In re Polygraphex Systems, Inc.

• Decision Date: 25 March 2002
• Docket Number: No. 00-11194-8W1.,00-11194-8W1.
• Citation: 275 B.R. 408
• Parties: In re POLYGRAPHEX SYSTEMS, INC., Debtor.
• Court: U.S. Bankruptcy Court — Middle District of Florida

275 B.R. 408

In re POLYGRAPHEX SYSTEMS, INC., Debtor.

No. 00-11194-8W1.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

March 25, 2002.

COPYRIGHT MATERIAL OMITTED

Michael C. Markham, Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A., Clearwater, FL, for debtor.

B. Norris Rickey, Pinellas County Attorney's Office, Clearwater, FL, for property appraiser.

Sarah Richardson, Pinellas County Attorney's Office, Clearwater, FL, for tax collector.

Memorandum Decision and Order Denying Motion for Summary Judgment Filed by Jim Smith, Property Appraiser for Pinellas County

MICHAEL G. WILLIAMSON, Bankruptcy Judge.

This case came on for hearing on December 4, 2001 ("Hearing"),¹ on a motion to dismiss or alternatively grant summary judgment² (Doc. No. 235) ("Motion") filed by Jim Smith, Property Appraiser ("Property Appraiser") for Pinellas County, Florida ("County"). The Motion was filed in response to the amended objection (Doc. No. 219) ("Objection") filed by the debtor, Polygraphex Systems, Inc. ("Debtor"), to the County's claim for ad valorem taxes (Claim No. 5) ("Claim"). The Claim was filed on behalf of the County by the Tax Collector for Pinellas County ("Tax Collector").

Procedural Posture of Case

The Debtor filed its petition for relief under chapter 11 on July 19, 2000. On July 28, 2000, the Tax Collector filed the Claim as a secured claim for tangible personal property taxes in the amount of $125,533.03 plus interest. In due course, the Debtor filed the original objection to the Claim (Doc. No. 206) on the ground that the Claim was based on an excessive valuation of the Debtor's personal property.

The Tax Collector filed a response to the original objection, asserting that complete relief could not be obtained on the Objection without joining the Property Appraiser as a party to the contested matter (Doc No. 208).³ At a hearing held on the original objection to the Claim, the Court — after finding merit with this position — granted leave to the Debtor to file an amended objection which the Debtor thereafter filed.

Thereupon, the Property Appraiser filed the Motion, asserting that "based upon the sovereign immunity granted to the State of Florida by the Eleventh Amendment to the United States Constitution, and as supported by the case law, notwithstanding the supremacy clause of the United States Constitution found in Article I, Section 8, the Property Appraiser is sovereignly immune from the ... requested relief."⁴

Issues

The Motion raises the following issues for the court's consideration:

1. Is the Property Appraiser an arm of the state for purposes of asserting Eleventh Amendment sovereign immunity?

2. Is the Debtor's Objection to the Claim filed by the County with respect to ad valorem taxes a "suit" against the state for purposes of Eleventh Amendment sovereign immunity?

3. By filing the Claim, did the Tax Collector waive the Property Appraiser's Eleventh Amendment sovereign immunity, if any exists, with respect to the Objection to Claim?

For the reasons stated below, the Court concludes that the Property Appraiser's Motion should be denied upon all three grounds. First, the Property Appraiser is not acting as an arm of the state for Eleventh Amendment sovereign immunity purposes. Second, the Eleventh Amendment does not apply because an objection to a claim filed by a county with respect to ad valorem taxes is not a "suit" against the state. Finally, even if Eleventh Amendment sovereign immunity were available as a defense under such circumstances, the filing of the Claim in the Debtor's case by the Tax Collector on behalf of the County operates as a waiver of that immunity for all purposes in connection with the adjudication of the estate's liability with respect to the Claim.

Conclusions of Law

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b), 157(b)(1), and 157(b)(2)(B). This is a core proceeding in accordance with 28 U.S.C. § 157(b)(2)(B).

As set out above, the Property Appraiser argues that the Eleventh Amendment grants him immunity from this Court's consideration of the Debtor's Objection to the Claim. The Eleventh Amendment provides:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

U.S. Const. amend. XI.

