In Re: Northern New England Telephone Operations LLC

Filing 15

OPINION. For the reasons in this Opinion, the Bankruptcy Order is affirmed. The Clerk of the Court is directed to terminate all pending motions and mark this case as closed. It is so ordered. (Signed by Judge Robert W. Sweet on 8/4/2014) (rjm)

usncsnNY
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT
___________ ----- OF NEW YORK

1

DOCUMENT .
•.
ELECfRONICALX FILED \

~DOC#:

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e · D A T E FILED:
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·

NORTHERN NEW ENGLAND TELEPHONE
OPERATIONS, LLC,
Debtor.

Chapter 11
Case No.
09-16365-CGM

----------------------------------------x
CITY OF CONCORD, NEW HAMPSHIRE,
Appellant,
-against-

14 Civ. 2187

(RWS)

OPINION

NORTHERN NEW ENGLAND TELEPHONE
OPERATIONS, LLC,
Appellee.
----------------------------------------x

A P P E A R A N C E S:
ATTORNEYS FOR APPELLANT CITY OF CONCORD, NEW HAMPSHIRE
CITY SOLICITOR
41 Green Street
Concord, NH 00301
By:
James W. Kennedy, Esq.

ATTORNEYS FOR APPELLEE NORTHERN NEW ENGLAND TELEPHONE
OPERATIONS, LLC
PAUL HASTINGS LLP
Park Avenue Tower
75 E. SSth Street, First Floor
New York, NY 10022
By:
Luc A. Despins, Esq.
James T. Grogan, Esq.

Sweet, D.J.

Appellant City of Concord, New Hampshire,
"Appellant")

has

moved

to

appeal

the

February

(the "City" or
11,

2014

Order

Denying City of Concord New Hampshire's Motion for Allowance and
Payment of Tax Claims,

see In re N.

New England Tel.

Operations

504 B.R. 372 (Bankr. S.D.N.Y. 2014)

(the "Bankruptcy Order"),

of the United States Bankruptcy Court,

Southern District of New

LLC,

York (the "Bankruptcy Court"), pursuant to 28 U.S.C.

§

Bankruptcy

involved

Order,

and

the

underlying

bankruptcy of FairPoint Communications,
reorganized debtors

matter,
Inc.

158(a). The
the

and its affiliated

(collectively, "FairPoint" or the "Debtors"),

including Northern New England Telephone

Operations,

LLC

("New

England Telco"). See Bankruptcy Order, 504 B.R. at 374.

Based on the conclusions set forth below, the Bankruptcy
Order is affirmed and the appeal dismissed.

I.

Prior Proceedings

FairPoint filed for relief under chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") on October 26, 2009
in the Bankruptcy Court. Id. at 375. On June 30, 2011 and November
7,

2012,

the Bankruptcy Court closed all chapter 11 cases in the
1

Debtors'

jointly administered proceedings except for the chapter

11 case of New England Telco.

On October 11, 2013 the City filed a motion for Allowance
and Payment of Tax Claims with the Bankruptcy Court.

The motion

sought payment of certain January and March 2010 tax bills
"Tax Claim")

(the

on six properties owned by New England Telco which

were due for the 2009 tax year and located within Concord, N.H.:
(1) Map 79, Lot 4, Bldg. 4, Unit A ("Locke RD");

(2) Map 36, Lot

1, Bldg. 6 ( "12 South ST") ;

( 3) Map 98, Lot 3, Bldg. 9 ("Hopkinton

RD");

Bldg.

(4)

Map 122,

Lot 4,

lllG, Lot 1, Bldg. 11
2 9 ( "18 Charles ST")

9

("445 Mountain RD");

(5)

Map

("64 Regional DR"); and (6) Map 1412P, Lot

(collectively, the "Properties") . On February

11, 2014, the Bankruptcy Court denied payment of the Tax Claim in
the Bankruptcy Order.

The City initiated the instant action seeking an appeal
of the Bankruptcy Order on March 28, 2014. Briefing was submitted
and oral arguments held, and the matter was marked fully submitted
on May 14, 2014.

II.

Facts

a.

The FairPoint Bankruptcy
2

--------~

On October 26, 2009, each of the Debtors filed petitions
for relief under Chapter 11. On February 4,

2010, the Bankruptcy

Court entered an order establishing the deadline and procedures
for filing proofs of claims in the Debtors' chapter 11 cases (the
"Bar Date Order"). Id. at 375. The Bar Date Order established April
26, 2010
units

(the "Bar Date")

as the last date by which governmental

(as defined in§ 101(27) of the Code)

could file proofs of

claims. Id.

The Bankruptcy Court entered an order on January 13,
2011

(the

amended

"Confirmation

joint

plan

Confirming Third Am.
Third Am.

of

Order")

reorganization

Plan,

Join Plan, No.

confirming

No.

(the

09-16335,

the

"Plan") .

ECF No.

09-16335, ECF No.

Debtors'
See

2113;

third
Order

Debtors'

2013. The Plan became

effective and was substantially consummated according to its terms
on January 24,
England

Telco,

2011.
all

By this time,
of

the

except

Debtors'

for the case of New

cases

had

been

fully-

administered and closed.

The Plan provides that "the property of the Estate and
FairPoint shall revest in reorganized Fair Point" and that:

3

As of the Effective Date, all property of FairPoint and
Reorganized FairPoint shall be free and clear of all
Claims, Liens and interests, except as specifically
provided in the Plan, the Confirmation Order, or the New
Credit Agreement.

