State of Tennessee ex rel. City of Chattanooga, Tennessee v. 2003 Delinquent Taxpayers, et al.

The issue in this case is whether the trial court had jurisdiction to hear a suit filed by the City of Chattanooga (“the City”) to enforce a real property tax lien on property acquired by Custom Baking Company through a sale conducted by a bankruptcy court trustee. The previous owner of the real property, which was alleged to have been delinquent in payment of its city property taxes, filed a bankruptcy petition in the United States Bankruptcy Court for the District of Delaware prior to this action. The City was listed as a creditor in the bankruptcy action and was notified of the proposed sale of the debtor’s assets by the bankruptcy trustee and filed no objection. After the sale of the property, the Bankruptcy Court approved the sale free and clear of all liens, claims, and encumbrances, and retained jurisdiction “to determine any claims, disputes or causes of action arising out of or relating to the proposed sale.” The City brought this action in state Chancery Court several months after the entry of the Bankruptcy Court’s order. Upon review, we affirm the trial court’s judgment that it lacked jurisdiction to hear and decide this case and that the City is barred by the collateral attack doctrine from bringing this action to circumvent the Bankruptcy Court’s prior valid final order.