             Case: 12-11392   Date Filed: 08/15/2013    Page: 1 of 16




                                                                        [PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                         ________________________

                               No. 12-11392
                         ________________________

                        D.C. Docket No. 10-02872-LMI


IN RE: BANKUNITED FINANCIAL CORPORATION, et al.,

                                              Debtors,
__________________________________________________

CLIFFORD A. ZUCKER,
Plan Administrator,
CRE AMERICA CORPORATION,
BU REALTY CORPORATION,

                                                         Plaintiffs - Appellees,

                                     versus

FDIC, in its capacity as Receiver of BankUnited, FSB,

                                                         Defendant - Appellant.

                         ________________________

                Appeal from the United States Bankruptcy Court
                      for the Southern District of Florida
                         ________________________

                               (August 15, 2013)
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Before TJOFLAT, PRYOR, and FAY, Circuit Judges.

TJOFLAT, Circuit Judge:

                                                  I.

       United States Department of Treasury regulations provide that a parent

corporation may file in its own name a consolidated income tax return for itself

and its subsidiary corporations (the “Consolidated Group” or “Group”). 1 In

addition to filing the tax return in its own name, the parent corporation receives in

its name any income tax refunds due the members of the Consolidated Group. 2

Federal law does not govern the allocation of the Group’s tax refunds; hence, a

parent and its subsidiaries are free to provide for the allocation of tax refunds by

contract.

       This case involves the allocation of tax refunds pursuant to a Tax Sharing

Agreement (“TSA”) entered into in 1997 by two members of a Consolidated

Group, the parent corporation, called BankUnited Financial Corporation (the


       1
           26 C.F.R. § 1.1502-77 (“[T]he common parent . . . is the sole agent (agent for the
group) that is authorized to act in its own name with respect to all matters relating to the tax
liability for the consolidated return year . . . . No subsidiary has authority to act for or to
represent itself in any matter . . . .”); id. (“[A]ny refund is made directly to and in the name of the
common parent . . . .”).
       2
          “[The consolidated tax return] regulations are basically procedural in purpose and were
adopted solely for the convenience and protection of the federal government.” In re Rob
Richards Chrysler-Plymouth Corp., 473 F.2d 262, 265 (9th Cir. 1973); In re First Cent. Fin.
Corp., 269 B.R. 481, 489 (Bankr. E.D.N.Y. 2001) (“[U]nder applicable I.R.S. regulations, a
parent company acts as agent for the consolidated group in filing consolidated tax returns [but]
this agency is purely procedural in nature, and does not affect the entitlement as among the
members of the Group to any refund paid by the I.R.S.”).
                                                   2
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“Holding Company”), and one of its subsidiaries, called BankUnited FSB (the

“Bank”), the principal operating entity for the Consolidated Group. The TSA was

entered into for the benefit of the Holding Company, the Bank, and the remaining

subsidiaries in the Group.

       The TSA provides that, whereas the Holding Company files the Group’s

income tax return, the Bank pays all of the taxes due. Within thirty days after the

return is filed and the taxes are paid, the members of the Group reimburse the Bank

for their share of the taxes the Bank paid. The TSA also provides that the Bank,

within thirty days of the Holding Company’s filing of an income tax return, pay the

members of the Group any tax refund they expect or are entitled to receive.

       On May 21, 2009, the Office of Thrift Supervision closed the Bank and

appointed the Federal Deposit Insurance Corporation (“FDIC”) as the Bank’s

receiver. The next day, the Holding Company petitioned the United States

Bankruptcy Court for the Southern District of Florida for relief under Chapter 11

of the Bankruptcy Code. 3 After the Holding Company filed the petition, the

Holding Company and the Bank requested refunds from the Internal Revenue

Service (“IRS”) for fiscal years 2007 and 2008 in the respective sums of

       3
          In re BankUnited Financial Corp., No. 09-19940 (S.D. Fla. filed May, 22, 2009). In
addition to the Holding Company, two of its subsidiaries, BankUnited Financial Services, Inc.,
and CRE America Corporation, also petitioned the Bankruptcy Court for Chapter 11 relief. The
court consolidated the cases, which explains why these subsidiaries are shown as plaintiffs and
appellees along with the Holding Company and BU Realty Corporation, a Holding Company
subsidiary that is not in bankruptcy. In this opinion, we refer to the plaintiffs and appellees as
the Holding Company unless otherwise necessary for the context.
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$5,566,878 and $42,552,226. Their request was granted, and the refunds were sent

to the Holding Company. Rather than forward the refunds to the FDIC for

distribution as provided in the TSA, however, the Holding Company decided to

retain the refunds as an asset of its bankruptcy estate. The FDIC responded to the

Holding Company’s action by filing a claim in the Chapter 11 proceeding,

asserting that it was entitled to receive the refunds so that it could comply with its

contractual obligation to distribute them to the members of the Group. With the

court’s approval, the Holding Company and the FDIC stipulated that the refunds be

held in escrow pending the Bankruptcy Court’s decision as to whether, as the

Holding Company contended, the refunds were an asset of the bankruptcy estate.

