The Benaroya Company LLC v. Lewis CountyThe Benaroya Company LLC v. Lewis County
MEMORANDUM DECISION ON MOTION FOR SUMMARY JUDGMENT
I. PROCEDURAL HISTORY
On March 18, 2025, Benaroya filed this adversary proceeding. Pl.‘s Compl., ECF No. 1. In its complaint, Benaroya seeks an order declaring the respective rights and duties of Benaroya and Lewis County, requiring Lewis County to accept a deed of conveyance to a buyer from Benaroya on a sale, accept Benaroya‘s Property2 real-estate tax affidavit that excludes excise tax, and accept Benaroya‘s Property conveyance and affidavit without payment of the excise tax to Lewis County. Pl.‘s Compl. ¶¶ 6.1-6.2, ECF No. 1. On June 3, 2025, Lewis County filed its answer to the complaint. Def. Lewis Cnty.‘s Answer, ECF No. 11. In its answer, Lewis County asserted that “so as to enable the Court to accord complete relief and avoid the waste of judicial resources and duplicative actions pertaining to common questions of facts or law” that the State of Washington Department of Revenue should be joined as a party in accordance with
On June 12, 2025, Benaroya filed the Motion supported by the Declaration of Marc Nemirow. Pl.‘s Mot. Summ. J., ECF No. 14; Nemirow Decl., ECF No. 15. Benaroya
On July 3, 2025, the State Defendants filed a motion to intervene in this proceeding as intervenor defendants, along with a proposed answer to Benaroya‘s complaint and counterclaim, two supporting declarations, and a notice of consent to entry of final orders or judgment by the bankruptcy court. Intervenor Defs.’ Mot. Intervene, ECF No. 20. On July 10, 2025, the State Defendants filed a stipulation and agreed order, signed by counsel for Benaroya and Lewis County, granting the motion to intervene. Stipulation Grant‘g Mot. Intervene, ECF No. 24. On July 24, 2025, the State Defendants filed their answer to Benaroya‘s complaint and counterclaim. Intervenor Defs.’ Answer and Countercl., ECF No. 26.
In their counterclaim, the State Defendants assert a cause of action for unjust enrichment, alleging that Benaroya‘s refusal to pay excise taxes serves only itself with no benefit to the bankruptcy estate. Intervenor Defs’ Answer and Countercl. ¶ 4.4, ECF No. 26. They also seek a declaratory judgment that Benaroya is required to pay real estate excise taxes imposed by
On July 28, 2025, Lewis County filed a limited, non-oppositional response to the Motion. Def. Lewis Cnty.‘s Resp. Mot. Summ. J., ECF No. 31. On July 30, 2025, Benaroya filed its reply to the State Defendants’ counterclaim. Pl.‘s Reply to Countercl., ECF No. 32. In its reply, “Benaroya admits that declaratory relief is necessary, in reply to paragraph 5.2 of intervenor defendants’ counterclaims, but denies the balance of that paragraph on
On July 31, 2025, the State Defendants filed a response to the Motion. Intervenor Defs.’ Resp. Mot. Summ. J., ECF No. 33. Benaroya filed its reply in support of the Motion on August 4, 2025. Pl.‘s Reply in Supp. of Mot. Summ. J., ECF No. 36. On August 7, 2025, the Court held a hearing on the Motion and heard argument from the parties. At the conclusion of the hearing, the Court took the matter under advisement.
II. FACTUAL BACKGROUND
A. Chapter 11 Bankruptcy Proceeding.
The debtor, Sovran LLC (“Sovran“), filed chapter 11 bankruptcy on June 23, 2011. Bankr. Case No. 11-45107-PBS, ECF No. 1. Sovran‘s primary asset at the time of petition was the Property, which consisted of approximately 320 acres of raw land located in Winlock, Washington, and was valued by Sovran in its schedules at $18,945,000. Bankr. Case No. 11-45107-PBS, Sched A, ECF No. 6. Sovran‘s schedules listed Benaroya and Lewis County as holder of claims secured by the Property. Bankr. Case No. 11-45107-PBS, Sched D, ECF No. 6. On October 5, 2011, on the joint motion of Benaroya and Timberland Bank, the Court entered an Order Determining that Debtor Sovran LLC is a Single Asset Real Estate Entity as defined in
The State Defendants received notice of the bankruptcy filing and 341 meeting through the Bankruptcy Noticing Center on July 12, 2011. Bankr. Case No. 11-45107-PBS, ECF No. 10. The State Defendants, who were not creditors at the time of the petition filing, were not included in Sovran‘s list of creditors, nor does it appear that they were ever added to the mailing matrix at any time during the pendency of the case. Lewis County, however, was included on the creditor matrix and filed three claims in the bankruptcy case and also cast a ballot rejecting Sovran‘s original plan of reorganization. Bankr. Case No. 11-45107-PBS, Claim Nos. 5-7; Debtor‘s Local Rule 3020 Stmt., ECF No. 123. The bankruptcy