Plan

§

8. 9

(emphasis

added).

"Reorganized FairPoint" to
§§

1. 53,

1. 122.

Plan

and

the

Plan defines

"FairPoint"

include New England Telco.

and

See Plan

Section 1. 4 of the Plan defined "Administrative

Expense Claim" as,
section 503(b)

The

among other things,

a right to payment under

of the Bankruptcy Code.
Confirmation

Ordered

See Plan §

required

all

1.4. Both the
administrative

expense claimants to make a request for payment by March 25, 2011,
60 days after the effective date of the Plan (the "Administrative
Expense Bar Date"). Bankruptcy Order, 504 B.R. at 375.

b.

The Tax Claim of the City

New

England

Telco

owns

a

number

of

parcels

of

real

property located within the taxing jurisdiction of the City. The
City sends property tax bills for a tax year on a quarterly basis,
with the first two bills for that year issued in July and October
of the tax year and the second two bills issued in January and
March of the fallowing calendar year.
§

76:15-aa,

II

bills for 2015,

(a);

Bankruptcy Order,

for example,

See N. H.

Rev.

Stat.

504 B.R.

at 375.

Ann.

The tax

will be issued on July and October
4

2015 and January and March 2016. On April 1 of each year, a lien
to secure property taxes arises on real estate by operation of
law. N.H. Rev. Stat. Ann.

§

80:19

(2013).

For the 2009 tax year,

the City sent property tax bills for the Properties in July and
October of 2009 and January and March of 2010.

On November 20, 2009, the City mailed New England Telco
the 2009 tax bills for its sixteen properties located in the City.
Case No. 09-16365, ECF No. 25, Ex. 3. On April 14, 2010, the City
sent notice to New England Telco of the impending tax lien against
sixteen of its properties due to its non-payment of 2009 taxes on
the Properties.

In that notice,

Id.

the City advised New England

Telco that "[i)f the total amounts are not paid before
2010

at

4: 15

PM],

a

Real

Estate Tax Lien will

be

[May 14,

executed to

[Concord] and recorded at the Merrimack County Registry of Deeds."
Id.,

Ex.

2 at 2.

will entitle

The notice further provided that the "Tax Lien

[Concord]

to a Tax Deed for a 100% interest in the

property described above unless, within 2 years of the Tax Lien,
the property is redeemed by payment of the amount of the above
totals plus interest at 18% per annum and redemption costs." Id.

With the chapter 11 filing of FairPoint, the City sought
payment of certain real property taxes assessed against New England
Telco. Bankruptcy Order, 504 B.R. at 375-76. These claims included

5

six claims that were filed by the City for taxes included on the
July and October 2009 tax bills for the Properties (the "Half-Year
Claims").

Id. The Half-Year Claims are as follows:

Proof of Claim
Number
367

Half-Year Claims
Claim Amount
Basis of Claim

2009 Property
Taxes
2009 Property
Taxes
2009 Property
Taxes
2009 Property
Taxes
2009 Property
Taxes
2009 Property
Taxes

$1,426.64

371

$412.66

375

$529.38

378

$16,526.73

379

$11,620.35

381

$364.60

Property

18 Charles St.
Locke Road
445 Mountain
Road
64 Regional
Drive
12 South
Street.
Hopkinton Road

Two of the Half-Year Claims, claim numbers 378 and 379,
were allowed under the Plan and Confirmation Order and ultimately
paid in full.

Id. at 376.

On November 8, 2011, the Debtors filed an objection (the
"88th Omnibus Claims Objection")

seeking, among other things, the

reduction of the allowed amount of the four remaining Half-Year
Claims on the basis that the filed amounts on those claims did not
match the Debtors' books and records.
2011

By order dated December 8,

(the "December 8 Order") ,

the Bankruptcy Court granted the

8 8th Omnibus Claims Objection,

thereby reduced and allowed the

6

remaining four Half-Year Claims as priority claims. See Bankruptcy
Order, 504 B.R. at 376.

The City filed a total of twenty-one proofs of claims
before the Bar Date.

at 376. However,

Id.

it did not file proofs

of claims for the January and March 2010 tax bills, which were due
for the 2009 tax year.

Id.

Instead, it moved the Bankruptcy Court

for an Allowance and Payment of the Tax Claims on these bills.
Bankruptcy Court, 504 B.R. at 376.

c.

The Bankruptcy Order

On February 11,
Bankruptcy

Order

2014,

rejecting

the Bankruptcy Court issued the

the

City's

contention

that

its

statutory lien was not extinguished under the Plan. The Bankruptcy
Court reasoned that (a) the Plan was confirmed,
with the

Properties,

( c)

(b) the Plan dealt

the City participated in the Debtors'

reorganization and (d) the Plan did not preserve the City's lien.
Id.

at 376-82.

Further,

the Bankruptcy Court held that the 2009

tax reflected on the January and March 2010 bills was incurred
under state law on April 1, 2009. Id. at 380. The Bankruptcy Court
also held that the tax was not incurred by the bankruptcy estates
as an administrative priority expense. Id. at 378-80. In addition,
the

Bankruptcy Order

found

that
7

the

City had not

demonstrated

excusable neglect for its failure to assert its additional claims
for taxes prior to the Bar Date. Id. at 380-82. The court reasoned
that the City "was required to file a proof of claim for the Tax
Claim" and "[s]ince the City failed to timely do so and has not
provided adequate justification for such failure

the City is

not entitled to payment of the Tax Claim." Id. at 374-75.

