Dona Ana Cnty. Treasurer v. Marcus (In re Las Uvas Valley Dairies)
| Decision Date | 27 August 2021 |
| Docket Number | Bankruptcy 17-12356-t11,2:20-cv-1014 JB/KK |
| Parties | In re LAS UVAS VALLEY DAIRIES, Debtor. v. ROBERT MARCUS, Successor Liquidating Trustee of Las Uvas Valley Dairies Liquidating Trust, Appellee. DOÑA ANA COUNTY TREASURER, Appellant, |
| Court | U.S. District Court — District of New Mexico |
PROPOSED FINDINGS AND RECOMMENDED DISPOSITION
THIS MATTER is before the Court on Appellant Doña Ana County Treasurer's (“County”)[1] appeal from the Order Denying Motion to Amend Proof of Claim and Application for Payment of Administrative Expenses (“Order”) and supporting Opinion entered by the United States Bankruptcy Court for the District of New Mexico on September 18, 2020. (Doc. 1-1 at 1; Doc. 5 at 201-13, 216.) The Court has jurisdiction over the appeal pursuant to 28 U.S.C. § 158. United States District Judge James O. Browning referred the appeal to the undersigned for proposed findings and a recommended disposition pursuant to 28 U.S.C. § 636(b). (Doc. 2.) For the reasons set forth below, the Court recommends that the Bankruptcy Court's Order and Opinion be affirmed in part, reversed in part, and remanded as set forth below.
In general, “[a] bankruptcy court's legal conclusions are reviewed de novo, while its factual findings are reviewed for clear error.” In re Long, 843 F.3d 871 873 (10th Cir. 2016). The Court discusses specific standards of review applicable to the issues raised in this appeal in its analysis.
Las Uvas Valley Dairies (“Debtor”) operated a dairy in Doña Ana County, New Mexico. (Doc. 5 at 201.) It owned, inter alia, real property and livestock subject to taxation by the County. (Doc. 3 at 4-31; Doc. 5 at 22, 35-36, 39-40, 140, 201-03.) On September 15, 2017, Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. (BR[3] Doc. 1; Doc. 4 at 1; Doc. 5 at 201-02.) Debtor listed the County as one of its creditors. (BR Doc. 1 at 7.)
On October 18, 2017, the County filed a proof of claim alleging Debtor owed it $234, 816.03 (“Proof of Claim”). (Doc. 3.) The first page, a form “proof of claim, ” indicated the basis of the claim was “[r]eal [p]roperty” and listed the entire amount as “[s]ecured[.]” (Id. at 3.) However, the form also indicated a portion of the claim consisted of “[t]axes or penalties owed to governmental units” “[e]ntitled to [p]riority” under “11 U.S.C. § 507(a)(8).”[4] (Id.) The remainder of the Proof of Claim consisted of tax bills addressed to Debtor. (Id. at 5-31.) The bills listed taxes, interest, and fees owed for 2016 and 2017 and indicated the taxed property consisted of “Agricultural Land[, ]” “Residential Mobile Home Improvement[, ]” “Non-Residential Land[, ]” “Residential Improvement[, ]” “Non-Residential Improvement[, ]” and “Residential Land[.]” (Id.)
Although Debtor filed its petition under Chapter 11, it was ultimately unable to reorganize. (Doc. 5 at 202.) Thus, in May 2018, the Unsecured Creditors Committee and Debtor's two largest secured creditors-Metropolitan Life Insurance Company (“MetLife”) and Production Credit Association of Southern New Mexico-proposed that a liquidating trustee sell all of Debtor's assets pursuant to their First Amended Chapter 11 Plan of Liquidation (“Chapter 11 Plan”). (Doc. 4 at 9-67; Doc. 5 at 202.)
The Chapter 11 Plan provided that the net proceeds from the sale of Debtor's assets would go to creditors according to the Bankruptcy Code's priorities, but that unsecured creditors would receive at least $1 million “to be shared pro rata[.]” (Doc. 4 at 9.) The plan incorporated a previously set deadline of March 14, 2018 for governmental entities to file proofs of claim, which it referred to as the “Bar Date for governmental entities[.]”[5] (Id. at 12.) It also set a deadline for filing notices of most “[a]dministrative [c]laim[s], ”[6] i.e., 90 calendar days plus 3 business days after the Bankruptcy Court confirmed the plan. (Id. at 10, 15, 32.) The plan referred to this deadline as the Administrative Claims Bar Date. (Id. at 10.)
On May 9, 2018, the Bankruptcy Court set a deadline of June 6, 2018 to object to the Chapter 11 Plan. (BR Doc. 378 at 1.) The court also scheduled a confirmation hearing to begin on June 13, 2018. (Id. at 2.) The plan and the order setting the deadline and hearing were served on the County on May 11, 2018. (Doc. 4 at 68, 71.) The County did not object to the plan and did not attend the confirmation hearing, which was held on June 13 and 14, 2018. (BR Docs. 442, 443.)
