In re Ilko
| Decision Date | 27 June 2011 |
| Docket Number | No. 09–60049.,09–60049. |
| Citation | 11 Cal. Daily Op. Serv. 7951,651 F.3d 1049 |
| Parties | In re Daniel ILKO, Debtor,Daniel Ilko, Appellant,v.California State Board of Equalization, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HEREA. Lavar Taylor, Law Offices of A. Lavar Taylor, Santa Ana, CA, for the debtor-appellant.Leslie Branman Smith, Deputy Attorney General for the State of California, San Diego, CA, for the appellee.Appeal from the Ninth Circuit Bankruptcy Appellate Panel, Montali, Rimel, and Jury, Bankruptcy Judges, Presiding. BAP No. 09–1119–JuRMo.Before: STEPHEN S. TROTT and PAMELA ANN RYMER, Circuit Judges, and RALPH R. BEISTLINE, Chief District Judge.*
ORDERWe affirm the decision of the Bankruptcy Appellate Panel for the reasons stated in its Memorandum dated October 15, 2009, attached to this Order as the Appendix.
AFFIRMED.
APPENDIX
NOT FOR PUBLICATION
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: Daniel Ilko, Debtor.
CALIFORNIA STATE BOARD OF EQUALIZATION, Appellant,
v.
DANIEL ILKO, Appellee.
BAP No. SC–09–1119–JuRMo
Argued and Submitted on September 23, 2009 at Pasadena, California
Filed—October 15, 2000
Appeal from the United States Bankruptcy Court for the Southern District of California
Before: JURY, RIMEL,2 and MONTALI, Bankruptcy Judges.
Appellant California States Board of Equalization (the “Board”) appeals the bankruptcy court's order granting summary judgment in favor of debtor Daniel Ilko in a proceeding relating to the discharge of California sale taxes.
More than two years after debtor received his chapter 7 discharge, the Board assessed debtor $105,334.49 3 as the responsible person for unpaid sales taxes owed by his corporation Executive Auto Sales, Inc. (“EAS”). After exhausting his administrative remedies, debtor reopened his bankruptcy case in June 2008 and filed an adversary complaint seeking a determination that his tax debt was discharged.
On cross motions for summary judgment, the bankruptcy court ruled for debtor, finding that the tax debt was discharged, presumably because it did not meet one or more of the requirements for a nondischargeable tax under §§ 523(a)(1) and 507(a)(8)(A)(iii).4
We follow the panel's prior decision in George v. Cal. State Bd. of Equalization (In re George), 95 B.R. 718 (9th Cir. BAP 1989) aff'd 905 F.2d 1540 (9th Cir.1990) and hold that debtor's responsible person liability to the Board was a “tax” for purposes of dischargeability under § 523(a)(1). We also follow, as we must, the panel's decision in Raiman v. State Bd. of Equalization (In re Raiman), 172 B.R. 933 (9th Cir. BAP 1994), which held that the California sales tax at issue here was a tax “on or measured by gross receipts” under § 507(a)(8)(A). Finally, we determine that debtor's tax liability was not assessed before, but still assessable under California law after the commencement of his case as required under § 507(a)(8)(A)(iii).
Accordingly, for the reasons set forth below, we hold that debtor's tax debt was excepted from discharge and REVERSE.
On May 1, 1993 debtor obtained a seller's permit in the name of EAS, a wholesale car dealership. Debtor was the president and majority shareholder for the business.
EAS was obligated to pay sales taxes to the State of California under Cal. Rev. & Tax Code § 6051 5, which imposes a tax on all retailers “[f]for the privilege of selling tangible personal property at retail....” The Board audited the sales tax returns of EAS for the period of October 1, 1993 through September 30, 1996. As a result, EAS became indebted to the Board through a final assessment in the amount of $85,376.58 that became due and payable on June 20, 1997. EAS made some payments towards this assessment.
On July 3, 2001 debtor filed his chapter 7 bankruptcy petition. His Schedule F reflected the EAS tax debt to the Board as a contingent liability. The debtor received his discharge on October 3, 2001.
On March 31, 2003 EAS ceased operations without paying the full amount of the audit assessment.
