                                                      United States Court of Appeals
                                                               Fifth Circuit
                                                            F I L E D
                                                              May 28, 2003
              IN THE UNITED STATES COURT OF APPEALS
                                                        Charles R. Fulbruge III
                         FOR THE FIFTH CIRCUIT                  Clerk
                         _____________________

                              No. 01-21175
                         _____________________

     In the Matter of:   GEORGE R HINSLEY
                              Debtor
------------------------------------

     PATRICIA JO HINSLEY; GEORGE R HINSLEY
                              Appellees
     v.

     HARRIS COUNTY, State of Texas; CITY OF HOUSTON; HOUSTON
     INDEPENDENT SCHOOL DISTRICT; FEDERAL DEPOSIT INSURANCE
     CORPORATION
                              Appellants


     In the Matter of:   GEORGE R HINSLEY
                              Debtor
------------------------------------

     GEORGE R HINSLEY; PATRICIA JO HINSLEY
                              Appellees
     v.

     FEDERAL DEPOSIT INSURANCE CORPORATION
                              Appellant
_________________________________________________________________

          Appeals from the United States District Court
                for the Southern District of Texas
                           H-97-CV-2694
_________________________________________________________________

Before KING, Chief Judge, and DeMOSS and CLEMENT, Circuit Judges.

KING, Chief Judge:*


     *
        Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
      At issue on appeal is the district court’s determination of

the debtor’s tax liability on certain real property owned by the

debtor and abandoned by the bankruptcy estate.           We reverse the

district court’s order on tax liability and render judgment in

favor of the appellants.

                  FACTUAL and PROCEDURAL BACKGROUND

      The general facts underlying this bankruptcy case are set

forth in two prior opinions of this court and will not be repeated

herein.    See Hinsley v. Boudloche (In re Hinsley), 201 F.3d 638

(5th Cir. 2000); Hinsley v. Boudloche (In re Hinsley), No. 97-

20967, 149 F.3d 1179 (5th Cir. July 15, 1998) (unpublished).

Relevant for the purposes of this controversy are the facts related

to a piece of property purchased in 1985 by a partnership of which

the   debtor,   George   Hinsley   (“Mr.   Hinsley”),   was   the   general

partner.

      Western Bank Westheimer loaned the partnership $3.8 million to

purchase the property, which is located at 6200 Kansas, Houston,

Texas (the “Kansas property”).           In October 1987, the Federal

Deposit Insurance Corporation (“FDIC”) succeeded to the rights of

Western Bank Westheimer, including its rights related to the note

on the Kansas property.      Mr. Hinsley thereafter defaulted on the

1985 Western Bank Westheimer note and, in May 1992, the FDIC




                                     2
obtained a judgment against Mr. Hinsley in the amount of $4.849

million.

       Mr. Hinsley filed for bankruptcy protection in 1995.                      On June

17, 1998, the district court granted the trustee’s notice of intent

to abandon the Kansas property.                The estate thus abandoned any

interest in the Kansas property in favor of Mr. Hinsley.                      Later, in

May 2000, as part of a settlement agreement related to an adversary

proceeding brought by the trustee of Mr. Hinsley’s estate – to set

aside certain alleged “fraudulent transfers” between Mr. Hinsley

and his    wife   Patricia      Hinsley       (“Ms.   Hinsley”)       –   Ms.    Hinsley

acquired the note held by the FDIC and secured by the deed of trust

lien on the Kansas property. Ms. Hinsley thus acquired lien rights

in and to the Kansas property.

       On May 18, 2001, after all of the bankruptcy estate matters

were    essentially      resolved,    Mr.      Hinsley       filed    a   motion     for

redetermination of tax liability pursuant to 11 U.S.C. § 505,

requesting that the district court reassess the amount of tax

liability of Mr. Hinsley for ad valorem property taxes on the

Kansas property for the tax years 1988 through 2000. Specifically,

he   contended    that    the   tax   valuation       of     the     Kansas     property

throughout the years in question exceeded the actual fair market

value of    the   Kansas    property      because      the    property        had   major

contamination problems.         The appellants, Harris County, the State

of Texas, The City of Houston and Houston Independent School

District (together, the “taxing authority”), opposed the motion for

                                          3
redetermination of tax liability, arguing that the district court

did not have jurisdiction to make the requested valuation and,

alternatively, that the district court should, in its discretion,

abstain from making the requested valuation.

