1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In re:

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

MERVYNS HOLDINGS, LLC, Debtor.

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Case No. 08-11586 KG Chapter 11 LIMITED OBJECTION TO MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR AN ORDER APPROVING AUCTION PROCEDURES, AGENCY AGREEMENT, STORE CLOSING SALES AND RELATED RELIEF BY CERTAIN SECURED CREDITORS THE CALIFORNIA TAXING AUTHORITIES COUNTIES DATE: August 26, 2008 TIME: 10:00 A.M.

TO THE HONORABLE KEVIN GROSS, UNITED STATES BANKRUPTCY JUDGE, AND TO ALL PARTIES OF INTEREST: The County of Napa, Contra Costa and Riverside, California, political subdivision of the State of California and local Taxing Authorities (California Taxing Authorities) hereby object to the Motion of Debtors and Debtors in Possession for an Order Approving Auction Procedures, Agency Agreement, Store Closing Sales and Related Relief by Certain Secured Creditors the California Taxing Authorities Counties. The California Taxing Authorities San Bernardinos objection will be limited to the store closing sales and in connection with payment of its local taxes at the store closings. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION.

The subject properties are comprised of business property in

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the various counties. Store Number

The stores are as follows: County Amount

Store Number 8

Napa, California 1116 First Street Napa

$5082.05

Store Number 11

Contra Costa (Two stores in Antioch Not sure of location) TBD

Store Number 263

Riverside, California 72280 Highway 111 $4182.26

The personal property is subject to the assessment of local property taxes by San Bernardino under California State law. Interest will accrue on this amount under 11 U.S.C. Section 506(b) and 11 U.S.C. Section 511. The California Taxing Authorities request that the above personal property taxes be paid directly from the store closing. II. THIS COURT MUST LOOK AT CALIFORNIA STATE LAW WHEN APPLYING WHEN DETERMINING TAX LIABILITY. It is well settled law that the bankruptcy court must apply California state law and California tax principles when determining the tax liability. In In Re Fairchild Aircraft Corp, 124 B.R. 488 (Bankr. W. D. Tex. 1991), the court held that the bankruptcy court's valuation of property for purposes of determining property taxes must be consistent with state law principles as the valuation is merely part and parcel of adjudication of a tax due and owing, which is a question controlled by state law. Id. at 492.

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The bankruptcy court, additionally, must give full faith and credit to the law of the state upon which the tax is based. Id. at 492. Also see In re Quality Beverage Co., Inc., 170 B.R. 310

(Bankr. S. D. Tex. 1994). Likewise, in Arkansas Corp. Commission v. Thompson, 313 U.S. 132 (1941), the Supreme Court has held for 64 years, that whether or not taxes are legally due and owing to a state depends upon the valid laws of the state. Id. at 142. This court then must apply California State law to determine the taxes. III. PERSONAL PROPERTY TAX ASSESSMENTS ARE MANDATED UNDER CALIFORNIA LAW. California State Law mandates that personal property must be subject to taxation. Under California State law the Tax Collector

shall collect taxes on all personal property. California Revenue and Taxation Code Section 2903. Under California state law, every piece of personal property is subject to taxation.1 California

Revenue and Taxation Code section 401 states: "Every assessor shall assess all property subject to general property taxation at its full value." Under California state law, personal property is to be assessed at 100% of fair market value each year.2 California Revenue and Taxation Code section 106 states: "'Personal property' includes all property except real estate." In California, property tax assessments consist of two components. The first component is the assessed value. The second is the tax rate. The latter is applied against the former to calculate the amount of taxes due. This equation is sometimes known as the tax ratio. For taxable personal property, the assessed value is determine annually at 100% of fair market value. The tax rate for personal property is one percent (1%) California 3
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California Revenue and Taxation Code Section 401.3 provides that: "The assessor shall assess all property subject to general property taxation on the lien date as provided in Articles XIII and XIIIA of the Constitution. . . ." Personal property taxes are assessed as of January 1 ("lien date") of the year in which taxes become due.3 Additionally, the personal property taxes are also secured by this statutory lien date established by California State Law which is January 1st preceding the fiscal year for which the taxes are levied. California Revenue and Taxation Code Sections 2901, 117 and 2192. Additionally, California law requires that upon sale the taxes be paid first. 2192.1 states: Every tax declared in this chapter to be a lien on real property . . . have priority over all other liens on the property, regardless of the time of their creation. Any tax . California Revenue and Taxation Code Section

