Rebuild America and REO America v. Mark E. and Tammy L. Davis

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

January 2015 Term FILED

April 9, 2015

released at 3:00 p.m.

RORY L. PERRY II, CLERK

No. 14-0432 SUPREME COURT OF APPEALS

OF WEST VIRGINIA

REBUILD AMERICA, INC. and REO AMERICA, INC.,

Defendants Below, Petitioners

v.

MARK E. DAVIS and TAMMY L. DAVIS, Plaintiffs Below;

MIKE RUTHERFORD, Sheriff of Kanawha County and

VERA MCCORMICK, Clerk of the County Commission of Kanawha County,

Defendants Below;

and HUNTINGTON NATIONAL BANK, N. A.,

Intervenor Below, Respondents

Appeal from the Circuit Court of Kanawha County

The Honorable Carrie L. Webster, Judge

Case No. 08-C-1058

AFFIRMED

Submitted: March 11, 2015

Filed: April 9, 2015

James W. Lane, Jr., Esq. Philip B. Hereford, Esq.

William J. Hanna, Esq. Hereford & Riccardi, PLLC

Flaherty Sensabaugh Bonasso, PLLC Charleston, West Virginia

Charleston, West Virginia and

Attorneys for Rebuild America, Inc. Christopher S. Smith, Esq.

And REO America, Inc. Hoyer, Hoyer & Smith, PLLC

Charleston, West Virginia

Attorneys for Huntington National Bank

CHIEF JUSTICE WORKMAN delivered the Opinion of the Court.

JUSTICE DAVIS, deeming herself disqualified, did not participate in the decision of this

case.

SENIOR STATUS JUSTICE MCHUGH, sitting by temporary assignment.

SYLLABUS BY THE COURT

1. “A circuit court’s entry of summary judgment is reviewed de novo.”

Syl. Pt. 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994).

2. The acts required under West Virginia Code § 11A-3-2(a) and (b)

(2007) (Repl. Vol. 2010) constitute acts in enforcement of a lien against property and,

where there exists an automatic stay pursuant to the provisions of 11 U.S.C. § 362, such

acts are violative of the stay.

3. Acts taken in violation of the automatic stay provisions of 11 U.S.C.

§ 362 (2010) are void ab initio.

i

WORKMAN, Chief Justice:

This is an appeal from the circuit court’s order granting summary judgment

in favor of respondent/intervenor below, Huntington National Bank (hereinafter

“Huntington”), declaring a tax deed issued to petitioner/defendant below, Rebuild

America, Inc. (hereinafter “Rebuild”) to be void. The circuit court found that the

issuance of two statutory notices of delinquency while the property owners (hereinafter

“the Davises”1) were under the protection of a bankruptcy stay voided the tax deed.2

Upon careful review of the briefs, the appendix record, the arguments of the

parties, and the applicable legal authority, we conclude that the existence of the

bankruptcy stay rendered the statutory notices void ab initio and therefore, the tax lien

sale was lacking in substantial compliance with the required statutory procedure.

Accordingly, we agree that the tax deed must be set aside and therefore affirm the order

of the circuit court.

1

Neither Mark E. Davis and Tammy L. Davis, plaintiffs below, nor Mike

Rutherford and Vera McCormick, defendants below, filed a brief in this appeal.

2

This order was entered on remand following this Court’s opinion in Rebuild

America, Inc. v. Davis, 229 W. Va. 86, 726 S.E.2d 396 (2012) (hereinafter “Rebuild I”).

1

I. FACTS AND PROCEDURAL HISTORY

This is the second time this Court has been presented with this case; as

such, the facts will not be exhaustively reiterated. As we set forth in detail in Rebuild I,

the Davises owned property located at 51 Woodbridge Drive, Charleston, West Virginia;

the property secured a credit line deed of trust held by Huntington. The Davises failed to

pay their 2005 and 2006 real property taxes, resulting in a notice of delinquency being

published in the newspaper on May 11, 2006, pursuant to West Virginia Code §§ 11A-2­

11 and -13 (Repl. Vol. 2010).

