The opinion of the court was delivered by: Judge James M. Munley United States District Court
Before the court is appellant's appeal (Doc. 1) of the decision of Bankruptcy Judge John Thomas's decision denying Appellant Monroe County Tax Claim Bureau's (MCTCB) objections to the debtor's petition to sell certain property that was part of the bankruptcy estate. Having been fully briefed and argued, the matter is ripe for disposition.
Judge John J. Thomas's opinion addressed tax claims raised on property owned by Susan H.D. Keuler, the debtor in the underlying bankruptcy case. Keuler had filed a Chapter 13 bankruptcy plan on January 10, 2006. On January 31, 2006, she sought to sell the property here in question, Lot 1605, Blue Ridge Dr., The Hamlet, Price Township, Monroe County, PA, free and clear of liens. The MCTCB filed an objection to this motion to sell the property on February 13, 2006. The parties then agreed to allow the sale of the property and hold a portion of the proceeds in escrow until the tax claim could be resolved. They filed briefs on the issues raised by the sale with the Bankruptcy Judge, who issued his decision on May 14, 2008.
The issue in this case is under what conditions the automatic stay in bankruptcy cases applies to protect a property owner from local property taxes. In most instances, the Bankruptcy Code provides an automatic stay, preventing "any act to create, perfect, or enforce any lien against the property of [a bankruptcy] estate." 11 U.S.C. § 362(a)(4). Thus, without an exception to the automatic stay provision or an act from the court to lift the stay, Appellant MCTCB's tax lien on the property would not be secured.
At issue here, however, is the effect of the Bankruptcy Reform Act of 1994, 11 U.S.C. § 362(b)(18). Under the statute, the automatic stay provision "does not operate as a stay . . . of the creation or perfection of a statutory lien for ad valorem property tax imposed by . . . a political subdivision of a State, if such tax comes due after the filing of the petition." Thus, any property tax imposed on the debtor's estate after the passage of this act would be a valid lien. The history of bankruptcies related to this property compel the court to consider the effect of the Bankruptcy Reform Act on bankruptcy petitions filed before passage of the act.
The property here in question has a long history of bankruptcies related to it.*fn1
The property was included in a series of bankruptcy filings since 1992, all of which appellant contends were an attempt to avoid a tax sale. On July 24, 1992, then-owner of the property Jacob Keuler filed for Chapter 11 bankruptcy protection in the United States District Court for the Middle District of Pennsylvania. That bankruptcy terminated on June 4, 1997. Astrid Keuler, another purported owner of the property, filed for Chapter 7 bankruptcy protection on August 28, 1995. That bankruptcy also terminated on June 4, 1997, after being consolidated with Jacob Keuler's filing. Jacob Keuler filed another bankruptcy petition pursuant to Chapter 11 on October 7, 1997. That case was terminated on January 28, 2002. The debtor in this case apparently inherited the property. This is her second bankruptcy filing. The first, filed in September 2004 in the Eastern District of Pennsylvania, was dismissed for failing to file required documents. Debtor filed the instant action on September 14, 2005.
The Bankruptcy Judge explored the status of the liens on the property. He found that the parties agreed that any liens assessed before the filing of the original bankruptcy on July 24, 1992 were secured. The court agreed with the appellant that the Bankruptcy Reform Act, enacted October 22, 1994, exempted property taxes from the automatic stay. At the same time, the bankruptcy judge found that the Act applied only to cases filed after October 22, 1994. Thus, the MCTCB's liens are secured with respect to bankruptcy cases filed after the amendment, as well as those which accrued after the initial filing was terminated in 1997. The court found, however, that the taxes which accrued during the pendency of the initial bankruptcy were unsecured. The court rejected appellant's argument that any claims which accrued during the bankruptcy would attach when the bankruptcy terminated. Citing In re Myers, 491 F.3d 120, 127 (3d Cir. 2007), the court concluded that taxes assessed in violation of the automatic stay were void, not voidable, meaning that the stay made them impossible to assess. The court thus concluded that taxes arising during the first Jacob Keuler bankruptcy "are, at best, unsecured administrative claims against Jacob Keuler." (Bankruptcy Court Opinion (Doc. 2-38) (hereinafter "Opinion") at 4). Other taxes (those which accrued before the 1992 filing and after the termination of the original case in 1997), however, were secured.
The MCTCB appealed the ruling to this court. The parties filed briefs in support of their position, bringing the case to its present posture.
This court reviews the bankruptcy court's conclusions of law de novo. In re O'Brien Environmental Energy, Inc., 188 F.3d 116, 122 (3d Cir. 1999). The bankruptcy court's findings of fact will only be set aside if clearly erroneous. Bank. Rule 8013 ("On appeal the district court . . . may affirm, modify, or reverse a bankruptcy judge's judgment order, or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall ...