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Universal Seismic Associates, Inc. v. Harris County (In Re Universal Seismic Associates, Inc.)

Court: Court of Appeals for the Fifth Circuit
Date filed: 2002-04-08
Citations: 288 F.3d 205
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18 Citing Cases

                 UNITED STATES COURT OF APPEALS
                      For the Fifth Circuit



                           No. 01-20456



     In The Matter of:   UNIVERSAL SEISMIC ASSOCIATES, INC.,

                                                           Debtor.


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              UNIVERSAL SEISMIC ASSOCIATION, INC.;
              UNIVERSAL SEISMIC ACQUISITION, INC.,

                                                       Appellants,


                              VERSUS


                 HARRIS COUNTY; CITY OF HOUSTON;
                KATY INDEPENDENT SCHOOL DISTRICT,

                                                         Appellees.




          Appeal from the United States District Court
               For the Southern District of Texas
                          April 8, 2002


Before SMITH and DeMOSS, Circuit Judges, and DUPLANTIER,1 District
Judge.

DeMOSS, Circuit Judge:




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          District Judge for the Eastern District of Louisiana,
sitting by designation.
      Universal    Seismic    Associates,      Inc.    and   its      subsidiaries

(collectively referred to as “Debtors”) were providers of three-

dimensional seismic acquisition and processing services to the

energy industry.         On September 7, 1999, Debtors filed voluntary

petitions under Chapter 11 of the Bankruptcy Code.                        Debtors’

Chapter 11 plan was confirmed by an order entered May 3, 2000.                 The

terms of the Debtors’ confirmed plan of reorganization specifically

provided for the retention of jurisdiction by the Bankruptcy Court

to   “determine    the     allowance    or    disallowance       of   Claims   and

Interests,” including the claims filed by Harris County/City of

Houston   and     Katy    Independent       School    District     (the    “Taxing

Authorities”).     On October 12, 1999, the Taxing Authorities filed

proofs of claim in the amounts of $33,731.06 (Harris County) and

$47,050.11 (Katy Independent School District).               Each of the proofs

of claim filed by the Taxing Authorities was for ad valorem

business personal property taxes for the tax years 1998 and 1999.

The Taxing Authorities alleged a security interest in the business

personal property of the Debtors to secure payment of their claims.

      The Debtors had equipment that was purchased or leased from

third parties in connection with their business. Soon after filing

for bankruptcy, the Debtors returned almost all personal property

to secured creditors/lessors pursuant to agreements and orders of

the Bankruptcy Court.         The Debtors retained only some vehicles,

which were sold for $54,500.00, and office furnishings valued at



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$3,700.00, equaling a combined value of $58,200.00.     The total of

the claims filed by the Taxing Authority, $81,054.73, was far in

excess of the total value of the remaining personal property, but

the Taxing Authorities contended this property remained encumbered

by their tax lien, up to the full value of the remaining property.

The Bankruptcy Court agreed and the District Court affirmed.       For

the reasons set forth below we also affirm.

     This Court applies the same standard of review as the district

court does reviewing the Bankruptcy Court’s factual findings for

clear error and its legal conclusions and mixed questions of fact

and law under a de novo standard.     In re Mercer, 246 F.3d 391, 402

(5th Cir. 2001).     Section 32.01(b) of the Texas Tax Code states

that:

          (a) 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 the 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.

          (b) A tax lien on inventory, furniture, equipment,
          or other personal property is a lien in solido and
          attaches to all inventory, furniture, equipment,
          and other personal property that the property owner
          owns on January 1 of the year the lien attaches or
          that the property owner subsequently acquires.

TEX. TAX CODE ANN. §§ 32.01(a) & (b)(2001).      The term in solido

literally means “as a whole” and creates an obligation of joint and

several liability.    BLACK’S LAW DICTIONARY 799 (7th ed. 1999).   The

Taxing Authorities relied on this section to establish their lien

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on all of the Debtor’s property.       The Debtors appear to recognize

that this lien existed, but claim that 11 U.S.C. § 502(b)(3) acts

to remove the underlying claims for taxes on property that they no

longer have an interest in, i.e. the property that was sold just

prior to and subsequent to the bankruptcy filing.

