The opinion of the court was delivered by: Wood, U.S.D.J.
Appellant Savage & Associates, P.C. ("Savage"), the Unsecured Claims Estate Representative of Teligent, Inc. and its subsidiaries (collectively "Teligent"), appeals the post-trial decision of the United States Bankruptcy Court for the Southern District of New York, dismissing Savage's preference action against the County of Fairfax, Virginia ("Fairfax County"). Savage initiated the action, pursuant to 11 U.S.C. § 547(b) ("§ 547(b)"), to recover two property tax payments made by Teligent to Fairfax County in the preference period prior to Teligent's May 2001 bankruptcy filing.
In dismissing the action, the Bankruptcy Court found that Fairfax County had acquired a lien on Teligent's property upon assessment of the taxes. The Bankruptcy Court accordingly concluded that Teligent's payments to Fairfax County were on account of a secured debt, and were not preferential.
On appeal, Savage argues that the Bankruptcy Court erred in finding that the taxes constituted a secured debt. Savage maintains, pursuant to Virginia law, that Fairfax County would not have acquired a lien on Teligent's property upon assessment of the taxes; rather, Fairfax County would have had "to distrain"*fn1 Teligent's property in order for a lien to attach. Savage contends that Fairfax County never distrained Teligent's property, and that the payments made to Fairfax County were on account of an unsecured debt. Accordingly, Savage argues that the payments were preferential.
For the reasons stated below, the Court agrees with the Bankruptcy Court that Fairfax County acquired a lien on Teligent's property upon assessment of the taxes. The taxes therefore constituted a secured debt, payment of which was not preferential, pursuant to § 547(b). The Court AFFIRMS the decision of the Bankruptcy Court.
I. Factual and Procedural Background
Teligent is a corporation involved in the provision of telecommunication services. During the time period relevant to this case, Teligent maintained its corporate headquarters in Fairfax County, Virginia, and operated as a Virginia public service corporation ("PSC"). Each year, Teligent was required to pay PSC taxes to Fairfax County on its real estate and personal property located in Fairfax County.
B. The Virginia Tax Scheme and PSC Taxes
1. Property Taxes Generally
Pursuant to article 10 of the Virginia Constitution, all property located in Virginia, unless explicitly excluded, is subject to taxation. VA. CONST. art. 10, § 1. For most business taxpayers, property taxes are assessed by the respective locality in which the property is located. See VA. CODE ANN. § 58.1-3000 et seq. (2009). These businesses pay one tax rate on their real estate, and another, usually higher, tax rate on their personal property. Compare http://www.fairfaxcounty.gov/dta (follow "Real Estate Tax Rate" hyperlink) with http://www.fairfaxcounty.gov/dta/business_personalproperty.htm.
PSCs are taxed differently on their property than other business taxpayers. First, PSC taxes are assessed not by the respective locality, but by a state agency, the State Corporation Commission. VA. CODE ANN. § 58.1-2600 (2009). Second, PSCs pay the lower real estate tax rate on both their real estate and personal property. See VA. CODE ANN. § 58.1-2606 (2009).
PSC taxes, like other property taxes, are computed once a year, and deemed assessed on January 1 of that year. See VA. CODE ANN. § 58.1-1 (2009).
C. Teligent's 2000 PSC Taxes
Savage brings this preference action to recover two PSC personal property tax*fn2 payments made by Teligent to Fairfax County during the preference period prior to Teligent's bankruptcy filing in May 2001.*fn3 The details of the two payments are described below.*fn4
In January 2000, the Virginia State Corporation Commission assessed the value of Teligent's personal property in Fairfax County as $22,876,239. The applicable tax rate in Fairfax County at that time was 1.23%. Teligent's PSC personal property taxes for 2000 thus totaled $281,377.74.
On or around October 25, 2000, Fairfax County billed Teligent for its 2000 PSC personal property taxes, in the amount of $281,377.74. The bill stated that Teligent's payment was due by February 15, 2001.
Teligent did not submit payment by February 15, 2001. Fairfax County assessed late penalties and interest against Teligent in the amount of $30,056.77.
By check dated February 27, 2001, Teligent sent Fairfax County a payment for $281,377.74, the original amount of the taxes. Fairfax County ...