513 B.R. 587
Bankr.D. Colo.2014Background
- Debtors co-own a Mesa County, Colorado shopping center; Creditor (West Loan) holds a first deed of trust for ~$5.1M; Debtors value property at $4.5M.
- Other creditors: Mesa County secured tax claim (2013 real property taxes) and four unsecured claims (~$22,100).
- Debtors proposed a 100% repayment Chapter 11 plan funded by operations and sale/refinance within 7 years; plan creates four classes including a separate class for Mesa County’s secured tax claim.
- Plan treats Mesa County by retaining its lien and paying its secured tax claim in equal monthly installments with statutory interest over one year; Creditor’s secured claim amortized 30 years with 7‑year balloon.
- Creditor objected to the disclosure statement, arguing plan is facially unconfirmable because Mesa County’s § 1129(a)(9)(D) secured tax claim cannot be separately classified or deemed impaired to satisfy § 1129(a)(10).
- Court conducted disclosure‑stage adjudication because the alleged defect (inability to obtain an accepting impaired class) was legal, undisputed on the facts, and would render the plan patently unconfirmable.
Issues
| Issue | Plaintiff's Argument (West Loan) | Defendant's Argument (Debtors) | Held |
|---|---|---|---|
| Whether Mesa County’s secured tax claim falls under § 1129(a)(9)(D) (i.e., is a tax incurred prepetition with last-payable date within 1‑year lookback) | Claim should not be governed by § 1129(a)(9)(D) because last-payable dates fall after petition so the claim is not a § 507(a)(8) equivalent | Mesa County’s last-payable dates fall within the one‑year lookback even if after petition; § 507/§502(i) treat such taxes as prepetition priority claims | Held: §1129(a)(9)(D) applies; Mesa County’s claim qualifies as the secured-tax subset equivalent to §507(a)(8) priority claims. |
| Whether a §1129(a)(9)(D) secured tax claim may be separately classified under §1123(a)(1) | §1129(a)(9)(D) tax claims should not be separately classified (they receive statutory treatment like §507(a)(8) claims) | §1123(a)(1) expressly lists only §507(a)(2),(3),(8) as unclassifiable and does not mention §1129(a)(9)(D) claims, so classification is required | Held: Despite textual tension, §1123(a)(1) technically requires classification, but practical/statutory considerations affect voting. |
| Whether a separately classified §1129(a)(9)(D) claim is "impaired" for voting under §1124/§1129(a)(10) | The tax claimant’s statutory treatment means it is not impaired; its vote cannot be counted as the required impaired, accepting class | The plan alters the creditor’s prepetition rights (deferral, bar to exercising state‑law remedies during payments), which is impairment; but source of limitation may be the statute rather than the plan | Held: The plan‑specified §1129(a)(9)(D) treatment is statutory, not plan, impairment — Mesa County is not an impaired class entitled to vote; its vote cannot satisfy §1129(a)(10). |
| Whether plan is facially confirmable given Creditor controls rejecting impaired classes | If Mesa County cannot be counted as an impaired, accepting class and Creditor will reject, plan cannot satisfy §1129(a)(10) and is unconfirmable | Debtors argued alternative factual readings or that classification/voting could be resolved later | Held: Plan is facially unconfirmable; disclosure statement approval denied as plan cannot meet §1129(a)(10) because no impaired accepting class exists. |
Key Cases Cited
- In re PPI Enters. (U.S.), Inc., 324 F.3d 197 (3d Cir. 2003) (statutory limits on claims can be statutory, not plan, impairment)
- Michigan v. Right (In re Right), 670 F.3d 699 (6th Cir. 2012) (priority‑tax timing language includes postpetition last‑due dates within the lookback)
- Marion Cnty. Treasurer v. Blue Lustre Prods., Inc. (In re Blue Lustre Prods., Inc.), 214 B.R. 188 (S.D. Ind. 1997) (taxes incurred prepetition but payable postpetition are treated as prepetition under §502(i))
- In re New England Carpet Co., 26 B.R. 934 (Bankr. D. Vt. 1983) (interpretation of "last payable" language favoring lookback regardless of petition date)
- In re Wang Zi Cashmere Prods., Inc., 202 B.R. 228 (Bankr. D. Md. 1996) (same construction of §507(a)(8) timing language)
- In re American Solar King Corp., 90 B.R. 808 (Bankr. W.D. Tex. 1988) (impairment analysis focuses on whether plan, not statute, alters creditor rights)