Matter of Holly's, Inc.
| Decision Date | 30 September 1994 |
| Docket Number | Bankruptcy Case No. 91-84931. Adv. No. 93-8530. |
| Parties | In the Matter of HOLLY'S, INC., Debtor. HOLLY'S, INC., d/b/a Holiday Inn-East, Plaintiff, v. CITY OF KENTWOOD, Defendant. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Michigan |
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Thomas C. Clinton, Grand Rapids, MI, for plaintiff Holly's, Inc., d/b/a Holiday Inn-East.
Daniel R. Kubiak, Grand Rapids, MI, for defendant City of Kentwood.
This adversary proceeding raises a number of complicated issues. Does this court have jurisdiction to hear, and render a final order or judgment in, this adversary proceeding, which was filed after confirmation of the Debtor's chapter 11 plan of reorganization? Even if the court has jurisdiction over this adversary proceeding for the tax years 1989 through 1992, does the court have jurisdiction to determine the Debtor's 1993 tax liability, which was assessed after the Debtor's plan was confirmed?
Is the Debtor's request to determine its tax liability, pursuant to 11 U.S.C. § 505, tantamount to an objection to claim? If so, does the Debtor's failure to object to Kentwood's claims within the 120-day postconfirmation period provided by the plan constitute excusable neglect? If not, does the Debtor's failure to object to Kentwood's tax claims either prior to confirmation or within the 120-day limitation established by the confirmed plan bar the Debtor from now litigating its tax liability under § 505?
If the Debtor's adversary proceeding is not an objection to claim, is the Debtor now precluded, under the doctrines of either res judicata or estoppel, from commencing this adversary proceeding because it failed to preserve in its plan the right to initiate this postconfirmation proceeding? If not, should the court nonetheless abstain from hearing this adversary proceeding?
On September 13, 1991, Holly's, Inc. (the "Debtor") filed for relief under chapter 11 of the Bankruptcy Code.1 On November 24, 1992, this court held a hearing on confirmation of the Debtor's Third Amended Plan of Reorganization Dated November 24, 1992 (the "Third Amended Plan"). On that day, the Order Confirming Debtor's Third Amended Plan of Reorganization Dated November 24, 1992 ("Plan Confirmation Order") was signed.
More than nine months later, on August 31, 1993, the Debtor filed its Motion for Determination of Tax Liability. The Debtor asked the court to enter an order, pursuant to § 505, to determine the Debtor's liability to the City of Kentwood ("Kentwood") for real property taxes on the Holiday Inn-East for the tax years 1989 through 1993. Motion at 1. In addition, the Debtor sought a stay of proceedings pending before the Michigan Tax Tribunal (the "MTT") involving appeals of tax assessments for the years 1991 through 1993.2 Id. at 2.
On October 13, 1993, the Debtor's motion was converted into an adversary proceeding. See Order Converting Contested Matter (Motion for Determination of Tax Liability Re City of Kentwood) Into Adversary Proceeding. On November 16, 1993, the Debtor subsequently filed its Complaint to Determine Tax Liability (the "Complaint"), which reiterated the substance of the motion and requested a refund of any overpayment of taxes with interest. Kentwood filed its Answer to Debtor's Complaint (the "Answer") on December 14, 1993.
After filing for bankruptcy, the Debtor paid $386,725.47 in real property taxes on the Holiday Inn-East for tax years 1992 and 1993. See Affidavit of Roselyn Butterworth (the "Butterworth Affidavit"), ¶¶ 5-6 at 2-3. Kentwood claims that as of May 1, 1994 the Debtor owed another $643,427.733 in real property taxes on the Holiday Inn-East property. See Butterworth Affidavit, ¶¶ 1-6 at 1-3. The Debtor timely appealed Kentwood's real property tax assessments before the MTT for the years 1991, 1992, and 1993. See Complaint, ¶ 9 at 3; Answer, ¶ 9 at 2. Although it failed to timely appeal the tax assessments for the 1989 and 1990 tax years, the Debtor contests Kentwood's assessments for those years as well. Thus, the Debtor has asked this court, pursuant to § 505, to determine the Debtor's tax liability on the Holiday Inn-East property for the tax years 1989 through 1993. See Complaint.