On

February

14,

2014,

the

Bankruptcy

Court

denied

Concord's Motion in its entirety. See Appellee Ex. 16.

III. Standard of Review

"On an appeal the district court ... may affirm, modify,
or

reverse

a

bankruptcy

judge's

judgment,

order,

or decree

or

remand with instructions for further proceedings." Fed. R. Bankr.
P.

8 013.

"The Bankruptcy Court's

finding of facts

are reviewed

under a clearly erroneous standard." In re Kollel Mateh Efraim,
LLC, 456 B.R. 185, 190 (S.D.N.Y. 2011)
Corp . ,

2 5 F . 3 d 113 2 ,

11 3 6

(citing In re Momentum Mfg.

( 2 d Cir . 1 9 9 4 ) ) . A finding of fact is

clearly erroneous if the Court is "left with the definite and firm
conviction that a mistake has been committed." Mannucci v. Cabrini
Med.

Ctr.

(In re Cabrini Med.

Ctr.),

2012) .

8

489 B.R. 7,

15-16

(S.D.N.Y.

The Bankruptcy Court's legal conclusions are reviewed de
novo.
Ltd .

456 B.R. at 190 (citing Pearl-Phil GMT

Kollel Mateh Efraim,
v .

Ca 1 do r

2 6 6 B. R. 5 7 5 ,

Corp . ,

580

( S . D. N . Y . 2 0 0 1 ) ) . "Mixed

questions of law and fact are reviewed de novo or under the clearly
erroneous

standard

depending

on

whether

the

question

is

predominantly legal or factual." Id. at 190 (citing Best Payphonesr
Inc. v. Manhattan Telecomm. Corp.r 432 B.R. 46, 53

(S.D.N.Y. 2010).

A district court reviews a bankruptcy court's decision
to deny a request to file a late claim or other matters within a
bankruptcy
standard.

court's
Mich.

discretion

Funds

Holdings Corp.),

Admin.

under
v.

DPH

an

"abuse

Holdings

494 Fed. App'x 135, 136

of

discretion"

Corp.

(2d Cir.

(In

2012)

re

DPH

(finding

that lower court did not abuse its discretion in denying request
to file late claim); Midland Cogeneration Venture L.P.
Corp .

(In

re

Enron

Corp . ) ,

419

F . 3d

115 ,

12 4

(2d

v.

Enron

Cir .

2 005 )

("Bankruptcy court decisions to deny a request to file late are
reviewed

for

abuse

of

discretion.").

Under

the

"abuse

of

discretion" standard, the Court should consider "whether, in light
of

the

record as

a

whole,

the bankruptcy court's

reasonable." Wilmington Trust Co. v. AMR Corp.
490 B.R. 470, 475

IV.

(S.D.N.Y. 2013).

The Bankruptcy Order Is Affirmed
9

decision was

(In re AMR Corp.),

The City contends that the Bankruptcy Order should be
reversed as:

( i)

the Plan did not deal with the Properties that

are subject to the City's purported lien,

(ii)

participate

in

with

Properties,

(iii)

the

Debtors'

the taxes

bankruptcy

reflected on the

the City did not
respect

to

the

January and March

2010 bills are administrative expenses under section 503 (b) (1) (b)
that are not time-barred, and (iv) the City demonstrated that its
failure to file a proof of claim on account of the January and
March 2010 bills was the result of excusable neglect. Appellant
Br.

at 6.

The City also reasons that under New Hampshire law,

a

lien arises in the April of each year to secure the payment of
property

taxes

for

that

year

and

that

it

possesses

a

valid

perfected tax lien on the Properties that passes through despite
the Plan. Notwithstanding these arguments, the Bankruptcy Order is
affirmed.

a.

Section 1141 ( c) of the Bankruptcy
Extinguishes the City's Tax Lien

Generally,
See 11 U.S.C.

§

Code

and

the

Plan

liens pass through a bankruptcy unaffected.

506. However,

section 1141(c)

this rule:

10

is an exception to

[E]xcept as otherwise provided in the plan or in the
order confirming the plan, after confirmation of a plan,
the property dealt with by the plan is free and clear of
all claims and interests of creditors, equity security
holders, and of general partners in the debtor.

11 U.S.C.

§

1141 (c).

A provision in a reorganization plan that

vests the property of the estates in the debtors "free and clear"
of

all

liens

will

void all

liens

unless

a

lien was

expressly

preserved in the plan. See In re WorldCom, Inc., 382 B.R. 610, 622
(Bankr. S.D.N.Y. 2008), aff'd, 2011 WL 1496378 (S.D.N.Y. Apr. 19,
2011),

aff'd,

Indus.

v.

466

F.

City Bank

App'x 28
&

(2d Cir.

Trust Co.

817, 820 (5th Cir. 2007)

2012);

see also Elixir

(In re Ahern Enters.),

507 F.3d

("[T]he confirmation of a Chapter 11 plan

voids liens on property dealt with by the plan unless they are
specifically preserved,

if the

lien holder participates in the

reorganization.").