On June 14, 2018, the Bankruptcy Court entered its order confirming the Chapter 11 Plan with modifications (“Confirmation Order”). (Doc. 4 at 83-120.) The Confirmation Order did not modify the Bar Date for governmental entities, which remained March 14, 2018. (See generally id.) It did, however, set a shorter deadline for notices of most administrative claims, which were to be filed within 15 days of the order's entry. (Id. at 87, 91.) The County asserts it “has no record of actually receiving the [C]onfirmation [O]rder until its counsel . . . retrieved it from the Bankruptcy Court docket in late 2019” upon receiving a claim objection from Appellee Robert Marcus. (Doc. 15 at 16-17.) Moreover, the Bankruptcy Court confirmed “[i]t is not clear the County received notice of the [C]onfirmation [O]rder.” (Doc. 5 at 202 n.3; see also Doc. 4 at 121-22 (); BR Doc. 441 (same).)
In July 2018, Mr. Marcus accepted appointment as successor liquidating trustee. (BR Doc. 493.) Mr. Marcus auctioned off Debtor's livestock in the summer of 2018. (Doc. 5 at 101.) In March 2019, he sold Debtor's real property and paid the County all taxes, interest, and penalties owed on that property. (Id. at 22, 203.) As a result, all amounts stated in the County's Proof of Claim were paid except for $8, 877.22, “which was identified as a tax on personal property.” (Id. at 21-22.) Also in March 2019, a County employee notified Mr. Marcus by e-mail that the County “still had a claim for personal property taxes far in excess of $8, 877.22.” (Id. at 23, 114.) “The claims asserted . . . in the email were for 2017 as well as 2018 personal property taxes on the cattle which had been sold the previous year.” (Id. at 23.) The County did not file a claim for the taxes referenced in the e-mail or otherwise seek relief from the Court at that time. (Id. at 203.)
“After extensive, arm's-length negotiations, ” Mr. Marcus reached a settlement with MetLife in May 2019, which the Bankruptcy Court approved in July 2019. (BR Doc. 531 at 6; Doc. 4 at 176-209; Doc. 5 at 203.) The parties then brought to the Bankruptcy Court's attention the issue of whether the County should be allowed to claim personal property taxes, interest, and fees on Debtor's livestock for 2017 (“2017 Livestock Taxes”) and 2018 (“2018 Livestock Taxes”). Specifically, on November 22, 2019, Mr. Marcus filed a Partial Objection to Claim asserting that the County's “claim had been paid except for $8, 877.22, ” and asking the Bankruptcy Court “to declare that the estate owed [the County] $8, 877.22 or less.” (Doc. 5 at 21-26, 203.) On December 23, 2019, the County filed a response in opposition to Mr. Marcus' Partial Objection to Claim, attaching tax bills showing Debtor owed $471, 816.85 in personal property taxes, interest, and fees for the years 2016, 2017, and 2018.[7] (Id. at 29-40.) With the Bankruptcy Court's leave, the County filed an amended response on February 24, 2020. (Id. at 56, 59-65.)
The parties also filed cross-motions for summary judgment. (Id. at 66-103.) After reviewing these motions, the Bankruptcy Court “determined that proper procedure was for the County to seek permission to amend its proof of claim and/or apply for an administrative expense.” (Id. at 137-38, 203.) The County did so; Mr. Marcus objected; and, the County replied. (Id. at 172-83, 203-04.)
After a hearing, the Bankruptcy Court issued the Opinion and Order at issue in this appeal. (Id. at 201-16.) In its Opinion, the Bankruptcy Court first concluded that the 2017 Livestock Taxes were incurred before Debtor's petition was filed and were thus a pre-petition claim subject to the Chapter 11 Plan's Bar Date for governmental entities. (Id. at 204-05.) The Bankruptcy Court then rejected the County's arguments that the 2017 Livestock Taxes should be allowed as either an amendment relating back to the County's timely Proof of Claim or a new claim filed out of time. (Id. at 205-10.) Finally, the Bankruptcy Court rejected the County's argument that its claim for the 2018 Livestock Taxes should be allowed as a post-petition administrative expense, because the County did not file a notice of claim for these taxes by the Administrative Claims Bar Date. (Id. at 210-12.) Thus, the Bankruptcy Court disallowed the County's claims for both the 2017 and 2018 Livestock Taxes. (Id. at 212-13.)
The County filed a Notice of Appeal in this Court on October 5, 2020 and filed its opening brief on January 14, 2021. (Docs. 1, 15.) On February 25, 2021, Mr. Marcus filed his response brief; and, on March 15, 2021, the County filed its reply. (Docs. 16, 17.) The County's appeal is thus fully briefed and ready for decision.
The County first argues that the Bankruptcy Court erred when it concluded that the 2017 Livestock Taxes were incurred pre-petition. (Doc. 15 at 23-26.) Rather, the County continues, the Bankruptcy Court should have allowed the County to claim the 2017 Livestock Taxes as a post-petition administrative expense. Alternatively, the County argues that if the 2017 Livestock Taxes were in fact incurred pre-petition, then the Bankruptcy Court should have allowed it to either (1) amend its timely...
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