B. Sovran‘s Plan of Reorganization and Order Confirming Plan.
On May 18, 2012, Sovran filed its Second Amended Chapter 11 Plan of Reorganization (“Plan“). Bankr. Case No. 11-45107-PBS, ECF No. 117. The Plan incorporated the terms of a settlement agreement entered into between Sovran and Benaroya. Bankr. Case No. 11-45107-PBS, ECF No. 118. The Plan classified Benaroya‘s claim, Class 2a, as an impaired allowed secured claim in the amount of $7,189,221, and classified Lewis County‘s claim, Class 2c, as an unimpaired allowed secured claim. Bankr. Case No. 11-45107-PBS ¶¶ 5.3.1-5.3.3, ECF No. 117.
1. Two-Step Transfer Procedure.
a. Step One: Sovran Conveys Property to Benaroya (“Step One“).
As part of a settlement with Benaroya and Lewis County3 on their allowed secured claims, and with other creditors, Sovran developed a consensual plan, which provided that all the Debtor‘s property would be transferred to Benaroya on the effective date of the Plan, subject to Lewis County‘s secured claims and free and clear of all other claims, liens, and interests of creditors and interest holders. The Plan also provided a waterfall for payment of the proceeds between Benaroya and Sovran‘s creditors to be distributed under the Plan‘s terms following Benaroya‘s development and/or sale of the Property.
The Plan conferred upon Benaroya several duties and rights, including the following:
8.1. Benaroya shall retain full discretion regarding any decisions related to the Property, including but not limited to: development, improvements, expenditures of any type, marketing, sales, financing, leasing, platting or parcelization, etc. It is understood that this discretion allows Benaroya to sell all or any part of the Property in a transaction whereby none or only some of the amount of the claims are paid to the potential Waterfall or Modified Waterfall recipients; provided, however, that all sales shall be for fair market value of the entire Property or the particular parcel.
b. Step Two: Benaroya is to Develop or Sell the Property (“Step Two“).
The second step of the Plan provides Benaroya with two options regarding the Property—develop any or all of the Property (Section 8.2) or sell the Property (Section 8.8), to satisfy its Total Cost. Benaroya‘s Total Cost is the sum of its Base Debt of $7,189,221 (the approximate amount of its secured claim), Benaroya‘s Limited Contribution of $70,000, Development Cost, additional costs expected to be incurred for all or part of the Property, and accrued Plan Rate of Interest of 8.75%. Bankr. Case No. 11-45107-PBS ¶¶ 2.8, 5.3.1.1, 8.3, 8.4, 8.6, 8.7, ECF No. 117.
If Benaroya decided to develop the Property, the following Plan provision applied:
8.2. If Benaroya decides to develop any part of the Property, Benaroya will apply the fair market value of the parcel subject to the development to its Total Cost as of the date it decides to develop the parcel. In the event the fair market value of the parcel as of the application date exceeds Benaroya‘s Total Cost, Benaroya shall pay cash for the excess fair market value in accordance with the Waterfall or Modified Waterfall.4
Bankr. Case No. 11-45107-PBS ¶ 8.2, ECF No. 117.
Under this provision, Benaroya would (i) apply the fair market value of the to-be developed property against its Total Cost, and (ii) pay cash to the Disbursing Agent if the fair market value exceeded Benaroya‘s Total Costs as of the development-decision date. Id. ¶ 8.2; Pl.‘s Compl. ¶ 3.9, ECF No. 1.
