AMC Mtg Co Inc v. TN Dept of Revenue

• Court: Court of Appeals for the Sixth Circuit
• Decided: May 26, 2000
• Docket: 99-5498
• Status: Published

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 ELECTRONIC CITATION: 2000 FED App. 0175P (6th Cir.) File Name: 00a0175p.06

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT _________________

;  In re: AMC MORTGAGE  COMPANY, INC.,   No. 99-5498 Debtor.  ________________________ >    AMC MORTGAGE COMPANY,

Plaintiff-Appellant,  INC.,   v.     TENNESSEE DEPARTMENT OF

Defendant-Appellee.  REVENUE,   1 Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 97-01037—Thomas A. Higgins, District Judge. Argued: April 25, 2000 Decided and Filed: May 26, 2000 Before: MARTIN, Chief Judge; MERRITT and SILER, Circuit Judges.

1 2 In re AMC Mortgage Co. No. 99-5498

_________________ COUNSEL ARGUED: Harry Willis Miller III, MILLER & ASSOCIATES, Nashville, Tennessee, for Appellant. Sally Ramsey, OFFICE OF THE ATTORNEY GENERAL, Nashville, Tennessee, for Appellee. ON BRIEF: Harry Willis Miller III, MILLER & ASSOCIATES, Nashville, Tennessee, for Appellant. Sally Ramsey, Kathleen A. Ayres, OFFICE OF THE ATTORNEY GENERAL, Nashville, Tennessee, for Appellee. _________________ OPINION _________________ BOYCE F. MARTIN, JR., Chief Judge. AMC Mortgage Company, Inc. appeals the decision of the district court affirming the dismissal of its Chapter 11 bankruptcy petition for failure to make payments due under the Chapter 11 plan. For the reasons stated below, we AFFIRM. I. On March 25, 1994, AMC filed a Chapter 11 petition in the United States Bankruptcy Court for the Middle District of Tennessee. Prior to this, in February 1992, AMC filed a taxpayer lawsuit in Tennessee state court against the Tennessee Department of Revenue challenging the tax assessed against AMC from 1987 to 1990. Accordingly, on its Chapter 11 Disclosure Statement, AMC listed the state’s claim as “disputed” and included its claim against the state as an asset. After filing its Chapter 11 petition, AMC removed the state court tax action and filed motions in bankruptcy court to determine its 1993 tax liability and whether it was entitled to a refund for taxes paid from 1982 through 1986. The bankruptcy court heard argument on these motions on July 26, 6 In re AMC Mortgage Co. No. 99-5498 No. 99-5498 In re AMC Mortgage Co. 3

special rules governing actions against the State . . . [and] 1994. The court abstained under 28 U.S.C. § 1334(c)(1) and suits against the State can be maintained only as remanded the case to the Davidson County, Tennessee, authorized by statutes; . . . statutes permitting suits Chancery Court. Thereafter, on October 17, 1994, the parties against the State must be strictly construed; . . . and entered into an agreed order that: general procedural statutes do not apply against the State unless the State is specifically named therein. [a]ll issues raised by AMC in its Motion for Determination of Tax Refund and Motion for T.C.A. § 28-1-105 does not specifically name the state. Determination of Tax Liability can presently be litigated Construing the language of the savings statute strictly, it in Tennessee state court in accordance with the cannot be applied against the state. See id. procedures set forth in T.C.A. Section 67-1-1801 et seq., the Tennessee Taxpayers Remedies Act, as those Under T.C.A. § 67-1-1801(b), AMC had ninety days from procedures may be modified by the United States the date the notice of assessment was mailed to file suit. Its Bankruptcy Code and specifically 11 U.S.C. § 108. initial suit may have been timely, but once AMC took a non-suit in the case, the ninety-day limit had passed, AMC AMC’s bankruptcy plan was confirmed on September 12, was barred from reinstating the dismissed action, and the 1995. In the plan, the litigation involving the Tennessee assessment became final. Thus, the litigation was “resolved” Department of Revenue, referred to as “TDR,” was addressed within the meaning of AMC’s confirmed Chapter 11 plan and as follows: AMC should have begun making payments to the state. Class 2: The only member of this class is TDR. The The record is clear that no payments were made before the claim of TDR is currently being disputed by the Debtor state filed its motion to dismiss the Chapter 11 case. A failure in litigation pending in Chancery Court . . . . The to make a payment required under the plan is a material payment to this class shall be reserved and/or suspended default and is cause for dismissal. See In re H.R.P. Auto until the resolution of said litigation. At that time, if Center, Inc., 130 B. R. 247, 256 (Bankr. N.D. Ohio 1991). TDR is successful, its allowed claim shall be paid, The bankruptcy court’s decision to dismiss the case for cause pursuant to 11 U.S.C. § 1129(a)(9)(C), over seventy-two under 11 U.S.C. § 1112(b)(8) was proper. (72) months at a rate of nine per cent (9%) per annum. Following AMC’s voluntary dismissal of its state tax On April 25, 1996, AMC filed a motion to amend its claims, adjudication of those claims became final and AMC complaint in the state court action, adding challenges to the should have begun making payments as required by the department’s assessments for 1982 to 1985, 1987 to 1991, confirmed plan. Failure to make those payments is a material and 1991 to 1995. The state objected to this motion. On July default and the bankruptcy court did not abuse its discretion 9, 1996, the Chancery Court allowed AMC’s challenges to the in dismissing the case. The decision of the bankruptcy court 1993 and 1995 assessments, but disallowed the others as dismissing AMC’s Chapter 11 case is AFFIRMED. either time-barred or unsupported by state law. The order provided that AMC could file an amended complaint. AMC did not file an amended complaint. Instead, on February 10, 1997, AMC filed a voluntary non-suit and the case against the state was dismissed. 4 In re AMC Mortgage Co. No. 99-5498 No. 99-5498 In re AMC Mortgage Co. 5