For a

lien to be avoided under section 1141 (c),

conditions must be met:

( 1)

the plan must be confirmed;

( 2)

four
the

property that is subject to the lien must be dealt with by the
plan;
and

(3) the lien holder must participate in the reorganization;
(4)

the plan must not preserve the lien.

B.R. at 622.

11

See WorldCom,

382

Factors (1) and (4) are clearly met and are not objected
to by either party:

the Bankruptcy Court confirmed the Plan via

the Confirmation Order and section 8.9 of the Plan did not preserve
the City's lien.
(2)

and

(3)

See Bankruptcy Order,

504 B.R.

are disputed by the parties.

at 377.

Factors

The City contends that

the Bankruptcy Court erred in determining that factors (2) and (3)
of the WorldCom test had been met.

i.

Section 8.9 of the Plan "Dealt With" the Properties

As an initial matter, section 8.9 of the Plan dealt with
the Properties.

Section 8. 9 provides that

"the property of the

Estate and FairPoint shall revest in Reorganized FairPoint" and
that "[a]s of the Effective Date,

all property of FairPoint and

Reorganized FairPoint shall be free and clear of all Claims, Liens
and interests,

except as specifically provided in the Plan,

Confirmation Order, or the New Credit Agreement." Plan

§

the

8.9. The

language in section 8.9 of the Plan was virtually identical to the
language

in the

extinguishment,
382

B.R.

situation.
statutory
However,

at
In

WorldCom plan of

see Bankruptcy Order,

321,

and

WorldCom

WorldCom,

the

court

found

is

504 B.R. at 377; WorldCom,
analogous

Waldinger

lien under Nebraska
the

reorganization regarding lien

law.

that
12

to

the

Corporation

WorldCom,

Waldinger's

382

asserted

B.R.

secured

instant

at

claim

a

614.
was

unsecured because its
WorldCom's plan.
WorldCom

lien was extinguished under the terms of

Id. at 622-23. Like section 8.9 of the Plan, the

plan stated that

"all property of the estates

of the

Debtors shall vest in the Reorganized Debtors free and clear of
all Claims, Liens .... " In re WorldCom, Inc., 382 B.R. at 621. Given
the similar language employed in the Plan,
the Second Circuit,

is dispositive here,

WorldCom,

affirmed by

and the Plan adequately

"dealt with" the Tax Claim of the City.

The City contends that the Plan does not "deal with" the
New England Telco properties because it does not specifically list
the liens or those properties.

Appellant Br.

at 10-12.

Yet the

City has cited to no cases in this Circuit that explicitly requires
such specificity in a reorganization plan. Moreover, a plan does
not need to specifically list a creditor's liens to satisfy the
criteria for lien extinction. See WorldCom,
Court notes

that

the

382 B.R. at 622

("The

second criterion of the property that

is

subject to the lien must be dealt with by the plan does not require
the lien itself to be dealt with by the Plan.").

This analysis

should logically extend to real and personal property,

as having

a requirement that a chapter 11 plan separately list each and every
parcel of real and personal property (or lien) that is subject to
the

discharge

contained

in

section

13

114l(c)

would

be

unduly

burdensome

in

a

manner

that

does

not

provide

any

perceivable

benefit.

The City also argues that sections 13.2 and 13.3 of the
Plan preserve its liens as it is more specific than section 8.9 to
the Tax Claim and they would not extinguish any liens. Appellant
Br.

at 11-12.

Claims

and

Section 13.2 and 13.3 deal with the "Discharge of

Termination

"Discharge

of

of

Debtors,"

Old

FairPoint

respectively.

Equity

These

Interests"

and

sections

discharge

only the City's claims for unpaid tax and the Debtors'

liability

for that tax. See Plan§§ 13.2, 13.3. Neither discuss the treatment
of

property

liens.

By

contrast,

Section

8.9

of

the

Plan

extinguishes any liens the City may have against the Properties.
See

Plan

FairPoint

§

8. 9

and

Liens .... ").

("As

of

the

Reorganized
Sections

13.2,

Effective

FairPoint
13.3

Date,

shall

and

8.9

be
of

all

property

free
the

of

all

Plan

are

of

not

ambiguous and separately delineate the resolution of claims, the
Debtors'

liability,

and

interests

in

estate

property,

respectively.

ii.

The City Participated In the FairPoint Bankruptcy
Proceedings

14

With
contends

regards

that

it

to

the

participation

participated

in

the

factor,

Debtors'

the

City

bankruptcy

proceedings with respect to the other claims it filed but not with
respect to the January and March 2010 bills. Appellant Br. at 16.
It states that it did not file a proof of claim for certain 2009
property taxes because it believed that it had a lien that secured
that claim.

Id.

at 4 (citing N.H. Rev. Stat. Ann.

§

80:19

(2013)

("The real estate of every person or corporation shall be holden
for all taxes assessed against the owner thereof;
estate

to

whomsoever

assessed

shall

be

holden

and all real
for

all

taxes

thereon. All such liens shall continue until one year from October
1 following the assessment.").

The

City's

argument

is

unpersuasive.