On July 12, 2006, the Davises filed a petition for Chapter 7 bankruptcy in

the United States District Court for the Southern District of West Virginia, initiating an

automatic stay pursuant to 11 U.S.C. § 362 (2010). Thereafter, on September 13, 2006, a

second notice of delinquency was published in the newspaper advising that the tax lien

would be sold on November 14, 2006,3 as required by West Virginia Code § 11A-3-2(a)

(2007) (Repl. Vol. 2010). On October 13, 2006, pursuant to West Virginia Code § 11A­

3-2(b), a notice of the tax lien sale was mailed to the Davises at their last known address,

but was returned undeliverable. On October 17, 2006, the Davises received a discharge

in bankruptcy and the bankruptcy was case closed, terminating the automatic stay. 11

U.S.C. § 362(c). The tax lien was sold by the sheriff on November 14, 2006, to Sass

Muni, which lien was later assigned to Rebuild.

3

This date is presumed inasmuch as the actual newspaper publication was not

included in the record; this is the date that the tax lien was actually sold.

2

Statutory notices to redeem were purportedly thereafter sent to the Davises

and Huntington noting that a tax deed would be issued after April 1, 2008, unless the

property was redeemed by payment of the taxes, interest, and charges due.4 No party

redeemed the property; therefore, a tax deed was issued to Rebuild on April 14, 2008.

The Davises filed the instant action on June 2, 2008, pro se. The circuit

court granted the Davises’ motion to set aside the tax sale, finding that because of the

Davises’ bankruptcy and failure to receive proper notices, the deed should be set aside

and the property “restored” to the Davises. Rebuild appealed to this Court, which

reversed and remanded, finding that the circuit court’s focus on the Davises’ failure to

receive the pre-tax sale notices was immaterial to an action to set aside a tax deed. The

Court further found that there was an insufficient record on the existence and effect of the

bankruptcy stay, as well as whether the Davises had received the post-sale notices to

redeem. This Court remanded for further development and ruling on these issues.

On remand, Huntington moved for summary judgment arguing that the

bankruptcy stay in effect during the publication of the second delinquency notice in the

paper and the issuance of the letter notifying the Davises of the impending tax lien sale

voided those actions and therefore, the tax deed. Huntington relied heavily on testimony

4

Because the circuit court determined that the bankruptcy stay voided the tax

deed, it did not address the post-sale notices to redeem as directed by this Court on

remand.

3

from the Kanawha County Sheriff’s Office’s Chief Tax Deputy who testified that the

Sheriff’s office improperly failed to code the Davises’ property as being in bankruptcy,

which should have halted the proceedings.5 Rebuild argued that the delinquency notice

and letter did not violate the provisions of the automatic stay, merely preserved the tax

sale proceeding, and/or fell into an exception for transactions to which the stay did not

apply. Rebuild further argued that Rebuild I stood for the proposition that any

irregularities with the pre-sale notices were inconsequential to the validity of the tax

deed. Nevertheless, the circuit court found that “actions taken in violation of the

automatic stay are void ab initio” and that as a necessary and integral part of the tax sale

process, the sale must be set aside as “jurisdictionally defective.” The circuit court gave

the Davises or Huntington thirty days to repay the redemption amount, interim taxes, and

interest to Rebuild. This appeal followed.

II. STANDARD OF REVIEW

It is well-established that “[a] circuit court’s entry of summary judgment is

reviewed de novo.” Syl. Pt. 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994).

With this standard in mind, we proceed to Rebuild’s arguments.

5

The Deputy, Allen Bleigh, testified that the office properly coded rental property

owned by the Davises as being in bankruptcy by denominating it “BR7” but failed to

likewise code the Woodbridge property. The Deputy was unequivocal in his testimony

that the Sheriff’s office had made an error and that had it been properly coded, all action

on the tax lien sale would have ceased.

4

III. DISCUSSION

This case presents the very narrow issue of whether notices issued pursuant

to West Virginia Code § 11A-3-2 violate the bankruptcy court’s automatic stay. 6

Critically, we note that the statutory tax sale process was not initiated during the stay, nor

was the sale of the tax lien itself conducted during the stay. Therefore, this case deals

only with the effect of the bankruptcy stay on the delinquency notice published in the

newspaper and the notice mailed to the Davises pursuant to West Virginia Code § 11A-3­

2(a) and (b), respectively. 7 To the extent the bankruptcy stay had an effect on those

notices, this Court must then determine the resulting effect on the tax deed.

