In re: AMC MORTGAGE COMPANY , INC. v. Tennessee Department of Revenue

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0175P (6th Cir.)
File Name: 00a0175p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
In re: AMC M ORTGAGE
C OMPANY , INC.,
Debtor.
________________________
AMC M ORTGAGE C OMPANY ,
INC.,
Plaintiff-Appellant,
v.
TENNESSEE DEPARTMENT OF
R EVENUE ,
Defendant-Appellee.
;>

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No. 99-5498
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 97-01037—Thomas A. Higgins, District Judge.
Argued: April 25, 2000
Decided and Filed: May 26, 2000
Before: MARTIN, Chief Judge; MERRITT and SILER,
Circuit Judges.

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2 In re AMC Mortgage Co. No. 99-5498
_________________
COUNSEL
ARGUED: Harry Willis Miller III, MILLER &
ASSOCIATES, Nashville, Tennessee, for Appellant. Sally
Ramsey, OFFICE OF THE ATTORNEY GENERAL,
Nashville, Tennessee, for Appellee. ON BRIEF: Harry
Willis Miller III, MILLER & ASSOCIATES, Nashville,
Tennessee, for Appellant. Sally Ramsey, Kathleen A. Ayres,
OFFICE OF THE ATTORNEY GENERAL, Nashville,
Tennessee, for Appellee.
_________________
OPINION
_________________
BOYCE F. MARTIN, JR., Chief Judge. AMC Mortgage
Company, Inc. appeals the decision of the district court
affirming the dismissal of its Chapter 11 bankruptcy petition
for failure to make payments due under the Chapter 11 plan.
For the reasons stated below, we AFFIRM.
I.
On March 25, 1994, AMC filed a Chapter 11 petition in the
United States Bankruptcy Court for the Middle District of
Tennessee. Prior to this, in February 1992, AMC filed a
taxpayer lawsuit in Tennessee state court against the
Tennessee Department of Revenue challenging the tax
assessed against AMC from 1987 to 1990. Accordingly, on
its Chapter 11 Disclosure Statement, AMC listed the state’s
claim as “disputed” and included its claim against the state as
an asset.
After filing its Chapter 11 petition, AMC removed the state
court tax action and filed motions in bankruptcy court to
determine its 1993 tax liability and whether it was entitled to
a refund for taxes paid from 1982 through 1986. The
bankruptcy court heard argument on these motions on July 26,

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6 In re AMC Mortgage Co. No. 99-5498
special rules governing actions against the State . . . [and]
suits against the State can be maintained only as
authorized by statutes; . . . statutes permitting suits
against the State must be strictly construed; . . . and
general procedural statutes do not apply against the State
unless the State is specifically named therein.
T.C.A. § 28-1-105 does not specifically name the state.
Construing the language of the savings statute strictly, it
cannot be applied against the state. See id.
Under T.C.A. § 67-1-1801(b), AMC had ninety days from
the date the notice of assessment was mailed to file suit. Its
initial suit may have been timely, but once AMC took a
non-suit in the case, the ninety-day limit had passed, AMC
was barred from reinstating the dismissed action, and the
assessment became final. Thus, the litigation was “resolved”
within the meaning of AMC’s confirmed Chapter 11 plan and
AMC should have begun making payments to the state.
The record is clear that no payments were made before the
state filed its motion to dismiss the Chapter 11 case. A failure
to make a payment required under the plan is a material
default and is cause for dismissal. See In re H.R.P. Auto
Center, Inc., 130 B. R. 247, 256 (Bankr. N.D. Ohio 1991).
The bankruptcy court’s decision to dismiss the case for cause
under 11 U.S.C. § 1112(b)(8) was proper.
Following AMC’s voluntary dismissal of its state tax
claims, adjudication of those claims became final and AMC
should have begun making payments as required by the
confirmed plan. Failure to make those payments is a material
default and the bankruptcy court did not abuse its discretion
in dismissing the case. The decision of the bankruptcy court
dismissing AMC’s Chapter 11 case is AFFIRMED.
No. 99-5498 In re AMC Mortgage Co. 3
1994. The court abstained under 28 U.S.C. § 1334(c)(1) and
remanded the case to the Davidson County, Tennessee,
Chancery Court. Thereafter, on October 17, 1994, the parties
entered into an agreed order that:
[a]ll issues raised by AMC in its Motion for
Determination of Tax Refund and Motion for
Determination of Tax Liability can presently be litigated
in Tennessee state court in accordance with the
procedures set forth in T.C.A. Section 67-1-1801 et seq.,
the Tennessee Taxpayers Remedies Act, as those
procedures may be modified by the United States
Bankruptcy Code and specifically 11 U.S.C. § 108.
AMC’s bankruptcy plan was confirmed on September 12,
1995. In the plan, the litigation involving the Tennessee
Department of Revenue, referred to as “TDR,” was addressed
as follows:
Class 2: The only member of this class is TDR. The
claim of TDR is currently being disputed by the Debtor
in litigation pending in Chancery Court . . . . The
payment to this class shall be reserved and/or suspended
until the resolution of said litigation. At that time, if
TDR is successful, its allowed claim shall be paid,
pursuant to 11 U.S.C. § 1129(a)(9)(C), over seventy-two
(72) months at a rate of nine per cent (9%) per annum.
On April 25, 1996, AMC filed a motion to amend its
complaint in the state court action, adding challenges to the
department’s assessments for 1982 to 1985, 1987 to 1991,
and 1991 to 1995. The state objected to this motion. On July
9, 1996, the Chancery Court allowed AMC’s challenges to the
1993 and 1995 assessments, but disallowed the others as
either time-barred or unsupported by state law. The order
provided that AMC could file an amended complaint. AMC
did not file an amended complaint. Instead, on February 10,
1997, AMC filed a voluntary non-suit and the case against the
state was dismissed.

