Fullmer, In re
| Decision Date | 28 April 1992 |
| Docket Number | Nos. 90-8073,90-8074,s. 90-8073 |
| Citation | 962 F.2d 1463 |
| Parties | -1186, 92-1 USTC P 50,237, 27 Collier Bankr.Cas.2d 92, Bankr. L. Rep. P 74,646 In re David Michael FULLMER, Debtor, David Michael FULLMER, Appellant, v. UNITED STATES of America, Appellee. In re Peggy Marie McCarty FULLMER, Debtor. Peggy Marie McCarty FULLMER, Appellant, v. UNITED STATES of America, Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Georg Jensen, Cheyenne, Wyo., for appellants.
David A. Hubbert, Atty., Tax Div., Dept. of Justice, Washington, D.C. (Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen and Gary D. Gray, Attys., Tax Div., Dept. of Justice, Washington, D.C., and Richard A. Stacy, U.S. Atty., D. Wyo., of counsel, with him on the brief), for appellee.
Before McKAY, Chief Judge, BARRETT and BRORBY, Circuit Judges.
In this consolidated appeal, David Michael Fullmer and Peggy Marie Fullmer challenge a Bankruptcy Court ruling allowing claims filed by the Internal Revenue Service ("IRS") in the Fullmers' separate bankruptcy proceedings. Mr. Fullmer also objects to the IRS's application of portions of his payments to certain tax claims.
Mr. Fullmer, doing business as Fullmer Construction Equipment Co. and as R & M Automotive and Truck Repair, filed a Chapter 11 bankruptcy petition on May 14, 1982. Pursuant to that proceeding, the IRS filed a proof of claim against Mr. Fullmer on June 10, 1982, for $52,778.29. This claim reflected debts arising prepetition for unpaid taxes and child support. The Department of Health and Human Services ("HHS") had requested that the IRS collect the unpaid child support pursuant to 26 U.S.C. § 6305 (1989) of the Internal Revenue Code. 1 Mr. Fullmer objected to the IRS's claim. He contended the IRS had failed to credit him for payments he had already made toward the taxes claimed. Pursuant to Mr. Fullmer's objections, the Bankruptcy Court entered an order on July 26, 1984, setting Mr. Fullmer's potential liability as of June 10, 1982, at $38,296.86 subject to IRS verification of Mr. Fullmer's claimed payments.
Mr. Fullmer's plan for reorganization was confirmed on April 11, 1984. Following confirmation, Mr. Fullmer paid the IRS $38,296.86 in two installments. The IRS applied a portion of the $38,296.86 to Mr. Fullmer's unpaid child support obligations. The balance of the payment was applied to unpaid prepetition taxes as well as interest and penalties that had accrued on those taxes both pre- and postpetition. Upon further investigation, the IRS discovered that Mr. Fullmer had not in fact made the payments he claimed to have made when he objected to the IRS's June 10, 1982, proof of claim. The IRS determined that Mr. Fullmer owed an outstanding prepetition liability of $11,366.72 in taxes, interest and penalties. Accordingly, the IRS filed an amended proof of claim for this amount on December 3, 1986. At the same time, the IRS filed a request for payment of administrative expenses for $20,512.24. This request reflected postpetition taxes incurred both before and after confirmation of Mr. Fullmer's plan and further unpaid child support requested by HHS pursuant to 26 U.S.C. § 6305.
Mrs. Fullmer filed a Chapter 13 bankruptcy petition on April 14, 1986. On December 3, 1986, the IRS filed a proof of claim in that proceeding for $38,494.17. The claim asserted that Mrs. Fullmer was a partner in Mr. Fullmer's business and thus liable for accrued taxes, interest and penalties.
Accordingly, the claim reflected the same taxes set forth in the amended proof of claim and request for payment filed on the same day in Mr. Fullmer's proceeding. The IRS claim against Mrs. Fullmer did not include Mr. Fullmer's unpaid child support, and the interest and penalties assessed against Mrs. Fullmer were different due to the different petition dates
Mr. and Mrs. Fullmer filed objections to the IRS's December 3, 1986, claims. After holding three hearings, the Bankruptcy Court entered an order on March 29, 1989, allowing the IRS's claims in full. The Fullmers appealed the Bankruptcy Court's decision to the District Court which affirmed the Bankruptcy Court's decision. The Fullmers now challenge both decisions.
The Fullmers assert a number of factual and legal errors in this appeal. They claim (1) the evidence before the Bankruptcy Court did not support the IRS's claims; (2) the Bankruptcy Court erred in finding the Fullmers did not operate their business as a corporation; (3) the IRS incorrectly applied portions of the $38,296.86 payment to postpetition interest and penalties that accrued prepetition; (4) the IRS was required to apply the $38,296.86 payment according to Mr. Fullmer's direction; and (5) the IRS incorrectly applied portions of the $38,296.86 payment to child support obligations.