6

With respect to this Court’s jurisdiction to determine the applicability of the

automatic stay, “courts have uniformly held that when a party seeks to commence or

continue proceedings in one court against a debtor or property that is protected by the

stay automatically imposed upon the filing of a bankruptcy petition, the non-bankruptcy

court properly responds to the filing by determining whether the automatic stay applies to

(i.e., stays) the proceedings.” Chao v. Hosp. Staffing Servs., Inc., 270 F.3d 374, 384 (6th

Cir. 2001); see In re Baldwin–United Corp. Litig., 765 F.2d 343, 347 (2d Cir. 1985)

(“Whether the stay applies to litigation otherwise within the jurisdiction of a district court

or court of appeals is an issue of law within the competence of both the court within

which the litigation is pending . . . and the bankruptcy court[.]”); In re: United Imports

Corp., 200 B. R. 234 (Bankr. D. Neb. 1996) (“[O]ther district courts retain jurisdiction to

determine the applicability of the stay to litigation pending before them[.]”).

7

West Virginia Code § 11A-3-2(a) requires the Sheriff to publish a list of

delinquent lands in the newspaper, as follows:

On or before the tenth day of September of each year, the

sheriff shall prepare a second list of delinquent lands, which

shall include all real estate in his or her county remaining

delinquent as of the first day of September, together with a

notice of sale . . . . The sheriff shall publish the list and notice

(continued . . .)

5

11 U.S.C. § 362(a) provides that the filing of a petition in bankruptcy:

operates as a stay, applicable to all entities, of—

(1) The commencement or continuation, including the

issuance or employment of process, of a judicial,

administrative, or other action or proceeding against the

debtor that was or could have been commenced before the

commencement of the case under this title, or to recover a

claim against the debtor that arose before the

commencement of the case under this title;

***

prior to the sale date fixed in the notice as a Class III-0 legal

advertisement in compliance with the provisions of article

three, [§§ 59-3-1 et seq.] chapter fifty-nine of this code, and

the publication area for such publication shall be the county.

Subsection (b) provides for notification of the delinquency and sale to a list of

enumerated persons, via certified mail, as follows:

In addition to such publication, no less than thirty days prior

to the sale, the sheriff shall send a notice of the delinquency

and the date of sale by certified mail: (1) To the last known

address of each person listed in the land books whose taxes

are delinquent; (2) to each person having a lien on real

property upon which the taxes are due as disclosed by a

statement filed with the sheriff pursuant to the provisions of

section three [§ 11A-3-3] of this article; (3) to each other

person with an interest in the property or with a fiduciary

relationship to a person with an interest in the property who

has in writing delivered to the sheriff on a form prescribed by

the Tax Commissioner a request for such notice of

delinquency; and (4) in the case of property which includes a

mineral interest but does not include an interest in the surface

other than an interest for the purpose of developing the

minerals, to each person who has in writing delivered to the

sheriff, on a form prescribed by the Tax Commissioner, a

request for such notice which identifies the person as an

owner of an interest in the surface of real property that is

included in the boundaries of such property[.]

6

(3) Any act to obtain possession of property of the estate or of

property from the estate or to exercise control over

property of the estate;

(4) Any act to create, perfect, or enforce any lien against

property of the estate;

(5) Any act to create, perfect, or enforce against property of

the debtor any lien to the extent that such lien secures a

claim that arose before the commencement of the case

under this title;

(6) Any act to collect, assess, or recover a claim against the

debtor that arose before the commencement of the case

under this title;

(emphasis added). The primary purpose of the automatic stay “is to give the debtor a

breathing spell from his creditors” and to “stop all collection efforts, stop all harassment

of a debtor seeking relief, and to maintain the status quo between the debtor and her

creditors, thereby affording the parties and the Court an opportunity to appropriately

resolve competing economic interests in an orderly and effective way.” In re Roach, 600

F.2d 1316, 1318 (9th Cir. 1981); Zeoli v. RIHT Mortgage Corp. 148 B. R. 698, 700

(D.N.H. 1993). Moreover, in its 1973 report, the Commission on the Bankruptcy Laws

of the United States specifically noted its “frustration with the ‘dismember[ing] of estates

by the foreclosures of liens instituted before the filing of a petition in bankruptcy.’”

Zeoli, 148 B.R. at 699. Rebuild makes four arguments in support of its contention that

the bankruptcy stay does not serve to void the tax deed as the circuit court determined.

We will address each in turn.

