Brockenbrough v. COMMISSIONER, IRS, Civ. A. No. 84-0010-C.
| Decision Date | 12 February 1986 |
| Docket Number | Civ. A. No. 84-0010-C. |
| Parties | Ronnie K. BROCKENBROUGH, Plaintiff, v. COMMISSIONER, INTERNAL REVENUE SERVICE, Defendant. |
| Court | U.S. District Court — Western District of Virginia |
Leroy R. Hamlett, Jr., Charlottesville, Va., for plaintiff.
S. Martin Teel, Jr., Civil Trial Section, Central Region, Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendant.
This action is before the court pursuant to 28 U.S.C. § 1334, and Bankruptcy Rule 8001, on the debtor's appeal of the Bankruptcy Court's dismissal of his Chapter 13 (11 U.S.C. § 1301, et seq.) bankruptcy proceeding. The issues have been briefed and argued and are ripe for disposition by this court. For the reasons set forth below, the decision of the Bankruptcy Court shall be affirmed.
On July 20, 1983, Ronnie Brockenbrough, the debtor, filed a Chapter 13 bankruptcy petition. The Internal Revenue Service filed a proof of claim in the amount of $178,573.01 — the total amount of penalty, interest, and lien fee accruing from the debtor's failure to remit employment taxes owed by the corporation of which he was vice president. Neither the debtor, nor any other party in interest, objected to the proof of claim. Further, the debtor did not avail himself of the opportunity, provided by 11 U.S.C. § 505(a)(1), to challenge the amount or legality of the assessment against him.
Upon motion of the Internal Revenue Service, the Bankruptcy Court dismissed the debtor's Chapter 13 petition as the debtor's unsecured, non-contingent, liquidated debts exceeded the $100,000 limitation established by 11 U.S.C. § 109(e). In so doing, the Bankruptcy Court rejected the debtor's argument that the IRS' claim was contingent since if the IRS succeeded in recovering the taxes owed by the corporation from escrow funds resulting from the Chapter 11 liquidation of the corporation, it would no longer pursue the claim against the debtor. The Bankruptcy Court also rejected the debtor's claim that his debt to the IRS would likely be reduced to an amount less than $100,000 by a set-off from the escrowed funds.
In its posture as an appellate court on bankruptcy matters, this court may set aside any conclusion of law found to be erroneous. Cross Electric Company, Inc. v. United States, 512 F.Supp. 511, 512 (W.D.Va.1980). Thus, this court is free to make a de novo determination of whether the debt in question was "contingent." The debtor's arguments in support of the debt's contingency appear to differ at the Bankruptcy and District Court levels, but this court finds neither position persuasive.
A "contingent" debt is defined as: one which the debtor will be called upon to pay only upon the occurrence or happening of an extrinsic event which will trigger the liability of the debtor to the alleged creditor and if such triggering event or occurrence was one reasonably contemplated by the debtor and creditor at the time the event giving rise to the claim occurred.
In Re All Media Properties, Inc., 5 B.R. 126, 133 (1980). The debtor's liability to the IRS was "triggered" by his failure to pay over the unemployment taxes collected from the corporation's employees — an event which occurred before the filing of the bankruptcy petition, so that the debt was, therefore, not contingent at the time of the filing of the petition. The statute is clear that the debtor's eligibility for a ...
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