On November 10, 2005 the Board issued a dual determination for responsible person liability to debtor under Tax Code § 6829 6 for the unpaid portion of the audit assessment against EAS. Debtor pursued his administrative remedies with the Board asserting, among other things, that the tax debt was discharged in his bankruptcy. On August 7, 2008 the Board determined that the dual determination was timely and debtor's tax debt was not discharged in his bankruptcy case.7
The bankruptcy court granted debtor's motion to reopen his bankruptcy case by order entered on June 23, 2008. On July 30, 2008 debtor filed an adversary complaint seeking a determination from the bankruptcy court that his responsible person tax liability was discharged. Debtor asserted, by way of motion for summary judgment, that the statute of limitations for assessment of his tax liability had expired prior to his bankruptcy filing.
The Board filed its cross motion for summary judgment on February 12, 2009, asserting that the statute of limitations for assessing that tax did not commence until EAS had ceased operations in March 2003, after debtor had filed his bankruptcy case. Thus, the Board argued the tax debt was nondischargeable under § 507(a)(8)(A)(iii) because the tax was not assessed, but remained assessable under California law.
The bankruptcy court ruled orally in debtor's favor at the hearing. The order granting summary judgment for debtor and denying the Board's motion was entered on April 27, 2009. The Board timely appealed the bankruptcy court's order. 8
The bankruptcy court had jurisdiction over this proceeding under 28 U.S.C. §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
Whether the bankruptcy court erred in finding that debtor's tax debt was discharged in his bankruptcy.
Since this case arises on summary judgment, the standard of review is de novo. Marshack v. Orange Comm'l Credit (In re Nat'l Lumber & Supply, Inc.), 184 B.R. 74, 77 (9th Cir. BAP 1995).
“[S]ummary judgment is proper ‘if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In making this determination, conflicts are resolved by viewing all facts and reasonable inferences in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).
The purpose of the discharge is to give the debtor a fresh start. Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). A chapter 7 debtor is generally granted a discharge of all debts that arose before the filing of the bankruptcy petition “[e]xcept as provided in section 523 of this title.” § 727(b). “Most tax claims are nondischargeable in bankruptcy.” State Bd. of Equalization v. Leal (In re Leal), 366 B.R. 77, 80 (9th Cir. BAP 2007).
Section 523(a)(1)(A) makes certain tax debts nondischargeable in Chapter 7, including those “of the kind” and for the periods specified in § 507(a)(8). 9 Section 507(a)(8)(A) gives unsecured tax claims priority if they are for a tax “on or measured by ... gross receipts for a taxable year ending on or before the date of the filing of the petition” and are taxes “not assessed before, but assessable, under applicable law ..., after, the commencement of the case.” 10 § 507(a)(8)(A)(iii). Thus, relevant to this appeal, the general discharge under § 727(b) does not discharge a debtor from liability for a tax that was unassessed at the time debtor filed for bankruptcy but still assessable by law.
We consider the threshold issue whether debtor's responsible person liability under Tax Code § 6829 for the unpaid sales taxes of EAS is a “tax” within the meaning of § 523(a)(1).
The Board contends that our prior decision in George, 95 B.R. 718 (9th Cir. BAP 1989) aff'd 905 F.2d 1540 (9th Cir.1990) provides the answer to this question.11 In George, the panel held that the debtor's personal liability under Tax Code § 6829 was a “tax” for purposes of nondischargeability under § 523. At oral argument, debtor's counsel conceded that George was controlling authority on this issue. Because we do not find George distinguishable from this case, we adopt its holding since we are bound by principles of stare decisis and follow our own decisions. See State v. Rowley (In re Rowley), 208 B.R. 942, 944 (9th Cir. BAP 1997) ().
Very briefly summarized, the panel in George applied the four-part test set forth in County Sanitation Dist. v. Lorber Indus. of Cal. (In re Lorber Indus. of Cal.), 675 F.2d 1062, 1066 (9th Cir.1982) to determine whether the debtor's personal liability under Tax Code § 6829 was a “tax” for purposes of nondischargeability. George, 95 B.R. at 720. In Lorber, the Ninth Circuit defined a “tax” as: (a) an involuntary pecuniary burden, regardless of name, laid upon individuals or property; (b) imposed by, or under authority of the legislature; (c) for public purposes, including the purposes of defraying expenses of government or undertakings by it; and (d) under the police or tax power of the state. The panel concluded that the debtor's personal liability was a “tax” because it was “an involuntary pecuniary burden imposed by the legislature under the taxing power of the state for public purposes.” George, 95 B.R. at 720.12
In addition, we recognize the holding and rationale set forth in United States v. Sotelo, 436 U.S. 268, 275, 98...
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