In re Bowers

• Decision Date: 22 November 2013
• Docket Number: BAP No. 13–8014.
• Parties: In re Michael Allen BOWERS and Margarita Ville Bowers, Debtors.
• Court: U.S. Bankruptcy Appellate Panel, Sixth Circuit

506 B.R. 249

In re Michael Allen BOWERS and Margarita Ville Bowers, Debtors.

BAP No. 13–8014.

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Argued: Aug. 20, 2013.

Decided: Nov. 22, 2013.

ARGUED:Scott W. Paris, Keith D. Weiner & Associates Co., LPA, Cleveland, OH, for Appellant. Robert M. Whittington, Jr., Akron, OOH, for Appellees. ON BRIEF:Scott W. Paris, Keith D. Weiner & Associates Co., LPA, Cleveland, OH, for Appellant. Robert M. Whittington, Jr., Akron, OH, for Appellees.

Before: EMERSON, LLOYD, and PRESTON, Bankruptcy Appellate Panel Judges.

OPINION

JOAN A. LLOYD, Bankruptcy Judge.

Plymouth Park Tax Services, LLC (“Plymouth Park”) appeals the order of the United States Bankruptcy Court for the Northern District of Ohio (the “Bankruptcy Court”) sustaining in part debtors Michael Allen Bowers and Margarita Ville Bowers's (the “Debtors”) objection to Plymouth Park's claim and overruling in part Plymouth Park's objection to confirmationof the Debtors' chapter 13 plan. The Bankruptcy Court's order held that under Ohio law the appropriate interest rate for Plymouth Park's tax claim against the Debtors was 0.25%. Plymouth Park argues that Ohio's tax lien statutes mandate a higher interest rate of 18%. For the reasons set forth below, the Panel affirms the Bankruptcy Court's decision.

STATEMENT OF ISSUES

The issue presented in this appeal is as follows: whether the Bankruptcy Court erred in determining that Ohio law set the Debtors' chapter 13 plan interest rate on Plymouth Park's tax lien certificate at 0.25%.

JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit (“BAP”) has jurisdiction to decide Plymouth Park's appeal of the Bankruptcy Court's order sustaining the Debtors' objection to Plymouth Park's claim. The United States District Court for the Northern District of Ohio has authorized appeals to the BAP, and no party has timely elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A “final” order of a bankruptcy court may be appealed by right under 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 797, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (internal quotations and citations omitted). An order sustaining an objection to a creditor's claim is a final order. Malden Mills Industries, Inc. v. Maroun (In re Malden Mills, Inc.), 303 B.R. 688, 696 (1st Cir. BAP 2004). On the other hand, an order overruling an objection to confirmation without confirming a plan is not a final order. State Bank of Florence v. Miller (In re Miller), 459 B.R. 657, 662 (6th Cir. BAP 2011). Consequently, this opinion will only review the Bankruptcy Court's order insofar as it sustained the Debtors' objection to Plymouth Park's claim.

The Panel reviews conclusions of law, such as a bankruptcy court's interpretation of state law, de novo. Dickson v. Countrywide Home Loans (In re Dickson), 655 F.3d 585, 590 (6th Cir.2011). Under a de novo standard of review, the appellate court determines the law at issue “independently of, and without deference to, the trial court's determination.” Palmer v. Washington Mut. Bank (In re Ritchie), 416 B.R. 638, 641 (6th Cir. BAP 2009) (citing Gen. Elec. Credit Equities, Inc. v. Brice Rd. Devs., LLC (In re Brice Rd. Devs., LLC), 392 B.R. 274, 278 (6th Cir. BAP 2008)).

FACTS

The Debtors owed delinquent real estate taxes to Summit County, Ohio. Summit County and several other Ohio counties sell outstanding tax obligations to investors in the form of tax lien certificates. By selling these tax lien certificates, Summit County obtains much-needed revenue. The investor purchasing a tax lien certificate obtains a lien against the taxpayer's property and the right to pursue the taxpayer for the unpaid taxes. SeeOhio Rev.Code Ann. (“O.R.C.”) §§ 5721.30–43.

On November 5, 2010, Plymouth Park filed a tax lien certificate with the Summit County, Ohio, Fiscal Officer showing its purchase of the Debtors' tax obligation for the price of $4,083.73 with a negotiated interest rate of 0.25%. This certificate states that it was offered, sold, and delivered on November 3, 2010. On October 3, 2011, Plymouth Park filed a second tax lien certificate with the Fiscal Officer showing its purchase of a second certificate for the price of $2,045.44 with a negotiated interest rate of 18.00%. Both of these certificates are titled “Tax Certificate (Negotiated Sale).” (Stipulation as to Undisputed Facts (“Stipulation”) Exs. B and C, Bankr.Case No. 12–51549, ECF No. 32). The certificates are signed by the “Treasurer/Fiscal Officer or Designee,” Shelly Davis, who states in the first paragraph: “I do hereby certify that at a negotiated sale pursuant to O.R.C. § 5721.33 this tax certificate for the parcel listed below was offered and sold....” ( Id.).

