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In the Matter of Universal Seismic Associates, Inc.

Under 11 U.S.C. '502(b)(3), a claim for taxes on property cannot exceed the value of the property that is remaining in the bankruptcy estate.

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Appeal from the United States District Court For the Southern District of Texas

Universal Seismic Associates, Inc. and its subsidiaries (collectively referred to as “Debtors”) were providers of three-dimensional seismic acquisition and processing services to the energy industry. On September 7, 1999, Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code. Debtors’ Chapter 11 plan was confirmed by an order entered May 3, 2000. The terms of the Debtors’ confirmed plan of reorganization specifically provided for the retention of jurisdiction by the Bankruptcy Court to “determine the allowance or disallowance of Claims and Interests,” including the claims filed by Harris County/City of Houston and Katy Independent School District (the “Taxing Authorities”). On October 12, 1999, the Taxing Authorities filed proofs of claim in the amounts of $33,731.06 (Harris County) and $47,050.11 (Katy Independent School District). Each of the proofs of claim filed by the Taxing Authorities was for ad valorem business personal property taxes for the tax years 1998 and 1999. The Taxing Authorities alleged a security interest in the business personal property of the Debtors to secure payment of their claims.

The Debtors had equipment that was purchased or leased from third parties in connection with their business. Soon after filing for bankruptcy, the Debtors returned almost all personal property to secured creditors/lessors pursuant to agreements and orders of the Bankruptcy Court. The Debtors retained only some vehicles, which were sold for $54,500.00, and office furnishings valued at $3,700.00, equaling a combined value of $58,200.00. The total of the claims filed by the Taxing Authority, $81,054.73, was far in excess of the total value of the remaining personal property, but the Taxing Authorities contended this property remained encumbered by their tax lien, up to the full value of the remaining property. The Bankruptcy Court agreed and the District Court affirmed. For the reasons set forth below we also affirm.

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