Alternatively, if Benaroya were to sell all or part of the Property, Benaroya would retain the net proceeds up to the amount of its unpaid Total Cost as of the closing date and pay any cash balance, in excess of the Total Cost, to the Disbursing Agent. The
8.8. Upon the sale of all or part of the Property the net proceeds from any sale shall be distributed according to the following provisions:
8.8.1. First, Benaroya will retain net proceeds from any transaction up to an amount equal to its Total Cost on the date of closing of the transaction;
8.8.2. Second, if there are thereafter remaining net proceeds, after Benaroya has been satisfied for its entire Total Cost, Benaroya shall transfer such remaining net proceeds to the Disbursing Agent for deposit into the Administrative and Priority Claim Fund, up to an aggregate amount equal the sum of any allowed and unpaid Unclassified or Priority Claims plus the amounts to be returned by the Disbursing Agent to the Debtor‘s members pursuant to ¶ 7.12.
8.8.3. Third, if there are thereafter remaining net proceeds, Benaroya shall transfer such remaining net proceeds to the Disbursing Agent for deposit into the Class 3 Dividend Fund, up to an aggregate amount equal to the total Allowed amount of all Class 3 Unsecured Claims plus interest on the outstanding principal balance of such claims at the federal judgment rate;
8.8.4. Fourth, if there are thereafter remaining net proceeds, Benaroya shall transfer fifty percent (50%) of such remaining net proceeds to the Disbursing Agent for deposit into the Class 4 Dividend Fund and Benaroya shall retain the remaining net proceeds.
8.8.5. In the unlikely event that there is a sale of less than 100 percent of the Property and if the net proceeds from the sale for a particular parcel exceeds 150% of Benaroya‘s Total Cost per usable square foot as of the date of closing of such sale on a per square foot basis, then the provisions of ¶ 8.9 will apply.
Bankr. Case No. 11-45107-PBS ¶ 8.8, ECF No. 117.
Additionally, the Plan provided the following provision relevant to the Motion:
8.11. Pursuant to
Section 1146 of the Bankruptcy Code , (a) the issuance, transfer or exchange of any securities, instruments or documents, (b) the creation of any Lien, mortgage, deed of trust or other security interest, (c) the making or assignment of any lease or sublease or the making or delivery of any deed or other instrument of transfer under, pursuant to, in furtherance of, or in connection with this Plan, including, without limitation, any deeds, bills of sale or assignments executed in connection with the transfer of the Property to Benaroya and any subsequent transfer or sale of any portion of the Property by Benaroya pursuant to, in implementation of, or as contemplated in this Plan and (d) the issuance, renewal, modification or securing of indebtedness by such means, and the making, delivery or recording of any deed or other instrument of transfer under, in furtherance of, or in
connection with, this Plan, including, without limitation, the Confirmation Order, shall not be subject to any document recording tax, excise tax, stamp tax, conveyance fee or other similar tax, mortgage tax, real estate transfer tax, mortgage recording tax or other similar tax or governmental assessment. Consistent with the foregoing, each recorder of deeds or similar official for any county, city or governmental unit in which any instrument hereunder is to be recorded shall, pursuant to the Confirmation Order, be ordered and directed to accept such instrument without requiring the payment of any filing fees, excise tax, documentary stamp tax, deed stamps, stamp tax, transfer tax, intangible tax or similar tax.
Bankr. Case No. 11-45107-PBS ¶ 8.11, ECF No. 117 (emphasis added).
On June 1, 2012, approximately one year after filing the case, the Court entered an order confirming the Plan (“Order Confirming Plan“). Bankr. Case No. 11-45107-PBS, ECF No. 130. The Order Confirming Plan includes a detailed provision similar to that contained in the Plan that identifies those transfers, etc., of the Property “under, in furtherance of, or in connection with, the Plan” that are exempt from excise taxes pursuant to
On the same day, the Court entered a Notice of Order Confirming Plan. Bankr. Case No. 11-45107-PBS, ECF No. 131. On June 3, 2012, the Bankruptcy Noticing Center provided a copy of the Notice of Order Confirming Plan to the State Defendants at the Attorney General‘s Office, Bankruptcy and Collections Unit. Bankr. Case No. 11-45107-PBS, ECF No. 133. No party filed a motion to reconsider the Order Confirming Plan or a Notice of Appeal of the Order Confirming Plan.
