Glaspell v. United States ex rel. Internal Revenue Serv. (In re Glaspell)
| Decision Date | 07 August 2020 |
| Docket Number | AP No.: 5:19-ap-36,Case No.: 5:17-bk-00301 |
| Court | U.S. Bankruptcy Court — Northern District of West Virginia |
| Parties | IN RE: SHEILA K. GLASPELL, Debtor. SHEILA K. GLASPELL, Plaintiff, v. THE UNITED STATES OF AMERICA ON BEHALF OF ITS AGENCY THE INTERNAL REVENUE SERVICE, Defendant. |
The United States of America on behalf of its agency the Internal Revenue Service (the "Defendant"), seeks the dismissal of this adversary complaint filed against it by Sheila K. Glaspell (the "Debtor"), or in the alternative, summary judgment. In its motion, the Defendant contends that the court should dismiss this adversary proceeding because the court lacks subject matter jurisdiction and the Debtor fails to state a claim upon which relief can be granted. In the alternative, the Defendant contends that this proceeding warrants summary judgment, because there are no genuine issues of material fact and it is entitled to judgment as a matter of law.
The Debtor's complaint seeks (1) the re-imposition of the automatic stay or a similar injunction to stop the Defendant's collection activities and (2) the assignment or subrogation of the Defendant's claim against the Debtor's bankruptcy estate upon her satisfaction of that claim. The Debtor opposes dismissal and summary judgment.
For the reasons stated herein, the court will grant the Defendant's motion in part and deny it in part.
The facts in this case are largely undisputed. Ms. Glaspell failed to file her federal tax returns for the tax periods ending December 31, 2007; December 31, 2008; and December 31, 2009. On March 22, 2017, she filed for relief under Chapter 7 of the Bankruptcy Code. Thomas H. Fluharty (the "Trustee") was appointed the Chapter 7 trustee. The Trustee designated the Debtor's case as one with assets to be liquidated for the benefit of unsecured creditors. On December 20, 2017, the Defendant filed an amended proof of claim asserting an unsecured, priority debt of $1,772.03, and a general, unsecured claim of $12,311.58.
On June 28, 2017, the Debtor received a discharge and lost the protections of the automatic stay. Nevertheless, the Defendant's claim, both the priority and unsecured portions, was excepted from discharge because Ms. Glaspell failed to file tax returns for the aforementioned tax periods. According to the Debtor, the Trustee anticipated paying the Defendant its claim in full with funds held in the bankruptcy estate. As of a January 16, 2020 hearing in this proceeding, the Trustee held over $70,000.00 to be distributed to creditors, including the Defendant.
Before this adversary proceeding, the Defendant agreed to an informal arrangement with the Debtor to suspend collection for a period of time; however, the precise details of this agreement remain unknown to the court. To date, the Trustee has not paid the Defendant in full, and the Defendant resumed collection on its debt for the non-discharged taxes when the informal agreement lapsed. The Defendant garnished the Debtor's income, which consists of approximately $1,672.00 per month via Social Security payments, at a rate of approximately $250.00 per month.
Of importance to this proceeding, the Debtor allegedly offered to pay the Defendant its full claim in exchange for the assignment of a portion of the priority claim against the bankruptcy estate, but the Defendant refused. On August 16, 2019, the Debtor filed this adversary proceeding seeking to enjoin the Defendant and obtain the claim through assignment or subrogation under 11 U.S.C. § 509(a). The Defendant seeks dismissal of this proceeding or summary judgment.
The Defendant invokes subparagraphs (1) and (6) of Fed. R. Civ. P. ("Rule") 12(b) in seeking dismissal of the Debtor's complaint. Additionally, it implicates Rule 56 in seeking summary judgment. However, the court only will address the Rule 12(b) motions.
When a motion implicating Rule 12(b)(1), made applicable to this proceeding by Fed. R. Bankr. P. 7012(b), is raised to the factual basis for subject matter jurisdiction, the burden of proving subject matter jurisdiction is on the debtor. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). The court is to regard the pleadings' allegations as mere evidence on the issue, and a court may consider evidence by affidavit, depositions or live testimony without converting the proceeding to one for summary judgment. Id.; Trentacosta v. Frontier Pacific Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987).
