789 F.2d 1080 (4th Cir. 1986), 85-1907, Best Repair Co., Inc. v. United States
|Citation:||789 F.2d 1080|
|Party Name:||14 Collier Bankr.Cas.2d 1235, In re BEST REPAIR COMPANY, INC., Appellee, v. UNITED STATES of America, Appellant.|
|Case Date:||May 08, 1986|
|Court:||United States Courts of Appeals, Court of Appeals for the Fourth Circuit|
Argued Feb. 6, 1986.
Raymond W. Hepper, Tax Div., U.S. Dept. of Justice (Glenn L. Archer, Jr., Asst.
Atty. Gen., Michael L. Paup, Wynette J. Hewett, Washington, D.C., Elsie L. Munsell, U.S. Attys., Alexandria, Va., on brief), for appellant.
Stuart L. Nachman (Kalfus, Nachman, Coureas & Stanley, P.C., Norfolk, Va., on brief), for appellee.
Before WINTER, Chief Judge, and RUSSELL and WIDENER, Circuit Judges.
HARRISON L. WINTER, Chief Judge:
The government appeals from the judgment of the district court denying it post-petition interest on its tax lien against property of the bankrupt debtor, Best Repair Company, Inc. The district court ruled that Sec. 506(b) of the Bankruptcy Code (11 U.S.C.) prohibits the recovery of post-petition interest on nonconsensual claims such as tax liens. Convinced that the plain terms of Sec. 506(b) require a contrary result, we reverse.
On July 23, 1983, the debtor, Best Repair Company, Inc., filed for reorganization under Chapter 11 of the Bankruptcy Code. The government filed proofs of claim for unpaid withholding and social security taxes, along with accumulated penalties and interest, totalling $57,838.26. The government secured this claim by a tax lien against real property of Best Repair. Best Repair admitted its liability for the pre-petition taxes, penalties, and interest, as well as the fact that the value of the property securing the claim exceeded the total amount claimed by the government.
The sole dispute is over Best Repair's contention that the government has no right to collect interest that accumulated after the filing of the bankruptcy petition. The bankruptcy court held that Sec. 506(b) does authorize the collection of post-petition interest on tax liens, and awarded the government approximately $10,000 for such interest. The district court reversed. The district court found Sec. 506(b) ambiguous and concluded that pre-Bankruptcy Code authority forbidding post-petition interest on nonconsensual secured claims was still controlling.
The dispositive issue in this case is the proper interpretation of 11 U.S.C. Sec. 506(b), which reads:
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