L Harris Constr. Co. v. Miss. Dep't of Revenue (In re L Harris Constr. Co.)
| Citation | 528 B.R. 664 |
| Decision Date | 09 April 2015 |
| Docket Number | CASE NO. 1401450EE,ADVERSARY NO. 1400037EE |
| Parties | In re : L Harris Construction Company. L Harris Construction Company v. Mississippi Department of Revenue |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Mississippi |
Hon. James G. McGee, Jr., jmcgee@mcgeetaxlaw.com, 125 South Congress Street, Suite 1240, Jackson, MS 39201, Attorney for Debtor
Hon. Kenitta Franklin Toole, kenitta.toole@dor.ms.gov, Post Office Box 22828, Jackson, MS 39225, Attorney for Mississippi Department of Revenue
THIS MATTER came before the Court on the Motion to Dismiss Adversary (Adv. Dkt.# 9) filed by the Mississippi Department of Revenue, the Response in Opposition to Defendant's Motion to Dismiss (Adv. Dkt.# 32) filed by L Harris Construction Company1 , and the Reply to Response to Motion to Dismiss (Adv. Dkt.# 34) filed by the Mississippi Department of Revenue. Having considered same and the respective briefs filed by the parties, the Court finds that the Motion to Dismiss Adversary (Adv. Dkt.# 9) filed by the Mississippi Department of Revenue should be granted.
On the onset, the Court will note that this adversary proceeding is one of at least four (4) adversary cases filed before this Court challenging tax assessments by the Mississippi Department of Revenue (MDOR).3 In addition, similar adversaries challenging MDOR tax assessments are pending before the other three (3) Mississippi bankruptcy judges.
According to the web site of the State of Mississippi's Secretary of State, the L Harris Construction Company (L Harris) was created as a for profit corporation on October 26, 2006. L Harris has its principal place of business at 819 Robinson Road, Canton, Mississippi. The President of L Harris is Lonnie Harris.
On January 25, 2012, MDOR issued to L Harris an Assessment of Sales Taxes4 (Assessment).
The Assessment states that “pursuant to an audit or other information relating to your records or returns,”5 MDOR assessed L Harris with a total assessment of $593,365.00 for sales taxes due from June 1, 2008, to October 31, 2011. The Assessment further states that L Harris had sixty (60) days from the date of the assessment to either pay the assessment in full or to file an appeal with the MDOR's Board of Review (BOR.). The Assessment states the address where L Harris was to mail an appeal.
L Harris filed a timely appeal with the BOR. On Thursday, May 10, 2012, the three member BOR held a hearing on L Harris's appeal (BOR Hearing). The Minutes of the Called Meeting of the Board of Review Held Thursday, May 10, 2012,6 (BOR Minutes) state that L Harris was represented by an attorney, James G. McGee, at the BOR Hearing and that Mr. Harris was present. The BOR Minutes further state that Mr. Harris brought documentation with him to the BOR Hearing, but did not provide documentation for all of the transactions during the time period of the assessment. The BOR Minutes further state that “[t]he taxpayer requested additional time to supply any additional documents and was granted two weeks.”7
The BOR entered its Order of the Board of Review Department of Revenue, Jackson, Mississippi (BOR Order) on July 5, 2012. After “[hearing] and carefully [considering] all the evidence presented by the taxpayer,”8 the BOR found that the Assessment should be affirmed but at a reduced amount. The BOR reduced the Assessment from $593,365.00 to $461,743.00.
The BOR Order states that L Harris had sixty (60) days from the date of the order to either pay the assessment in full or to file an appeal with the Mississippi Board of Tax Appeals. The BOR Order states the address where L Harris was to mail an appeal.
L Harris timely appealed the BOR Order to the Mississippi Board of Tax Appeals (BTA). The BTA held a hearing on February 20, 2013, (BTA Hearing) on L Harris' “protest and appeal from an assessment of sales tax.”9
On June 5, 2013, the BTA entered its Order (BTA Order). The BTA Order states that L Harris was represented by James G. McGee, Jr. at the BTA Hearing and that Mr. Harris and his wife, Movelyn A. Harris, attended the hearing. The BTA Order further states: “the decision of the Board of Review to reduce the assessment of sales tax to $461,743.00 and to uphold and affirm the assessment as reduced should be upheld and affirmed.”10
The BTA Order states that L Harris had sixty (60) days from the date of the order to pay the assessment in full or to file a petition in chancery court requesting a hearing pursuant to Miss. Code § 27–77–7. The sixty (60) days ran on or about August 4, 2013.