     Section 502(b) states that the court shall allow claims,

except to the extent that, “if such claim is for a tax assessed

against property of the estate, such claim exceeds the value of the

interest of the estate in such property.”      11 U.S.C. § 502(b)(3).

The interpretation of § 502(b)(3) is an issue of first impression

in this Circuit, and there is little guidance on the statute’s

interpretation in other circuits or at other levels of the court

system.   Therefore, “[a]s in any case of statutory interpretation,

we look to the plain language of the statute, reading it as a whole

and mindful of the linguistic choices made by Congress.”       Whatley

v. Resolution Trust Corp., 32 F.3d 905, 909 (5th Cir. 1994); Kelly

v. Boeing Petroleum Servs., Inc., 61 F.3d. 350, 362 (5th Cir. 1995)

(stating that the starting point of interpreting a statute is with

the plain language and if the language is plain and unambiguous, it

must be given effect).    This Circuit has also noted that when a

plain reading of a statute precludes one party’s interpretation,

“no legislative history – be it ever so favorable – can redeem it.”

Nalle v. Comm’r, 997 F.2d 1134, 1140 (5th Cir. 1993).      In areas of

law where state and federal regulations are coincident, this Court


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is enjoined from seeking out conflicts between the two where none

clearly exists. Exxon Corp. v. Governor of Maryland, 437 U.S. 117,

130 (1978) (citing Huron Cement Co. v. Detroit, 362 U.S. 440, 446

(1960)).    As to the applicability of state property taxes in such

proceedings, the Supreme Court has stated:

           Property interests are created and defined by state
           law.    Unless some federal interest requires a
           different result, there is no reason why such
           interests should be analyzed differently simply
           because an interested party is involved in a
           bankruptcy proceeding.      Uniform treatment of
           property interests by both state and federal courts
           within a State serves to reduce uncertainty, to
           discourage forum shopping, and to prevent a party
           from receiving “a windfall merely by reason of the
           happenstance of bankruptcy.”       Lewis v. Manu-
           facturers National Bank, 364 U.S. 603, 609 (1961).
           The justifications for application of state law are
           not limited to ownership interests;     they apply
           with equal force to security interests, including
           the interest of a mortgagee in rents earned by
           mortgaged property.

Butner v. United States, 440 U.S. 48, 54-55 (1979) (internal

footnote omitted).   The Court also noted that while it is true that

the Constitution grants Congress the power to enact Bankruptcy laws

that would suspend conflicting state laws, those laws are only

suspended to the extent that they actually conflict with the

Bankruptcy Act.   Id. at 54, n. 9.

     Debtors ask that we read § 502(b)(3) to mean that once a party

no longer has an interest in property, the underlying tax on that

property that created the lien must necessarily be denied, and that

this reading of § 502(b)(3) supersedes the Texas Property Tax Code.


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Such a reading goes against the plain language of the statute.    We

hold that a more logical reading of § 502(b)(3) is that a claim for

taxes on property can not exceed the value of the property that is

remaining in the bankruptcy estate.   Under section 32.01(b) of the

Texas Tax Code, a lien on all of the taxed property was created as

of January 1, 1999.   The Taxing Authorities were entitled to this

amount but, under § 502(b)(3), they could not claim more than the

value of the interest the Debtors’ had in the estate.   We hold that

the “value of the interest of the estate” refers to the gross value

of the property that entered into the bankruptcy estate.      In re

Milit, Inc., 231 B.R. 604, 607-08 (Bankr. W.D.Tex. 1999).        The

Bankruptcy Court found the gross value of the property entering the

bankruptcy estate to be $58,200.00 and we do not find this to be in

error.   We therefore affirm the Bankruptcy and District Courts’

decisions.

          AFFIRMED.




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