In re Pointer

• Decision Date: 13 April 1990
• Docket Number: Bankruptcy No. 387-36028 RCM-11,Adv. No. 390-3036.
• Citation: 113 BR 285
• Parties: In re Martha Jo POINTER, Debtor. Martha Jo POINTER, Plaintiff, v. CITY OF FARMERS BRANCH, Carrollton-Farmers Branch Independent School District, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Texas

113 B.R. 285 (1990)

In re Martha Jo POINTER, Debtor.

Martha Jo POINTER, Plaintiff, v. CITY OF FARMERS BRANCH, Carrollton-Farmers Branch Independent School District, Defendants.

Bankruptcy No. 387-36028 RCM-11, Adv. No. 390-3036.

United States Bankruptcy Court, N.D. Texas, Dallas Division.

April 13, 1990.

David L. Ellerbe, Samuel M. Stricklin, Dallas, Tex., for plaintiff.

James E. Porter, Arlington, Tex., for City of Farmers Branch.

Steven L. Eason, Dallas, Tex., for Carrollton-Farmers Branch ISD.

MEMORANDUM OPINION

ROBERT McGUIRE, Chief Judge.

This case involves the extent, validity, and priority of the tax liens of claimants, City of Farmers Branch ("City") and Carrollton-Farmers Branch Independent School District ("ISD") (collectively, "Defendants" or "Taxing Units") against property of the estate of Martha Jo Pointer ("Plaintiff" or "Pointer"), which property Plaintiff obtained by her foreclosure from the bankruptcy estate of Valwood Village Apartments, Ltd. ("VVAL"). Following are the Court's Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 7052.

Procedural History

1. On January 10, 1990, Plaintiff filed her complaint to determine extent, validity, and priority of liens (the "Complaint") against Defendants.

2. The Court has jurisdiction over this matter under 28 U.S.C. §§ 157(a) and 1334(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(B) and (K). Defendants stipulated that the Court had jurisdiction and that this was a core proceeding. Both Taxing Units filed a claim in the Pointer bankruptcy case.

3. The parties entered into an agreed order pursuant to which the parties agreed that this proceeding would be determined upon the pleadings, stipulated facts, briefs, and oral arguments. The briefing and oral arguments have been completed.

Additional Stipulated Facts

The parties additionally stipulated to the following:

1. Plaintiff\'s confirmed modified third amended plan of reorganization as supplemented by the modification of September 15, 1988, provided that this Court retain jurisdiction to consider the matters within this adversary proceeding.

2. From 1963 to 1969, Gerald Pointer built, in sections, an apartment complex in Farmers Branch, Texas ("Valwood Apartments"). In or about 1977, Gerald Pointer sold the Valwood Apartments. As part of the consideration for such sale, Gerald Pointer accepted a promissory note secured by a deed of trust granting Gerald Pointer a lien on the Valwood Apartments.

3. In 1982, Gerald Pointer and his wife, Plaintiff herein, were divorced. As part of the divorce decree, Plaintiff was awarded the promissory note and deed of trust upon the Valwood Apartments. During the early 1980s the Valwood Apartments were transferred to various entities. All transfers of the Valwood Apartments were subject to the Pointers\' lien upon such apartments. Plaintiff did not have an interest in any such entity.

4. In 1986, the Valwood Apartments were owned by an entity named VVAL. On April 25, 1986, an involuntary petition under Chapter 7 of Title 11 was filed against VVAL (the "VVAL Petition Date"). VVAL\'s Chapter 7 bankruptcy case is still pending in the Northern District of Texas, Dallas Division, before another Court, under, case Number XXX-XXXXX HCA-7. Included in the estate of VVAL was the real and personal property of the Valwood Apartments.

5. Pursuant to Texas Property Tax Code § 32.07, personal liability for the payment of ad valorem taxes upon real property in Texas fixes to the owner of such real property on January 1 of such tax year. Pursuant to Texas Property Tax Code § 32.01, tax liens ordinarily attach to real property in Texas on January 1 of each year for the payment of such year\'s ad valorem taxes.

6. Pointer filed for relief under Chapter 11 of Title 11 of the United States Code on November 16, 1987.

7. On February 2, 1988, Pointer, acting as debtor-in-possession, filed a motion for relief from the stay in the VVAL bankruptcy case, seeking an order modifying the stay to allow Pointer to foreclose her lien upon the Valwood Apartments. On June 9, 1988, the Honorable Harold C. Abramson, the Bankruptcy Judge presiding over the VVAL bankruptcy case, ordered that the automatic stay be lifted to allow Pointer to take any and all actions necessary to enforce her security interest in the Valwood Apartments.

8. On September 6, 1988, Pointer conducted a foreclosure sale of the Valwood Apartments. Pointer was the highest bidder at such sale, and, consequently, purchased the Valwood Apartments via credit bid.