Some four (4) months after the BTA Order was entered on June 5, 2013, L Harris, by and through its attorney James G. McGee, Jr., filed a Complaint (Chancery Complaint) on October 10, 2013, in the Chancery Court of the First Judicial District of Hinds County, Mississippi, against the Commissioner of Revenue of the Mississippi Department of Revenue, Ed Morgan, and the Executive Director of the Mississippi Board of Tax Appeals, Sam Polk. In the Chancery Complaint, L Harris requests that pursuant to Miss. Code § 11–13–11, the court enter a judgment declaring that the Assessment “was not in conformity with the law;”11 that the tax lien filed by MDOR should be released; and, that MDOR should be prohibited from any further collection action against L Harris.
The MDOR filed a motion to dismiss the Chancery Complaint and filed a motion for summary judgment on behalf of Sam Polk. However, before the chancery court could hear the motions on May 1, 2014, L Harris (Debtor) filed a petition for relief under Chapter 11 of the United States Bankruptcy Code on April 30, 2014.
On May 8, 2014, MDOR filed its Emergency Motion to Determine that the Automatic Stay Does Not Bar Lawsuit Currently Pending Filed by Debtor or in the Alternative, for Relief from the Automatic Stay (Dkt.# 24) (Stay Motion). In its Stay Motion, MDOR prays that the Court enter an order declaring that the automatic stay did not bar MDOR from defending itself in the chancery court action or in the alternative, to declare that the stay is lifted to allow the litigation to proceed. On May 19, 2014, the Debtor and MDOR's Agreed Order on Motion to Determine Stay or to Lift the Automatic Stay (Dkt.# 45) was entered lifting the stay to allow the parties to proceed in chancery court through the entry of a final order.
On June 19, 2014, the chancery court held a hearing on MDOR's motion to dismiss the Chancery Complaint.12 The attorney for MDOR argued that the Debtor could not attack the validity of the sales tax Assessment under Miss. Code § 11–13–11, but rather, a complaint attacking the validity of an assessment must be brought under Miss. Code § 27–77–7.13 MDOR asserted that since the BTA entered its order on June 5, 2013, any complaint challenging the Assessment had to be filed within sixty (60) days of June 5, 2013, or by August 4, 2013. Since the Chancery Complaint was filed more than sixty (60) days after BTA Order was entered, MDOR asserted that the chancery court did not have jurisdiction to hear the challenge to the Assessment.14
In response to MDOR's arguments, Mr. McGee told the chancellor that “I agree with everything Ms. Marbury just said.”15 The chancellor announced from that bench that the Chancery Complaint would be dismissed without prejudice. Thereafter, the chancellor entered an order on June 23, 2014, dismissing the Chancery Complaint without prejudice.
The above-styled adversary proceeding was commenced on June 16, 2014, by the Debtor filing its Complaint of L. Harris Construction Company Initiating Adversary Proceeding (Adv. Dkt.# 1) (Complaint). In its Complaint, the Debtor alleges that “the Notice of Assessment was never properly delivered to the [Debtor] in accordance with the statutory requirements ... [and that] MDOR has failed to produce a copy of the certified mail receipt and/or ‘green card’ indicating that the Notice of Assessment was properly delivered to the [Debtor].”16
Count One of the Debtor's Complaint asserts that the Assessment is void because of lack of adequate notice and because the MDOR based the Assessment on “alternative accounting methods not permitted when adequate records exist”17 to calculate the Debtor's tax liability. Count Two “avers that the unlawful tax assessments filed by MDOR are dischargeable in case No.: 14–01450.”18 Count Three “asserts that this complaint is the initial pleading by which an adversarial (sic) proceeding is initiated with regard to the subject dispute between the [Debtor] and MDOR.”19
On July 17, 2014, MDOR filed its Motion to Dismiss Adversary (Adv. Dkt.# 9) (Motion to Dismiss). In its Motion to Dismiss, MDOR asserts that the adversary should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6)20 because the Complaint fails to state a claim upon which relief can be granted.
The Debtor filed a Response in Opposition to Defendant's Motion to Dismiss (Adv. Dkt.# 32)(Response) on February 20, 2015.21 In its Response, the Debtor states that MDOR issued the Assessment and that the Debtor timely appealed to the BOR. Thereafter, the Debtor appealed the BOR Order to the BTA. The Debtor alleges that the BTA failed to send the BTA Order to it and its attorney. However, the Debtor states that when it received the BTA Order, it immediately appealed to the chancery court. The Debtor asserts that the Motion to Dismiss should be denied because the chancery court dismissed its Chancery Complaint without prejudice, consequently “the [Debtor] has yet to receive a final adjudication on the merits by the Chancery Court and the [Debtor] still has the opportunity for judicial review in the Chancery Court.”22
MDOR filed its Reply to Response to Motion to Dismiss (Adv. Dkt.# 34) (Reply) on March 6, 2015. In its Reply, MDOR states that the Assessment has been contested and adjudicated and that its Motion to Dismiss should be granted. The Court then took the matter under advisement.23
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