_____________

No. 95-3039MN

_____________

In re: D & P Partnership; *

D & P Partnership II, *

*

Debtors. *

*

*

-------------------------- *

*

Norwest Equipment Finance, Inc.;*

Norwest Bank Minnesota Central, *

N.A.; Norwest Bank Minnesota, *

N.A. (collectively, "Norwest"); *

Stearns County National Bank of *

Albany (SCNB), * On Appeal from the United

* States District Court

Appellees, * for the District of

* Minnesota.

v. *

*

*

Mahendra Nath; Ashok Mehta; *

Torchwood Franchise Group, *

Inc., *

*

Appellants. *

*

*

D & P Partnership; D & P *

Partnership II, *

*

Defendants. *

___________

 Submitted: May 13, 1996

 Filed: July 31, 1996

___________

Before RICHARD S. ARNOLD, Chief Judge, MAGILL and MURPHY, Circuit Judges.

___________
-2-

RICHARD S. ARNOLD, Chief Judge.

The defendants in this case, collectively referred to as the Nath

Group, purchased assets from a bankrupt debtor, D & P Partnership. At the

time of the purchase, the state of Minnesota imposed a sales tax on such

sales, which tax was paid. Subsequently, Minnesota repealed the sales tax

with retroactive application, so that the tax on this sale was subject to

a refund. The Bankruptcy Court held that the plaintiffs in this case,

secured creditors of D & P, were entitled to the proceeds of that refund.

The District Court affirmed. We disagree and reverse.

I.

In January of 1991, D & P filed a Chapter 11 bankruptcy petition.

In time, D & P decided that a self-directed liquidation of its assets was

its best alternative, and its creditors, including the plaintiffs,

acquiesced in that decision. The Nath Group and two other entities

submitted offers to purchase 17 of D & P's Burger King restaurants.

Naturally, the three offers were not identical. D & P put all three

offers before the Bankruptcy Court and allowed its creditors to choose

which offer they wished to accept. They chose the Nath Group's offer.

Further negotiation led to an agreement that D & P would relinquish any

claim to the proceeds of the sale in favor of its creditors. The Nath

Group, in turn, would receive title to the assets free and clear of any

existing liens.

On the eve of the hearing at which the Bankruptcy Court would be

asked to approve the agreement, a problem was discovered. The balance in

D & P's operating account was not sufficient to pay operating expenses,

administrative expenses, and the sales taxes on
 D & P was made a party to the suit, but did not 1

participate.

-3-

the sale if all of the proceeds were paid over to the creditors. In an

attempt to remedy this problem, the Nath Group was asked to increase its

offer, which it refused to do. Instead, the creditors, plaintiffs in this

case, agreed to accept less and allow part of the proceeds of the sale to

be allocated to the newly discovered expenses. This plan met with the

approval of the Bankruptcy Court. The sale was closed on October 31, 1991.

Subsequently, the Nath Group purchased two more restaurants from D & P

under an identical agreement. The required sales taxes were paid over to

the state of Minnesota for both sales.

In January of 1992, the sales-tax statute was amended to exclude the

sale of substantially all of the assets of a business from the list of

taxable events. Minn. Stat. § 297A.25 Subd. 12 (Supp. 1996). This

amendment was retroactive to June 30, 1991, meaning that the sales taxes

in this case were subject to a refund. D & P applied for the refund, but

was denied by the Minnesota Department of Revenue. It did not appeal that

ruling. On the other hand, the Nath Group applied for, and was granted,

the refund.

The plaintiffs then sued the Nath Group in the Bankruptcy Court to

have the proceeds of the refund paid over to them, asserting two theories 1

in support of their claim. First, they argued that the agreement between

the parties required D & P, not the Nath Group, to pay the sales taxes.

Thus, the refund was property of the estate, and should go to the

plaintiffs as creditors. Second, they argued that the Nath Group would be

unjustly enriched if it were allowed to keep the refund. The Bankruptcy

Court agreed with both of these theories, and ordered the Nath Group to

relinquish the refund. The District Court affirmed that decision.
-4-

II.

We must first decide whether we have subject-matter jurisdiction to

hear this case. Generally, once the reorganization plan has been

confirmed, as D & P's plan has been, the estate of the debtor, and thus the

bankruptcy court's jurisdiction, ceases to exist. United States v. Unger,

949 F.2d 231, 233 (8th Cir. 1991). However, a bankruptcy court may

explicitly retain jurisdiction over aspects of a plan related to its

administration and interpretation. Id. at 234.

The Bankruptcy Court retained jurisdiction over the subject matter

of this lawsuit. Article X of the Plan addresses the continuing

jurisdiction of the Bankruptcy Court. It reads that the "Court shall

retain jurisdiction until this Plan has been fully consummated" for various

purposes. Among those purposes are the "interpretation and enforcement of

the terms of this Plan."

We think this settles any jurisdictional question. Certain funds

were paid into the bankruptcy estate by the Nath Group. Those funds were

to be used to pay sales taxes and the plaintiffs, among other things. The

state of Minnesota saw fit to change its law and refund the sales taxes.

The plaintiffs now argue that the "terms of this Plan" require the Nath

group to pay the refund to the debtor so that it can be turned over to

them. We do not see what could more clearly be a matter of "interpretation

and enforcement of this plan" over which the Bankruptcy Court retained

jurisdiction than is the plaintiffs' request. We hold that the Bankruptcy

Court, and this Court, have jurisdiction over the subject matter of this

case.