9. Attached hereto are two schedules respectively entitled "Schedule B — City of Farmers Branch" and "Schedule C — Carrollton/Farmers Branch ISD". The schedules set out the amount of base taxes, penalties, interest, and additional penalty for collection costs claimed by the respective Taxing Units as owing upon the Valwood Apartments for the tax years of 1988 and before, as of the following dates: (a) April 1986 — the VVAL involuntary petition date; (b) September 1988 — Pointer\'s foreclosure date; and (c) March 1990— the present. The parties stipulate that the amounts in the schedules are correctly stated; however, Pointer does not stipulate that all these amounts are secured by a lien upon Valwood Apartments; Pointer merely stipulates that the Taxing Units have liens upon the Valwood Apartments to secure the payment of 1985 and 1986 base taxes and interest only, without penalties and fees. Whether liens upon the Valwood Apartments secure all other amounts is the subject of the dispute making up this adversary proceeding.

Issues

The precise issues involved in this case are:

1. whether the automatic stay provisions of § 362 bar the Taxing Units from obtaining tax lien status for 1987 and 1988 taxes (the answer to this issue, in turn, depends on the extent to which the exceptions set forth in 11 U.S.C. §§ 362(b)(3) and 546(b) are applicable to these tax liens), and

2. whether the Taxing Units are entitled to penalties, fees, costs, or other charges on the portions of all unpaid ad valorem taxes that the Court determines to be secured by valid liens.

Debtor's contentions are pictorially set forth on Schedule A attached hereto. For a general discussion of these type issues, see, Schwartz, et al, Treatment of Post Petition Real Estate Taxes in Bankruptcy, NORTON BANKRUPTCY LAW ADVISER (Monthly Analysis, March, 1990).

Method of Real Property Ad Valorem Taxation Under Texas Law

Debtor substantially correctly sets forth the method of real property ad valorem taxation under Texas law. It appears that method was utilized by the Taxing Units in the present case.

The process of real property taxation in Texas is set forth in the Texas Property Tax Code, Tex. Tax Code Ann. §§ 1.01-43.04 (Vernon 1982 & Supp.1990) (the "Tax Code"). The Tax Code applies to the City and the ISD as taxing units. Id., §§ 1.02, 1.04.

Each county has an appraisal district, administered by a chief appraiser, which is responsible for appraising property in the county for each taxing unit that imposes ad valorem taxes on real property in the county. Id., §§ 6.01(a), (b) and 6.05(c) (1982 & Supp.1990). The Dallas Central Appraisal District appraises property in Dallas County for the City and the ISD.

A tax lien, to secure payment of all taxes imposed during a tax year on real property, attaches to the property on January I of each tax year (prior to completion of the following steps described), regardless of when the taxes for the year are actually imposed. Id., § 32.01 (Supp.1990). § 32.01 reads as follows:

On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on that property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit having power to tax the property.

Amended by Acts 1983, 68th Leg., p. 4827, ch. 851, § 22, eff. Aug. 29, 1983.

Emphasis added.

The first step thereafter, in the ad valorem taxation process, occurs on May 15 of each tax year,¹ when the chief appraiser is required to prepare appraisal records that list all taxable property in the district, and state the appraised value of each such property. Id., § 25.01(a). The appraisal records include the identity of each taxing unit in which the property is taxable, a property description, and the appraised value of real property and improvements thereon. Id., § 25.02(a)(2), (5), (6), and (11).

The chief appraiser is also required, by May 15 or as soon thereafter as practicable, to submit the appraisal records to the appraisal review board² for review and for the determination of protests. Id., § 25.22 (1982 & Supp.1990); see also §§ 41.01-41.11, 41.41-41.47 (review and protest process) (1982 & Supp.1990). The appraisal review board must complete its review, determine timely protests, and submit a list of its approved changes in the appraisal records to the chief appraiser by July 20 of each tax year. Id., § 41.12 (Supp.1990).

After receiving the corrected appraisal records from the appraisal review board, the chief appraiser is required to submit to the assessor for each taxing unit the portion of the appraisal records that lists the taxable property for such taxing unit. The part of the appraisal records that the chief appraiser certifies and submits to the assessor is the appraisal roll for that unit. Id., § 26.01(a) (Supp.1990); see also id., § 25.24 (1982).

After receiving the appraisal roll, the assessor for each taxing unit determines the total appraised value, the total assessed value, and the total taxable value of all property. Id., § 26.04(a) (Supp.1990). By August 1 of the tax year or as soon thereafter as practicable, the assessor must submit the appraisal roll to each taxing unit's governing body. The appraisal roll shows the total appraised, assessed, and taxable values of all property. Id., § 26.04(b) (Supp.1990).

By September 1 or...