C. Final Decree, Case Closure, and Adversary Proceedings.
On June 20, 2014, the Court entered an order on Sovran‘s supplemental motions to fix the amount of claims participating in Plan distributions and for entry of a final decree (“Order on Supplemental Motions“).5 Bankr. Case No. 11-45107-PBS, ECF No. 176. Within
Benaroya made a development decision to develop nearly 72 acres of the Property in May 2020, “as a non-cash distribution, Waterfall transaction, and later sold that acreage as a non-Waterfall transaction in 2021,” and paid state excise tax in the amount of $944,860.23. Pl.‘s Compl. ¶ 3.16, ECF No. 1; Adams Decl., ECF No. 20-3. The Department of Revenue later denied Benaroya‘s request to refund the excise tax. Adams Decl., ECF No. 20-3. Benaroya now concedes that if it elects the development option under the Plan, it will pay excise taxes for any subsequent sale and that the current Motion only applies to its election of the sale option. See discussion infra p. 15, lines 19-22. Benaroya currently lists the remaining 248 acres for sale with its commercial real estate broker, NAI Puget Sound Properties. Pl.‘s Compl. ¶ 3.17, ECF No. 1.
On May 17, 2024, Sovran filed an action against Benaroya in Lewis County Superior Court, Case No. 24-2-00479-1 (“Lewis County Proceeding“). In its complaint, Sovran alleges that Benaroya failed to comply with certain requirements of the Plan and asserts various causes of action, including breach of contract, breach of covenant of good faith and fair dealing, conversion, constructive trust and an accounting. Adv. Proc. No. 24-4033-
On March 18, 2025, Benaroya filed this adversary proceeding.
III. DISCUSSION
Benaroya asserts two causes of action in its complaint. The first cause of action is for a declaratory judgment answering “the following question of law: Is Benaroya entitled to an
A. Jurisdiction and Ripeness.
1. Jurisdiction.
This Court has jurisdiction over the Motion and adversary proceeding under
“A matter ‘arises under’ the Code if its existence depends on a substantive provision of bankruptcy law, that is, if it involves a cause of action created or determined by a statutory provision of the Bankruptcy Code.” In re Ray, 624 F.3d 1124, 1131 (9th Cir. 2010) (citations omitted).
A proceeding “arises in” a case under the Code “if it is an administrative matter unique to the bankruptcy process that has no independent existence outside of bankruptcy and could not be brought in another forum, but whose cause of action is not expressly rooted in the Bankruptcy Code.” Id. (citations omitted).
Both Benaroya, in its complaint, and the State Defendants, in their counterclaim, assert that this Court has “arising under” jurisdiction over these matters. Pls.’ Compl. ¶ 2.1, ECF No. 1; Intervenor Defs.’ Answer and Countercl. 8:17-19, ECF No. 26. The Court agrees. This proceeding seeks a declaratory ruling regarding a statutory provision in the Code,
Even if the Court did not have “arising under” jurisdiction, it clearly has “related to” jurisdiction. It is well established that bankruptcy courts have “related to” jurisdiction over postconfirmation proceedings that involve the interpretation and implementation of the confirmed bankruptcy plan that “could conceivably have any effect on the estate being administered in bankruptcy.” In re Pegasus Gold Corp., 394 F.3d 1189, 1198 (9th Cir. 2005) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). Matters affecting the interpretation, implementation, consummation, execution, or administration of a confirmed plan typically have the requisite close nexus for “related to” jurisdiction. See also In re Wilshire Courtyard, 729 F.3d 1279, 1289 (9th Cir. 2013). This adversary proceeding meets the Pegasus Gold test and all parties have consented to the Court‘s entry
2. Ripeness.
The Court also must determine whether Benaroya‘s declaratory action is ripe for review. While the State Defendants’ Answer to Complaint raises ripeness as an affirmative defense, the second cause of action of their counterclaim acknowledges that an actual controversy has arisen regarding Benaroya‘s entitlement to market and sell the remaining Property without paying the excise tax under
Because ripeness is a question of timing, the court should determine ripeness based on the facts at the time of the court‘s decision. Whitaker v. Monroe Staffing Servs., LLC, 42 F.4th 200, 208 (4th Cir. 2022) (citing Blanchette v. Conn. Gen. Ins. Corps., 419 U.S. 102, 140 (1974)). Ripeness has constitutional and prudential components. U.S. v. Braren, 338 F.3d 971, 975 (9th Cir. 2003). “The constitutional ripeness of a declaratory judgment action depends upon ‘whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.‘” Braren, 338 F.3d at 975 (citations omitted).
