United Indep. Sch. Dist. v. Vitro Asset Corp. (In re Vitro Asset Corp.)

• Decision Date: 23 September 2015
• Docket Number: No. 3:15–CV–0236–B.,3:15–CV–0236–B.
• Citation: 539 B.R. 108
• Parties: In re VITRO ASSET CORP., et al., Debtors. United Independent School District, Appellant, v. Vitro Asset Corp., and its Affiliated Debtors, Appellees.
• Court: U.S. District Court — Northern District of Texas

539 B.R. 108

In re VITRO ASSET CORP., et al., Debtors.

United Independent School District, Appellant

v.Vitro Asset Corp., and its Affiliated Debtors, Appellees.

No. 3:15–CV–0236–B.

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

Signed Sept. 23, 2015.

J. Alberto Alarcon, Alarcon & Saenz PLLC, Laredo, TX, for Appellant.

Gregory M. Wilkes, Ryan E. Manns, Norton Rose Fulbright U.S. LLP, Dallas, TX, William R. Greendyke, Norton Rose Fulbright U.S. LLP, Houston, TX, for Appellees.

Harlin D. Hale, Dallas, TX, pro se.

MEMORANDUM OPINION & ORDER

JANE J. BOYLE, District Judge.

United Independent School District (UISD) appeals the bankruptcy court's Order Granting Reorganized Debtor's Motion Pursuant to 11 U.S.C. §§ 105 and 524 to Enforce the Order Confirming the First Amended Joint Chapter 11 Plan for Reorganization and its Order Denying the Motion to Alter or Amend Judgment and Motion for Reconsideration. Vitro Asset Corp. (Vitro Asset) and its affiliated debtors (together Vitro Appellees), including subsidiary Vitro Packaging, LLC (Vitro Packaging), respond. Having reviewed the orders, this Court AFFIRMS for the following reasons.¹

I.BACKGROUND

A. The Vitro Asset Bankruptcy

This is a tax collection suit. UISD is a taxing authority and secured creditor. Its tax claims are for ad valorem property taxes, penalties, interest, and collection fees. They are secured by statutory lien and attached to Vitro Packaging's personal property. See Tex. Tax Code Ann. § 32.01. These claims comprise part of a larger Chapter 11 reorganization involving parent company Vitro Asset, which began in 2010 and closed in 2014. R. 840, 1577. The bankruptcy court discharged UISD's claims and statutory lien, enjoined its collection efforts, and denied reconsideration of the judgment. R. 5–10. UISD appeals. R. 1–4.

In 2012, UISD delivered two tax bills to Vitro Packaging totaling $464,709.97 due on January 31, 2013 (the base taxes). Appellant's Br. 5. On April 4th, 2013, Vitro Asset and its affiliated debtors filed a motion seeking authorization to pay certain taxes. R. 431. The next day, UISD filed a proof of claim with supporting documentation for $598,360.56 against Vitro Asset—$464,709.97 in base taxes and $133,650.59 in tax penalties, interest, and collection fees (the disputed fees). R. 426–30 (original proof of claim). After the bankruptcy court authorized payment, Vitro Packaging paid UISD $464,709.97, and has made no other payments. R. 809.

Then, UISD amended its proof of claim and attached supporting documentation. R. 463–69 (amended proof of claim). The record does not clearly explain the purpose of the amendment. In the hearing before the bankruptcy court, UISD stated that it was because it had filed the original proof of claim in the wrong case. R. 1631 (Hearing transcript). Vitro Appellees, in turn, stated that the amendment came as a result of a conversation between counsel identifying issues with the claim amount and which case UISD filed it against. R. 1628. In effect, there is no difference. Either way, the end result is the amended proof of claim.

UISD made five material changes: (1) UISD amended the name of the debtor from Vitro Asset to Vitro Packaging; (2) it amended the amount of the secured claim from $598,360.56 to $464,709.97; (3) it altered the supporting documentation to reflect this change by striking out previously listed penalties, interest, and fees; (4) it attached additional supporting documentation listing unpaid base taxes and previously accrued penalties, interest, and fees; and (5) it added the language, “United Independent School District is an oversecured creditor and therefore, interest, penalties, court costs, expenses and attorney's fees under the Texas Tax Code continue to accrue and are to be added to this claim. 11 USC § 506(b) [sic].” Id. UISD insisted this last amendment “affirmatively seeks those ... post petition arrears.” R. 1632.

B. The Confirmed Plan

Soon after, Vitro Asset and its affiliated debtors filed their First Amended Joint Chapter 11 Plan of Reorganization (the plan), R. 582, which the bankruptcy court confirmed (the confirmed plan). R. 559.² The confirmed plan categorized UISD's post-petition claims as Class 2: allowed secured claims. R. 599–600 (Section 4.2). At issue in this case is section 3.5.

