In re Reef Petroleum Corp.
| Decision Date | 21 October 1988 |
| Docket Number | Adv. No. 86-0224.,Bankruptcy No. NT 83-02437 |
| Citation | 92 BR 741 |
| Parties | In re REEF PETROLEUM CORPORATION, Debtor. MANISTEE COUNTY and Cleon Township, Plaintiffs, v. REEF PETROLEUM CORPORATION, a Michigan corporation, Reef Drilling Corporation, a Michigan corporation, Harris Trust and Savings Bank, a foreign corporation, and Unsecured Creditors Committee, Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Michigan |
Gockerman, Wilson & Saylor, P.C., Richard M. Wilson Jr., Manistee, Mich., for plaintiffs.
Dunn, Schouten & Snoap, Thomas W. Schouten, Wyoming, Mich., for defendant Harris Trust and Sav. Bank.
This is an action by Cleon Township and Manistee County to recover the unpaid personal property taxes on an oil well drilling rig for the year 1982. This action involves the relative priorities of the tax lien of the taxing units and the consensual lien of Harris Trust & Savings Bank (Harris).
Manistee County and Cleon Township are making the same claim and hereafter will be referred to collectively as "Township" or "Plaintiff". Township and Harris have agreed to submit this proceeding on a stipulated statement of facts. At the pretrial conference, Reef Drilling Corporation was defaulted and the court indicated that a default judgment could be entered against it and in favor of Township for the full amount of the taxes due. No judgment was submitted to date by Township. Also, at the pretrial conference, these proceedings were dismissed as to Reef Petroleum Corporation (Reef) and the Unsecured Creditors Committee.
Under agreement of counsel, this case is submitted under a "Stipulated Statement of Facts" and a "Supplemental Stipulated Facts". As the court is bound by these Stipulations they are paraphrased below:
STIPULATED STATEMENT OF FACTS
1. On December 3, 1981, Reef Drilling Rig # 1 (the Rig) was owned by the Debtor herein, and leased to Reef Drilling Corporation pursuant to the written lease.
2. On December 31, 1981, the Rig was located in Cleon Township, Manistee County, Michigan.
3. On December 31, 1981, personal property taxes calculated on the basis of the Personal Property Tax Statement as of December 31, 1981, filed with Cleon Township were assessed against the Rig and Reef Drilling Corporation. Further, on December 31, 1981, Defendant Harris had a properly perfected, valid consensual lien in the Rig, pursuant to a security agreement dated September 28, 1978, and a financing statement filed initially with the Michigan Secretary of State on October 4, 1978.
4. On December 1, 1982, the unpaid personal property taxes became a valid and perfected lien against the Rig.
5. After remaining unpaid, the personal property taxes were returned as delinquent to the Manistee County Treasurer pursuant to law, on March 1, 1983.
6. On September 23, 1983, Debtor herein filed its voluntary petition in bankruptcy and the Rig became part of the bankruptcy estate. The Court granted Defendant Harris a lien on the Rig in addition to its consensual lien by way of its orders approving Debtor's use of cash collateral, the first of said Orders being dated the 26th day of September, 1983, as amended.
7. Plaintiffs were both notified of the bankruptcy prior to the entry of the Order Confirming Second Amended Plan of Reorganization of April 25, 1985. On the 31st day of October, 1983, the Manistee County Treasurer filed a Proof of Claim (Claim # 44) on behalf of Plaintiffs with respect to the unpaid taxes, claiming the same as a secured priority claim.
8. Plaintiffs were both listed on the bankruptcy mailing matrix as "Manistee County Treasurer, Manistee, Michigan 49660"; and "Cleon and Manistee Co. Treasurer, Courthouse, Manistee, MI 49660".
9. On May 24, 1984, this Court entered an Order based upon a Stipulation entered into by Defendant Harris, Debtor, and the Unsecured Creditors' Committee, which Order had the effect of establishing Defendant Harris' consensual liens as "valid, properly perfected first liens" on much of Debtor's equipment, including "all drilling equipment".
10. The May 24, 1984, Stipulation and Order was entered during an adversary proceeding, styled Harris Trust & Savings Bank, et al. v. Reef Petroleum Corporation, et al., Adversary Proceeding No. 84-0012.
11. Plaintiffs were not parties to the adversary proceeding in which the Stipulation and Order was entered May 24, 1984.
12. The May 24, 1984, Stipulation and Order entered in the adversary was served on the six individuals whose names appear on the Order but was not served on Plaintiffs.
13. On July 12, 1984, this Court entered an Order Upon Application for Establishment of Procedure for Sale of Assets Free and Clear of Liens pursuant to Section 363 of the Bankruptcy Code.