It is undisputed that Benaroya currently lists for sale with a commercial real-estate broker the remaining 248 acres of the Property. Nemirow Decl. ¶ 5, ECF No. 15. The largest transactional cost aside from the sales commission is the real-estate excise tax. Nemirow Decl. ¶ 7, ECF No. 15. In order to establish an asking price, negotiate, or respond to a sale offer, the broker must know whether a real-estate excise tax must be paid to Lewis County. Nemirow Decl. ¶ 7, ECF No. 15. As set forth in the State Defendants’ Answer and Counterclaim, the State Defendants’ position is that Benaroya is not exempt under the Plan or
The prudential component of ripeness requires a more thorough consideration. Braren, 338 B.R. at 975. The court‘s analysis is guided by two considerations: “[1] the fitness of the issues for judicial decision and [2] the hardship to the parties of withholding court consideration.” Braren, 338 F.3d at 975. The first element of prudential ripeness is met if the claim is primarily legal and does not require any further factual development. In re PG&E Corp., Adv. Proc. No. 19-03003, 2019 WL 2477433, *9 (Bankr. N.D. Cal. June 12, 2019). The second element focuses on the hardship to the parties if the court does not make a determination.
In order for the Court to resolve the issue of whether
B. Summary Judgment Standard.
The party seeking summary judgment bears the burden of demonstrating that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law.
As the moving party, Benaroya bears the burden of establishing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. All inferences from the evidence presented are drawn in the light most favorable to Lewis County and the State Defendants.
C. Declaratory Relief Regarding § 1146(a) .
Benaroya seeks a declaratory judgment that it is entitled to an
As an initial matter, to the extent the State Defendants contend the complaint is vague as to precisely which property Benaroya‘s requested relief applies, the Court finds no basis in the record to support this argument. It is evident from the Motion and Declaration of
Turning to the issue raised in Benaroya‘s declaratory action,
The parties do not dispute that the Plan contemplated the sale of the Property by Benaroya to third parties in a two-step transaction and that the first-step transfer of the Property to Benaroya was exempt from taxation under
Accordingly, the Court finds that there are no material facts in dispute, and the issue before the Court is solely a question of law appropriate for resolution on summary judgment: whether
1. Section 1146(a)‘s “Under a Plan” Meaning.
At its core, the issue in this case is whether future sales of the Property by Benaroya are “under a plan,” within the meaning of
To ascertain the ordinary meaning of a statutory term, courts often begin with the dictionary. See MCI Telecomm. Co. v. AT & T Corp., 512 U.S. 218, 227-28 (1994) (discussing the use of dictionary definitions to interpret statutory text). Several courts have looked to dictionary definitions of the term “under” in analyzing
Based on the Court‘s review of the caselaw, all circuit-level courts that have interpreted the phrase “under a plan” have required that the transfer be either an integral part of, or
While these cases are instructive, the Court finds that some of the decisions, including the Jacoby-Bender decision—all of which were determined prior to Piccadilly in 2008—ignore the plain language of
This approach is consistent with Piccadilly. Although Piccadilly did not directly address the narrow issue of what “under a plan” means, when deciding the meaning of “under a plan confirmed” under chapter 11, the Supreme Court relied on the most natural reading of the text and concluded that only post-confirmation transfers “made pursuant to a Chapter 11 plan” were afforded stamp-tax exemption. Piccadilly, 554 U.S. at 52-53. Thus, the Supreme Court used “pursuant to” in place of “under” when referring to
While not necessary for this Court‘s determination, this interpretation also is consistent with the legislative history of
Another provision that affects the method of taxation in bankruptcy applies only in chapter 11. Section 1146(c) of title 11 is modeled after section 267 of the Bankruptcy Act which exempts any security or transfer instrument dealt with under a confirmed chapter X plan from any State or Federal stamp tax. Section 1146(c) of title 11 broadens the exemption to any stamp tax or similar *842 tax on a security or a transfer instrument dealt with under the consolidated chapter 11. No opposition has been voiced with respect to this section.