We first focus on the Fullmers' challenges to the Bankruptcy Court's factual findings. In doing so we note that we must accept the factual findings of the bankruptcy court unless they are clearly erroneous. Bankr.Rule 8013, 11 U.S.C. (1988); Branding Iron Motel, Inc. v. Sandlian Equity, Inc. (In re Branding Iron Motel, Inc.), 798 F.2d 396, 399 (10th Cir.1986).
The Fullmers assert that the evidence before the Bankruptcy Court did not support the validity and amount of the IRS's claims and thus the claims were improperly allowed. The tax claims at issue here included debts that arose prepetition, postpetition and postconfirmation. We will address the Fullmers' challenges to these claims in the order in which the debts arose.
Mr. Fullmer objects to the allowance of the IRS's claim reflecting a prepetition liability in excess of the amount set out in the July 26, 1984, order. Prepetition claims are asserted by means of a proof of claim. 11 U.S.C. § 501 (1988). A properly filed proof of claim is prima facie evidence of the validity and amount of the claim. 11 U.S.C. § 502(a) (1988); Bankr.Rule 3001(f), 11 U.S.C. (1988). This evidentiary presumption remains in force even though an objection to the claim is filed by a party in interest. In re Wells, 51 B.R. 563, 566 (D.Colo.1985). To overcome this prima facie effect, the objecting party must bring forward evidence equal in probative force to that underlying the proof of claim. Id. Only then is the ultimate burden of persuasion with the proponent of the proof of claim. Id.
In contesting the IRS's amended proof of claim against him, Mr. Fullmer failed to produce any evidence except to assert that all prepetition taxes had been paid pursuant to the July 26, 1984, order setting his potential liability at $38,296.86. Mr. Fullmer's assertion was based on his contention that the order was dispositive of the amount of his prepetition tax indebtedness. The order expressly stated, however, that the $38,296.86 represented only Mr. Fullmer's potential liability. This potential liability was subject to verification of the payments Mr. Fullmer claimed to have made to the IRS. After reviewing evidence presented by the IRS, the Bankruptcy Court apparently found Mr. Fullmer's representations regarding the payments to be false. 2 Thus, the Bankruptcy Court was Mrs. Fullmer contends the evidence before the Bankruptcy Court did not support the IRS's assertion that she was a partner in Mr. Fullmer's business and thus the proof of claim against her was improperly allowed. The proof of claim filed in Mrs. Fullmer's bankruptcy proceeding also had a prima facie effect, however, which shifted to Mrs. Fullmer the burden of bringing forth rebuttal evidence of equal probative force. There is no indication in the record that Mrs. Fullmer brought forth any evidence whatsoever to rebut the IRS's assertion that she was a partner in Mr. Fullmer's business. Thus, the Bankruptcy Court was entitled to find that Mrs. Fullmer failed to meet her evidentiary burden of production.
entitled to find that Mr. Fullmer had failed to bring forward evidence equal in probative force to that underlying the proof of claim in objecting to the IRS's amended proof of claim.
Mr. Fullmer further challenges the Bankruptcy Court's findings with respect to the IRS's claim for taxes arising postpetition against the bankruptcy estate. Postpetition claims are asserted against a debtor's bankruptcy estate through a request for payment of administrative expenses. 11 U.S.C. § 503(a) (1988). Claims set forth in such requests for payment do not enjoy the same presumption of correctness as those asserted by proofs of claim. See In re 9085 E. Mineral Office Bldg., Ltd., 119 B.R. 246, 249 (Bankr.D.Colo.1990) (). The record fully supports, however, the IRS's claim for taxes incurred postpetition by the bankruptcy estate. Thus, we affirm the Bankruptcy Court's findings with respect to these claims.
We cannot affirm, however, the Bankruptcy Court's allowance of that portion of the IRS's request for payment reflecting taxes arising postconfirmation. The government concedes that requests for payment of administrative expenses may only be filed to recover taxes incurred by the bankruptcy estate pursuant to 11 U.S.C. § 503(b)(1)(B)(i) (1988). Brief for Appellee at 6 n. 5. The request for payment filed by the IRS on December 3, 1986, incorrectly included a claim for taxes incurred after Mr. Fullmer's plan was confirmed. Upon confirmation, Mr. Fullmer, and not the bankruptcy estate, began to incur these taxes. Thus, as the government concedes, the IRS's request for payment of administrative expenses was excessive in the amount of $13,254.35. We remand this issue to the Bankruptcy Court for further proceedings.
Finally, we affirm the Bankruptcy Court's finding that the Fullmers did not operate their business as a corporation and thus they were personally liable for its debts. This finding is amply supported by the record. The IRS presented evidence showing that aside from filing...
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