The Holding Company thereafter commenced an adversary proceeding against the

FDIC by filing a multi-count complaint. Counts 1 and 2 are relevant here; Count 1

challenged the sufficiency of the FDIC’s claim, and Count 2 sought a declaration

that the refunds constituted an asset of the bankruptcy estate.

      On cross-motions for summary judgment, the Bankruptcy Court declared

that the refunds were indeed assets of the bankruptcy estate. Specifically, on

receipt, the refunds became the property of the Holding Company and thus the

bankruptcy estate. However, because the Holding Company was required “at some

point” in time to transfer the refunds to the FDIC, it became indebted to the FDIC.

Record, no. 165, at 22. The Bankruptcy Court therefore granted judgment in favor


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of the Holding Company. The parties thereafter requested the Bankruptcy Court to

certify the judgment for appeal to this court. We granted their request and lodged

the appeal. See 28 U.S.C. § 158(d)(2)(A).4

                                                II.

       The sole issue in this appeal is whether the Bankruptcy Court erred in

declaring the tax refunds an asset of the bankruptcy estate. 5 For ease of discussion,


       4
         We have jurisdiction to hear a direct appeal of a final judgment from the Bankruptcy
Court pursuant to 28 U.S.C. § 158(d)(2). That provision provides in relevant part:

       (A) The appropriate court of appeals shall have jurisdiction of appeals [from final
       judgments of bankruptcy judges entered in cases and proceedings referred to
       bankruptcy judges under 28 U.S.C. § 157] if the bankruptcy court . . . acting on its
       own motion or on the request of a party to the judgment . . . , or all the appellants
       and appellees (if any) acting jointly, certify that—

       (i) the judgment, order, or decree involves a question of law as to which there is
       no controlling decision of the court of appeals for the circuit or of the Supreme
       Court of the United States, or involves a matter of public importance.

       . . . .; or

       (iii) an immediate appeal from the judgment, order, or decree may materially
       advance the progress of the case or proceeding in which the appeal is taken;

       and if the court of appeals authorizes the direct appeal of the judgment, order, or
       decree.

       (B) If the bankruptcy court . . . .

       (ii) receives a request made by a majority of the appellants and a majority of
       appellees (if any) to make the certification described in subparagraph (A); then
       the bankruptcy court . . . shall make the certification described in subparagraph
       (A).
       5
         The FDIC contends that 12 U.S.C. § 1821(d)(13)(D) precluded the Bankruptcy Court
from deciding the issue because, in its view, the tax refunds constitute an asset of the FDIC
receivership. See 12 U.S.C. § 1821(d)(13)(D) (“Except as otherwise provided, no court shall
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we analyze this case as if the controversy occurred prior to the filing of the Chapter

11 petition; the Holding Company refused to turn the refunds over to the Bank for

distribution amongst the members of the Consolidated Group. We do so because

the Holding Company in bankruptcy stands in the shoes it was wearing pre-

bankruptcy. By the same token, the FDIC stands in the shoes the Bank was

wearing. That said, the question for the Bankruptcy Court, and this court, is a

matter of contract interpretation. Under the TSA, are the tax refunds the property

of the Holding Company?

                                                 A.

       The TSA provides that Delaware law governs its enforcement. Record, no.

91-1, at 2. Our inquiry focuses on recital A and sections 2 through 4 of the TSA.

Recital A describes the purpose of the TSA.