H.R. Rep. No. 595, 95th Cong., 1st Sess. 281 (1977), reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5963, 6238. A transfer that is authorized by a plan is likewise “dealt with” under a plan. Further, this is consistent with the purpose behind
Finally, this textualist and common-meaning approach utilized by the Supreme Court generally9 should reduce unnecessary litigation over whether a particular transfer qualifies as “under a plan” based on standards that each court invents for itself. See Karen
The Court recognizes that some courts have applied what appears to be a somewhat stricter standard than “authorized by” a confirmed plan and have used terms such as “required,” “necessary,” or “essential.” See, e.g., In re Eastmet Corp., 907 F.2d 1487, 1489 (4th Cir. 1990) (the recording of a mortgage to secure a loan to purchase property from the estate was not “under a plan” because the plan did not “require” the financing be accomplished through a purchase money deed of trust); In re 310 Assocs., 282 B.R. 295, 298 (finding that the transfer at issue was not an “essential” component of any plan at the time the transfer took place); Orlando, 391 F.3d at 1294 (holding that the critical inquiry under 1146 is whether the transaction is “necessary” to the consummation of the plan). These cases are not binding on this Court and generally are distinguishable for other reasons, such as involving preconfirmation transfers, or that the transfers at issue were clearly not authorized by or otherwise dealt with in the plan.
Additionally, it appears that courts have taken the Second Circuit‘s decision in Jacoby-Bender and extended it further than intended or the plain language of the statute requires. As stated prior, the Second Circuit held that “where, as here, a transfer, and hence an instrument of transfer, is necessary to the consummation of a plan, the plan seems implicitly to have ‘dealt with’ the transfer instrument.” Jacoby-Bender, 758 F.2d at 842. Some courts have cited to this language for the proposition that “under a plan” means “necessary to consummation.” See, e.g. Orlando, 391 F.3d at 1291-92. This Court disagrees with this interpretation. This Court reads Jacoby-Bender and the other cases cited supra, to require that the transfer be “authorized by” the plan, and that a transfer that is “necessary to consummation” or “required by” or “essential to” is impliedly “authorized by” a plan, but not the standard. In other words, a transfer that is demonstrated to be
The Court also recognizes the federalism canon that tax-exemption statutes are to be construed narrowly. See Piccadilly, 554 U.S. at 50; see also United States v. Centennial Sav. Bank FSB, 499 U.S. 573, 583 (1991). For this reason, a court should ““proceed carefully when asked to recognize an exemption from state taxation that Congress has not clearly expressed.“” Piccadilly, 554 U.S. at 48 (quoting Cal. State Bd. of Equalization v. Sierra Summit, Inc., 490 U.S. 844, 851-52 (1989)). This canon, however, is not in conflict with the plain-language canon of statutory construction, but instead can be applied in conjunction with it. See Piccadilly, 554 U.S. at 48, 50-52. In Piccadilly, when determining whether § 1146 applies to preconfirmation transfers, the Supreme Court reached its conclusion by applying the most natural reading of the statute notwithstanding the federalism canon. In doing so, the Court agreed with the Fourth Circuit‘s summation of
‘Congress struck a most reasonable balance. If a debtor is able to develop a Chapter 11 reorganization and obtain confirmation, then the debtor is to be afforded relief from certain taxation to facilitate the implementation of the reorganization plan. Before a debtor reaches this point, however, the state and local tax systems may not be subjected to federal interference.’
Piccadilly, 554 U.S. at 52 (quoting NVR, 189 F.3d at 458). For this reason, the Court believes that the proper standard adopts the plain language of the statute and nothing further.10
Thus, applying the plain-language standard to this case, the inquiry is whether under the terms of the Plan, sales of the Property by Benaroya to third parties are transfers “under” the Plan. Such transfers are “under a plan” if authorized by, according to, or pursuant to the confirmed Plan. Because the Plan terms are not in dispute, applying the
2. The Plain Language of § 1146(a) Does Not Preclude Transfers from Non-debtors to Third Parties.
The State Defendants argue that
Significantly, the statute does not identify an actor but instead is written in the passive voice: “[t]he issuance, transfer, or exchange . . . under a plan confirmed under section 1129 or 1191 of this title, may not be taxed.”
Like
Thus, nothing in the plain language of
3. The Plain Language of § 1146(a) Does Not Preclude Two-step Transfers.
Benaroya argues that it is entitled to judgment as a matter of law because the plain language of
In support of its argument, Benaroya cites State of Maryland v. Antonelli Creditors’ Liquidating Trust, 123 F.3d 777 (4th Cir. 1997), for the proposition that two-step
The State Defendants assert that Antonelli is distinguishable because it ultimately held that the defendants in that case had received proper notice of the plan and were bound by the plan terms under
The Court finds that the Fourth Circuit‘s reasoning in Antonelli, though dicta, persuasive and agrees that there is nothing in the statute prohibiting the application of
4. The Plain Language of § 1146 Does Not Necessitate that a Transfer Be Required Under a Plan.
The State Defendants argue that the terms of the Plan itself do not require Benaroya to sell the Property for the Plan to be consummated, thus such a sale is not “under a plan.” This argument suffers from the same deficiency as the State Defendants’ argument
The State Defendants, however, again read into the statute requirements that are not there. Specifically, that the transfer must be “required” under the plan. As stated supra, for a transfer to be “under a plan,” it must be “authorized” by the Plan.