. . described in the preceding sentence shall be given priority over matters including but not limited to any recognizance, deed, judgment, debt, obligation, or responsibility with respect to which the subject real property

Constitution Article XIII section 12. California Revenue and Taxation Code, section 117 states: "Lien date is the time when taxes for any fiscal year become a lien on the property." California Revenue and Taxation Code Section 118 defines assessment year as "the period beginning with a lien date and ending immediately prior to the succeeding lien date for taxes levied by the same agency." Revenue and Taxation Code section 2192 states:" . . . all tax liens attach annually as of 12:01 a.m. on the first day of January preceding the fiscal year for which the taxes are levied..." 4
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may become charged or liable. The California Taxing Authorities respectfully request that this court order that the tax liens be paid directly from the store closings. IV. CONCLUSION.

The California Taxing Authorities respectfully request that this court order that the payment of the tax liens be paid directly from the store closing(s). Dated: August 22, 2008 ROMERO LAW FIRM

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 By /s/ Martha E. Romero MARTHA E. ROMERO, State Bar No. 128144 ROMERO LAW FIRM BMR Professional Building 6516 Bright Avenue Whittier, California 90601 (562) 907-6800 (562)907-6820 Facsimile Email: Romero@mromerolawfirm.com Attorneys for Certain California Taxing Authorities

1 2 3 In re: 4

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 08-11586 KG Chapter 11 CERTIFICATE OF SERVICE TO LIMITED OBJECTION TO MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR AN ORDER APPROVING AUCTION PROCEDURES, AGENCY AGREEMENT, STORE CLOSING SALES AND RELATED RELIEF BY CERTAIN SECURED CREDITORS THE CALIFORNIA TAXING AUTHORITIES COUNTIES Date: August 26, 2008 Time: 10:00 a.m. ET CERTIFICATE OF SERVICE

MERVYNS HOLDINGS, LLC, 5 Debtor. 6 7 8 9 10 11 12 13 14

I certify that a true and correct copy of the foregoing has been 15 16 17 18 19 20 21 22 23 24 25 26 27 28 By /s/MARTHA E. ROMERO MARTHA E. ROMERO, State Bar No. 128144 ROMERO LAW FIRM BMR Professional Building 6516 Bright Avenue Whittier, California 90601 (562) 907-6800 (562)907-6820 Facsimile Email: Romero@mromerolawfirm.com Certain California Taxing Authorities served via first class U.S. Mail and/or electronically day of August 2008. Dated: August 22, 2008 Respectfully submitted ROMERO LAW FIRM on this 22nd

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 United States Trustee 844 King Street, Room 2207 Lockbox #35 Wilmington, DE 19899-0035 302-573-6491 David M. Fournier Pepper Hamilton LLP Hercules Plaza, Suite 5100 1313 Market Street Wilmington, DE 19899-1709 James S. Carr, Esq. Kelley Drye & Warren LLP 101 Park Avenue New York, New York 10178

Service List Christopher M. Samis Richards, Layton & Finger, P.A. 920 N. King Street One Rodney Square Wilmington, DE 19801 Daniel J. DeFranceschi Richards, Layton & Finger One Rodney Square, P.O. Box 551 Wilmington, DE 19899 Samuel B. Garber Kristen N. Pate General Growth Management, Inc., as Agent 10 N. Wacker Chicago, IL 60606 Simon Property Group, Inc. Attn: Ronald M. Tucker, Esq. 225 West Washington Street Indianapolis, Indiana 46204 Elizabeth Weller LINEBARGER GOGGAN BLAIR & SAMPSON, LLP 2323 BRYAN STREET SUITE 1600 DALLAS, TX 75201 Adam G. Landis, Esquire LANDIS RA TH & COBB LLP 919 Market Street, Suite 600 Wilmington, DE 19801 Adam C. Harris, Esquire SCHULTE ROTH & ZABEL LLP 919 Third Avenue New York, NY 10022 Andrew S. Conway 200 East Long Lake Road Suite 300 Bloomfield Hills, Michigan 48304 Douglas R. Davis PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, NY 10019 Claudia Tobler 1615 L Street, NW Suite 1300 Washington, DC 20036 Domenic E. Pacitti 919 Market St. Suite 1000 Wilmington, DE 19801