III.

We turn, then, to the merits of this case. At the outset, it is

important to realize that the plaintiffs are not claiming that
-5-

they are entitled to the tax refund under the refund statute, Minn. Stat.

§ 289A.50 (Supp. 1996). Indeed, the Supreme Court of Minnesota has made

it clear that purchasers, not sellers, are entitled to tax refunds. See

Acton Construction Co. v. Commissioner of Revenue, 391 N.W.2d 828, 832-33

(Minn. 1986); Minn. Stat. § 289A.50, subd. 2. Thus, the interpretation of

the Minnesota statute is not before us. Under the statute, there is no

doubt that the Nath group has a right to the refund. We must interpret the

terms of the contract between the parties and apply the equitable principle

of unjust enrichment to determine whether either one requires the Nath

Group to surrender the proceeds of the refund to the plaintiffs, legal

questions over which we exercise plenary review.

The gravamen of the plaintiffs' argument is that the contract between

the parties shifted the responsibility of funding the sales taxes from the

buyer, the Nath Group, to the seller, D & P and its creditors. The Nath

Group, it is argued, intended to part forever with the total purchase

price, and had no interest in how those funds were utilized. It follows,

then, that any refund would belong to the bankruptcy estate because the

estate "paid" the sales taxes. In other words, it is argued that the

contract between the parties mandates that the seller is entitled to the

refund. See Acton, 391 N.W.2d at 832 n.5.

Several portions of the writings between the parties are important.

In paragraph 2.1 of the Asset Purchase Agreement, the Nath Group agrees to

pay a set amount for the assets. Paragraph 1.5, the critical portion of

the writings for present purposes, reads that

The purchase price payable by the Buyers as set forth in

section 2.1 is inclusive of any sales or use tax payable.

Sellers agree to pay any sales tax owing, however, Sellers

shall pay such sales tax from the proceeds of the Purchase

Price (as defined in Section 2.1). Accordingly,
 Identical documents were executed for both the 17- 2

restaurant sale and the two-restaurant sale.

-6-

the dollar amounts distributed to the Sellers' designees may be

reduced to pay any sales tax owing.

Finally, the Stipulation Relating to Sale Proceeds, Settlement of

Administrative Claim and Transfer of Franchises (the Stipulation) provides

that D & P "shall receive no proceeds from the sale and shall be liable for

any expenses of the Sale," including sales taxes.2

This language at most does nothing to change the statutory

presumption that purchasers pay sales taxes and are consequently entitled

to refunds when the taxes are repealed. Arguably, it refutes the

plaintiffs' argument altogether. Paragraph 2.1 establishes the purchase

price. That price, according to paragraph 1.5, includes sales taxes. The

seller is directed to remit those taxes to the state. As a consequence,

the funds distributed to the plaintiffs were reduced. This language, as

we read it, says the Nath Group "paid" the sales taxes by providing the

funds to meet that liability. The seller merely passed those funds on to

the state. 

The plaintiffs ask us to look outside the agreement in order to

bolster their argument. First, as the plaintiffs' lawyer pointed out at

oral argument, this sale was not a typical sale between willing parties on

the open market. It was a self-directed liquidation of the assets of a

bankrupt debtor. Thus, the plaintiffs, as creditors, were merely trying

to minimize losses.

Second, when the funding shortfall was discovered the Nath Group was

asked to increase its offer. Its reply was that the offer on the table was

what it was willing to pay for the business, and all that it was willing

to pay. Moreover, the chairman of the
-7-

Nath Group commented, in a deposition, that he never contemplated paying

an additional amount for sales taxes when he formulated his offer. These

facts, we are told, show that the Nath Group intended to part forever with

the purchase price and leave the plaintiffs with the responsibility of

coping with any new expenses that might arise.

Finally, the plaintiffs remind us that they were the ones who were

forced to sacrifice funds when the shortfall was discovered. They gave up

a portion of the proceeds in order to facilitate the sale. If some of

those proceeds are to be returned, it is only fair that they, not the Nath

Group, recoup those funds.

These additional facts do nothing to alter our conclusion. We

recognize that the Nath Group is recouping funds that it never expected to

recoup when it parted with them, but so would the plaintiffs if we held

that they were entitled to the refund. The Minnesota statute entitles the

Nath Group to a refund of the sales taxes. At minimum, there is no

provision in the contract that changes that outcome.

This reasoning also disposes of the plaintiffs' unjust-enrichment

claim. Under the Minnesota precedents, unjust enrichment occurs when one

party enriches himself at the expense of another illegally or inequitably.

See Christle v. Marberg, 421 N.W.2d 748, 751 (Minn. App. 1988). Here, the

plaintiffs argue that the Nath Group's action in retaining the refund is

unlawful because it violates the terms of the contract. We have already

held that, at a minimum, the contract is not contradicted by allowing the

Nath Group to retain the refund. Thus, to do so cannot be unlawful and the

unjust-enrichment claim must be rejected. There is nothing inequitable

about allocating money in accordance with a statute, and in a manner not

contrary to the parties' agreement.

IV.
-8-

The judgment of the District Court, affirming the Bankruptcy Court,

is reversed. The Nath Group is entitled to retain the proceeds of the tax

refund, and the Bankruptcy Court, on remand, is instructed to enter

judgment accordingly.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.