On May 24, 1994,4 Kentwood filed its Motion for Summary Judgment/To Dismiss/To Abstain (the "Kentwood Summary Judgment/Dismissal Motion"). Kentwood asked the court to dismiss the Debtor's adversary proceeding, pursuant to FED.R.BANKR.P. 7012 or 7056, or, in the alternative, to abstain from determining the Debtor's tax liability for the tax years 1989 through 1993. This court held a hearing on the Kentwood Summary Judgment/Dismissal Motion on June 6, 1994, at which time it took the matter under advisement. Docket # 40.
In its Summary Judgment/Dismissal Motion, Kentwood asks this court to dismiss the Debtor's Complaint, pursuant to either FED.R.BANKR.P. 7012 or 7056. Kentwood did not specify the subsection of FED.R.BANKR.P. 7012 under which it seeks dismissal. The court assumes, based on the content of Kentwood's motion, that Kentwood seeks dismissal under FED.R.BANKR.P. 7012(b)(1): lack of jurisdiction over the subject matter. FED. R.BANKR.P. 7012(c), however, provides as follows:
After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
This court has considered matters outside the pleadings in its decision; thus, Kentwood's request for dismissal under FED. R.BANKR.P. 7012 should be treated as a motion for summary judgment. In addition, Kentwood's Summary Judgment/Dismissal Motion also requested this court to dismiss on the basis of FED.R.BANKR.P. 7056. Therefore, this court now turns to an examination of the standards governing motions for summary judgment.
FED.R.BANKR.P. 7056(c) provides the starting point for analyzing Kentwood's motion for summary judgment.
The motion for summary judgment shall be served at least 10 days before the time fixed for the hearing. The adverse party prior to the day of hearing may serve opposing affidavits. The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
FED.R.BANKR.P. 7056(c). Kentwood filed its Summary Judgment/Dismissal Motion on May 24, 1994. It served that Motion on the Debtor's attorney on May 23, 1994. See Docket # 33 (Proof of Service). The court held a hearing on the Motion on June 6, 1994. Therefore, Kentwood served its Motion in accordance with FED.R.BANKR.P. 7056(c). The parties did not submit depositions or answers to interrogatories to the court for its consideration; thus, the court relies on the pleadings, the one affidavit filed by Kentwood, and the court's records5 in the Debtor's chapter 11 bankruptcy case in rendering its decision on Kentwood's Summary Judgment/Dismissal Motion.
The Sixth Circuit in Atlas Concrete Pipe, Inc. v. Roger J. Au & Son, Inc. (In re Atlas Concrete Pipe, Inc.), 668 F.2d 905 (6th Cir. 1982) provides a succinct statement of the standards governing a court's decision to grant or deny a motion for summary judgment.6
Summary judgment is appropriate only where no genuine issue of material fact remains to be decided and the moving party is entitled to judgment as a matter of law. . . . A court may not resolve disputed questions of fact in a summary judgment decision, . . ., and if a disputed question of fact remains, the district court should deny the motion for summary judgment and proceed to trial.
Id. 908 (citations and footnote omitted). Kentwood's motion for summary judgment only requires the court to determine issues of law, not of fact. Therefore, this court must determine whether Kentwood is entitled to judgment as a matter of law, on the basis of a lack of subject matter jurisdiction, or the preclusive effects of the doctrine of res judicata.7
Jurisdiction generally and bankruptcy jurisdiction particularly are among the most misunderstood and misapplied concepts in the law.8
The threshold question this court must address is whether it has jurisdiction to hear and decide the Debtor's request to determine its tax liability to Kentwood, pursuant to 11 U.S.C. § 505. Unfortunately, the Supreme Court's decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) and Congress's response in the Bankruptcy Amendments and Federal Judgeship Act of 1984 resulted in an often confusing jurisdictional scheme. That confusion is magnified when the courts confront the issue of the bankruptcy court's postconfirmation jurisdiction.
Section 1334 of Title 28 of the United States Code defines subject matter jurisdiction for bankruptcy cases and proceedings.9 Confirmation of the chapter 11 plan does not, and should not, render nugatory the language of 28 U.S.C. § 1334. In addition, nothing in the language of 28 U.S.C. § 1334 even remotely suggests that confirmation of a plan of reorganization in a chapter 11 case alters the basic jurisdictional analysis for bankruptcy cases and proceedings.
So long as a chapter 11 case is "open,"...
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