The City admits

that it filed proofs of claims for the July and October 2009 bills
for precisely the same 2009 tax due on the Properties. All claims
and liens for the 2009 property taxes arose on April 1, 2009, and
it

would

be

counterintuitive

to

state

that

the

City

did

not

participate with respect the 2009 tax bills it elected to bill in
January and March 2010 for the 2009 tax liens that had already
arose when it did participate with respect to the 2009 taxes it
elected to bill in July and October 2009: the City's election to
bill

in

January

and

March

2010

does

not

remove

them

from

participation in the FairPoint chapter 11 with respect to the 2009
15

property taxes as a whole. Indeed, the City's general participation
with respect to the FairPoint bankruptcy proceedings is made even
more poignant with its filing of twenty-one proofs of claims prior
to the Bar Date and the City's

litigation of the

8 8th Omnibus

Claims Objection.

Furthermore, filing a proof of claim in a reorganization
proceeding

is

sufficient

in

this

Circuit

to

satisfy

the

participation element. See WorldCom, 382 B.R. at 622 (finding that
the

claimant

"participated in

the

reorganization proceeding by

filing a proof of claim."). The City had filed the Half-Year Claims
on the Properties, which is a sufficient level of activity to find
that the City's participated in the Debtors' bankruptcy.

The cases cited by the City in support of its position
are inapplicable here. In In re Be-Mac Transp. Co., Inc.,

83 F.3d

1020 (8th Cir. 1996), the FDIC filed a secured proof of claim, but
when it amended the claim it forgot to include the secured portion
of its claim. The debtor then filed a plan of reorganization that
proposed to treat the FDIC as an unsecured creditor for purposes
of voting and distributions. FDIC sought leave from the bankruptcy
court to further amend its proof of claim prior to confirmation
and assert

its

status

bankruptcy

court

as

denied

a
the

secured creditor.
FDIC' s
16

motion

to

Id.

at

amend

1023.
the

The

claim

because it was untimely,

refused to count the FDIC' s vote as a

secured creditor, and confirmed the plan over the FDIC's objection.
Id.

at

1025.

The

bankruptcy court

Eighth

Circuit

reversed

erroneously denied the

and

found

that

the

FDIC an opportunity to

participate in the case even though the FDIC was actively pursuing
its rights as a secured creditor prior to the confirmation of the
plan

and

had

timely

filed

a

secured proof

of

claim

that

inadvertently made unsecured due to subsequent amendment.

Id.

was
at

1026-27.

The

concerns

in

Be-Mac are

not

present

here.

Be-Mac

involved a secured creditor whose rights were improperly infringed
during the contested confirmation of the plan and who triggered
the claims allowance process by filing a secured proof of claim.
Here,

the

City

confirmation

of

is
the

challenging
Plan.

the

Disturbing

Plan
the

three

years

Bankruptcy

holdings would unsettle the finality of the Plan,

after
Order's

a factor that

weighs for affirming the Bankruptcy Order.

Similarly, Greater Am. Land Res., Inc. v. Town of Brick,
N.J., 11-CV-5308 CCC, 2012 WL 1831563 (D.N.J. May 17, 2012), does
not

compel

reversal

of

the

Bankruptcy Order.

Greater

American

involved a creditor who filed a proof of claim relating to only
one of two properties; that court in turn found that the creditor
17

only participated in the reorganization proceeding with respect to
the property for which it filed a proof of claim. Id. at *6. Unlike
in Greater American,

"the City timely filed proofs of claim for

all six of the properties subject to the Tax Claim." Bankruptcy
Order, 504 B.R. at 378. Extending the reasoning in Greater American
for a proof of claim on tax bills for one time period and not tax
bills

on

another

period

for

the

same

property

stretches

participation analysis to an impermissible degree.

the

This is even

more poignant when considering that the July and October 2009 and
January and March 2010 tax bills are for tax liens that arose on
the same day and for the same tax year.

Consequently,

"the City

cannot now claim non-participation for the second half of the 2009
tax

year

when

it

filed

proofs

of

claim

for

these

same

six

properties for the first half of the 2009 tax year." Id.

Likewise, Acceptance Loan Co. v. S. White Transp.,

(In re S.

White Transp.,

Inc.),

725 F.3d 494

(5th Cir.

Inc.

2013),

is

also inapplicable because the secured creditor in that case "never
filed a proof-of-claim in the bankruptcy court and otherwise did
not involve itself in any way with the ongoing bankruptcy." Id. at
495. By contrast, the City filed 21 claims and actively litigated
several issues before the Bankruptcy Court.

18

In re Barton Industries,

Inc., 104 F.3d 1241 (10th Cir.

1997), is also distinguishable. The property at issue in that case
was

a

lien on an unearned,

return

insurance premium finance agreement.

insurance premiums under

an

Id. at 1245-46. The case did

not involve a property tax. The Barton court held that the creditor
asserting the lien did not receive sufficient notice because the
plan stated that all allowed claims were entitled only to a pro
rata

share

of

funds

from

the

creditor

trust,

but

did

not

specifically refer to the return premiums, the creditor's interest
therein, or the plan's effect on such interest. Id. at 1246. Here,
the City is not challenging the adequacy of notice of the Plan.
Moreover,

the Plan specifically provides for payment of "Allowed

Secured Tax Claims"
would,

and the

extinguishment

of

all

liens.

This

and did given the City's filing of twenty-one proofs of

claims, give the City sufficient notice of the Plan and FairPoint
bankruptcy.

