Free Order - District Court of Delaware - Delaware

Case 1:04-cv—01428-G|\/IS Document 18 Filed 09/24/2007 Page 1 of 4
IN THE UNITED STATES COURT
FOR THE DISTRICT OF DELAWARE

In re: ) Chapter 11
ANC RENTAL CORPORATION., et al., ; Adv. Pro. No. 04-51211 (MFW)
Appellant, g Civil Action No. 04-1428 (GMS)
)
v. )
)
TARRANT COUNTY, et al., )
Appellees. g

ORDER
1. On December 10, 2003, ANC Rental Corporation ("ANC" or the "appe1lants") filed a
complaint in the United States Bankruptcy Court for the District of Delaware against Tarrant
County, Tarrant Appraisal District ("TAD"), Tarrant County College District, Tarrant
Hospital District, City of Euless, and Grapevine-Colleyville Independent School District
(collectively, "the defendants"), seeking a detemrination of tax liability pursuant to Section
505 of the Bankruptcy Code. ANC asked the Bankruptcy Court to correct and reduce the
amount oftax assessed against them for the tax years 1999 through 2001, alleging that their
taxes for those years were based on erroneously high valuations of personal property owned
by them as a result of appraisals done by TAD.
2. The defendants filed motions to dismiss the complaint, arguing that the court lacked subject
matter j urisdiction to hear the case because ANC filed protests of their 1999 and 2001 taxes,
but withdrew those protests before any adjudication was made. The defendants argued that
when ANC withdrew their formal protests, they waived their right to protest the tax

Case 1 :04-cv—01428-GIVIS Document 18 Filed 09/24/2007 Page 2 of 4
assessments in the future.
3. The Bankruptcy Court agreed, based on binding precedent in City of Perth Amboy v. Custom
Distribution Services, 224 F.3d 235, 243-44 (3d Cir. 2000), and dismissed ANC’s complaint
pursuant to 15 U.S.C. § 505(a). Specifically, the Bankruptcy Court found that the views
espoused by the Third Circuit in Custom Distribution bar jurisdiction when a debtor does not
"properly request" a refund or protest the valuation of its property in accordance with state
law. (D.l. 2, Memorandum Opinion at 4-5.) ANC filed this appeal on November 8, 2004.
4. The court has jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(a) (2004). In
reviewing a case on appeal, the Bankruptcy Court’s factual determinations will not be set
aside unless they are clearly erroneous. See Mellon Bank, NA. v. Metro Comm., Inc., 945
F.2d 635, 641 (3d Cir. 1991), cert. denied, 503 U.S. 937, (1992). Conversely, a Bankruptcy
Court’s conclusions of law are subject to plenary review. See id. Mixed questions of law
and fact are subject to a "mixed standard of review." See id. at 641-42. Under this "mixed
standard of review," the appellate court accepts findings of "historical or narrative facts
unless clearly erroneous, but exercise[s] plenary review of the trial court’s choice and
interpretation of legal precepts and its application of those precepts to historical facts." Id.
5. Because the Bankruptcy Court made conclusions of law with respect to its jurisdiction, the
court reviews its decision de novo. After having reviewed the decision and relevant law, the
court finds that the Bankruptcy Court properly dismissed ANC’s complaint.
6. ANC argues that the Bankruptcy Court’s dismissal was improper because: 1) the Bankruptcy
Court improperly read a ‘properly protested’ requirement into the language of Section 505(a)
ofthe Bankruptcy Code (See D.l. 13 at 3.); and 2) the Bankruptcy Court relied on the Third
2

Case 1 :04-cv—01428-GIVIS Document 18 Filed 09/24/2007 Page 3 of 4
Circuit’s decision in Custom Distribution, a decision that ANC argues is both fatally flawed
precedent and inapposite to the case at bar. (See D.I. 13 at 14-16; D.l. 17 at 5-6.) ANC’s
criticisms of Custom Distribution notwithstanding, this court is, of course, bound by the
decisions of the Third Circuit and, thus, must follow the Custom Distribution decision.
7. ANC attempts to distinguish their tax dispute from the dispute in Custom Distribution on the
grounds that Custom Distribution’s holding does not apply to disputes over unpaid taxes,
such as the ANC’s 2001 taxes in this case. (D.l. 13 at 14-16.) While ANC correctly asserts
that the Custom Distribution holding distinguishes paid and unpaid taxes in some respects,
it fails to recognize that the basic reasoning that underlies the Third Circuit’s decision applies
to both paid and unpaid taxes. Custom Distribution requires parties who object to tax
detemrinations made by govermnent appraisers to contest the tax determinations in
accordance with state law. 224 F.3d at 243-44. While the debtors in Custom Distribution
had already paid their taxes for the years in question, the principle articulated by the Third
Circuit is no less applicable in cases where the taxes have not yet been paid. In either case,
the dispute centers on the valuation ofthe property in question and the resultant tax owed on
that property. The value of the property and the corresponding tax is the same regardless of
whether that tax was actually paid. Consequently, Custom Distribution requires debtors
seeking a redetermination of their taxes to follow relevant state statutes governing the
determination of tax disputes, regardless of whether the full amount ofthe disputed taxes had
been paid.
3

Case 1 :04-cv—01428-GIVIS Document 18 Filed 09/24/2007 Page 4 of 4
8. In the present case, ANC admits that it timely filed and then formally withdrew a protest of
its taxes pursuant to Texas law. (D.I. 13 at 18.) As part of the withdrawal of its protest,
ANC explicitly waived any right to further protest these taxes. (D.I. 2, Exhibit 5A.) Thus,
ANC’s own actions in failing to pursue its protest necessarily leads to the conclusion that
ANC did not properly request a tax determination under Texas law, as required by Custom
Distribution. See Custom Distribution, 224 F .3d at 241-42. The Bankruptcy Court,
therefore, was correct in concluding that it lacked the jurisdiction to redetermine the amount
of tax owed.
Therefore, it is hereby ordered that:
1. The October 8, 2004 Order of the Bankruptcy Court is AFFIRMED.
Dated: September Ld, 2007 $4 Q $ 2 — jg g Q El
CHIE ,UNITE STATES DI TRICT JUDGE
F I L E D
EE'? 2 4 Ecijilt
5 us. onsmicr coum
onsmicr OF DELAWARE
4