IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: ) ) COLLINS & AIKMAN ) CORPORATION,

et al ) ) ) ____________________________________) Chapter 11 Case No. 05-55927 (swr) (Jointly Administered) Hon. Steven W. Rhodes

CITY OF ST. CLAIRS LIMITED RESPONSE TO DEBTORS TWELFTH OMNIBUS OBJECTIONS TO CLAIMS (LATE FILED CLAIMS)RE CLAIM NUMBER 8516 Creditor, The City of St. Clair (St. Clair), through its attorneys, Gold, Lange and Majoros, PC, in response to Debtors Twelfth Omnibus Objection to Claims (Late Filed Claims) (the Claims Objection), says: 1. 2. 3. Admitted. Admitted. Admit that the cited rules and Code sections allow the Court to resolve certain

objections to claims, deny that Debtors have a valid objection to St. Clairs Claim No. 8516. 4. 5. 6. 7. 8. Admitted. Admitted. Admitted. Admitted. The Courts November 22, 2005 Bar Date Order is admitted, deny the notice

described in 8. of the Claims Objection provided adequate notice to all parties in interest, including St. Clair. 1

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9.

Admit that Debtors object to the Late Filed Claims listed on Exhibit B for the reasons

set forth in the 9. of the Claims Objection, but deny that such objection can extinguish St. Clairs secured interest in the real and personal property to which its liens have attached, or its Claim No. 8516. 10. Admit that St. Clair filed its Amended Proof of Claim No. 8516 after January 11,

2006, but deny that its failure to file a proof of claim by such date can result in the disallowance of such claim or that it should be barred or expunged. 11. Admit that St. Clair received a copy of the Claims Objection with its specific claim

detail and neither admit or deny the remaining allegations contained in 11 for a lack of information upon which to form a belief. 12. Neither Admit nor deny the allegations contained in 12 for a lack of information

upon which to form a belief. In further response to Debtors objection to St. Clairs Claim No. 8516, St. Clair says: 13. St. Clairs Proof of Claim 85161 in the amount of $71,967.52 consists of taxes on real

and personal property, including Industrial Facilities Taxes (IFT), which are reduced charges assessed, levied and for all practical purposes treated as ad valorem property taxes on property as a result of agreement between St. Clair and the Debtors for rehabilitation of Debtors property in a manner that the State has determined to encourage by statute. MCL 207.561 et seq. 14. In Michigan, real estate taxes, personal property taxes and IFT taxes are each assessed

In addition St. Clair timely filed Claim No. 4548 for unpaid pre-petition water bills, which it originally denominated a priority claim, but which was in fact a secured claim. This claim was subsequently amended to reflect that it was really a secured claim and the Debtor has not objected to this claim. 2

as of December 31 of the year prior to the time they are billed and due, MCL 211.2(2), 211.13(1) and 207.561(2). Michigan Real Property Law, Cameron, John G., Jr., (3Ed, 2005) p. 1567. This date is the tax day. 15. These taxes become a lien on the property taxed (1) on the following December 1,

(2) on a day provided for by the charter of a city or village, or (3) as provided for in section 40a.2 16. The City of St. Clair City Charter, 7.10 designates August 1st of each year the date

that amounts assessed on any interest in real or personal property become a debt due to the city and the date that the taxes due become a lien on the property assessed.3 17. Personal property taxes, once they become a lien

are also a first lien, prior, superior, and paramount, on all personal property of the persons assessed . . . and take precedence over all other claims, encumbrances, and liens on that personal property, whether created by chattel mortgage, title retaining contract, execution, any final process of a court, attachment, replevin, judgment, or otherwise. A transfer of personal property assessed for taxes does not divest or destroy the lien, except where the personal property is actually sold in the regular course of retail trade. MCL 211.40 (in part). 18. The real and personal property taxes (including the IFT taxes), together totaling

$71,967.52, became a lien on the real and personal property used by the Debtors on August 1, 2005.