Four months later, on June 4, 1997, the department filed a AMC argues that a voluntary non-suit under Rule 41.01 of motion to dismiss the Chapter 11 case under 11 U.S.C. the Tennessee Rules of Civil Procedure is not a final § 1112(b)(8), arguing that the state litigation was over and judgment. See Merchants and Manufacturer’s Transfer Co. that AMC had failed to begin making the payments due under v. Johnson, 403 S.W.2d 106 (Tenn. App. 1996). the confirmed bankruptcy plan. AMC objected to the motion Furthermore, AMC argues that under T.C.A. § 28-1-105 it has to dismiss and again asked the bankruptcy court to decide the one year after its voluntary dismissal or non-suit to refile the issues that were voluntarily dismissed in the Tennessee state action. Thus, AMC argues that it did not fail to comply with court proceeding, and to assume jurisdiction over the tax the terms of the confirmed plan because it had until February matters. The bankruptcy court held that AMC had voluntarily 10, 1998 to reinstate its case. ended its lawsuit when it chose not to appeal the Chancery Court decision. Accordingly, the court granted the Although AMC is correct that Rule 41.01 provides for a department’s motion to dismiss the Chapter 11 case. AMC voluntary non-suit, and that such a non-suit is not a final appealed and the district court, adopting the recommendation judgment, AMC does not have a year to reinstate its action. of the magistrate, affirmed the bankruptcy court’s decision. T.C.A. § 28-1-105 is the general saving statute, providing that a plaintiff, after a voluntary dismissal or non-suit, has one II. year to refile the dismissed action. However, another state statute specifically limits the time to file a suit challenging a This court reviews a bankruptcy court’s decision directly, tax assessment to ninety days. See T.C.A. § 67-1-1801(b) not the district court’s review of the bankruptcy decision. See (“A suit challenging the assessment of a tax . . . must be: (1) Trident Assocs. Ltd. Partnership v. Metropolitan Life Ins. Filed within ninety (90) days from the date of mailing of the Co., 52 F.3d 127, 130 (6th Cir. 1995). The bankruptcy notice of assessment to the taxpayer by the commissioner”). court’s findings of fact are reviewed for clear error, while its The Tennessee Supreme Court has held that a general statute conclusions of law are reviewed de novo. See Trident does not apply to the state unless the state is specifically Assocs., 52 F.3d at 130; Laguna Assocs. Ltd. Partnership v. named in the statute. See Automobile Sales Co. v. Johnson, Aetna Cas. and Sur. Co., 30 F.3d 734, 737 (6th Cir. 1994). 122 S.W.2d 453, 454-55 (Tenn. 1938). In that case, the plaintiff sued to recover an allegedly illegal tax, voluntarily It is settled law in this circuit that a bankruptcy court may dismissed the suit, and then sought to refile the case under the dismiss a case under Chapter 11 for cause. See 11 U.S.C. savings statute. See id. The court held that general statutes § 1112(b); Trident Assocs., 52 F.3d at 130. The bankruptcy do not apply to the state “unless they expressly so provide.” court has broad discretion to dismiss a Chapter 11 case under Id. at 458. The court went on to say that where the statute that 11 U.S.C. § 1112(b). See Matter of Woodbrook Associates, creates the right of action expressly limits the time in which 19 F.3d 312, 316 (7th Cir. 1994); In re Lumber Exch. Bldg. a suit to enforce the action may be brought, “time is of the Ltd. Partnership, 968 F.2d 647, 648 (8th Cir. 1992); In re essence of the right and the limitation of the remedy is a Gonic Realty Trust, 909 F.2d 624, 626-27 (1st Cir. 1990); In limitation of the right.” Id. At the heart of this matter is the re Koerner, 800 F.2d 1358, 1368 (5th Cir. 1986). notion that the state, as sovereign, may only be sued with its Accordingly, the decision to dismiss the case will be upheld permission. See Alden v. Maine, 119 S.Ct. 2240, 2246 unless it was an abuse of discretion, defined as “a definite and (1999). The Tennessee Supreme Court held in Cronin v. clear conviction that the trial court committed a clear error of Howe, 906 S.W.2d 910, 914 (1995), that because there are judgment.” Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th Cir. 1996).