       A. The [Holding] Company and [the Bank] desire to provide for the
       allocation of current and deferred income tax assets and liabilities

have jurisdiction over . . . any action seeking a determination of rights with respect to[] the assets
of [the FDIC receivership].”). According to the FDIC, 12 U.S.C. § 1821(d)(6) provides the only
avenue for judicial review of a claim against an asset of the FDIC receivership—and that
provision grants federal jurisdiction only to the district court, not the bankruptcy court. See 12
U.S.C. § 1821(d)(6) (“The claimant may . . . file suit on [a claim against the FDIC receivership]
in the district or territorial court of the United States for the district within which the depository
institution’s principal place of business is located or the United States District Court for the
District of Columbia (and such court shall have jurisdiction to hear such claim).”).
         The FDIC’s argument is unpersuasive. Section 1821(d)(13)(D) applies only to assets of
the FDIC’s receivership. It therefore does not preclude the Bankruptcy Court from determining
the threshold question of whether the tax refunds are an asset of the bankruptcy estate. In this
case, we hold that the tax refunds are not an asset of the bankruptcy estate. The refunds
accordingly revert to the FDIC for distribution to the members of the Group in accordance with
the provisions of the TSA. The tax refunds will constitute an asset of the receivership if and
when a portion of the refunds is distributed to the FDIC receivership.
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       between the [Holding] Company, [the Bank] and other members of
       the [Consolidated] Group.

Id. at 1.

       Section 1 of the TSA provides that the Bank, not the Holding Company,

pays all taxes to the government.

       1. Payment of Income Taxes. [The Bank] shall be responsible for
       making all consolidated income tax payments on behalf of the
       [Group] to the [IRS6] based upon periodic income tax returns in
       accordance with the [Internal Revenue] Code, and other payments
       required from time to time including, but not limited to[,] estimated
       tax payments, tax penalties and interest, and tax deficiencies.

Id.

       Section 2 of the TSA describes the process in which members of the Group

determine their individual income tax liabilities.

       2. Determination of Income Tax Assets and Liabilities. [The Holding
       Company] and [the Bank] agree to determine the current and deferred
       income tax assets and liabilities of each member of the [Group] on a
       separate-entity basis. Each member of the Group will determine its
       individual portion of the consolidated income tax assets and liabilities
       in accordance with the [Internal Revenue] Code without regard to any
       income tax expenses or benefits of other members of the Group and
       shall record the amounts so determined in accordance with Generally
       Accepted Accounting Principles (“GAAP”). Each member of the
       Group shall allocate its income tax assets and liabilities between
       current and deferred in accordance with GAAP no less frequently than
       on an annual basis.

Id.


       6
          The TSA applies to payments to all taxing authorities. For ease of discussion, we limit
the opinion to taxes due the IRS.
                                                7
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      Section 3 of the TSA describes how the individually determined income tax

liability for each member of the Group is aggregated and adjusted for the

preparation of a consolidated tax return.

      3. Determination of Inter-Company Income Tax Receivables and
      Payables. Each member of the Group shall record an inter-company
      income tax receivable or payable with [the Bank] in the amount of its
      current net income tax asset or liability as determined in Section 2.
      Upon the filing of any consolidated tax return or amended return, the
      inter-company income tax receivables or payables of all members of
      the Group shall be adjusted to reflect its share of the actual
      consolidated income tax payable or receivable as determined on a
      separate-entity basis.

Id. at 1-2. It is important to note the difference between the terms “assets” and

“receivables,” as well as the terms “liabilities” and “payables,” as they are used in

the TSA. The TSA uses the term “assets” when it refers to tax refunds to which

members of the Group are entitled from the government; it uses the term

“liabilities” when it refers to taxes that members of the Group owe to the

government. The TSA uses the terms “payables” and “receivables” when referring

to inter-company obligations. An “income tax payable” refers to the amount that a

member owes to the Bank as reimbursement for the Bank paying its share of taxes

owed to the government. An “income tax receivable” refers to the amount to

which a member is entitled from the Bank as a result of a tax refund from the

government.




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      Section 4 of the TSA describes the payment and reimbursement process

among the members of the Group:

      4. Settlement of Inter-Company Income Tax Receivables and
      Payables. Within 30 days following the remittance by [the Bank] of
      any income tax payment, any member of the Group having a net inter-
      company income tax payable as determined under Section 3 shall pay
      to [the Bank] such amount as reimbursement for payment of its
      proportional share of the consolidated current income tax liability. In
      the event that [the Bank’s] separately determined current income tax
      results in an asset or receivable, the amount of the inter-company
      settlement shall have the effect of reimbursing [Bank] for 100% of the
      income tax payment, and at no time shall the amount of unsettled
      inter-company taxes under this section cause the amount paid by
      [Bank], net of receipt of inter-company amounts, to exceed the
      amount that would have been due and payable to the taxing authorities
      if [Bank] were filing its tax return on a separate-entity basis. Not less
      frequently than annually following the filing of any periodic income
      tax return or amended return, and within 30 days of such event, each
      member of the Group having a net inter-company income tax payable
      shall pay such amount to [the Bank]; and [the Bank] shall reimburse
      any member of the Group for net inter-company income tax
      receivables. Any income tax refunds received by [the Bank] shall be
      allocated among, and paid to the members of the Group in accordance
      with Sections 2 and 3.

