UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 01-20456
In The Matter of: UNIVERSAL SEISMIC ASSOCIATES, INC.,
Debtor.
---------------------------------------
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:
1
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
2
$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
3
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
4
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.
5
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.
6