Both certificates also state that “[t]his certificate will be canceled six years after the date of delivery pursuant to Ohio Revised Code 5721.27, unless the date is extended because of bankruptcy pursuant to O.R.C. 5721.37(A)(3)(b),” and that “[t]he purchaser of this Tax Certificate or any transferee is entitled to file a notice of intent to foreclose on this parcel within six years after the purchase of the Tax Certificate, or by the date negotiated with the county treasurer.” (Id.).

On April 17, 2012, the Summit County Fiscal Officer filed a tax lien foreclosure complaint against the Debtors. The Summit County Fiscal Officer filed this complaint “pursuant to a request for foreclosure form sent to the Fiscal Officer by Plymouth [Park].” (Stipulation, at ¶ 6). The foreclosure complaint stated that “as provided by Section 5721.38(B) of the Ohio Revised Code” the “redemption price” calculated by the Fiscal Officer was $10,585.82. (Stipulation Ex. D, at ¶ 6).

On May 10, 2012, the Debtors filed their chapter 13 plan and petition. The Debtors' chapter 13 plan proposed to pay interest on Plymouth Park's tax certificates at the interest rates listed on those certificates: 0.25% on the first tax certificate and 18% on the second. On May 23, 2012, Plymouth Park filed a proof of claim based on both certificates in the amount of $10,521.46, an amount that included $2,120.00 in fees and the principal balance of $7,781.19 plus 18% interest from June 1, 2012. The Debtors' plan and Plymouth Park's claim thus put the parties at odds: While the Debtors sought an interest rate of 0.25% on the first tax certificate and 18% on the second, Plymouth Park demanded that the Debtors pay 18% on both.

On May 23, 2012, Plymouth Park filed an objection to confirmation of the Debtors' plan. Plymouth Park claimed that O.R.C. § 5721.38(B) entitled it to an 18% interest rate on its claim for the first tax certificate (the “Tax Certificate”). That same day, the Debtors filed an objection to Plymouth Park's claim, demanding the 0.25% interest rate listed on the Tax Certificate and disputing the propriety of Plymouth Park's $2,120 fee charge.¹ On August 18, 2012, the Bankruptcy Court held an evidentiary hearing at which testimony was taken regarding the procedures and fees involved in Summit County's tax lien foreclosure process. On December 5, 2012, the Bankruptcy Court entered an order directing the parties to file additional briefs “regarding the applicability and/or inapplicability of Ohio Revised Code § 5721.38 to the issues before the Court, specifically to what extent, if any, a debtor's chapter 13 plan treatment of the tax certificate holder's claim should be equated with the process of redemption contemplated in § 5721.38.” (Order Directing Parties to File Briefs, at 1, Bankr.Case No. 12–51549, ECF No. 44).

In its brief on O.R.C. § 5721.38, Plymouth Park argued that Ohio law controlled the appropriate interest rate payable on its claim because the claim constituted a “tax claim” under 11 U.S.C. § 511. Plymouth Park then turned to O.R.C. § 5721.38(B), a statute that allows taxpayers to redeem their property by paying a lump sum with an 18% interest rate applicable from the date that foreclosure proceedings commence. Ohio Rev.Code Ann. § 5721.38(B). According to Plymouth Park, O.R.C. § 5721.38(B) guaranteed it an 18% interest rate on its claim.

The Debtors made two arguments against this high rate. First, they argued that Plymouth Park's claim was not a “tax claim” under § 511 of the Bankruptcy Code and that therefore the state statute did not govern the interest rate payable on Plymouth Park's claim. According to this argument, the interest rate had to be determined by using the “prime plus” formula set forth in Till v. SCS Credit Corp., 541 U.S. 465, 124 S.Ct. 1951, 158 L.Ed.2d 787 (2004). Second, the Debtors argued that the lump sum redemption described in O.R.C. § 5721.38(B) could not be equated with a redemption via chapter 13 plan payments. The Debtors proposed that O.R.C. § 5721.38(C)(2) which provides for a redemption payment plan, not a lump sum payment should guide the selection of an interest rate for Plymouth Park's claim. Subsection (C)(2) makes no reference to the 18% interest rate that is required in subsection (B) and instead provides for redemption via a payment plan calculated to include a tax certificate's “certificate rate of interest.” Ohio Rev.Code Ann. § 5721.38(C)(2).

In an Order and Memorandum Opinion entered on March 22, 2013, the Bankruptcy Court agreed with Plymouth Park that Plymouth Park's claim was a tax claim under 11 U.S.C. § 511 and that state law governed the interest rate issue. But the Bankruptcy Court rejected the proposition that the 18% rate in O.R.C. § 5721.38(B) should apply to the Debtors' plan. The Bankruptcy Court stated as follows:

According to Ohio Revised Code § 5721.38(B)(2), the owner of the property “may redeem the parcel by paying ... interest on the certificate purchase price for each tax...