Under Rule 12(b)(6), a complaint should be dismissed for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6); Fed. R. Bankr. P. 7012(b) (incorporating Rule 12(b)(6)). To survive a Rule 12(b)(6) motion, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bonds v. Leavitt, 629 F.3d 369, 385 (4th Cir. 2011) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). "[T]he complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570). As the Fourth Circuit has explained, the plausibility standard requires a plaintiff "to articulate facts, when accepted as true, that 'show' that the plaintiff has stated a claim entitling him to relief, i.e., the 'plausibility' of 'entitlement to relief.'" Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 557). Finally, when courts evaluate a motion to dismiss, they are to (1) construe the complaint in a light favorable to the plaintiff, (2) take factual allegations as true, and (3) draw all reasonable inferences in favor of the plaintiff. 5C Charles Wright & Arthur Miller, Federal Practice and Procedure § 1357 (3d. ed. 2012) (). The court's role in ruling on a motion to dismiss is not to weigh the evidence, but to analyze the legal feasibility of the complaint. See Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998). In fact, the court is "limited to considering the sufficiency of allegations set forth in the complaint and the 'documents attached or incorporated into the complaint.'" Zak v. Chelsea Therapeutics Int'l Ltd., 780 F.3d 597, 607 (4th Cir. 2015) (citing E.I. du Pont de Nemours & Co. v. Kolon Indus Inc., 637 F.3d 435, 448 (4th Cir. 2011)).
Rule 56, made applicable to this proceeding by Fed. R. Bankr. P. 7056, provides that summary judgment is appropriate if the movant demonstrates "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A party seeking summary judgment must make a prima facie case by showing: (1) the apparent absence of any genuine dispute of material fact; and (2) the movant's entitlement to judgment as a matter of law on the basis of undisputed facts. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The movant bears the burden of proof to establish that there is no genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Demonstrating an absence of any genuine dispute as to any material fact satisfies this burden. Id. at 323. Material facts are those necessary to establish the elements of the cause of action. Anderson, 477 U.S. at 248. Thus, the existence of a factual dispute is material—thereby precluding summary judgment—only if the disputed fact is determinative of the outcome under applicable law. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir. 1994).
A movant is entitled to judgment as a matter of law if "the record as a whole could not lead a rational trier of fact to find for the non-movant." Williams v. Griffin, 952 F.2d 820, 823 (4th Cir. 1991) (citation omitted). The court is required to view the facts and draw reasonable inferences in the light most favorable to the nonmoving party. Shaw, 13 F.3d at 798. However, the court's role is not "to weigh the evidence and determine the truth of the matter [but to] determine whether there is a need for a trial." Anderson, 477 U.S. at 249-50. The court should not make credibility determinations. Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986).
The Defendant asserts two theories upon which the court should dismiss this adversary proceeding. First, the Defendant moves to dismiss this proceeding for a lack of subject matter jurisdiction under Rule 12(b)(1). Specifically, the Defendant contends that the court lacks subject matter jurisdiction, because the Anti-Injunction Act ("AIA") prohibits any lawsuit, including this proceeding, that restrains the assessment or collection of any tax. However, the Debtor argues that the court possesses subject matter jurisdiction to hear this case. Nevertheless, this proceeding ultimately depends on the applicability of § 509(a) of the Bankruptcy Code.
Second, the Defendant seeks to dismiss this proceeding for failure to state a claim upon which relief can be granted. However, the Debtor opposes dismissal and asserts that she states a claim upon which relief can be granted: (1) to re-impose the automatic stay or similar injunction pending an interim or final distribution by the Trustee; and (2) the bankruptcy estate and the Debtor are co-debtors within the scope of § 509(a) such that the statute is applicable in this case to assign or subrogate the Defendant's claim to the Debtor.
In the alternative to its motion to dismiss, the Defendant moves for summary judgment. With respect to the aforementioned § 509(a) claim, the Defendant contends that no genuine issue of material fact exists, and the Defendant is entitled to judgment as a matter of law. Specifically, the Defendant pleads that the bankruptcy estate and the Debtor as an individual are not "co-debtors." Conversely, the Debtor appears...
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