7

A. Inapplicability of 11 U.S.C. § 362(a)

While the statutory tax lien sale at issue ostensibly implicates each of the

provisions of § 362(a) delineated above, the parties focus their attention on subsection

(a)(4), forbidding “[a]ny act to create, perfect, or enforce any lien against property of the

estate[.]” (emphasis added). 8 Rebuild argues that the tax sale was not an attempt to

“enforce” the tax lien because the tax lien sale was merely a “transfer” of the lien to a

third party. In support of this argument, Rebuild correctly notes that the sale of a tax lien

transfers only the lien held by the Sheriff, not the property itself. Rebuild relies on an

oft-cited decision from the Middle District of Georgia, which holds that

the automatic stay provisions of the Bankruptcy Code do not

prohibit a creditor of a debtor from transferring any interest or

claim it might have against the debtor’s bankruptcy estate to a

third party. Such a transfer merely substitutes the party that

holds the interest or claim against the debtor’s bankruptcy

estate, and such transfer does not serve to increase or decrease

the interest or claim the party asserts against the debtor’s

bankruptcy estate.

In re: Georgia Steel, Inc., 71 B. R. 903, 909 (Bankr. M.D. Ga. 1987). Rebuild notes that

it is only after the property is unredeemed that title to the property transfers to the lien

purchaser, which it contends is the actual act of “enforcement.” As noted above, in

opposition, Huntington relies heavily on the testimony of the Tax Deputy who admitted

that the Sheriff’s office improperly failed to code the Davises’ property as being in

8

There is little question that the acts of the Sheriff were not an attempt to create or

perfect the lien; the lien was created and attached to the property on July 1, 2004. W. Va.

Code § 11A-1-2 (Repl. Vol. 2010).

8

bankruptcy and that if it had been properly coded, all actions related to the sale would

have ceased.9

While it is undisputed that the tax lien sale merely transfers the tax lien, we

find it difficult to characterize the initiation and execution of the statutory tax sale

procedure outlined in West Virginia Code § 11A-3-1 et seq. as anything other than an act

to “enforce” the tax lien. Albeit a process, it is still an attempt to collect the taxes due

under the lien. Rebuild’s invocation of the rule articulated in Georgia Steel would be

compelling were the sale of the tax lien not a step in a process of enforcement which

ultimately results in the onus being placed upon the debtor to redeem. A tax sale is not a

simple assignment or transfer of a lien that has no further effect. See In re Barton, 359 B.

R. 681, 689 (Bankr. N.D. Ill. 2006) (“[A] tax sale is a step in the enforcement process.”);

In re Young, 14 B. R. 809, 311 (Bankr. N.D. Ill. 1981) (“‘Tax sales have as their purpose

coercion of negligent and unwilling citizens to pay their taxes.’ The sale of debtors’ real

property for the nonpayment of delinquent taxes is the exact type of creditor action § 362

9

Rebuild argues that the opinion of the Tax Deputy is irrelevant to this issue of

law. We agree. The Sheriff’s policy of terminating all activity when a property is in

bankruptcy is not germane to the narrow issue of whether the notices at issue are

violative of the stay; this is a pure question of law. The Sheriff’s policy is undoubtedly in

place to avoid inadvertently performing any acts that would plainly be in violation of the

stay, such as issuing a tax deed and therefore divesting the bankruptcy estate of the

property. Obviously, although the tax lien sale did not in this instance occur during the

stay, the Sheriff’s office does not know how long a bankruptcy may actually remain

pending and therefore undoubtedly terminates tax sale activity to avoid any potential

interference with the bankruptcy estate, not necessarily because all of its associated

activities violate the stay as a matter of law.

9

(a) stays.” (citations omitted)). Therefore, we conclude that the statutory notices plainly

implicate the automatic stay.

B. Applicability of 11 U.S.C. § 362(b)(24)

Rebuild next argues that, even if the language of 11 U.S.C. § 362 which

creates the stay appears to apply to the statutory process at issue, an exception contained

in 11 U.S.C. § 362(b)(24) removes the notices from operation of the stay. 11 U.S.C. §

362(b)(24) provides that the filing of a petition in bankruptcy does not operate as a stay

“of any transfer that is not avoidable under section 544 and that is not avoidable under

section 549[.]” In essence, Sections 544 and 549 empower the bankruptcy trustee to

“avoid” or nullify transfers of estate property that occur for a certain period of time

before the bankruptcy and during the bankruptcy, respectively. Rebuild argues that both

Section 544 and 549 empower the trustee only to avoid “transfer[s] of property of the

debtor” or “transfer[s] of property of the estate,” respectively. Simply put, Rebuild

maintains that since the tax lien was not property of the Davises or the Davises’ estate—

rather, the lien belonged to the Sheriff—that it was not a transfer “avoidable” by the

trustee. 11 U.S.C. § 362(b)(24) establishes that if a transfer is not avoidable by the

trustee, it is not subject to the stay.