Even though the Eleventh Amendment refers to suits by citizens "of another state," it has long been held that this immunity extends to a suit by a citizen against the citizen's own state. Hans v. Louisiana, 134 U.S. 1, 15, 10 S.Ct. 504, 33 L.Ed. 842 (1890). As discussed in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 54, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), the Eleventh Amendment precludes federal courts from exercising any jurisdiction in private suits against states. Seminole Tribe makes clear that Congress, under its Article I powers, cannot vest federal courts with jurisdiction to hear such suits. Id. at 72-73, 116 S.Ct. 1114. The Eleventh Amendment insulates states from "`... private parties seeking to impose a liability [in federal court] which must be paid from public funds in the state treasury....'" Hufford v. Rodgers, 912 F.2d 1338, 1340 (11th Cir.1990) (quoting Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974)). "[I]t also serves to avoid the `indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties.'" Seminole Tribe, 517 U.S. at 58, 116 S.Ct. 1114 (quoting P.R. Aqueduct and Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146, 113 S.Ct. 684, 121 L.Ed.2d 605 (1993)).

However, the immunity granted by the Eleventh Amendment does not bar a federal court from adjudicating the rights of governmental entities under all circumstances. In re Hechinger Inv. Co. of Del., Inc., 254 B.R. 306, 310 (Bankr.D.Del.2000). Three such exceptions to its application are relevant to the Court's analysis of the Property Appraiser's Motion. First, the suit must be against a state. U.S. Const. amend. XI; Hechinger, 254 B.R. at 310 (citing Mitchell v. Franchise Tax Bd., State of Cal. (In re Mitchell), 209 F.3d 1111, 1116 (9th Cir.2000)); Chandler v. Oklahoma (In re Chandler), 251 B.R. 872, 875 (10th Cir. BAP 2000). Second, the legal proceeding must be a suit — for example, a "well-established rule is that an action by a private party against a state, which seeks entry of a monetary judgment against the state, is a suit for purposes of the Eleventh Amendment." Hechinger, 254 B.R. at 311 (citing Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974)). Third, a state may voluntarily consent to a suit in federal court. Hechinger, 254 B.R. at 311, n. 5 (citing In re Sacred Heart Hosp., 133 F.3d 237, 241 (3rd Cir.1998)). Waiver, under certain circumstances, may amount to such voluntary consent by the state. Gardner v. New Jersey, 329 U.S. 565, 573-74, 67 S.Ct. 467, 91 L.Ed. 504 (1947).

1. A Property Appraiser is Not an Arm of the State for Eleventh Amendment Sovereign Immunity Purposes.

As set forth in the Motion, it is the position of the Property Appraiser that he is "sovereignly immune" from the relief requested by the Debtor by virtue of the immunity "granted to the State of Florida by the Eleventh Amendment." In evaluating this position, the starting point is the general rule that the "Amendment's bar to suits in federal courts ... does not extend to counties, municipal corporations, or other political subdivisions of the state." Stewart v. Baldwin County Bd. of Educ., 908 F.2d 1499, 1508 (11th Cir.1990) (citing Mt. Healthy Bd. of Educ. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977)). See also State of Maryland v. Antonelli Creditors' Liquidating Trust, 123 F.3d 777, 786 (4th Cir.1997) ("It has long been the law that the Eleventh Amendment does not bar suits in federal court against political subdivisions of the state."); Smith v. Avino, 866 F.Supp. 1399 (S.D.Fla.1994) ("Eleventh Amendment immunity does not extend to independent political entities, such as counties." — quoting Tuveson v. Fla. Governor's Council on Indian Affairs, 734 F.2d 730, 732 (11th Cir.1984)).

Whether a local governmental entity is protected by Eleventh Amendment immunity turns upon whether it is an "arm of the state." Hufford, 912 F.2d at 1340. Thus, the court must determine whether the Property Appraiser is an arm of the state, in which case the Eleventh Amendment protects him, or of the County,⁵ in which case it does not. Id. For the reasons set forth below, this Court concludes, just as the Eleventh Circuit did in Hufford (in the context of a sheriff), that a property appraiser is a county official rather than an agent of the state, and, therefore, is not entitled to Eleventh Amendment immunity.

In Hufford, the Eleventh Circuit cited to Tuveson v. Fla. Governor's Council on Indian Affairs, 734 F.2d at 732, in which it recognized that the Supreme Court's Eleventh Amendment analysis requires "special attention to the state law creating and defining the entity." Hufford, 912 F.2d 1338, 1340. Applying Hufford, a court must consider the following four aspects of state law: (a) how state law defines the entity, (b) what degree of control the state maintains over the entity, (c) what is the source of funding for the entity, and (d) who is responsible for judgment against the entity. Id. While not specifically addressed in Hufford, other courts have also looked to whether the attorney representing the governmental entity in the action is employed by the county or by the state. American Charities for Reasonable Fundraising Regulation, Inc. v. Pinellas County, 997 F.Supp. at 1485.

(a) Definition Under State Law.

In Hufford, the court first turned to the provisions of the Florida Constitution pertaining to "Local Government," Fla. Const., art. VIII, and noted that it...