Id. at 2. The plain language of section 4 of the TSA directs that within thirty days

after the Bank pays the taxes owed to the government on behalf of the Group, any

member that owed taxes must reimburse the Bank for its proportional share of the

Group’s tax payment. In the event the Bank itself is entitled to a tax refund, the

amount of money transferred to the Bank by members of the group that owed

taxes, and whose taxes were paid by the Bank, shall reimburse the Bank 100% for

any payment it made on behalf of those members. At no point shall the amount of
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taxes paid by the Bank on behalf of the group, net of any transfers of money

already made by members of the Group to the Bank, exceed the amount of taxes

the Bank would have to pay the government were it filing an individual tax return.

Within thirty days of the Holding Company’s filing of a tax return or an amended

return, each member owing taxes shall pay the amount it owes to the Bank, and the

Bank shall reimburse any member owed a tax refund. The Bank will distribute tax

refunds according to each member’s determination of the refund it is due, per

Section 2 of the TSA, as adjusted to reflect each member’s proportional share of

the group’s tax assets and liabilities, per Section 3 of the TSA.

      It is clear, as the Holding Company has contended, that section 4 contains no

words instructing the Holding Company to forward to the Bank any tax refunds it

receives. It is also clear, as the Holding Company has acknowledged, that the

Bank is obligated to distribute any tax refunds that the Holding Company receives

to the Group’s members—including to itself and the Holding Company. To do

this, the Bank must have possession of the refunds—it must receive them from the

Holding Company. Thus, it is clear that the Holding Company must at some point

forward the refunds to the Bank.

      Section 4 is ambiguous in two respects: first, section 4 does not state when

the Holding Company must forward the tax refunds to the Bank, and second, it




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does not explain whether the Holding Company “owns” the refunds before

forwarding them to the Bank.

                                             B.

       Under Delaware law, the members of the Consolidated Group were free to

allocate the ultimate disposition of tax liabilities and tax savings by agreement.

See e.g., Abex, Inc. v. Koll Real Estate Group, Inc., No. 13462, 1994 WL 728827,

at *15 (Del. Ch. Dec. 22, 1994) (“[M]embers of the group [may] allocate the

ultimate tax liability among themselves by contract.”) (citation omitted). Where,

as here, operative provisions of a contract are ambiguous, the court’s task is to

determine the intent of the parties. In Delaware, as in typical common law

jurisdictions, the contract “must be read in the light of the intent of the parties as

determined by the facts and circumstances surrounding the transaction.” Rohner v.

Niemann, 380 A.2d 549, 552 (Del. 1977) (citation omitted). In other words, the

court infers the parties’ intent.

       In undertaking to discern the parties’ intent, the Bankruptcy Court began

with the assumption that at some point, the Holding Company had to forward the

tax refunds to the Bank. “There is no question that the [TSA] presumes that at

some point the Holding Company is going to deliver a tax refund to the Bank; that

is implicit in the [TSA’s] provisions that the Bank gives out the allocable shares in

any refund to the group.” Record, no. 165, at 22. But, in the next breath, the court


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flatly contradicted this presumption, with the statement that “there is also no

question that the [TSA] does not require the Holding Company to deliver those

funds to the Bank . . . .” Id. According to the court, the TSA did not require the

Holding Company to deliver the funds because there is nothing “in the [TSA to]

suggest that the Holding Company accepts those funds from the IRS in any kind of

trust or agency capacity or holds those funds under any specialized status that

would cause those funds to be considered something other than the property of the

Holding Company when in its possession.” Id. In stating that there is nothing “in

the [TSA to] suggest,” the court was holding that there is nothing in the language

of the TSA that would imply that the refunds, while in the hands of the Holding

Company, were anything other than unencumbered assets of the company.

      Yet, the court ultimately found that the Holding Company became indebted

to the Bank in a sum equivalent to the amount of the refunds it received from the

IRS. The court appears to reach this finding by noting that the TSA describes

      the entire relationship between the various members of the [Group] . . .
      only in terms of payables and receivables—inter-company debts and
      claims. Depending on how the tax balance sheet obligations are set
      up at a particular time, the fact that the Bank, when it holds the funds,
      stands as the debtor or creditor, does not change the fact that when the
      Holding Company holds the funds it also has the status of the debtor
      or creditor.




