution of this issue need be answered.
3
11 U.S.C. § 549(d) states:
“An action or proceeding under this section may not be commenced
after the earlier of--
(1) two years after the date of the transfer sought to be avoided;
or
(2) the time the case is closed or dismissed.”
4
The Herringtons also argue that the bankruptcy court abused its discretion
in refusing to retroactively set aside the automatic stay. The bankruptcy court
gave compelling reasons for refusing to lift the stay, and we find no error in
this ruling.
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to remand to the bankruptcy court for further proceedings
consistent with this opinion.
AFFIRMED in part; VACATED in part and REMANDED.
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