Dowding v. Open Terrace Associates, LLC (In Re Dowding)

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 05a0090n.06
Filed: February 4, 2005
No. 03-2519
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
In re: RANDY WAYNE DOWDING, )
)
Debtor. )
)
____________________________ )
)
RANDY WAYNE DOWDING, ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
Debtor-Appellant, ) EASTERN DISTRICT OF MICHIGAN
)
v. )
)
OPEN TERRACE ASSOCIATES, LLC, )
)
Creditor-Appellee. )
Before: NELSON and SUTTON, Circuit Judges; WELLS, District Judge.*
SUTTON, Circuit Judge. Randy Dowding challenges the bankruptcy court’s order to lift the
automatic stay in his Chapter 11 proceeding and to permit Open Terrace Associates to enforce
ownership interests in two properties. Because Open Terrace was a secured creditor at the time
Dowding filed his bankruptcy petition and because Dowding did not redeem the properties post-
filing, we affirm.
*
The Honorable Lesley Wells, United States District Judge for the Northern District of Ohio,
sitting by designation.
No. 03-2519
In re Dowding
I.
This bankruptcy dispute stems from a judgment for $76,715.07 that Open Terrace obtained
on August 7, 2000, against Randy Dowding in Michigan state court, due to Dowding’s breach of a
commercial lease. See Open Terrace Associates, LLC v. Dowding, No. 00-05099-CK. On February
16, 2001, pursuant to a writ of execution issued by the Michigan state court in connection with the
judgment, Open Terrace levied upon two of Dowding’s pieces of property located in Jackson
County, Michigan. Open Terrace recorded these notices in March of 2001.
On July 25, 2001, once again pursuant to the writ of execution, Jackson County’s Deputy
Sheriff sold the properties at auction, both of them to Open Terrace as the high bidder. Open
Terrace then recorded the sales with the County on August 16, 2001. According to Michigan law
and the recorded sales certificates, the parties agree, the sheriff’s sale was to become absolute and
Open Terrace was entitled to a deed of conveyance on September 25, 2002, unless the debtor
subsequently redeemed the properties. See Mich. Comp. Laws § 600.6062.
One day prior to the expiration of the redemption period (on September 24, 2002), Dowding
filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. As a result of the
filing, Dowding gained a 60-day extended time period to redeem the properties. See 11 U.S.C.
§ 108(b) (“[I]f applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or
an agreement fixes a period within which the debtor . . . [may] cure a default, or perform any other
similar act, and such period has not expired before the date of the filing of the petition, the trustee
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No. 03-2519
In re Dowding
may only . . . cure, or perform, as the case may be, before the later of—(1) the end of such period,
including any suspension of such period occurring on or after the commencement of the case; or (2)
60 days after the order for relief.”).
Shortly after the additional 60 days elapsed (on November 25, 2002), Open Terrace (on
November 27, 2002) filed a motion for relief from the automatic stay, arguing that Dowding no
longer maintained an interest in the properties after failing to redeem them during the statutory
period. Dowding responded that Open Terrace was an unsecured creditor. The bankruptcy court
granted Open Terrace’s motion on January 22, 2003. Dowding appealed to the district court, which
affirmed on October 4, 2003. He now appeals to us.
II.
The Bankruptcy Code requires a bankruptcy court, “[o]n request of a party in interest and
after notice and a hearing,” to grant relief from the automatic stay “for cause, including the lack of
adequate protection of an interest in property of such party in interest” or if “the debtor does not
have an equity in [the] property.” 11 U.S.C. § 362(d)(1)–(2). Applying these principles to this case,
the bankruptcy court correctly concluded that Open Terrace would not receive adequate protection
without relief from the automatic stay, see 11 U.S.C. § 361; and that, at any rate, Dowding’s interest
in the two properties at issue had been extinguished when he failed to redeem them during the 60-
day extended period granted by the filing of his bankruptcy petition, see 11 U.S.C. § 108(b); In re
Glenn, 760 F.2d 1428, 1440 (6th Cir. 1985).
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No. 03-2519
In re Dowding
Dowding’s arguments to the contrary are unavailing. Dowding first claims that Open
Terrace cannot get relief from the automatic stay because it was not a secured creditor. Not so. The
Bankruptcy Code defines the term “lien” as a “charge against or interest in property to secure
payment of a debt or performance of an obligation,” and recognizes a “judicial lien” as a variety of
“lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.”
11 U.S.C. § 101(36)–(37); see also 11 U.S.C. § 506(a) (“An allowed claim of a creditor secured by
a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value
of such creditor’s interest in the estate’s interest in such property.”). Open Terrace acquired and
recorded its liens against the Jackson County property in March of 2001, thus becoming a secured
creditor well before Dowding’s bankruptcy filing. See George v. Sandor M. Gelman, P.C., 506
N.W.2d 583, 585 (Mich. Ct. App. 1993).
This analysis also goes a long way to refuting Dowding’s second argument. Dowding argues
that permitting Open Terrace to enforce its property interests would violate the preference provisions
in 11 U.S.C. § 547(b). Also not so. To the extent any property was transferred prior to the petition,
that transfer occurred at the time of the liens, over a year before the filing of Dowding’s bankruptcy
petition. See, e.g., In re Girard, 57 B.R. 66, 72 (E.D. Mich. Bankr. 1985) (“[T]he material transfers
occurred when the tax liens were recorded, more than 90 days before the debtor’s bankruptcy
petition was filed.”). To the extent Dowding believes that Open Terrace’s post-petition enforcement
of its property rights counts as a preferential “transfer,” he is wrong. Section 547(b) applies only
to “transfer[s] of [ ] interest” that a debtor makes “on or within 90 days before the date of the filing
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No. 03-2519
In re Dowding
of the petition” or, for insider creditors, “between ninety days and one year before the date of the
filing of the petition.” 11 U.S.C. § 547(b) (emphasis added). On its face, the provision simply has
no relevance when a secured creditor enforces its property rights after the filing of the petition.
III.
For these reasons, we affirm.
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