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HomeMy WebLinkAboutMotion - GDC property tax obligationFREsE, NAsx & ToRPY, P.A. ATTORNEYS AT LAW GARY B. FRESE t CHARLES IAN NASH VINCENT G. TORPY, JR. RICHARD E. TORPY GREGORY S. HANSEN J. PATRICK ANDERSON LAURA L. ANDERSON WILLIAM A. GRIMM OF COUNSEL October 14, 1992 Robert S. McClary City Manager City of Sebastian P.O. Box 780127 Sebastian, FL 32978 Re: General Development Corporation Our File No. 90-5496 Dear Rob: 930 S. HARBOR CITY BLVD. SUITE 505 MELBOURNE, FLORIDA 32901 (407) 984-3300 FAX (407) 951-3741 ♦ (BOARD CERTIFIED IN TAXATION BOARD CERTIFIED IN ESTATE PLANNING AND PROBATE 5161718 �9? Z44 OC� .- Al � � 1 Enclosed please find two motions which were forwarded to me in connection with the General Development Corporation bankruptcy. One of the motions, which relates solely to an agreed order with regard to a letter of credit between General Development Corporation and First National Bank of Boston, appears to be of no consequence to us. The second motion, however, has some significance as it deals with General Development Corporation's obligation to pay property taxes as a condition precedent to replatting land. Specifically, it appears that General Development is planning to replat large tracts of land so that they can be sold as one parcel, as opposed to being sold in individual lots. Pursuant to the plan of reorganization, General Development Corporation is to pay pre- petition property taxes in ten equal installments beginning in February of 1993. Alternatively, GDC has to pay all pre-petition property taxes at the time of sale, if they sell a parcel of land. Beyond that, GDC has no affirmative obligation to pay pre-petition property taxes. Pursuant to Florida Statute 177.101(4), it appears that all property taxes are to be paid prior to replatting of any land. GDC is requesting the Bankruptcy Court to approve replatting of land without meeting the requirement of Section 177.101(4). Robert S. McClary October 14, 1992 Page -2- This motion could obviously have some effect on the City of Sebastian if GDC were to come in and attempt to replat any of the lands they still hold within the City of Sebastian. I am unsure, however, the significance of the effect that it may have. Pursuant to our conversation, I am not going to attend the hearing scheduled for October 8, 1992 with regard to this matter. I will, however, contact Greenberg and Traurig to determine the outcome of this hearing. After you have reviewed the enclosed motions, if you have any questions, please let me know. Sincerely, FRESE, NASH & TORPY, P.A. Richard E. Torpy RET/lbg Enclosure In re GENERAL DEVELOPMENT CORPORATION, et al., Debtors. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA CASE NO. 90-12231-BKC-AJC JOINTLY ADMINISTERED MOTION FOR AN ORDER DETERMINING EFFECT OF PLAN OF REORGANIZATION ON CERTAIN ADMINISTRATIVE REQUIREMENTS FOR PLATTING OR OTHER ACTIONS AFFECTING THE REORGANIZED DEBTOR'S PROPERTY ATLANTIC GULF COMMUNITIES CORPORATION, formerly GENERAL DEVELOPMENT CORPORATION ("GDC" or the "Debtor"), the reorganized Debtor, and its Subsidiaries that are Debtors in these jointly - administered cases (collectively, "Atlantic Gulf"), by and through their undersigned counsel, and pursuant to Section 105(a) of the Bankruptcy Code (the "Code"), 11 U.S.C. § 105(a), and this Court's Order Confirming Second Amended Joint Plan of Reorganization of General Development Corporation dated March 27, 1992 (C.P. No. 3718) (the "Confirmation Order"), hereby move for an order determining that governmental administrative action with respect to platting, replatting, or vacating plats on tracts of land owned by the Atlantic Gulf, or any other actions affecting Atlantic Gulf's property other than a sale of the property, may not be conditioned on pre -payment of pre-petition property tax claims. In support of its Motion, Atlantic Gulf states as follows: BACKGROUND 1. The Debtor commenced the above -captioned case by filing, together with certain of its subsidiaries, voluntary petitions for relief under Chapter 11 of the Code on April 6 and 12, 1990. The Restated Second Amended Joint Plan of Reorganization of GDC (the "Plan") was confirmed by this Court pursuant to the Confirmation Order on March 27, 1992. The Plan became effective on March 31, 1992, and GDC was renamed Atlantic Gulf Communities Corporation. This Court retains jurisdiction over this matter pursuant to the Plan and the Confirmation Order. 