BALLARD SPAHR ANDREWS & INGERSOLL, LLP 51st Floor - Mellon Bank Center 1735 Market Street Philadelphia, PA 19103 Attn: David L. Pollack, Esquire BALLARD SPAHR ANDREWS & INGERSOLL, LLP 919 Market Street, 12th Floor Wilmington, DE 19801 attn: Tobey M. Daluz, Esquire Andrew S. Conway, Esquire The Taubman Company 200 East Long Lake Road Suite 300 Bloomfield Hills, MI 48304 Susan E. Kaufma Cooch and Taylor, P.A. 1000 West Street, 10th Floor The Brandywine Building Wilmington, DE 19899 2

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John Mark Stern Assistant Attorney General Bankruptcy & Collections Division P. O. Box 12548 Austin, Texas 78711-2548 KATTEN MUCHIN ROSENMAN LLP c/o Thomas J. Leanse 2029 Century Park East Suite 2600 Los Angeles, California 90067 Ilan Markus, Esq. TYLER COOPER & ALCORN, LLP 555 Long Wharf Drive, 8th Floor P.O. Box 1936 New Haven, CT 06509-0906 OTTERBOURG STEINDLER HOUSTON & ROSEN PC 230 Park Avenue New York, New York 10169 Attention: Jonathan N. Helfat WOMBLE CARLYLE SANDRIDGE & RICE, PLLC 222 Delaware Avenue, Suite 1501 Wilmington, DE 19801 Attention: Francis A. Monaco Frederick B. Rosner Duane Morris LLP 1100 North Market St. Suite 1200 Wilmington, DE 19801 Jeffrey K. Garfinkle, Esq. Buchalter Nemer, PC 18400 Von Karman Avenue Suite 800 Irvine, CA 92612 William B. Sullivan One West Fourth Street Winston-Salem, NC 27101 Kevin J. Mangan 222 Delaware Ave. Suite 1501 Wilmington, DE 19801 Catherine Meeker 1000 East Hanes Mill Rd. Winston-Salem, NC 27105

Louis F. Solimine, Esq. THOMPSON HINE LLP Suite 1400 312 Walnut Street Cincinnati, Ohio 45202-4029 Eric C. Cotton, Esq. 3300 Enterprise Parkway Beechwood, Ohio 44122 David R. Kuney 1501 K Street, NW Washington, DC 20005 William P. Bowden 500 Delaware Ave., 8th Floor PO Box 1150 Wilmington, DE 19899 Alex R. Rovira 787 Seventh Ave. New York, NY 10019 Joseph E. Shickich, Jr. 1001- 4th Avenue Suite 4500 Seattle, WA 98154 Neal J. Levitsky 919 North Market St. Suite 1300 PO Box 2323 Wilmington, DE 19899 Samuel R. Arden Hartman, Simons, Spielman & Wood, LLP 6400 Powers Ferry Road, NW, Suite 400 Atlanta, GA 30339 John P. Byrne 20969 Ventura Blvd. Suite 230 Woodland Hills, CA 91364 Ernie Zachary Park 13215 E. Penn St. Suite 510 Whittier, CA 90602 Mark S. Bostick Wendel, Rosen, Black & Dean LLP 1111 Broadway, 24th Floor Oakland, CA 94607 3

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German Yusufov/Terri A. Roberts Deputy County Attorneys 32 North Stone Avenue, Suite 2100 Tucson, Arizona 8570 Karol K. Denniston 550 S. Hope St. Suite 2300 Los Angeles, CA 90071 William J. Factor SEYFARTH SHAW LLP 131 S. Dearborn Street Suite 2400 Chicago, IL 60603 William Novotny 2901 North Central Ave. Suite 200 Phoenix, AZ 85012 William Ray Hamilton Beach Brands, Inc. 4421 Waterfront Dr. Glen Allen, VA 23060 William F. Taylor 405 North King St. Wilmington, DE 19899 Scott M. Shaw 2030 Hamilton Place Blvd. Suite 150 Chattanooga, TN 37421 David Aelvoet Travis Building 711 Navarro Suite 300 San Antonio, TX 78205 Ian S. Landsberg 16030 Ventura Blvd. Suite 470 Encino, CA 91436 Michael S. Fox, Esq. Olshan Grundman Frome Rosenzweig & Wolosky LLP Park Avenue Tower 65 East 55th Street New York, New York 10022

