UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

In re: COLLINS & AIKMAN CORPORATION, et al, Debtors.

Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification #13-3489233) Hon. Steven W. Rhodes

CITY OF STERLING HEIGHTS BRIEF IN SUPPORT OF RESPONSE IN OPPOSITION TO THE COLLINS & AIKMAN LITIGATION TRUST AND POST-CONSUMMATION TRUSTS FIRST JOINT OMNIBUS OBJECTION TO CLAIMS (AMEND AND ALLOW CLAIMS) For its Brief in Support of its Response in Opposition to the Collins & Aikman Litigation Trust and Post Consummation Trusts (the Trusts) Motion, the City of Sterling Heights (Sterling Heights) states as follows: FACTUAL BACKGROUND Between the dates of August 2004 and December 2005, Collins & Aikman incurred certain water and sewer utility charges for the properties located at 6600 Fifteen Mile Road and 6385 Wall Street in Sterling Heights (Subject Properties). (Exhibit A, Affidavit of Walter Hessell). These water and sewer utility charges are secured pursuant to state law under MCLA 123.162 and, therefore, on January 6, 2006, Sterling Heights timely filed a Proof of Claim for the secured amount of $11,410.58. (Exhibit B).

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On or about July 12, 2007, this Court confirmed Collins & Aikmans Chapter 11 Plan (the Plan) under which secured creditors were to be paid. The Plan identified Sterling Heights as being a secured creditor for the amount listed above1. (Exhibit C). As a secured creditor, Sterling Heights relied on the provisions of the Plan and had no choice but to wait to be paid as a secured creditor under the terms of the Plan. Any other action by Sterling Heights at that time, such as enforcement of the lien, would have been in clear violation of the terms of the Plan as well as the Automatic Stay. Therefore, Sterling Heights has waited to be paid pursuant to the Plan. Now, the Trusts (as successors to the debtor) have brought the current motion seeking to reclassify Sterling Heights secured claim in the amount of $11,410.58 into a general unsecured claim. This would be improper and contrary to the Plan. LEGAL ARGUMENT A. Sterling Heights claim is secured pursuant to state law. MCLA 123.162 states as follows: A municipality which as operated or operates a water distribution system or a sewage system for the purpose of supplying water or sewage system services to the inhabitants of the municipality, shall have as security for the collection of water or sewage system rates, or any assessments, charges, or rentals due or to become due, respectively, for the use of sewage system services or for the use or consumption of water supplied to any house or other building or any premises, lot or lots, or parcel or parcels of land, a lien upon the house or other building and upon the premises, lot or lots, or parcel or parcels of land upon which the house or other building is situated or to which the sewage system service or water was supplied. This lien shall become effective immediately upon the distribution of the water or provision of the sewage system service to the premises or property supplied, but shall not be enforceable for more than 3 years after it becomes effective.

In fact, as recently as March 14, 2008, an individual from the law firm of Carson Fisher by the name of Nancy R. contacted Walter Hessell, accountant for the City of Sterling Heights, to confirm the Citys secured creditor status (Exhibit A).

Pursuant to this statute, the $11,410.58 in outstanding charges incurred by Collins & Aikman immediately became secured by a lien against the Subject Properties simultaneous with the provision of the water and sewer service. B. To reclassify Sterling Heights claim as unsecured would be unjust. At the time the Plan was confirmed in this matter, Sterling Heights was a secured creditor of Collins & Aikman by virtue of MCLA 123.162. Now, to the extent that the Trusts (as successors to the Debtor) are attempting to argue that Sterling Heights no longer is secured because the Subject Properties no longer belong to the Debtor is disingenuous. Due to the Automatic Stay following the filing of Debtors bankruptcy on May 17, 2005, and again on July 12, 2007, when this Court confirmed the Plan, Sterling Heights had no choice but to await payment pursuant to the terms of the Plan. To do anything else, such as enforce the lien and/or otherwise collect the outstanding charges owed, would have been a clear violation of both the Plan and the Automatic Stay. Therefore, when Collins & Aikman sold the subject properties, Sterling Heights could not and did not object for these very reasons. Sterling Heights had no choice but to rely on the Plan. To convert this claim now from a secured claim to a general unsecured claim would be completely unjust and result in great prejudice against Sterling Heights. Therefore, Sterling Heights requests that it be treated as a secured creditor as called for under the provisions of the Plan. THEREFORE, City of Sterling Heights respectfully requests this Honorable Court deny the Motion insofar as the City of Sterling Heights claim is properly secured pursuant to state law

and should be paid accordingly as set forth in Debtors Chapter 11 Plan. OREILLY RANCILIO P.C.

By:

/s/ Ralph Colasuonno Ralph Colasuonno (P55019) Attorney for City of Sterling Heights 12900 Hall Road, Suite 350 Sterling Heights, MI 48313 (586) 726-1000

Dated: April 4, 2008

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