See,

e.g.,

Ahern, 507 F.3d at 823

(finding the plan

gave sufficient notice to its treatment of the property to which
the creditor's lien attached where the plan "provided for pro-rata
payment of all unsecured and undersecured creditors of the debtor,
specifically

stating

that

this

class

of

claims

including

all

judgment lien holders").

The City's citation to Acceptance Loan Co. v.
Transp.,

Inc.

(In re S.

White Transp.,
19

Inc.),

S. White

725 F.3d 494

(5th

Cir.

2013),

misplaces

the

case's

significance

to

the

instant

action. In Acceptance, the secured creditor "never filed a proofof-claim in the bankruptcy court and otherwise did not involve
itself in any way with the ongoing bankruptcy." Id.

at 495.

By

contrast, the City filed multiple proofs of claims.

The cases
extend the

section

instant case.

Here,

cited by the City in which courts did not
1141 ( c)

exception are

not

analogous

tax liens on the Properties

to

the

(including tax

bills for the 2009 tax lien) were claimed by the City throughout
the

FairPoint

chapter

11

proceedings.

The

City

clearly

"participated" in the reorganization. Although it elected not to
submit the January and March 2010 tax bills as proofs of claims,
this choice does not eviscerate its participation in the FairPoint
bankruptcy.

iii. The Section 1141 (c) Exception Applies to the Tax
Claim And the City's Tax Lien Does Not Survive In
Accordance With 11 U.S.C. § 506

As all four factors outlined in WorldCom applies to the
Tax Claim, section 1141(c) exception applies here.

20

The City contends that its lien survives under section
506 (d)

of

the

Bankruptcy

Code.

Appellant

Br.

at

8-9.

Section

50 6 ( d) ( 2) provides, in relevant part:

(d) To the extent that a lien secures a claim against
the debtor that is not an allowed secured claim, such
lien is void, unless-

(2) such claim is not an allowed secured claim due only
to the failure of any entity to file a proof of such
claim under section 501 of this title.

11 U.S.C.

§

506(d) (2).

Nonetheless,

section 114l(c)

provides an

exception to section 506(d). The City's tax liens were extinguished
by operation of section 114l(c) because the Properties were dealt
with pursuant to section 8. 9 of the Plan,

not because the City

failed to file a proof of claim. Consequently,

section 506(d)

is

inapplicable here.

The City suggests that the taxes it failed to include
for the last half of 2009 are new claims that can pass through the
chapter 11 cases. Under New Hampshire law, "real estate taxes are
assessed as of April 1 in each year and the tax year begins on
that date. The tax for the whole year is an obligation of the owner
as of April 1 and the tax becomes due and payable as of that date."

See Town of Gilford v.

State Tax Comm'n,
21

229 A.2d 691,

693

(N.H.

1967)

(emphasis added)

of Francestown,

No.

(citations omitted); see also Cote v. Town

17893-98PT,

2000 WL 136841,

at *l

(N.H.

Bd.

Tax. Land. App. Jan. 31, 2000); Graves v. City of Portsmouth, No.
16674-96PT, 1998 WL 615432, at *l

(N.H. Bd. Tax. Land. App.

July

31, 1998); Daigle v. Town of Sandown, No. 2744-84, 1985 WL 19576,
at *l (N.H. Bd. Tax. Land. App. May 16, 1985). As the liens in the
Tax Claim arose on April 1, 2009, the taxes billed in January and
March 2010 were
Moreover,

the

still

covered under the

City filed

claims

for

that

Plan.
tax

See Plan
in the

§

8. 9.

Half-Year

Claims. Section 506(d) does not allow a creditor to assert a lien
after its claims have been allowed in a fixed amount by court order
and then satisfied under a

confirmed plan that expressly vests

property of the estate in the reorganized debtor free and clear of
any liens.

It is not inequitable to affirm the Bankruptcy Court's
finding that the City's tax liens were extinguished under the Plan.
The Seventh Circuit stated in In re Penrod, 50 F.3d 459 (7th Cir.
1995), that the reasons liens can be extinguished if they are dealt
with by a plan is that

[ i] t
lowers
the
costs
of
transacting
with
the
reorganized firm, thus boosting the chances that the
reorganization will succeed. By studying the plan of
reorganization a prospective creditor of or investor in
the reorganized firm can tell whether any liens that
22

creditors whose interests in the new entity are defined
in the plan may have had against its bankrupt predecessor
survive as encumbrances on the assets of the new firm.

Id. at 463. Penrod's equitable concerns stem from notice. See id.
at 464 ("[S]ince the law was not clear with respect to the survival
of the lien .

[the creditor]

may not have realized when the

plan was adopted that its lien was in jeopardy. Conceivably this
might give

[the creditor]

an equitable defense to the complete

extinction of the lien."). Notice concerns do not exist here. The
City actively participated in the

Fair Point bankruptcy and was

provided clear notice that its liens would be extinguished with
the terms of the Plan. It also filed proofs of claims for July and
October of 2009; the City was clearly aware of the 2009 tax lien
on the Properties. Consequently, equitable concerns do not exist.

Accordingly,

section 114l(c)

applies to the Tax Claim,

and the Bankruptcy Court's holdings with respect to this issue is
upheld.

b.

The City's Tax Claim Is a Prepetition Claims Subject to
the Bar Date

The City contends that the Bankruptcy Court erred in not
treating the Tax Claim as an administrative expense claim pursuant

23

to section 503 (b) ( 1) (B)
18.