Jeffrey W. Broker 18191 Von Karman Ave. Suite 470 Irvine, CA John T. Banks 3301 Northland Dr. Suite 505 Austin, TX 78731 Patricia P. McGonigle Seitz, Van Ogtrop & Green, P.A. 222 Delaware Avenue, Suite 1500 P. O. Box 68 Wilmington, DE 19899 Diane W. Sanders 1949 South IH 35 PO Box 17428 Austin, TX 78760 David N. Crapo One Gateway Center Newark, NJ 07102 William F. Taylor, Jr. McCarter & English, LLP Renaissance Center 405 North King Street, 8th Floor Wilmington, Delaware 19801 Katharine L. Mayer McCarter & English, LLP Renaissance Center 405 North King Street 8th Floor Wilmington, Delaware 19801 Robert Kolodney, Esq. Kane Kessler, P.C. 1350 Avenue of the Americas 26th Fl. New York, New York 10019-4896 Margery N. Reed 30 S. 17th St. Philadelphia, PA 19103 Dennis M. Ryan, Minnesota #161275 Faegre & Benson LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-3901

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William R. Firth, III, Esquire GIBBONS P.C. 1000 North West Street Suite 1200 Wilmington, DE 19801 Thomas J. Polis, Esq. 19800 MacArthur Boulevard, Suite 1000 Irvine, California 92612-2433 David A. Nill Woodbury & Kesler, P.C. 265 East 100 South, Suite 300 Salt Lake City, Utah 84111 John A. Adler One Gateway Center Newark, NJ 07102 J. Bennet Friedman 1900 Avenue of the Stars Suite 1800 Los Angeles, CA 90067 Imperial County Treasurer-Tax Collector 940 West Main St. Suite 106 El Centro, CA 92243 Mark E. Felger 1201 N. Market St. Suite 1400 Wilmington, DE 19801 Kohner, Mann & Kailas, S.C. Attn: Samuel C. Wisotzkey Washington Building Barnabas Business Center 4650 North Port Washington Road Milwaukee, WI 53212-1059 William J. Factor 131 S. Dearborn St. Suite 2400 Chicago, IL 60603 Richard S. Reiser PO Box 45308 Omaha, NE 68145

Todd C. Schiltz WolfBlock, LLP 1100 North Market Street, Suite 1001 Wilmington, DE 19801 William P. Coley, II Roetzel & Andress 310 Chiquita Center 259 East Fifth Street Cincinnati, OH 45202 Diana M. Thimmig Roetzel & Andress 1375 East 9th Street One Cleveland Center Cleveland, OH 44114 Ronald S. Beacher, Esq. DAY PITNEY LLP 7 Times Square New York, New York 10036-7311 Stephen B. Grow (P39622) 900 Fifth Third Center 111 Lyon St. NW Grand Rapids, Michigan 49503 Attorneys for Whirlpool Corporation Michael R. Stewart, Minnesota #122397 Faegre & Benson LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, MN 55402-3901 PAUL J. PASCUZZI (Calif. State Bar No. 148810) FELDERSTEIN FITZGERALD WILLOUGHBY & PASCUZZI LLP 400 Capitol Mall, Suite 1450 Sacramento, CA 95814 Thomas Macauley Virgina Guldi 919 Market Street Suite 990 P.O. Box 1028 Wilmington DE 19899 Bruce Jameson Prickett, Jones and Elliott 1310 King Street P.O. Box 1328 Wilmington DE 19899

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Jack J. Carriglio Eric Newman Meckler Bulger Tilson Marcik and Pearson 123 North Wacker Drive Suite 1800 Chicago, Illinois 60606 Christine R. Etheridge IKON Financial Services 1738 Bass Road P.O. Box 13708 Macon GA 31208-3708 Thomas Polis Polis and Associates 19800 MacArthur Boulevard Suiter 1000 Irvine, CA 92612-2433 Sally E. Edison Nicholas E. Meriwether McGuire Woods LLP 625 Liberty Avenue, 23rd Floor Pittsburgh PA 15222