We find this exception to the automatic stay inapplicable to the instant case.

There is no “transfer” of property—the estate’s or otherwise—that occurred within the

stay at all such as to implicate this exception; the tax lien sale occurred after the stay was

10

extinguished.10 Therefore, this exception does nothing to resolve the issue of whether the

notices—administrative steps in the tax sale process—violated the stay. See Bascom

Corp. v. Chase Manhattan Bank, 832 A.2d 956, 961 (N. J. Super. Ct. App. Div. 2003)

(noting that final judgment of foreclosure was entered after stay was extinguished and

that [w]hat was void was . . . the only action in the proceeding that occurred while the

stay was in effect.”).

C. Preservation of the “Status Quo”

Rebuild next argues that the notices themselves did not affect the Davises

or the bankruptcy estate, but merely maintained the status quo as to the statutory

procedure employed: “The automatic stay, though broad, does not preclude all post-

petition activity. Actions taken that tend to maintain the status quo are not as likely to be

found to violate the automatic stay provision of § 362.” In re Atlas Machine & Iron

Works, Inc., 239 B. R. 322, 330 (Bankr. E.D. Va. 1998) (citations omitted).

In support of this argument, Rebuild cites a litany of cases which generally

hold that notices of postponement of mortgage foreclosure sales do not violate the stay.

See Roach, 660 F.2d at 1318 (“Postponement notices which specify a new sale date do

10

Rebuild appears to recognize the inapplicability of this provision for precisely

this reason. In its brief, Rebuild concludes its argument by stating that “the sale of the

tax lien qualifies as an exception from the automatic stay and all events associated with

the tax sale did not [violate] the automatic stay.” (emphasis added). Presumably the

“events associated with the tax sale” to which Rebuild refers are the notices at issue.

Rebuild provides no support for the argument that “associated” events which occur

during the stay do not violate the stay themselves.

11

not violate 11 U.S.C. § 362.”); Taylor v. Slick, 178 F.3d 698 (3d Cir. 1999) (same); In re:

Fine, 285 B. R. 700 (Bankr. D. Minn. 2002) (same); Zeoli, 148 B. R. 698 (same). In each

of these cases, the bank initiated foreclosure proceedings but sought to postpone the sale

itself and filed notices of postponement during the stay. Courts addressing the effect of

these postponements have uniformly held that such acts do not violate the stay.

In Zeoli, the court reasoned that notices of postponement of foreclosure

were not acts in “continuation” of a proceeding as forbidden by § 362(a)(1), but “[r]ather,

[are] more appropriately characterized as an act in preservation of a stayed proceeding.”

148 B. R. at 701. The court explained that “[t]ime does not stand still for legal

processes” and that the passage of time would have “entirely expunged the stayed

foreclosure proceeding, thereby disrupting the status quo to the economic detriment of

RIHT, while conferring no discernable benefit on the debtor.” Id. The court observed

that the postponement “preserved the existing relationship between the parties, protected

its legitimate interests, and imposed no burden on the debtor.” Id.

We agree that the notices themselves had no appreciable effect on the

bankruptcy estate itself and served to maintain the statutory procedure initiated pre-

petition. However, as both the Atlas and Zeoli courts noted, the “status quo” is not

maintained when the actions taken post-petition actually advance the proceeding. See

Atlas, 239 B. R. at 332 (distinguishing case where “the creditor was . . . acting in

furtherance to enforce a lien against the property of the estate.”); Zeoli, 148 B.R. at 700,

12

n.2 and 701 (contrasting postponement with “initially scheduling” a sheriff’s sale post-

petition and finding that mere postponement does not “harass[], or revive[] the financial

pressures that drove the debtor into bankruptcy”). See also Taylor, 178 F.3d at 702

(“[T]he filing of a bankruptcy petition prohibits the beginning (‘commencement’) of a

judicial proceeding and the carrying forward (‘continuation’) of a proceeding that has

already begun.”).

