Bostwick, Matter of
| Decision Date | 01 August 1975 |
| Docket Number | Nos. 74-1970 and 74-1971,s. 74-1970 and 74-1971 |
| Citation | 521 F.2d 741 |
| Parties | 75-2 USTC P 9630 In the Matter of Harry Stanley Bostwick and Steva Maxine Bostwick, Bankrupts. Harry Stanley BOSTWICK, Appellee, v. UNITED STATES of America, Appellant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Karl Schmedler, Atty., App. Sect., Tax Div., Dept. of Justice, Washington, D. C., for appellant.
Richard E. Shugrue, Omaha, Neb., for appellees.
Before HEANEY and STEPHENSON, Circuit Judges, and SMITH, Senior District Judge. *
The United States appeals from an order of the United States District Court for the District of Nebraska affirming an order of the Referee in Bankruptcy holding that: (1) the bankruptcy court had jurisdiction to determine the dischargeability of a tax debt where the United States had not filed a proof of claim or otherwise participated in or consented to the proceedings; and (2) that the bankruptcy court had jurisdiction to enjoin the district director from collecting federal taxes where the United States had not filed a proof of claim or otherwise participated in or consented to the proceedings. The United States also contends in this appeal that the action of the bankruptcy court is prohibited by the Declaratory Judgment Act.
We affirm.
Harry Bostwick and Steva Bostwick filed voluntary petitions in bankruptcy on February 15, 1973, in which the United States was listed as a creditor in the amount of $68,400. This sum represented unpaid taxes for the years 1963 through 1967. The United States did not file proofs of claim in either proceeding. Orders of discharge were entered by the referee on May 2, 1973. The bankrupts, on May 3, 1973, filed applications to determine the dischargeability of debts owed to the United States. The United States, on June 26, 1973, filed a motion to dismiss the applications on grounds that the bankruptcy court lacked jurisdiction to grant the bankrupts' applications. On July 10, 1973, the bankrupts sought an order enjoining the United States from collecting back taxes from the bankrupts until the dischargeability of the debts was determined by the bankruptcy court. On that same date, the bankruptcy court held that it had jurisdiction to determine the dischargeability of the debts owed the United States and, thereupon, enjoined the United States from instituting any proceedings against the bankrupts to collect any taxes for 1968 or prior years until the question of the dischargeability of the tax debts was determined by the bankruptcy court. Upon a petition for review filed by the United States, the District Court affirmed and the United States appealed to this Court.
JURISDICTION OF THE BANKRUPTCY COURT TO DETERMINE THE DISCHARGEABILITY OF A TAX DEBT WHERE THE UNITED STATES HAS NOT FILED A PROOF OF CLAIM.
The dispute as to whether the bankruptcy court has jurisdiction to determine the dischargeability of the bankrupts' tax debt where the United States has not filed a proof of claim or otherwise participated in or otherwise voluntarily consented to the proceedings turns on the proper interpretation of § 2(a) of the Bankruptcy Act. 1 The statute provides that courts of bankruptcy have jurisdiction to:
Hear and determine, or cause to be heard and determined, any question arising as to the amount or legality of any unpaid tax, whether or not previously assessed, which has not prior to bankruptcy been contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction * * *
The government contends, despite the plain language of the statute, that Congress did not intend to waive the sovereign immunity of the United States. In support of its position, the government cites a report of the majority of the Senate Finance Committee 2 wherein it was stated:
* * * This committee understands that this amendment makes no change in present law under which a bankruptcy court cannot adjudicate the merits of any claim, including a Federal tax claim, which has not been asserted in the bankruptcy proceeding by the filing of a proof of claim.