The City contends

prepetition claim,

of the Bankruptcy Code. Appellant Br. at
that

if

the

Tax Claim is

not

a

secured

then the taxes that become due post-petition

are entitled to administrative expense status.

Appellant Br.

at

18.

As previously noted, in New Hampshire "[t]he tax for the
whole year is an obligation of the owner as of April 1 and the tax
becomes due and payable as of that date." Gilford,
693; see also N.H. Rev. Stat.

§

229 A.2d at

76:2 ("The property tax year shall

be April 1 to March 31 and all property taxes shall be assessed on
the inventory taken in April of that year

.... ").

Ownership of

property on April 1 triggers the obligation of the owner to pay
taxes for that year in the state.

Id.

(citing N.H.

Rev.

Stat.

§

76:10; Town of Gilford, 229 A.2d at 693).

Section 503
in relevant part,
expenses

(b) (1) (B)

of the Bankruptcy Code provides,

that "there shall be allowed,

including

( B)

any

tax

-

( i)

administrative
incurred by the

estate, whether secured or unsecured, including property taxes for
which liability is in rem,

in personam, or both, except a tax of

a kind specified in section 507(a) (8) of this title." 11 U.S.C.A.
§

503 (b) (1) (B) (i). The phrase "incurred by the estate" establishes

that it is the date that property taxes are attached and become an

24

obligation,

rather

than

the

date

that

taxes

are

due,

that

determines whether taxes qualify as administrative expenses. See,
e.g.,

Marion

County Treasurer v.

Lustre Prods.),

Blue Lustre Prods.

214 B.R. 188, 190 (S.D. Ind. 1997)

(In

re Blue

("[I]t is clear

a full twenty months

that the property taxes were incurred .

prior to the date the bankruptcy petition was filed.

Because the

estate does not exist until after the bankruptcy petition is filed
taxes

incurred

by

the

debtor

prior

to

the

filing

petition are not taxes incurred by the estate.").

taxes

Holdings,

incur

in

New

Hampshire.

435 B.R. 153, 165

(Bankr.

See,

e.g.,

the

The Tax Claim

became an obligation of New England Telco on April 1,
date

of

In

S.D.N.Y. 2010)

2009,
re

the

EH

S &B

(finding that

local Texas tax liens attached and became a personal obligation of
the

debtors

on

January 1 because

under

state

law

"a tax

lien

attaches to property to secure payment of all taxes ... ultimately
imposed for the year on the property" on January 1 of each year) .
Consequently, the Tax Claim is a prepetition claim.

The City contends that since it was a governmental unit,
it was not required to file an administrative expense request by
the

Administrative

503 (b) (1) (D)
U.S.C.

§

Expense

Bar

Date

by

operation

of

section

of the Bankruptcy Code. Appellant Br. at 18; see 11

503(b) (1) (D)

("[N]otwithstanding

the

requirements

of

subsection (a), a governmental unit shall not be required to file
25

a request for the payment of an expense described in subparagraph
(B) or (C), as a condition of its being an allowed administrative
expense.").

However,

bar date orders "can bind tax claimants to

file administrative claims for postpetition personal property and
other

taxes

despite

the

exception

in

503

that

(b) (1) (D)

governmental units are not otherwise required to file requests for
payment of administrative expenses .... the 503 (b) ( 1) ( D) exception
does not apply where the court has entered an administrative bar
date order applicable to governmental units." EH S&B Holdings, 435
B.R. at 164-65. Thus, if an administrative bar date order "applies
generally to 'all parties'

[t]ax [a]uthorities are required to

comply with it regardless of section 503 (b) (1) (D)

"

Id.

The Plan applied the Administrative Expense Bar Date to
all

parties,

and

the

City

was

required

to

timely

file

an

administrative expense request by March 25, 2011. The City did not
timely submit a request for payment of administrative expenses for
the

Tax

Claim

prior

to

the

Administrative

Expense

Bar

Date.

Consequently, the Tax Claim cannot be treated as an administrative
expense claim.

c.

The Bankruptcy Court Did Not Abuse Its Discretion in
Finding That The City Did Not Demonstrate Excusable
Neglect

26

The City contends that the Bankruptcy Court erred when
it determined that the City did not demonstrate that its failure
to

file

a

proof

Appellant

Br.

of

at

Bankruptcy Court

claim is

19.

Upon

the

result

review,

it

of

excusable

is

apparent

adequately considered each factor

neglect.
that

the

and did not

abuse its discretion in its determination.

Courts

must

consider

four

factors

when

whether to permit a creditor to file a late claim:
of prejudice to the debtor,

(2)

(1) the danger

the length of the delay and its

potential impact on judicial proceedings,
delay,

contemplating

(3)

the reason for the

including whether it was within the reasonable control of

the movant, and (4) whether the movant acted in good faith. Pioneer
Inv.

Servs.

Co.

v. Brunswick Ass'n. L.P.,

507 U.S.

380,

395, 113

S.Ct. 1489, 1498, 123 L.Ed.2d 74 (1993). The ultimate determination
will depend on these factors and upon a careful review of "all
relevant circumstances." Id.

No abuse of discretion was made by

the Bankruptcy Court in its review of the Pioneer factors.

1.