This provision allows a municipal treasurer to create a tax day for specific real or personal property by filing an affidavit with the county register of deeds attesting to certain facts that might impair the municipalitys ability to collect the taxes owing, including the filing of a bankruptcy petition. On August first the taxes thus assessed shall become a debt due to the city from the persons to whom they are assessed. The amounts assessed on any interest in real property shall become a lien upon such real property for such amounts and for all interest and charges thereon; and all personal taxes shall become a lien on all personal property of such parties so assessed. Such lien shall take precedence over all claims, encumbrances or liens to the extent provided by the general tax laws of the state, and shall continue until such taxes, interest and charges have been paid. St. Clair City Charter; Section 7.10. 3
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Although this was after the bankruptcy petition, which was filed May 17, 2005, the fixing of the lien was an exception to the operation of the automatic stay pursuant to 11 U.S.C. 362(b)(18) because, as required, these taxes did not come due until after the filing of the petition. 19. St Clair may have received notice of the January 11, 2006 claims bar date in the

Courts November 22, 2005 Bar Date Order. However, it did not believe that the Bar Date Order would apply to it and to its tax claim and tax lien against Debtors property because the tax bill became due and payable after Debtors bankruptcy filing. It did not file Proof of [its secured] Claim within the time set forth in the Bar Date Order. 20. July 31, 2006. 21. Despite its late filing of Claim No. 8516, the Debtors may not avoid St. Clairs lien St Clair filed its Proof of Claim No. 8516, listing its interest as a secured creditor, on

on the Debtors interest in the real and personal property to which St. Clairs lien has attached. 22. It is a well-established rule that secured liens pass through bankruptcy unaffected.

Long v. Bullard, 117 U.S. 617, 620-21, 29 L.Ed. 1004, 6 S.Ct. 917 (1886). This rule survived the various overhauls of bankruptcy law. Dewsnup v Timm, 502 U.S. 410, 417, 116 L.Ed.2d 903, 112 S.Ct.773 (1992), In re Hamlett, 322 F.3d 342 (4th Cir. 2003). 23. The mere failure to file a proof of claim, or to file a timely claim, in a bankruptcy

proceeding is not a proper basis for avoiding the underlying lien that secures the claim. Id. at 349, In re Tarnow, 749 F.2d 464, 466-67 (7th Cir. 1984), In re Be-Mac Transp. Co., Inc., 83 F.3d 1020, 1027 (8th Cir. 1996). 11 U.S.C. 506(d)(2)4

(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.

24.

Once a proof of claim is filed, the claim is deemed allowed and the proof constitutes

prima facie evidence of the claims validity and amount. In re Be-Mac, supra, at 1025, citing 11 U.S.C. 502(a) and Fed R. Bankr. P. 3001(f). 25. In the present case, the Debtors seek to have the Court disallow St. Clairs Claim No.

8516 solely because it was filed late. It does not challenge and has never challenged the amount or the substantive validity of the claim. 26. Nor have Debtors filed a proceeding to determine the validity, priority, or extent of

St. Clairs lien pursuant to Fed. R. Bankr. P 7001(2). WHEREFORE, Creditor City of St. Clair respectfully requests that the court 1) deny Debtors objection to Claim No. 8516 as set forth in Debtors Twelfth Omnibus

Objection to Claims (Late Filed Claims) or, in the alternative; 2) 3) grant St. Clair leave to file its claim late; or determine that, because the tax bills in question did not become due and payable until

after the filing of the petition, they are administrative expense claims that St. Clair may seek to have Debtors pay in accordance with 11 U.S.C. 503(b)(1)(B). GOLD, LANGE & MAJOROS, P.C.

Dated: January 31, 2007

By:

/s/ Donna J. Lehl DONNA J. LEHL Attorneys for City of St. Clair 24901 Northwestern Hwy., Ste. 444 Southfield, MI 48075 (248) 350-8220 dlehl@glmpc.com (P40013)