14. Plaintiffs did not object to the entry of the Order of July 12, 1984. Further, Plaintiffs were served with all necessary and appropriate notice and are bound by the Order.
15. On August 27, 1984, this Court entered its Order of Sale confirming that the notice provided for in the July 12, 1984, Order was appropriate and all that was necessary for the case under Bankruptcy Code 16. Plaintiffs did not object to this sale or the entry of the Court's August 27, 1984, Order of Sale. Further, Plaintiff were served with all necessary and appropriate notice and are bound by the Order.
17. On August 29, 1984, the Rig was sold at auction to a third party other than Harris, pursuant to the July 12, 1984, Order, and Defendant Harris received all of the net proceeds therefrom.
18. On April 25, 1985, this Court entered its Order Confirming Second Amended Plan of Reorganization of Reef Petroleum Corporation.
19. Plaintiffs did not object to the entry of the Order Confirming the Second Amended Plan of Reorganization. Further, Plaintiffs were served with all necessary and appropriate notice and are bound by the Order.
20. On June 26, 1985, the Debtor filed its Objection to the Plaintiffs' claim for unpaid taxes.
21. On June 26, 1985, all necessary and appropriate notice of objection was served on all interested parties, including Plaintiffs.
22. No one on behalf of Plaintiffs appeared in opposition to the Debtor's Objection to the Plaintiffs' claim.
23. On August 7, 1985, this Court entered its Order disallowing Plaintiffs' claim against Debtor for the unpaid personal property taxes, and no appeal was taken by the Plaintiffs to that Order.
24. Upon receipt of the August 7, 1985, Order Disallowing Claims, the Manistee County Treasurer retained present counsel to attempt to secure payment of the unpaid personal property taxes now in issue.
25. On September 28, 1985, Plaintiffs filed their Motion for Reconsideration of Disallowed Claims.
26. On October 2, 1985, Debtor filed its Objections to the Plaintiffs' Motion to Reconsider.
27. On February 6, 1986, Plaintiffs received confirmation from the attorneys for Debtor that the net proceeds of the sale of the Rig were paid to Defendant Harris.
28. Plaintiff and Debtor stipulated to the withdrawal of Plaintiff's Motion for Reconsideration of Disallowed Claims and an Order to that effect was entered by the Court on March 11, 1986. This Order did not allow or revive the original Claim # 44 of Plaintiffs nor did it prohibit Plaintiffs from seeking further relief from other parties who may be liable for payment of the taxes.
29. The following day, March 12, 1986, the instant action was filed against Debtor, Reef Drilling Corporation, Defendant Harris and the Unsecured Creditors' Committee.
30. Reef Drilling Corporation has been defaulted for failure to appear or answer Plaintiffs' Complaint.
31. By stipulation of counsel, Debtor and the Unsecured Creditors Committee have been dismissed from this action.
32. The base tax at issue in this action is $17,279.91.
33. No amount of the base tax, fees, interest or penalties have been paid.
34. The terms of all Orders, Stipulations, Motions, and Pleadings referred to in this Stipulated Statement of Facts are incorporated herein by reference as are the terms of all Exhibits.
35. On the date of the tax assessment, December 31, 1981, the Rig had an assessed valuation of $444,400 and the net proceeds received by Defendant Harris from the sale of the Rig was $287,283.83.
Not set forth in this opinion are the exhibits referred to in paragraph no. 34, but these will be referred to in the discussion. The Court will also take judicial notice of any documents or court papers which are a part of this file.
This Court has jurisdiction over this case by virtue of 28 U.S.C. § 1334, and this adversary proceeding constitutes a core proceeding. 28 U.S.C. § 157(b)(2)(K). Further, the confirmed plan provided that this Court would retain jurisdiction after confirmation "to hear and determine all questions and disputes regarding liens . . . between the debtor and/or committee and any other party. . . ."
Originally, it appeared that the principal issue in this proceeding was whether Township's lien was superior to Defendant Harris' consenual lien. Harris seems to have conceded that the Township lien takes precedence because Harris' briefs raise no arguments to the contrary. However, in the event that I have misunderstood the position of Harris, I hold that the Township has a valid, perfected lien which is superior to that of Harris.
Generally, the priority of competing liens is determined by Michigan's Uniform Commercial Code. Mich.Comp.Laws § 440.9101 et seq. (1967) (Mich.Stat.Ann. § 19.9101 et seq. (Callaghan 1981)). However, Michigan's Uniform Commercial Code does not apply to statutory liens. Mich.Comp.Laws § 440.9102 (1967) (Mich.Stat.Ann. § 19.9102 (Callaghan 1981)). In order to establish the priority of a statutory lien, one must look outside the Michigan Uniform Commercial Code.
All personal property within the...
To continue reading
Request your trial