Prejudice

Courts consider a variety of factors when determining
whether danger of prejudice to the debtor exists, including whether
allowing

a

late

claim might

precipitate
27

a

flood

of

late-filed

claims. See Midland Cogeneration Venture Ltd. P'ship v. Enron Corp.
(In

re

Enron

419

Corp.),

F.3d

115,

130

(2d

Cir.

2005).

The

Bankruptcy Order noted that "the Debtors have confirmed a plan
under which all timely filed claims against the Debtors have been
administered

and

all

distributions

have

been made"

and

"[t] he

Debtors were prepared to close the case of New England Telco, the
Debtors' last remaining open case." Bankruptcy Order, 504 B.R. at
381. Given the status of the Debtor's chapter 11 proceedings, there
was

a

very

real

possibility

that

allowing

late

claims

could

"inundate[e] the [Bankruptcy] Court with new requests for payment,
filing tax liens and asserting foreclosures all over the country."
Id.

(citation and quotation marks omitted).

Concord

contends

that

its

claims

are

relatively

negligible in amount. But as the Bankruptcy Court noted "[i]t can
be

presumed

in

a

similarly-situated

case

of

this

potential

that

size

claimants

to

there

[Concord]."

are
Id.

other
The

Bankruptcy Court also noted that the Debtors operated in eighteen
states. Id. Those states' and municipalities' tax laws create the
potential of inundating the Bankruptcy Court with new claims if
the Tax Claim is approved. Thus,

the prejudice recognized by the

Bankruptcy Court in allowing the Tax Claim was a real possibility,
and it was appropriate to consider "whether allowing a claim would

28

be likely to precipitate a flood of similar claims." Enron,

419

F.3d at 130.

2.

Length of Delay

The Bankruptcy Court noted that "[t]his case commenced
over four years ago, the Governmental Bar Date passed three and a
half years ago, the Plan was confirmed nearly three years ago, and
the Administrative Expense Bar Date passed two and a half years
ago." Bankruptcy Order, 504 B.R. at 381. The Bankruptcy Court also
found that the Debtors were prepared to close New England Telco's
chapter 11 case and "all timely filed claims against the Debtors
have been fully administered and distributions have been made."
Id. Allowing the Tax Claim would clearly have risked delaying the

proceedings. Accordingly,

the Bankruptcy Court did not abuse its

discretion on this issue.

3.

Reason for the Delay

The

Second

reason for the delay,

Circuit

emphasizes

the

third

factor,

the

as the most important Pioneer factor.

See

Williams v. KFC Nat. Management Co., 391 F.3d 411, 415-16 (2d Cir.

2004). "[E]quities will rarely if ever favor a party who fails to
follow the clear dictates of a court rule and ... where the rule
29

is entirely clear,

we continue to expect that a party claiming

excusable neglect will,

in the ordinary course,

lose under the

Pioneer test." Silivanch v. Celebrity Cruises, Inc., 333 F.3d 355,

366-67

(2d Cir. 2003)

(internal citations omitted).

The City contended before the Bankruptcy Court and in
the instant motion that its belief that it was not required to
file

a

proof

of

Bankruptcy Order,

claim was

mere

inadvertence

and mistake.

See

504 B.R. at 381; Appellant Br. at 22. However,

as noted by the Bankruptcy Order, "inadvertence, ignorance of the
rules, or mistakes construing the rules do not usually constitute
'excusable' neglect ... . "Pioneer, 507 U.S. at 392, 113 S.Ct. 1489;
see Bankruptcy Order,

504

B.R.

at

381.

The

Bankruptcy Court's

finding that the City did not offer any "persuasive justification
as to why it failed to file a proof of claim for the Tax Claim"
when twenty of the other twenty-one proofs of claims that the City
timely

filed

against

the

Debtors

arose

from the

Debtors'

non-

payment of real property taxes and six of these claims relate to
the same Properties and the same tax year as the Tax Claim,

see

id. at 382, was not an abuse of discretion. For as the Bankruptcy

Court noted, "[e]ven if the City believed that the Tax Claim would
be consensually resolved, nothing prevented it from filing a proof
of claim for the Tax Claim,

just as it did for its other twenty-

30

one claims." Id. Accordingly, this factor weighs against excusable
neglect.

4.

Good Faith

The last Pioneer factor asks whether the movant acted in
good faith. The Bankruptcy Court found that this factor "does not
favor

either

conclude

party"

that

the

as

City

the

record was

failed

to

act

insufficient
in

good

for

faith.

it

Id.

to
The

Bankruptcy Court's neutrality as to this factor clearly does not
constitute abuse of discretion.

The Bankruptcy Court ultimately reasoned that the since
the first three factors favored New England Telco's position, the
City did not meet its burden of demonstrating excusable neglect
for its failure to file a proof of claim for the Tax Claim.

Id.

Given that the Bankruptcy Court did not abuse its discretion in
finding for New England Telco with respect to the Pioneer factors,
the

Bankruptcy

Court's

ultimate

conclusion

against

excusable

neglect and denial of the City's ability to file an untimely proof
of claim was not an abuse of its discretion.

31

·----------·

V.

Conclusion

For
affirmed.

the

foregoing

The

Clerk of the

reasons,
Court

is

the

Bankruptcy

directed to

Order

terminate

pending motions and mark this case as closed.

It is so ordered.

Dated:

New York:bNew York
August _:I, 2014

Robert W. Sweet, U.S.D.J.

32

is
all