1 United States Court of Appeals

Fifth Circuit



## FILED

February 13, 2006

Charles R. Fulbruge III

Clerk UNITED STATES COURT OF APPEALS

For the Fifth Circuit

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 inter est 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 the2

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 b rothers 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 by3

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 n otice 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

Herri n gtons 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 or4

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-claimagainst the Herringtons. Following trial, the court

rendered judgment against the Herringtons and declared the tax sale

null because it was held in vio lation 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 p roperty was not recorded or otherwise

reasonably identifiable to the taxing authorities; thus,5

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 asser t 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 ta x sale violated the

a utomatic 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 advers ely affected that party’s6

property interest.”

Second, appellants contend that the d istrict 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 la cks 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.

Aft er 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 violati on of the

automatic stay.

Although T.A. Grant contends that the Trustee’s authority to7

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 P ointer 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.” I d. 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 87-8.1 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.”

8 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.” I d. 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-petitio n 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

gran ts an avoidance power solely to the trustee or debtor-inpossession. Id. at 87. Because Pointer was neither the trustee

nor the debtor-in-posses sion, 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 set2 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.

9 aside the sale emanates from § 549, and we must remand this case to

the district court with instructions to r emand 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

t o 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 instructions10

to remand to the bankruptcy court for further proceedings

consistent with this opinion.

AFFIRMED in part; VACATED in part and REMANDED.