Section 3.5 sets forth requirements and deadlines for recovering Class 2 claims for post-petition interest, reimbursement, and other charges:

Any holder of an Allowed Claim, other than an Unsecured Claim, seeking payment of either postpetition interest or reimbursement of attorney's fees and other costs associated with such claimant's Allowed Claim shall file with the Bankruptcy Court (and serve on the Debtors and the Office of the United States Trustee) a request seeking such relief within 30 day after the Effective Date [of December 19, 2013]. Any such request must include all of the documentation upon which the claimant relies to establish such claimed entitlement. THE INCLUSION OF THE ENTITLEMENT TO THESE TYPES OF CLAIM [sic] IN PROOFS OF CLAIM SHALL NOT BE SUFFICIENT TO ESTABLISH SUCH CLAIMS. The Reorganized Debtors shall have 60 days after the Effective Date to resolve any such request without the need for the Bankruptcy Court's approval and shall file notice with the Bankruptcy Court when the matter is resolved; provided, however, that if the matter has not been resolved within the foregoing 60 day period, it shall resolved by the Bankruptcy Court.

R. 598–99 (emphasis in original). UISD did not object to or appeal the confirmed plan. Additionally, UISD took no action to request or collect any post-petition claims during the thirty days after the Effective Date. On February 21, 2014, the bankruptcy court entered its Final Decree Closing Chapter 11 Cases. R. 1577. On June 5, 2014, UISD resumed collection attempts. R. 658–63.

C. The Instant Case

To address these collection attempts, the bankruptcy court reopened the underlying Chapter 11 bankruptcy. Vitro Asset and its affiliated debtors filed a Motion to Enforce the order confirming the plan, which the bankruptcy court granted, holding: (1) UISD failed to preserve any claim to the disputed fees under section 3.5 of the confirmed plan, and was consequently not entitled to payment of any of the disputed fees; (2) Vitro Packaging's $464,709.97 payment constituted full satisfaction of UISD's allowed claim for the base taxes;³ (3) full satisfaction of the base taxes claim resulted in release, termination, and extinguishment of any associated property liens; and (4) UISD was enjoined from continuing to attempt to collect the disputed fees. R. 693, 6–7. UISD filed a Motion for Reconsideration, which the bankruptcy court denied. R. 8. UISD appeals from both orders. R. 1–4.

II.LEGAL STANDARD

A. Order Granting Motion to Enforce

Final judgments, orders, and decrees of a bankruptcy court may be appealed to a federal district court. 28 U.S.C. § 158(a). Because the district court functions as an appellate court, it applies the same standard of review federal appellate courts use when reviewing district court decisions. Webb v. Reserve Life Ins. Co. (In re Webb), 954 F.2d 1102, 1103–04 (5th Cir.1992). The Court reviews the bankruptcy court's findings of fact for clear error and its questions of law, or mixed questions of law and fact, de novo. McLain v. Newhouse (In re McLain), 516 F.3d 301, 307 (5th Cir.2008) ; Wooley v. Faulkner (In re SI Restructuring, Inc.), 542 F.3d 131, 135 (5th Cir.2008). Further, the Court may affirm on any supported grounds, regardless of whether the bankruptcy court relied on those grounds. See Bickford v. Int'l Speedway Corp., 654 F.2d 1028, 1031 (5th Cir.1981).

B. Denial of Motion to Alter or Amend and Motion for Reconsideration

Denial of a motion to alter or amend or a motion for reconsideration filed pursuant to Rule 59(e) of the Federal Rules of Civil Procedure is generally reviewed for abuse of discretion. See Coliseum Square Ass'n, Inc. v. Jackson, 465 F.3d 215, 247 (5th Cir.2006) (citing Simon v. United States, 891 F.2d 1154, 1159 (5th Cir.1990) ). Unless the bankruptcy court clearly abused its discretion in determining whether movant “established a manifest error of law or fact nor presented newly discovered evidence, the [bankruptcy] court's ruling should not be disturbed.” Id.

III.ANALYSIS

Before reaching the merits, the Court must clarify the issues before it. UISD raises three issues on appeal. First, UISD seeks review of whether, as a taxing authority with an unimpaired security interest, res judicata can bar its collection efforts by claim or lien. Appellant's Br. 2.⁴ Second, UISD argues that section 3.5 does not eliminate its claims or lien. Id. Third, UISD contends that the confirmed plan violates 11 U.S.C. § 502. Id. Because the first two grounds are dispositive of this appeal, the Court does not reach the third issue.

UISD's first two issues address: (1) the interpretation of section 3.5, and (2) the application of section 3.5. The first issue, as UISD frames it, addresses whether the bankruptcy court's interpretation of section 3.5 impermissibly impairs its claims, creating an irreconcilable conflict with other sections of the confirmed plan, the bankruptcy court's confirmation order, and bankruptcy law. Its proposed interpretation of the confirmed plan would be to omit section 3.5 from the plan for purposes of this case. Vitro Appellees correctly reframe the issue as a res judicata question. (Appellees' Br. at 2).

Regardless of whether that provision is inconsistent with the bankruptcy laws or within the authority of the bankruptcy court, it is nonetheless included in the Plan, which was confirmed by the bankruptcy court without objection and was not appealed. [Creditor], in effect, is now seeking to appeal the confirmed Plan and asking us to review it on its merits. Questions of the propriety or legality of the bankruptcy court confirmation order are indeed properly addressable on direct appeal. [Creditor], however,

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