     On November 1, 2001, following a hearing on Mr. Hinsley’s

motion for redetermination, the district court determined the tax

liability on the Kansas property for the tax years 1988 through

2001 to be $389,359.76.   The taxing authority and the FDIC timely

appealed.

              ANALYSIS OF RELEVANT ISSUES ON APPEAL

     The district court’s order granting Mr. Hinsley’s motion for

redetermination is brief.   It states, in full, that:

     The court determines that the tax liability for the
     debtor, an owner through the debtor, or the F.D.I.C. for
     ad valorem property taxes assessed by Harris County, the
     State of Texas, the City of Houston, and the Houston
     Independent School District on the property at 6200
     Kansas, Houston, Texas (fully described in exhibit A) for
     the tax years January 1, 1988, through July 30, 2001, is
     $389,259.76.

Implicit in the order is a decision not to abstain (as the taxing

authority requested) from exercising jurisdiction over the debtor’s

motion for redetermination of the ad valorem taxes on the Kansas

property.   We review a decision to abstain or not to abstain for

abuse of discretion.   See Matter of Howe, 913 F.2d 1138, 1143 (5th

Cir. 1990).   Although, in its order, the district court gave no

reasons for its decision to exercise jurisdiction, rather than



                                 4
remanding for what would likely be a useless exercise, we have

evaluated the reasons for and against exercising jurisdiction;1 we

find       that    the   district    court       abused   its   discretion    in    not

abstaining; and we render judgment for the taxing authority.2

       A.         11 U.S.C. § 505

       Title 11 of the United States Code § 505 provides, in relevant

part,      that     “[e]xcept   as   provided       in    paragraph   (2)    of    this

subsection, the court may determine the amount or legality of any

tax, any fine or penalty relating to a tax, or any addition to tax,

whether or not previously assessed, whether or not paid, and

whether or not contested before and adjudicated by a judicial or

administrative tribunal of competent jurisdiction.”                         11 U.S.C.

§ 505(a) (emphasis added).            Thus, as stated by this court, “absent

the express statutory limitations in § 505(a)(2)(A) and (B),

       1
        As stated, the district court did not specifically make a
ruling on the abstention question. It also did not mention 11
U.S.C. § 505, nor did it cite to our recent § 505 case, In re
Luongo, 259 F.3d 323 (5th Cir. 2001), or weigh any of the Luongo
factors relevant to the § 505 abstention inquiry. Indeed, during
the hearing on the debtor’s motion for redetermination, the
district court responded to the taxing authority’s request to
discuss procedural abstention issues under § 505 by stating,
“Skip that. Let’s get down to what happened if [the debtor’s
counsel] was right [regarding the over-valuation of the
property].” The degree of deference afforded the district
court’s implied decision to abstain is thus limited in these
circumstances.
       2
        Although we reverse the district court’s order on
abstention grounds, we reject the implication in the district
court’s order that the FDIC can be liable for taxes on a piece of
property it does not own. As set forth in the order of sale,
liquidation, and payment, entered August 16, 2000, the FDIC was
ordered to transfer its lien, not ownership, to Ms. Hinsley.

                                             5
[neither of which has any application here], bankruptcy courts have

universally recognized their jurisdiction to consider tax issues

brought   by    the   debtor,   limited   only   by   their   discretion   to

abstain.”      Luongo v. Luongo (In re Luongo), 259 F.3d 323, 329 (5th

Cir. 2001).

