Brown v. Ohio Dep't of Tax. (In re Brown)
| Decision Date | 21 August 2019 |
| Docket Number | Case No. 18-30546,Adv. Pro. No. 18-03045 |
| Parties | In Re: Billy D. Brown, Karen R. Merrell-Brown Debtors. Billy D. Brown, et al. Plaintiffs, v. Ohio Department of Taxation, et al. Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document has been entered electronically in the record of the United States Bankruptcy Court for the Northern District of Ohio.
MEMORANDUM Of DECISION AND ORDER ON MOTION FOR SUMMARY JUDGMENT
This adversary proceeding is before the court on a motion for summary judgment filed by Defendant State of Ohio Department of Taxation on co-Plaintiff Karen R. Merrell-Brown's claim against it. [Doc. # 49]. The motion was filed electronically on June 17, 2019, and served by ordinary mail upon both Plaintiffs at their respective addresses. [Id. at p. 5, Certificate of Service]. On August 8, 2019, the court approved an Agreed Judgment Entry-Stipulated Dismissal as between the Defendant and co-Plaintiff Billy D. Brown. [Doc. # 51]. That stipulated dismissal entry terminates the remaining claim of Plaintiff Billy D. Brown in this action. As a result, the motion for summary judgment remains pending for decision only as to co-Plaintiff Karen R. Merrell-Brown's claim.
The district court has jurisdiction over the underlying Chapter 7 bankruptcy case and all civil proceedings in it arising under Title 11, including this adversary proceeding. 28 U.S.C. § 1334(a) and (b). The Chapter 7 case and all proceedings in it arising under Title 11, including this adversary proceeding, have been referred to this court for decision. 28 U.S.C. § 157(a) and General Order No. 2012-7 entered by the United States District Court for the Northern District of Ohio. Proceedings to determine the dischargeability of particular debts are core proceedings that this court may hear and determine. 28 U.S.C. § 157(b)(1) and (b)(2)(I).
For the following reasons, the State of Ohio Department of Taxation's motion is granted.
Billy D. Brown and Karen R. Merrell-Brown are the co-debtors in the underlying Chapter 7 bankruptcy case and received their discharges.1 Their adversary Complaint seeks a declaration of dischargeability of debts regarding personal income taxes from several tax years and names three taxing authorities as defendants, including the now only remaining Defendant, movant State of Ohio Department of Taxation ("Defendant" or "ODT"). The tax years at issue regarding ODT are 2009 through 2011. [Doc. # 1, ¶ 4]. The Complaint also avers that Plaintiffs timely filed tax returns for those years. [Id., ¶ 5].
Plaintiffs contend that the income tax debts are dischargeable under 11 U.S.C. § 727(b) and 523(a)(1). [Doc. # 1, ¶ 6 ].2 Plaintiffs' claims against two of the three named taxing authority Defendants have already been resolved, as has Plaintiff Billy D. Brown's claim against ODT, as noted above.3 Only Plaintiff Karen R. Merrell-Brown's claim against ODT remains in dispute, set forth in Count 1 of the adversary Complaint as follows:
[Doc. # 1, at p. 2/4]. In its answer, ODT denies that any tax returns were filed and thus that the taxes due and owing for the relevant period are dischargeable under 11 U.S.C. § 727(b) and § 523(a)(1). [Doc. # 5].
On March 1, 2019, ODT initially filed a motion denominated as a motion to dismiss [Doc. # 38] after the original dispositive motion deadline of February 8, 2019. [Doc. # 27]. The court held a further pretrial conference on April 4, 2019, and the parties were granted sixty days to attempt resolution of the claims against ODT. [Doc # 45]. Additionally, the court set a new deadline for filing summary judgment motions and explained that it was denying ODT's motion to dismiss, without prejudice, on procedural grounds. An order then issued confirming the court's oral ruling and denying the motion to dismiss, without prejudice. [Doc. # 47].
ODT timely filed its motion for summary judgment on both Plaintiffs' claims.4 ODT's motion included, on the certificate of service page, the Notice required by Local Bankruptcy Rule 9013-1(a), advising Plaintiffs that a response was due fourteen days from the date of service of the motion, absent which the court may grant the relief sought without further notice. [Doc. # 49, p. 5]. The deadline has passed without any response or request for extension of time to respond having been filed by Plaintiff Karen R. Merrell-Brown.
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7056, summary judgment is only proper where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter oflaw. Fed. R. Civ. P. 56(a). In reviewing a motion for summary judgment, all inferences "must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-88 (1986); Rose v. State Farm Fire & Cas. Co., 766 F.3d 532, 535 (6th Cir. 2014). Although a party fails to respond to a motion for summary judgment, the court must nevertheless satisfy itself that the moving party met the demands of Rule 56 before granting the motion. See Guarino v. Brookfield Twp. Trustees, 980 F.2d 399, 407 (6th Cir. 1992).
The party moving for summary judgment always bears the initial responsibility of informing the court of the basis for its motion, "and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In the first part of a summary judgment analysis, the court must determine whether there is a genuine issue of material fact. A fact is material if its existence affects the outcome of the suit under the pertinent substantive law. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). In a summary judgment context, the court considers admissible evidence, including affidavits, in determining whether a genuine issue of material fact exists or not.
Where the moving party has met its initial burden, the adverse party "may not rest upon the mere allegations or denials of his pleading but . . . must set forth specific facts showing there is a genuine issue for trial." Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
Under Chapter 7 of the Bankruptcy Code, a debtor may obtain a discharge from debts incurred prior to the filing of his or her petition subject to exceptions listed in 11 U.S.C. § 523. In re Gardner, 360 F.3d 551, 557 (6th Cir. 2004). The policy of affording a "fresh start" to the debtor is limited to debts of "the honest but unfortunate debtor." Id. (citing Grogan v. Garner, 498 U.S. 279, 286-87 (1991)). Because of this policy, exceptions to discharge under § 523 are construed narrowly against the creditor. Rembert v. AT&T Universal Card Svcs., Inc. (In re Rembert), 141 F.3d 277, 281 (6th Cir. 1998).
The first exception to discharge in § 523(a) pertains to certain tax debts and sets forth the law at issue. 11 U.S.C. § 523(a)(1). Figuring out whether unpaid income tax debts are dischargeable or not requires parsing and applying complicated statutory language involving return due and assessment dates. See 11 U.S.C. § 523(a)(1)(A), incorporating 11 U.S.C. § 507(a)(8). However, the statute provides that even if an unpaid income tax debt falls within the general time period for dischargeability, it will not be dischargeable if a tax return was required to be filed and that return was not filed, as follows:
11 U.S.C. § 523(a)(1)(B)(i).
In their complaint, Plaintiffs allege that unpaid taxes due to the Defendant taxing authorities for tax years 2009-2011 fall within the basic time period for dischargeability and that tax returns for those obligations were filed. ODT asserts, however, that State of Ohio income tax returns were required to be filed for the tax years 2009-2011 by Plaintiff Karen R. Merrell-Brown and that she did not file them. If those facts are established, then as a matter of law any income tax obligations for those years fall within the § 523(a)(1)(B)(i) dischargeability exception and are non-dischargeable. The facts forming the basis for ODT's motion for summary judgment are thus straight-forward.
Meeting its obligation under Celotex Corp v. Catrett to inform the court of the basis for its motion, ODT advances its position that Plaintiff Karen...
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