West Virginia Code § 11A-3-1 et seq. (2010 Repl. Vol.) was specifically

enacted “[t]o provide for the speedy and expeditious enforcement of the tax claims of the

state and its subdivisions” and to “provide for the transfer of delinquent and nonentered

lands to those more responsible to, or better able to bear, the duties of citizenship than

were the former owners[.]” West Virginia Code § 11A-3-2(a) and (b) are the first steps

in this process. Subsection (a) provides for publication of a list of delinquent lands and

notice of sale to the county at large. See n.7, supra. Subsection (b) provides for notice

via certified mail to a set of enumerated interested persons of the delinquency and

impending sale. Id.

Therefore, we find the notices at issue herein do not merely maintain the

status quo; rather, they advance the tax lien enforcement procedures outlined in West

Virginia Code § 11A-3-1 et seq. Once a tax lien sale is initiated under our statutes, each

step in the statutory process brings the debtor closer to potential loss of his or her

property unless he or she redeems the property in the amount of the taxes due. As

13

previously noted, the purpose of a tax sale is provide impetus for citizens to pay their

taxes. Without question, institution and continuation of this statutory procedure “revives

the financial pressure that drove the debtor into bankruptcy” and interferes with the

“breathing spell” from creditors, all of which the automatic stay was designed to prevent.

Zeoli, 148 B. R. at 701; Roach, 660 F.2d at 1318. Unlike the foreclosure postponement

notices discussed by Rebuild, the statutory notices at issue do not simply hold the tax lien

sale in limbo. Rather, the notices are evidence that the lien enforcement process marches

forward with the end result being payment of the taxes, redemption, or transfer of the

property.

The affirmative nature of the integral steps in the foreclosure or tax sale

processes has been observed by other courts, which have found such acts to be violative

of the automatic stay. In In re Ring, 178 B. R. 570, 574 (Bankr. S.D. Ga. 1995), the

United States Bankruptcy Court for the Southern District of Georgia held that the

initiation of foreclosure proceedings post-Chapter 7 filing violated the stay: “Advertising

for foreclosure is clearly the sort of creditor action that is stayed by sections 362(a)(1),

(3), (4) and (5).” Likewise, in In re Demp, 23 B. R. 239 (Bankr. E.D. Pa. 1982), the

bankruptcy court held that posting property for Sheriff’s sale after notice of a bankruptcy

petition was a violation of the stay. See also In re Kane, 248 B.R. 216 (B.A.P. 1st Cir.

2000) (“[W]hatever procedural requirements are imposed by Maine statutes, the effect of

the Notice was perfection of a lien against property of the estate which arose before the

commencement of the case, and hence violated the automatic stay.”); In re Derringer,

14

375 B. R. 903 (B.A.P. 10th Cir. 2007) (distinguishing “postponement” of foreclosure sale

and holding that “[w]hen a foreclosure sale is initially scheduled postpetition, case law

holds that actions in furtherance of the foreclosure sale are violations of the automatic

stay.”); Atlas, 239 B.R. at 332 (setting sale date post-petition was not maintaining status

quo “but acting in furtherance to enforce a lien against property of the estate.”); McKeen

v. Fed. Deposit Ins. Corp., 549 S.E.2d 104, 106 (Ga. 2001) (“Filing a notice of levy and

advertising the property for sale are actions that are clearly stayed during the pendency of

a bankruptcy.”); Therefore, we hold that the acts required under West Virginia Code §

11A-3-2(a) and (b) constitute acts in enforcement of a lien against property and, where

there exists an automatic stay pursuant to the provisions of 11 U.S.C. § 362, such acts are

violative of the stay.

Furthermore, it is widely held that acts taken in violation of a bankruptcy

say are void ab initio: “Actions taken in violation of the stay are void and without

effect.” 2 Collier on Bankruptcy, § 362.11 (15th Ed. 1979); see also Jordache Enters.,

Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 204 W.Va. 465, 487, 513 S.E.2d 692,

714 (1998) (Davis, J., dissenting) (“In general, acts taken in violation of the automatic

stay are void and without legal effect.” (citing Kalb v. Feuerstein, 308 U.S. 433 (1940))).

As noted by the United States District Court for the Southern District of West Virginia,

“[t]he majority of circuits hold that a violation of the automatic stay is generally void as a

matter of law.” Ellison v. Comm’r of Internal Revenue Serv., 385 B. R. 158, 163 (S.D.

