Carroll v. U.S., 5:08-cv-01181-CLS.

Decision Date06 May 2009
Docket NumberNo. 5:08-cv-01181-CLS.,5:08-cv-01181-CLS.
Citation415 B.R. 561
PartiesDavid Blain CARROLL, Appellant, v. The UNITED STATES of America, Department of the Treasury, Appellee.
CourtU.S. District Court — Northern District of Alabama

David Blain Carroll, Atlanta, GA, pro se.

Alice H. Martin, U.S. Attorney's Office, Birmingham, AL, David Zisserson, U.S. Dept. of Justice, Tax Division, Washington, DC, for Appellee.

MEMORANDUM OPINION AND ORDER

C. LYNWOOD SMITH, JR, District Judge.

This is an appeal from a final summary judgment entered by the United States Bankruptcy Court for the Northern District of Alabama against David Blain Carroll ("appellant").1 In an adversary proceeding before the bankruptcy court, appellant unsuccessfully attempted to secure a discharge of his personal liability for the payment of estate taxes owed to the United States by the estate of his deceased father. The bankruptcy court granted summary judgment on that issue in favor of the United States, and held that appellant's tax debt is excepted from discharge pursuant to 11 U.S.C. § 523(a)(1)(C).2 Appellant appeals from that decision. Upon consideration of the pleadings, the parties' briefs, and the evidence of record, this court concludes that the judgment of the bankruptcy court is due to be affirmed.

I. STANDARD OF REVIEW

Generally speaking, as the U.S. District Court for the Southern District of Alabama aptly stated,

[i]n an appeal of a bankruptcy court decision, the district court sits as an appellate court. In that capacity, the district court cannot make independent factual findings, and must affirm the bankruptcy court's findings of fact unless they are clearly erroneous. Alabama Dept. of Human Resources v. Lewis, 279 B.R. 308, 313-14 (S.D.Ala. 2002) (citing In re Club Associates, 956 F.2d 1065, 1069 (11th Cir.1992)); see also In re Spiwak, 285 B.R. 744, 747 (S.D.Fla.2002) ("A district court reviewing a bankruptcy appeal is not authorized to make independent factual findings; that is the function of the bankruptcy court."); Fed. R. Bankr. Proc. 8013 (on appeal, bankruptcy court's findings of fact "shall not be set aside unless clearly erroneous"). A finding of fact is clearly erroneous when, even if there is evidence to support it, the reviewing court is left with the definite and firm conviction that a mistake has been committed. In re Hatem, 273 B.R. 900, 903 (S.D.Ala. 2001).

By contrast, a bankruptcy court's conclusions of law are subject to de novo review by a district court. In re Brown, 303 F.3d 1261, 1265 (11th Cir.2002); Club, 956 F.2d at 1069; In re Calvert, 907 F.2d 1069, 1070 (11th Cir.1990). Finally, a bankruptcy court's equitable determinations are reviewed for abuse of discretion. Spiwak, 285 B.R. at 748 (citing In re Red Carpet Corp. of Panama City Beach, 902 F.2d 883 (11th Cir. 1990)).

In re Boutwell, Civil Action No. 03-0355-WS-C, 2003 WL 25629875, at *5 (S.D.Ala. Dec.15, 2003). However, an exception to the general rule arises when a district court reviews a bankruptcy court's ruling on a motion for summary judgment, as is the case here. In such cases, the "clearly erroneous" standard does not apply:

Under Fed.R.Civ.P. 56(c), made applicable to adversary proceedings and contested matters in bankruptcy cases by Bank. R. 7056 and 9014, summary 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 judgment as a matter of law." Fed. R. Civ. P 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). "`In making this determination, the court must view all evidence and make all reasonable inferences in favor of the party opposing summary judgment.'" Chapman v. AI Transp., 229 F.3d 1012, 1023 (11th Cir. 2000) (en banc) (citation omitted). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

It is axiomatic that a bankruptcy court deciding a summary judgment motion, just like a district court, must determine whether there are any genuine issues of material fact. See Carey Lumber Co. v. Bell, 615 F.2d 370, 378 (5th Cir.1980) (per curiam) (holding that a bankruptcy court that (1) determined that there were no issues of material fact, (2) accepted all undisputed factual allegations as true, and (3) found that summary judgment was warranted as a matter of law, "followed the correct legal standard."). Like a district court, a bankruptcy court may only grant summary judgment where there is no genuine issue of material fact. See Fed.R.Civ.P. 56(c). Our law is also clear that an appellate court reviews a bankruptcy court's grant of summary judgment de novo. See In re Walker, 48 F.3d 1161, 1163 (11th Cir.1995) ("We review the bankruptcy court's grant of summary judgment de novo, applying the same legal standards used by the trial court."); In re Club Assocs., 951 F.2d 1223, 1229 (11th Cir.1992) (citing In re Nash, 765 F.2d 1410, 1412 (9th Cir.1985) ("The bankruptcy court's grant of summary judgment, affirmed by the district court, is subject to de novo review.")).