The Court cannot and will not read into the statute language that is not there. See Lomax v. Ortiz-Marquez, 140 S. Ct. 1721, 1725 (2020) (stating that a court may not narrow a provision‘s reach by inserting words Congress chose to omit.) Accordingly, the Court finds that under the plain reading of
The State Defendants’ argument also relies on a misconception of the meaning of the term consummation. According to the State Defendants, the future transactions cannot be necessary to consummation because the confirmed plan was “substantially consummated” when the Final Decree was entered on July 1, 2014, which contained a finding that “the Plan [has] been substantially consummated.” Bankr. Case No. 11-45107-PBS, ECF No. 182.
As stated supra, this Court concludes that a transfer does not need to be “necessary to consummation” to be “under a plan” for purposes of
The caselaw‘s use of the term consummation in reference to
of the business or of the management of all or substantially all of the property dealt with by the plan; and (C) commencement of distribution under the plan.”
5. The Transfers at Issue are Exempt Under § 1146(a) .
The Court holds that the Property transfers at issue are exempt from excise tax under
The Court has ruled that the plain text of
6. Notice.
The State Defendants contend that the Plan is not binding on them because of an alleged lack of notice. Section 1141(a) provides that the provisions of a confirmed chapter 11 plan bind the debtor, creditors, equity security holders, and general partners, regardless of whether they have accepted the plan or whether their claims are impaired under the plan. “Once the bankruptcy court issues an order confirming the plan, that document binds the debtor and its creditors going forward—even those who did not assent to the plan.” Harrington v. Purdue Pharma L. P., 603 U.S. 204, 214 (2024).
The issue before the Court on Benaroya‘s declaratory action is a § 1146 issue, not a notice issue or res judicata issue. Significantly, the relief requested in Benaroya‘s complaint is not predicated on the res judicata effect of the confirmed Plan. Moreover, the Court has determined as a matter of law that
The same is true of the State Defendants’ argument that additional notice of the injunctive relief sought in the Plan and disclosure statement was required pursuant to
The State Defendants argue that Sovran‘s pending adversary proceeding against Benaroya (Adv. Proc. No. 24-4033-MJH) requires denial of summary judgment. This is not the case. Even if Sovran ultimately prevails in that adversary proceeding and obtains a monetary judgment against Benaroya and/or a constructive trust is imposed, this will have no bearing on the issue of whether the sales proceeds are tax exempt under
D. Injunctive Relief.
On summary judgment, Benaroya further requests that the Court enjoin Lewis County from refusing to accept (1) a Benaroya Property deed of conveyance to a buyer, (2) a real-estate tax affidavit that excludes excise tax, or (3) a conveyance and affidavit without payment of the excise tax. While there is little practical difference between injunctive and declaratory relief, “declaratory relief is a much milder form’ of relief because it is not backed by the power of contempt.” United Aeronautical Corp. v. U.S. Air Force, 80 F.4th 1017, 1031 (9th Cir. 2023) (quoting Steffel v. Thompson, 415 U.S. 452, 471 (1974)). Injunctive relief is extraordinary, and should be granted sparingly, and only to the extent that the standards for such relief are satisfied and to the extent necessary to achieve the purpose of injunctive relief. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22-24 (2008). In suits against government officials and departments, “we generally assume that they will comply with declaratory judgments.” United Aeronautical, 80 F.4th at 1031 (citing Poe v. Gerstein, 417 U.S. 281, 281 (1974) (per curiam) (“[T]here was ‘no allegation here and no proof that respondents would not, nor can we assume that they will not, acquiesce in the [declaratory judgment] decision ....’ ” (citation omitted))).
According to Benaroya, Lewis County has declined to assure Benaroya that it will honor the
IV. CONCLUSION
The Court finds that there are no genuine disputes of material fact and Benaroya is entitled to judgment as a matter of law as to Benaroya‘s first cause of action for declaratory relief. Two-step transfers, as authorized under the Plan, fall within the scope of
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