W. Va. 2008) (collecting cases from First, Second, Third, Seventh, Ninth, Tenth, and

15

Eleventh Circuits). There is, however, a small minority of jurisdictions that find such

acts merely “voidable.” As astutely observed by the Ellison court, “[c]haracterizing an

act as ‘void’ or ‘voidable’ has the practical effect of determining which party bears the

burden of going forward.” Id. at 162.

We agree that finding acts violative of the stay merely voidable “diminishes

the benefits of the automatic stay by placing an additional burden on a debtor in

bankruptcy. . . . [A] debtor’s time and money are better spent reorganizing their finances,

rather than prosecuting litigation on the validity of acts violating the automatic stay.” Id.

at 165. Therefore, we further hold that acts taken in violation of the automatic stay

provisions of 11 U.S.C. § 362 are void ab initio.

D. Applicability of the Court’s holding in Rebuild I

Having determined that the bankruptcy stay served to render the West

Virginia Code § 11A-3-2 notices void ab initio, we must now assess the effect of this

determination on the validity of the tax deed. See Bascom Corp. 832 A.2d at 961

(“[S]ince foreclosure law is a matter uniquely within the state’s competence, the state is

free to make its own determination as to the effect of the entry of a void interlocutory

order irrespective of the reason it is void.”). Rebuild contends that even if the notices are

found to have violated the automatic stay, this Court’s opinion in Rebuild I holds that

such invalidity is of no consequence to the subsequent tax lien sale and tax deed.

16

In Syllabus Point 1 of Rebuild I, this Court held that

[a] tax deed is not invalidated on the basis that a person or

entity failed to receive notice of the tax lien sale required by

W. Va. Code, 11A-3-2 [2007], where it is proven that: (1) the

subsequent redemption notice required by W. Va. Code, 11A­

3-21 [2010], was served on all persons and entities entitled to

notice, (2) service of the notice to redeem was perfected in

the manner required by W. Va. Code, 11A-3-22 [2010], (3)

the property was not redeemed within the time period set out

in the redemption notice, and (4) a tax deed, meeting the

requirements of W. Va. Code, 11A-3-27 [2010], was

delivered to the tax lien purchaser or assignee thereof.

(emphasis added). The Court cited to West Virginia Code § 11A-3-2(b) which provides

that “‘[i]n no event shall failure to receive the mailed notice by the landowner or

lienholder affect the validity of the title of the property conveyed . . .’” 229 W. Va. at

93, 726 S.E.2d at 403. Based upon this statutory declaration, this Court held that it is

plain that the Legislature intended that a mere failure to receive the pre-redemption

notices would not invalidate a sale. Id.

Rebuild argues that even if the West Virginia Code § 11A-3-2 notices were

invalidated by the bankruptcy stay, this Court’s holding in Rebuild I indicates that such

invalidation is immaterial to the validity of the tax deed as only the post-sale redemption

notices are pertinent.11 However, a more careful reading of Rebuild I reveals that the

Court’s holding—and the language of the statute itself—is limited to the property

11

Because the circuit court’s decision was not based on, nor included an analysis

of, the post-tax lien sale redemption notices, this opinion does not reach those issues and

should not be read as affecting our body of caselaw regarding post-sale redemption

notices. See n.4, supra.

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owner’s failure to receive the pre-sale notices, not the failure to issue them in the first

instance. The Legislature plainly intended that a property owner simply cannot claim that

he did not receive the pre-tax sale notices in order to invalidate the sale; this is obviously

to preclude homeowners from self-servingly claiming they failed to receive the notice

and disrupting an otherwise valid tax sale.

Accordingly, it is plain that Rebuild I holds that to the extent a homeowner

claims not to have received the notices, such lack of receipt is insufficient to invalidate a

tax sale. However, the failure to issue the notices at all and comply with statutory

procedure must necessarily invalidate the tax deed. Since the notices are rendered void

ab initio due to the bankruptcy stay, the notices simply did not occur. There can be no

sale of a tax lien if there was no notice of the tax lien sale issued. We therefore find that

the failure to comply with the statutory tax lien sale procedures contained in West

Virginia Code § 11A-3-1 et seq. requires the tax deed issued in this matter to be set aside.

IV. CONCLUSION

For the reasons set forth hereinabove, we affirm the March 20, 2014, order

of the circuit court.

Affirmed.

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