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4 In re AMC Mortgage Co. No. 99-5498
Four months later, on June 4, 1997, the department filed a
motion to dismiss the Chapter 11 case under 11 U.S.C.
§ 1112(b)(8), arguing that the state litigation was over and
that AMC had failed to begin making the payments due under
the confirmed bankruptcy plan. AMC objected to the motion
to dismiss and again asked the bankruptcy court to decide the
issues that were voluntarily dismissed in the Tennessee state
court proceeding, and to assume jurisdiction over the tax
matters. The bankruptcy court held that AMC had voluntarily
ended its lawsuit when it chose not to appeal the Chancery
Court decision. Accordingly, the court granted the
department’s motion to dismiss the Chapter 11 case. AMC
appealed and the district court, adopting the recommendation
of the magistrate, affirmed the bankruptcy court’s decision.
II.
This court reviews a bankruptcy court’s decision directly,
not the district court’s review of the bankruptcy decision. See
Trident Assocs. Ltd. Partnership v. Metropolitan Life Ins.
Co., 52 F.3d 127, 130 (6th Cir. 1995). The bankruptcy
court’s findings of fact are reviewed for clear error, while its
conclusions of law are reviewed de novo. See Trident
Assocs., 52 F.3d at 130; Laguna Assocs. Ltd. Partnership v.
Aetna Cas. and Sur. Co., 30 F.3d 734, 737 (6th Cir. 1994).
It is settled law in this circuit that a bankruptcy court may
dismiss a case under Chapter 11 for cause. See 11 U.S.C.
§ 1112(b); Trident Assocs., 52 F.3d at 130. The bankruptcy
court has broad discretion to dismiss a Chapter 11 case under
11 U.S.C. § 1112(b). See Matter of Woodbrook Associates,
19 F.3d 312, 316 (7th Cir. 1994); In re Lumber Exch. Bldg.
Ltd. Partnership, 968 F.2d 647, 648 (8th Cir. 1992); In re
Gonic Realty Trust, 909 F.2d 624, 626-27 (1st Cir. 1990); In
re Koerner, 800 F.2d 1358, 1368 (5th Cir. 1986).
Accordingly, the decision to dismiss the case will be upheld
unless it was an abuse of discretion, defined as “a definite and
clear conviction that the trial court committed a clear error of
judgment.” Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th
Cir. 1996).
No. 99-5498 In re AMC Mortgage Co. 5
AMC argues that a voluntary non-suit under Rule 41.01 of
the Tennessee Rules of Civil Procedure is not a final
judgment. See Merchants and Manufacturer’s Transfer Co.
v. Johnson, 403 S.W.2d 106 (Tenn. App. 1996).
Furthermore, AMC argues that under T.C.A. § 28-1-105 it has
one year after its voluntary dismissal or non-suit to refile the
action. Thus, AMC argues that it did not fail to comply with
the terms of the confirmed plan because it had until February
10, 1998 to reinstate its case.
Although AMC is correct that Rule 41.01 provides for a
voluntary non-suit, and that such a non-suit is not a final
judgment, AMC does not have a year to reinstate its action.
T.C.A. § 28-1-105 is the general saving statute, providing
that a plaintiff, after a voluntary dismissal or non-suit, has one
year to refile the dismissed action. However, another state
statute specifically limits the time to file a suit challenging a
tax assessment to ninety days. See T.C.A. § 67-1-1801(b)
(“A suit challenging the assessment of a tax . . . must be: (1)
Filed within ninety (90) days from the date of mailing of the
notice of assessment to the taxpayer by the commissioner”).
The Tennessee Supreme Court has held that a general statute
does not apply to the state unless the state is specifically
named in the statute. See Automobile Sales Co. v. Johnson,
122 S.W.2d 453, 454-55 (Tenn. 1938). In that case, the
plaintiff sued to recover an allegedly illegal tax, voluntarily
dismissed the suit, and then sought to refile the case under the
savings statute. See id. The court held that general statutes
do not apply to the state “unless they expressly so provide.”
Id. at 458. The court went on to say that where the statute that
creates the right of action expressly limits the time in which
a suit to enforce the action may be brought, “time is of the
essence of the right and the limitation of the remedy is a
limitation of the right.” Id. At the heart of this matter is the
notion that the state, as sovereign, may only be sued with its
permission. See Alden v. Maine, 119 S.Ct. 2240, 2246
(1999). The Tennessee Supreme Court held in Cronin v.
Howe, 906 S.W.2d 910, 914 (1995), that because there are

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