In Re: Mba Poultry, L.L.C., Debtor. Bird Watchers, L.L.C. v. Johnson County, Nebraska
Docket: 01-2155
Court: Court of Appeals for the Eighth Circuit; May 29, 2002; Federal Appellate Court
Bird Watchers, L.L.C. purchased personal property from the bankruptcy estate of MBA Poultry, L.L.C., which had outstanding personal property taxes owed to Johnson County, Nebraska. The bankruptcy court ruled that if Johnson County held a valid tax lien on MBA Poultry's personal property, that lien would survive the sale to Bird Watchers. The district court upheld this decision, prompting Bird Watchers to appeal.
MBA Poultry, which operated a chicken processing plant, owed both real estate and personal property taxes at the time of its bankruptcy filing. Johnson County filed a claim for approximately $106,724.32 in unpaid property taxes. Heller Financial, Inc., a creditor, had perfected a security interest in MBA Poultry's personal property prior to the tax lien. The bankruptcy court granted Heller a super-priority on February 17, 2000, and Heller sold its interest to Bird Watchers, who then acquired all of MBA Poultry's assets for $4.8 million.
After the acquisition, Bird Watchers paid the real estate taxes but contested the obligation for personal property taxes, asserting that its security interest took precedence. Johnson County challenged the bankruptcy court's prior ruling, claiming it had not been notified of the proceedings that led to the super-priority designation. The bankruptcy court ruled in favor of Johnson County, affirming that its tax liens retained priority and could be enforced under Nebraska law.
Bird Watchers subsequently appealed to the district court, while also transferring the personal property to its subsidiary, Tecumseh Poultry, without notifying the court or Johnson County. The district court affirmed the bankruptcy court's ruling. During the appeal, Johnson County sought to collect the unpaid taxes from Bird Watchers, prompting Bird Watchers to assert it no longer possessed the property. Johnson County then moved to dismiss the appeal for lack of subject matter jurisdiction and requested attorney fees for its response to Bird Watchers's appeal.
Before evaluating the merits of Bird Watchers's appeal regarding Johnson County's tax lien, the determination of Bird Watchers's standing is essential. Standing requires a personal stake in the controversy, as established in Warth v. Seldin. Counsel for Bird Watchers indicated that they would ultimately be liable for any tax collected by Johnson County related to the disputed personal property, establishing their standing to appeal.
The bankruptcy court's decision is reviewed under the same standards as the district court, focusing solely on legal issues, which are assessed de novo. Under pre-1903 Nebraska law, personal property tax liens had priority over subsequent liens. However, the 1903 Nebraska revenue law elevated unpaid personal property taxes to a first lien status until paid, similar to real property taxes.
Nebraska Revised Statutes section 77-203 asserts that taxes on both real and personal property are first liens upon the respective properties. A 'first lien' is defined as one that takes precedence over all other encumbrances. Bird Watchers contends that the Nebraska Legislature did not intend for personal property tax liens to hold the same priority as real property tax liens, citing the omission of personal property mentions in section 77-208, which emphasizes the priority of real property tax liens.
However, analysis of the 1903 revenue law indicates that the legislature did not differentiate between the types of first liens based on property classification. Instead, it distinguished between general tax liens and special assessments. Therefore, the fact that real property tax liens are reiterated in the statutes does not undermine the priority of personal property tax liens.
Nebraska's Uniform Commercial Code (U.C.C.) does not challenge the precedence of personal property tax liens, as established by the district court. The specific U.C.C. version in effect during this dispute explicitly excluded tax liens created under state law (referencing Neb. U.C.C. 9-102(2)). Although Bird Watchers contends that prior rulings indicated the U.C.C. applies to tax liens, the cited case, United States v. Trigg, relied on the Federal Tax Lien Act, which is not mirrored by any Nebraska law. Therefore, the court refrains from applying Trigg to this case.
The court also declines to assess the validity of Johnson County’s lien under Nebraska law, as this issue was not raised in lower courts. It concludes that if Johnson County possesses a valid lien for unpaid personal property taxes owed by MBA Poultry, this lien takes precedence over Bird Watchers's interest in the property. Consequently, both the bankruptcy court and district court's rulings are affirmed, denying Johnson County's motions to dismiss and for attorney fees.