     Approximately three months before the district court’s order

was entered, our court discussed certain factors that must be

considered by the bankruptcy court in deciding whether it should

exercise discretion to abstain from making a valuation pursuant to

§ 505.    Luongo, 259 F.3d at 331-32.       In so doing, we stated that:

     When bankruptcy issues are at the core of a dispute, it
     would be absurd for a bankruptcy court to abstain from
     deciding those matters over which it has particular
     expertise. On the other hand, simply because tax law is
     somehow implicated does not automatically trigger
     abstention . . . Accordingly, we hold that where
     bankruptcy issues predominate and the Code’s objectives
     will potentially be impaired, bankruptcy courts should
     generally exercise jurisdiction. Conversely, absent any
     bankruptcy   issues  or   implication   of  the   Code’s
     objectives, it is usually appropriate for the bankruptcy
     court to decline or relinquish jurisdiction.

Id. (internal footnote omitted).            The specific non-exhaustive

examples of “bankruptcy issues” the court alerted to were “ensuring

the efficient administration and equitable distribution of the

estate for the benefit of the creditors and protecting the debtor’s

right to a fresh start.”        Id. at 332.

     B.     Application of § 505 Abstention Factors to this Case




                                      6
      Weaving the facts of this case through the factors cited in

Luongo, we are satisfied that abstention is appropriate here.                       All

issues related to the bankruptcy estate had been resolved when Mr.

Hinsley filed his motion for redetermination.                     Of more importance

to the relevant factors, however, the property to be valued in Mr.

Hinsley’s    motion    for    redetermination         is    not    property    of   the

bankruptcy estate, nor will bankruptcy law or the Bankruptcy Code

be implicated in the requested tax valuation.                  Because the trustee

of   Mr.   Hinsley’s    estate    specifically         abandoned       the    property

relevant to this tax redetermination motion through a notice of

intent to abandon property nearly three years before Mr. Hinsley

filed his motion for redetermination, it simply cannot be said that

bankruptcy issues will predominate in the requested valuation.

See, e.g., In re Dewnsnup, 908 F.2d 588 (10th Cir. 1990) (when

abandoned,    property       ceases   to   be   property       of    the    bankruptcy

estate).       In     the     hearing      on   Mr.        Hinsley’s       motion   for

redetermination, the trustee of Mr. Hinsley’s estate stated his

position regarding whether the ad valorem tax should be adjusted as

follows: “Well, Your Honor, I don’t have a dog in that fight.”

This admission underscores the evident fact that the beneficiaries

of the reduction in tax liability for the Kansas property are Mr.

Hinsley (the owner of the Kansas property) and Ms. Hinsley (a

lienholder on the property), not the estate.                  Although Ms. Hinsley

is also an unsecured creditor in the estate of Mr. Hinsley, her

enjoyment of a reduction in the tax liability that primes her lien

                                           7
on the Kansas property can be tied to the estate in only an

extremely attenuated sense.

      Several courts have noted the creditor (rather than debtor)

oriented policy goals of § 505.   See, e.g., 99 Invest. v. Maricopa

Cty. (In re 99 Invest.), No. 98-16576, 205 F.3d 1352, at *1 (9th

Cir. Dec. 16, 1999) (unpublished) (holding that “[a] determination

of tax liability would not advance the creditor-oriented policy

goals of § 505"); Kearns v. Kearns (In re Kearns), 219 B.R. 823,

827 (8th Cir. 1998) (“[I]f the estate is not to receive the refund,

the matter does not belong in bankruptcy court.        The general

unsecured creditors, not the debtor, are the intended beneficiaries

of section 505(a)”); In re American Motor Club, Inc., 139 B.R. 578,

581 (Bankr. E.D.N.Y. 1992) (stating that courts should abstain from

making a § 505 valuation if the impact of abstention on the general

administration of the estate is minimal); Millsaps v. United States

(In re Millsaps), 133 B.R. 547, 554-555 (Bankr. M.D. Fla. 1991)

(“Although Congress extended jurisdiction to the bankruptcy court

to determine the debtors’ personal tax liability under section

505(a)(1), the debate in the House of Representatives leading to

the passage of the section clearly shows that, when there is no

need for a determination of the amount of the tax for estate

administration purposes, Congress did not intend or foresee that

the bankruptcy court would be the forum for this litigation.”),

aff’d, 138 B.R. 87 (M.D. Fla. 1991).