2. Pursuant to Section 5.2.3 of the Plan, holders of allowed pre-petition Secured Property Tax Claims (Class 2.3) shall receive the amount of their Claims in cash in 10 equal installments beginning, with interest, beginning with the Payment Date in February 1993. Section 5.2.3 of the Plan also provides that when property is sold, the proceeds will be applied first to payment of the unpaid property tax claim on such property plus accrued interest; the Plan does not allow mandatory prepayment of pre-petition property taxes in any other circumstances. Section 5.2.3 further provides that holders of such Claims "shall retain their statutory tax liens on such property to secure the Reorganized Company's obligations under this Plan, but shall be barred from enforcing their rights with respect to such liens - 2 - unless and until the Reorganized Company fails to make any payment provided for in this section." 3. Atlantic Gulf's post -reorganization business plan contemplates that it will seek to sell as bulk acreage certain undeveloped tracts of land that were previously platted for homesites and to generate value by platting or replatting previously completed tracts. Accordingly, to facilitate such sales and appreciation of value, Atlantic Gulf has sought, and may seek in the future, administrative action by certain localities to plat, vacate plats, or replat tracts previously platted (collectively, "Platting Actions"). Florida law requires that applications for certain Platting Actions must include "certificates showing that all state and county taxes have been paid." Fla. Stat. Ann. § 177.101(4) (Supp. 1991). Atlantic Gulf has paid all post-petition property taxes due on the its properties. However, certain local governmental units have refused or may refuse to allow certain Platting Actions, unless, contrary to the express provisions of the Plan, Atlantic Gulf pays all pre-petition property taxes owed on the land in question. ARGUMENT 4. Any effort by local governmental units to condition Platting Actions on payment of pre-petition property taxes violates the express terms of the Plan and the Confirmation Order. First, all claims based on pre-petition claims have been discharged by operation of the Plan, the Confirmation Order and - 3 - 41 the Bankruptcy Code. (Plan § 8.11; Confirmation Order, § 19; 11 U.S.C. § 1141(d)(1)(A).) Moreover, under Section 5.2.3 of the Plan, mandatory prepayments of property tax claims are not required unless there is a sale of the property, and holders of Secured Property Tax Claims are barred from enforcing their rights so long as the reorganized Debtor is not in default of its obligations under that section. The first payment in respect of Secured Property Tax Claims under Section 5.2.3 is not due until February 1993. Thus, because Atlantic Gulf is current with respect to that obligation, and the pre-petition claim has been discharged, Atlantic Gulf must be deemed to have paid the taxes owed on the property in question for purposes of § 177.101(4). Atlantic Gulf's applications for Platting Actions therefore cannot be denied because of any finding that the requirement of section 177.101(4) has not been satisfied. 5. Second, the Confirmation Order expressly enjoins all creditors, including governmental entities, from seeking to recover a pre-petition debt. It provides: "All persons and entities are hereby stayed, restrained and enjoined from taking one or more of the following actions for the purpose of, directly or indirectly, collecting, recovering or receiving payment of, on or with respect to any Claim . . . . "(a) from commencing, conducting, or continuing in any manner, directly or indirectly, any suit, action or other proceeding (including, without limitation any thereof in a judicial, arbitral, administrative or other forum) against or affecting GDC or any property thereof - 4 - "(e) as to the holders of Allowed Claims in Class 2.3 (and/or their successors or assigns), from enforcing any rights with respect to statutory tax liens against the property securing such claims . . . unless the Reorganized Company fails to make any payment provided in Section 5.2.3 of the Plan." (Confirmation Order, § 22.) Any actions by governmental units to require early payment of Secured Property Tax Claims through the administrative procedures provided for Platting Actions under Florida law would constitute a collection effort enjoined by the Confirmation Order. 