The Benaroya Company LLC v. Lewis County, 25-04023

Background

Sovran LLC filed chapter 11 in 2011; its primary asset was ~320 acres in Winlock, WA. Plan transferred the property to Benaroya LLC (Step One) and left Benaroya the option to develop or sell remaining acreage (Step Two).
The confirmed Plan and Confirmation Order include § 8.11, expressly stating transfers made under or in connection with the Plan (including subsequent transfers by Benaroya) are exempt from document-recording, excise, and real-estate transfer taxes under 11 U.S.C. § 1146(a).
The bankruptcy case was administratively closed in 2014 after entry of a final decree; Benaroya retained the Property and later developed/sold ~72 acres (paid excise tax on that transaction) and now lists the remaining ~248 acres for sale.
Benaroya filed this adversary proceeding seeking a declaratory judgment that § 1146(a) exempts its marketing and future sales of the remaining Property and sought an injunction preventing Lewis County from demanding excise tax on conveyances.
The State of Washington and WA Dept. of Revenue intervened and counterclaimed, arguing § 1146(a) does not exempt the post‑confirmation, two‑step sale transactions by a non‑debtor and raising notice/coverage issues; Lewis County took no position. The court treated the matter as ripe and core/related to the bankruptcy.

Issues

Issue	Benaroya's Argument	State Defendants' Argument	Held
Whether § 1146(a) exemption covers Benaroya's planned post‑confirmation sales (two‑step transfers)	§ 1146(a) exempts transfers "under a plan"; the Plan authorizes Benaroya to sell and §8.11 expressly exempts subsequent transfers — so sales are "under the Plan"	§ 1146(a) should not cover optional, post‑confirmation, two‑step sales by a non‑debtor; exemption should be limited to transfers required by or by the debtor under the plan and to debtor/estate actors	Held for Benaroya: "under a plan" means transfers authorized by or pursuant to a confirmed plan; two‑step transfers and transfers by non‑debtors fall within §1146(a) when authorized by the plan
Whether § 1146(a) requires the transfer to be by the debtor or estate (i.e., excludes non‑debtor actors)	Statute is silent as to actor; passive wording focuses on characterization of transfer, not on who performs it; Plan expressly authorizes subsequent sales	Statute should be read to apply only to debtor/estate or trustee transfers; non‑debtor transactions should be excluded	Held for Benaroya: statute does not require the transferor be the debtor; actor is immaterial if transfer is "under" the confirmed plan
Whether § 1146(a) requires the transfer to be necessary/essential to consummation of the plan	Plain text requires authorization by the plan; optional but authorized sales qualify even if not strictly required for consummation	Exemption should be cabined to transfers necessary to consummate the plan; optional sales are not "under a plan"	Held for Benaroya: court will not read a "necessary to consummation" requirement into §1146(a); authorization by the confirmed plan suffices
Whether Benaroya is entitled to injunctive relief forcing Lewis County to accept deeds/affidavits without excise tax	Injunctive relief is warranted because Lewis County refused to assure Benaroya it will honor §1146(a) on future sales	County (limited position) and State argue injunction unnecessary or inappropriate; declaratory relief is the proper, sufficient remedy	Injunctive relief denied: declaratory judgment granted on §1146(a) issue; injunction unnecessary and not justified on summary judgment

Key Cases Cited

Fla. Dep't of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33 (2008) (§1146(a) applies only to transfers made pursuant to a chapter 11 plan that has been confirmed)
Bartenwerfer v. Buckley, 598 U.S. 69 (2023) (statutory passive‑voice drafting can render the actor immaterial; focus on event characterization)
Jacoby–Bender, Inc. v. H. L. Smith, 758 F.2d 840 (2d Cir. 1985) (plan that "deals with" a transfer may imply authorization; transfers necessary to consummation are dealt with by a plan)
NVR, L.P. v. Home Buyers Warranty Corp., 189 F.3d 442 (4th Cir. 1999) (interpreting “under” to mean with authorization of or pursuant to a plan)
In re Hechinger Inv. Co. of Del., Inc., 335 F.3d 243 (3d Cir. 2003) (§1146 did not apply to preconfirmation transfers)
In re T.H. Orlando Ltd., 391 F.3d 1287 (11th Cir. 2004) (interpreting §1146 to cover transfers authorized by a confirmed plan)