The precise issue before us was considered by Judge Mahon of the Northern District of Texas in a well reasoned and exhaustively researched opinion. Judge Mahon concluded that the government's reliance on the majority report of the Senate Finance Committee was misplaced and that a thorough examination of the legislative history supported a determination that the amendment was intended to grant jurisdiction to the bankruptcy court in factual situations of the type presented here. He stated:
A review of the legislative history relative to § 2a(2A) and its companion amendments reveals that the statement of the Senate Finance Committee that is herein given emphasis by the Government appears in the closing paragraph of the last section of the majority views of Senate Report No. 999. The statement is made under the concluding general topic, "Comments on Other Provisions of the Bill," not under the more specific section captioned "Discharge of Taxes" wherein H.R. 3438 (encompassing the § 2a(2A) amendment) was addressed. In fact, the Senate Finance Committee's recommendations on H.R. 3438 appeared in Senate Report 998, not Senate Report No. 999, * * * and though the Finance Committee discussed its recommendations on both H.R. 3438 and H.R. 136 in Senate Report No. 999, its views relative to H.R. 3438 were not adopted and its recommendations relative thereto were expressly rejected. * * *
In re Durensky, 377 F.Supp. 798, 801 (N.D.Tex.1974) (Footnotes omitted.). 3
Judge Mahon, in addition, relied upon the observations of two bankruptcy experts 4 who agree that the statement in the report of the Senate Finance Committee is not determinative in interpreting the amendment. First, they note that the bill to amend the Bankruptcy Act originated in the House and that the House never considered the construction placed on the amendment by the majority report of the Senate Finance Committee. Second, the bill, after passage in the House, was referred to the Senate Judiciary Committee which in turn referred the bill to the Senate Finance Committee for consideration of the tax aspects. Third, the majority of the Finance Committee, at the request of the Treasury Department, proposed a number of changes in the bill and included these recommendations, along with the statement under consideration here, in the majority report. Fourth, the Judiciary Committee rejected the proposals made by the Finance Committee, adopted the minority views opposing the changes and recommended passage of the House Bill without change. The Senate accepted the recommendation of its Judiciary Committee.
In the light of such legislative history, the self-serving statement in the majority report of the Finance Committee inserted at the behest of the Treasury Department cannot be accorded consideration in construing the amendment. 5
We are in complete agreement with Judge Mahon's analysis. It is evident to us that the Congress, as a whole, rejected the viewpoint stated in the majority report of the Senate Finance Committee and intended the plain meaning of the amendment to have effect. The amendment provides that the bankruptcy court has jurisdiction to "hear and determine * * * Any question arising as to the amount or legality of any unpaid tax, whether or not previously assessed * * *." (Emphasis supplied.) We find no reason to avoid the plain meaning or to strain the statute.
Further, we are in agreement with Judge Mahon's conclusion that the subsequent amendments to the Bankruptcy Act and the Rules of Bankruptcy Procedure 6 do not support the government's position. Rather, such amendments and rules support and are consistent with the conclusion that the bankruptcy court has jurisdiction in the instant case. 7 Had Congress wished to create the exception urged by the government, it had the opportunity to do so.
JURISDICTION OF THE BANKRUPTCY COURT TO ENJOIN THE DISTRICT DIRECTOR FROM COLLECTING FEDERAL TAXES.
The United States contends that suits to enjoin the assessment and/or collection of taxes are prohibited by the "anti-injunction" statute and hence that the bankruptcy court was without jurisdiction to issue an injunction in this case. Section 7421(a) of the 1954 Internal Revenue Code 8 provides:
Except as provided in sections 6212(a) and (c), 6213(a), and 7426(a) and (b) (1), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.
The United States argues that none of the statutory exemptions are applicable to the present case and that the narrow judicial exception as announced in Enochs v. Williams Packing Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962) 9 and reaffirmed in Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974) and Alexander v. "Americans United", Inc., 416 U.S. 752, 94 S.Ct. 2053, 40 L.Ed.2d 518 (1974), is equally inapplicable. We agree. However, we do not believe that the "anti-injunction statute" is relevant to the present case inasmuch as Congress has evidenced an intention to enact a complete scheme governing bankruptcy which overrides the general policy represented by the "anti-injunction" act.
We stated above that, in our opinion, Congress has given the bankruptcy court jurisdiction under Section 2a(2A) of the Bankruptcy Act, supra, to determine the dischargeability of a tax debt where the United States had not filed a proof of claim or otherwise participated in or consented to the proceedings. We believe that the overriding policy of the Bankruptcy Act is the rehabilitation of the debtor and we are convinced that the Bankruptcy Court must have the power to enjoin the assessment and/or collection of taxes in order to protect its jurisdiction, administer the bankrupt's estate in an orderly and efficient...
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