6. In the alternative, any conditioning of a Platting Action on the payment of pre-petition property taxes contravenes section 525(a) of the Bankruptcy Code. That section provides that "a governmental unit many not deny, revoke, suspend, or refuse to renew a license, permit charter, franchise or similar grant to, condition such a grant to, discriminate with respect to such a grant against . . . a person that . . . has been a debtor under [the Code], solely because [such debtor] has not paid a debt that is dischargeable in the case under [the Code] . 11 U.S.C. § 525(a) 7. It is well-established that application of a facially -neutral law or regulation in a manner that penalizes a former debtor on account of its not having paid a pre-petition debt violates section 525(a). The Supreme Court first enunciated this principle in Perez v. Campbell, 402 U.S. 637 (1971), in - 5 - which it held that revocation of a drivers license for failure to pay a dischargeable pre-petition automobile accident tort judgment would frustrate the fresh start policy of the bankruptcy laws and provide creditors with inappropriate levereage to collect debts discharged in bankruptcy. The result of this decision was expressly codified in the Bankruptcy Code in section 525(a). See H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 366-67 (1977); S. Rep. No. 95-989, 95th Cong.., 2d Sess. 81 (1978). This principle has been extended to preclude revocation of a debtor's drivers license under a state financial responsibility statute, because application of the stautute discriminates against debtors with discharged debts by treating them differently than person with no such debt. In re Shamblin, 18 B.R. 800, 803 (Bank. S.D. Ohio 1982). 8. Similarly, a state licensing authority's denial of a debtor's license for failure to pay delinquent pre-petition taxes has been held to violate Section 525(a). In re Nejberger, 120 B.R. 21, 24-25 (E.D. Pa. 1990); Matter of Anderson, 15 B.R. 399, 400 (Bankr. S.D. Miss. 1981). In Nejberger, a Chapter 11 debtor was denied a renewal of its liquor license by the licensing authority for failure to pay delinquent taxes that were dischargeable in bankruptcy. The district court held that the bankruptcy court's order requiring the renewal of the license, while overly broad for other reasons, was appropriate to the extent that it required the licensing commission not to consider the delinquent taxes in passing on the renewal application. In - 6 - Anderson, a state licensing authority notified the Chapter 11 debtors that it would not renew their liquor license "primarily" due to the debtor's dischargeable pre-petition tax obligations and its presence in bankruptcy proceedings. 15 B.R. at 400. The bankruptcy court required the state licensing authority to renew a liquor license, holding that its failure to renew the license would "frustrates" the policies underlying Chapter 11 and "violate" section 525. Id. at 401. 9. Here, the Platting Actions are necessary to facilitate the sale of those lands or enhance their value so as to generate future sales, and, thus, to further the reorganization efforts of Atlantic Gulf. The governments' approval of a Platting Action is a "permit" or "similar grant" within the meaning of section 525(a). Conditioning such a governmental action on payment of a prepetition debt that was discharged under the Plan discriminates against Atlantic Gulf in a manner prohibited by section 525(a). To hold otherwise would prevent Atlantic Gulf from maximizing the value of its assets and frustrate its reorganization in violation of the fresh start principles under the Code. - 7 - V 10. For the reasons stated above, Atlantic Gulf requests that the Court (i) find that conditioning any Platting Action or any other action affecting Atlantic Gulf's property (other than an outright sale) on payment of pre-petition property taxes violates the language and purposes of the Plan, the Confirmation Order and the Bankruptcy Code; (ii) enter an order prohibiting any governmental entity from so conditioning approval of any Platting Action on payment of pre-petition property taxes, except as required by the Plan; and (iii) grant such other relief as it deems just and proper. GREENBERG, TRAURIG, HOFFMAN LIPOFF, ROSEN & QUENTEL, P.A. 1221 Brickell Avenue Miami, Florida 33131 (305) 579-0500 DATED: September 25, 1992 - 8 - Respectfully submitted, William J. Perlstein Thomas W. White Bruce L. Plotkin WILMER, CUTLER & PICKERING 2445 M Street, N.W. Washington, D.C. 20037-1420 (202) 663-6000 Attorneys for Debtors and Debtors -in -Possession