To the extent, however, that the district court's opinion may be read to suggest that appellate review of a bankruptcy court's entry of summary judgment may be governed by a clearly erroneous standard, we take this opportunity to make clear that both the district court and this Court review a bankruptcy court's entry of summary judgment de novo.

In re Optical Technologies, Inc., 246 F.3d 1332, 1334-35 (11th Cir.2001).

Accordingly, because appellant appeals from an adverse ruling on summary judgment, this court will review the bankruptcy court's decision de novo.

II. SUMMARY OF FACTS3

Appellant's father, George Carroll, died on March 17, 1998. The executors of George Carroll's estate are appellant and his siblings, Stephen Carroll and Judy Bullington.4 In 1999, the total amount of tax owed to the United States was $2,554,547.5 The executors and the Unites States agreed that the estate would satisfy the tax debt in separate, regular installment payments, pursuant to 26 U.S.C. § 6166.6 The final installment payment was to be remitted on December 17, 2012;7 however, the estate stopped making payments in 2004.8 Appellant estimates that the executors have, to date, paid approximately $1.2 million of the tax debt.9 The debt remains unpaid.

Between the years 1998 and 2006, the executors collectively distributed various assets of the estate to themselves, personally, or to closely held corporations. Judy Bullington received real property (most notably the deceased's primary residence) and cash money.10 Appellant and his brother, Stephen Carroll, were given shares of stock held by the estate in two close corporations: United Gunite, Inc., and Pressure Concrete, Inc.11 Appellant claims that he and his brother planned to use the profits from those two entities to make the necessary installment payments to the United States.12

After the shares of stock were transferred to appellant and his brother, appellant became the "president" of Pressure Concrete, Inc., and the "vice-president" of United Gunite, Inc.13 That said, and despite the fact that appellant owned stock in both companies, appellant considered Pressure Concrete to be "his" company, and United Gunite to be his brother's responsibility.14

In 2001, Stephen Carroll was charged with and subsequently pled guilty to "felony bribery of a public official."15 The estate, appellant, and Pressure Concrete loaned or gifted large amounts of money to United Gunite; however, the company was no longer a viable entity by 2002, and it currently has no assets whatsoever.16

Pressure Concrete suffered constant financial woes under appellant's direction.17 On February 28, 2004, appellant, acting in his capacity as an executor of his father's estate, transferred the last of the estate's liquid assets—$733,613.23 in cash—to a bank account owned by Pressure Concrete.18 The transfer was not a loan. The infusion of cash was necessary, according to appellant, to ensure Pressure Concrete's continued existence. Two years later, in 2006, appellant used his personal funds to purchase his brother's stock in Pressure Concrete for approximately $29,500.19 That same year, Pressure Concrete, acting at appellant's direction, issued two separate checks, totaling $25,000, drawn and payable to the "University of Alabama Athletic Dept.—Tide Pride" for the purchase of football tickets—a fact proving only (if proof were needed) that, in this State, Alabama football is a secular religion promoting misplaced and false values.20 Shortly thereafter, Pressure Concrete failed, and the remaining assets of the company were sold.

Appellant commenced bankruptcy proceedings in the United States Bankruptcy Court for the Northern District of Alabama on March 5, 2007. On May 16, 2007, appellant filed an adversary proceeding against the United States, seeking a discharge from his personal liability for the unpaid balance of the estate's tax debt. After a period of discovery, appellant filed a motion for summary judgment, in which he argued that his personal liability was not excepted from discharge. The United States contended that there was sufficient, undisputed evidence of record to show that appellant's personal liability for the tax debt was not dischargeable under 11 U.S.C. § 523(a)(1)(C). The bankruptcy court agreed with the United States, and granted summary judgment in its favor.

III. DISCUSSION

This court finds that the material facts of this case are not in dispute. When there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law," summary judgment is appropriate....

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