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Id. at 22-23. 7 In short, the Holding Company is the Bank’s debtor. The tax

refunds are assets of the Holding Company. In the Bankruptcy Court’s view, if

the Holding Company does not forward the refunds to the Bank, the Bank’s only

recourse is to sue the Holding Company, obtain a money judgment, and, if

necessary, satisfy that judgment via the writs provided by the forum for obtaining

the satisfaction of money judgments. Since the Holding Company is in

bankruptcy, the Bank, i.e., the FDIC as its receiver, must file a claim as an

unsecured creditor.

                                                C.

       Although the TSA does not contain a provision expressly requiring the

Holding Company to forward the tax refunds to the Bank on receipt, it is obvious

to us that this is what the parties intended. That is, they did not intend that the

Holding Company keep the refunds and incorporate them into its own portfolio, as

if the Bank had loaned the refunds to the Holding Company unencumbered. 8

       A debtor-creditor relationship is created by consent, express or implied. We

find no words in the TSA from which it could reasonably be inferred that the

parties agreed that the Holding Company would retain the tax refunds as a

company asset and, in lieu of forwarding them to the Bank, would be indebted to
       7
          Although the court did not cite the provisions of the TSA referred to, we assume that it
was referring primarily to words—“payables” and “receivables”—in section 4.
        8
          In holding that the parties intended a debtor-creditor relationship, the Bankruptcy Court
implicitly eschewed the thought that the Holding Company tortiously converted the tax refunds,
in which case it would not be liable to the Bank as a debtor but as a tortfeasor.
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the Bank in the amount of the refunds. Nor do we find any words from which the

terms of the indebtedness could be inferred. If, as the Bankruptcy Court

concluded, the parties created a debtor-creditor relationship, we would expect to

find some means of protection for the creditor that would help guarantee the

debtor’s obligation, such as a fixed interest rate, a fixed maturity date, or the ability

to accelerate payment upon default. See Lasker v. Mcdonnell & Co., Inc, No.

3560, 1975 WL 1950, at *10 (Del. Ch. July 9, 1975). The Bankruptcy Court found

none of these elements. All it found was that the Holding Company would

“deliver a tax refund to the Bank” at “some point” in time.

      The effect of the Bankruptcy Court’s decision that the tax refunds constitute

an unencumbered asset of the Holding Company is to frustrate the Bank’s ability to

discharge its obligation to distribute to the members of the Group the portion of the

tax refunds to which they are entitled. In short, the court’s decision undermines a

paramount purpose of the TSA, which is to ensure that the tax refunds are

delivered to the Group’s members in full and with dispatch.

      If the court’s decision is allowed to stand, this is what would transpire if the

Holding Company and the Bank were in a debtor-creditor relationship. If the

Holding Company refused to forward the tax refunds on receipt, the Bank’s only

recourse would be to file suit. Assuming the litigation were successful, the

Holding Company, the Bank, and the other members of the Group would share in


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the litigation expenses the bank incurred in collecting on the Holding Company’s

debt. Thus, before the Bank would give these beneficiaries their portion of the

refunds, it would subtract such expenses from the amount of the refunds available

for distribution. We cannot imagine that the Bank and the other subsidiary

corporations in the Group contemplated this scenario when the Bank and the

Holding Company signed the TSA.

                                        III.

       The relationship between the Holding Company and the Bank is not a

debtor-creditor relationship. When the Holding Company received the tax refunds,

it held the funds intact—as if in escrow—for the benefit of the Bank and thus the

remaining members of the Consolidated Group. The parties intended that the

Holding Company would promptly forward the refunds to the Bank so that the

Bank could, in turn, forward them on to the Group’s members. In the Bank’s

hands, the tax refunds occupied the same status as they did in the Holding

Company’s hands—they were tax refunds for distribution in accordance with the

TSA.

       For these reasons, we reverse the Bankruptcy Court’s judgment and direct

the Bankruptcy Court to vacate its decision declaring the tax refunds the property

of the bankruptcy estate and to instruct the Holding Company to forward the funds




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held in escrow to the FDIC, as receiver, for distribution to the members of the

Group in accordance with the TSA. 9

       SO ORDERED.




       9
          In part I of this opinion, we indicate that the complaint the Holding Company filed to
commence its adversary proceeding against the FDIC contained multiple counts. Included in
those counts were a variety of claims unrelated to the Holding Company’s claim to the tax
refunds for fiscal years 2007 and 2008. There is some indication in the record that the parties
may have entered into a settlement agreement prior to the Bankruptcy Court’s issuance of the
decision at issue in this appeal. Our decision in this appeal is a narrow one; it only involves the
Bankruptcy Court’s determination that the tax refunds are property of the bankruptcy estate.

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