                                  8
     In Luongo, we cautioned against taking too narrow a view of

the goals of the Bankruptcy Code, stating that “[t]he bankruptcy

court’s responsibility in administering the estate is not only to

achieve   a   fair   and   equitable   distribution    of   assets   to   the

creditors, but also to ‘relieve the honest debtor from the weight

of oppressive indebtedness and permit him to start afresh.’” 259

F.3d at 330 (citation omitted).            We did so, however, under very

different factual circumstances than we are presented with here.

There, the Internal Revenue Service (“IRS”) setoff the debtor’s

overpayment for tax year 1997 against her unpaid 1993 tax liability

that had been discharged in bankruptcy.            Id. at 327.       The tax

liability issue presented to the bankruptcy court thus dealt almost

entirely with bankruptcy law (including the interpretation of

apparent conflicting sections of the Bankruptcy Code) and related

to a debt that had been discharged by the same bankruptcy court in

the earlier bankruptcy proceeding.           Id.   Faced with a situation

where factors integral to the Code’s objectives – the debtor’s

“rights to the integrity of her discharge and to the use of her

exemptions” – were present, we thus upheld the bankruptcy court’s

decision not to abstain.      Id. at 332.

     We do not see Luongo as inconsistent with our holding today.

The tax valuation on non-estate property subject to state taxation

does not implicate the Code’s objectives.          It is undisputed that,

despite possible environmental contamination, the property here is

worth at least as much as the taxes owing on it.             The extent to

                                       9
which the      “fresh   start”   objective        of   the    Bankruptcy        Code   is

implicated is thus minimal, particularly given that neither the

debtor nor the trustee made any effort to contest the allegedly

inflated valuation on the Kansas property as avenues to challenge

the state tax valuation passed them by.                 See New Haven Projects

Ltd. Liab. v. City of New Haven (In re New Haven Projects Ltd.

Liab.), 225 F.3d 283, 290 (2d Cir. 2000) (“Section 505 was enacted

to   protect    creditors    from   the    prejudice         caused   by   an    ailing

debtor’s failure to contest tax assessments . . . It was not

enacted to afford debtors a second bite at the apple at the expense

of outside creditors.”); Brandt-Airflex Corp. v. Long Island Trust

Co. (In re Brandt-Airflex Corp.), 843 F.2d 90, 96 (2d Cir. 1988)

(“[T]he bankruptcy court pointed out quite correctly that a literal

reading of § 505 makes the Bankruptcy Courts a second tax court

system, empowering the Bankruptcy Courts to consider ‘any’ tax

whatsoever, on whomsoever imposed.”); Northbrook Partners LLP v.

Cty. of Hennepin (In re Northbrook Partners LLP), 245 B.R. 104, 121

(Bankr. D. Minn. 2000) (“[T]he fresh start cannot be used as a rote

mantra against the basic limitations of a federal system.”); In re

Swan, 152 B.R. 28, 30 (Bankr. W.D.N.Y. 1992) (“What the Debtor is

requesting in this case is nothing more than an attempt to gain a

second bite of the apple, which would only benefit her and not her

creditors, a result never intended under Section 505.”).                    Further,

as discussed, the trustee here abandoned the property that is

central to      the   tax   liability     issue    in   Mr.     Hinsley’s       motion.

                                        10
Although   Mr.   Hinsley    attempts    to   posture   this   litigation   as

interwoven with the bankruptcy estate, Ms. Hinsley’s interest in

the property bears little, if any, relation to her capacity as an

unsecured creditor in the estate and the Kansas property is simply

not property of the bankruptcy estate.

     In contrast to the situation confronted in Luongo, bankruptcy

issues do not predominate here, nor will performing the valuation

further the efficient administration or equitable distribution of

the estate for the benefit of the creditors.           Where, as here, the

only parties likely to benefit from the resolution of a debtor’s

dispute with the taxing authority are the debtor and his lienholder

on property that is not a part of the estate, there is no warrant

for a bankruptcy court to assume decision-making power over the

dispute.

                                CONCLUSION

     Upon a careful review of the record and relevant law, this

court holds that the district court abused its discretion in

failing to abstain.        Further, because abstention is appropriate

under the facts of this case, we REVERSE and RENDER judgment in

favor of the appellants.




                                       11
