Gurwitch, In re

• Citation: 794 F.2d 584
• Decision Date: 21 July 1986
• Docket Number: No. 85-5571,85-5571
• Parties: -5473, 86-2 USTC P 9612, 14 Bankr.Ct.Dec. 1415, Bankr. L. Rep. P 71,257, Unempl.Ins.Rep. CCH 16,914 In re Harry GURWITCH, Debtor. UNITED STATES of America, Plaintiff-Appellee, v. Harry GURWITCH, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 584

794 F.2d 584

58 A.F.T.R.2d 86-5473, 86-2 USTC P 9612,

14 Bankr.Ct.Dec. 1415,

Bankr. L. Rep. P 71,257,

Unempl.Ins.Rep. CCH 16,914

In re Harry GURWITCH, Debtor.

UNITED STATES of America, Plaintiff-Appellee, v. Harry GURWITCH, Defendant-Appellant.

No. 85-5571.

United States Court of Appeals, Eleventh Circuit.

July 21, 1986.

Robert A. Schatzman, Britton, Cassel, Schantz & Schatzman, Scott Alan Orth, Miami, Fla., for Harry Gurwitch.

Leon Kellner, U.S. Atty., Miami, Fla., Glenn L. Archer, Jr., Michael L. Paup, Wynette J. Hewett, Matthew J. Anderton, Tax Div., Dept. of Justice, Washington, D.C., for U.S.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY and KRAVITCH, Circuit Judges, and HENLEY ^*, Senior Circuit Judge.

CORRECTED OPINION

HENLEY, Senior Circuit Judge:

Harry Gurwitch filed a petition for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. Secs. 1101-1174, in January, 1980. He was a major shareholder and perhaps only shareholder in EMC Film Corporation (EMC) and American Contemporary Art Corporation (ACA), both of which ceased operations in August, 1979. In his schedule of liabilities he listed a withholding tax claim of $12,435.93 as to EMC, and in his disclosure statement he acknowledged that the IRS was seeking to collect a like claim of $21,000.00 with respect to ACA, which he was disputing. The IRS filed a proof of claim for a combination of income and withholding tax liabilities totalling $7,756.41. The plan, which was confirmed in August, 1981, allowed for payment of 100% of the IRS claim.

Before the case was closed the IRS began collection efforts for the withholding taxes of EMC and ACA. Gurwitch advised the IRS of the bankruptcy proceedings and of his continuing dispute as to liability. After closure the IRS placed a lien on his real estate holdings for payment of these tax claims.

Gurwitch then had the case reopened. The bankruptcy court ¹ held that the amount of the claim had been determined at confirmation and was binding on the parties. The district court ² reversed, stating that the tax debt was nondischargeable. In re Gurwitch, 54 B.R. 927 (Bankr. S.D. Fla. 1985).

Gurwitch appeals arguing that on the basis of res judicata, policy considerations, and equitable estoppel the amount of the tax claim should be fixed by the confirmation of the plan. We affirm.

Appellant first argues that the bankruptcy proceedings were a final determination of his tax liabilities, and therefore res judicata prevents the IRS from making a claim after closure of his case. He also contends that allowing this claim inhibits reorganization, defeats the rehabilitative purpose of the Code, and discourages the IRS from participating in reorganization proceedings.

Appellant's res judicata argument is not persuasive. The Bankruptcy Code makes clear under 11 U.S.C. Sec. 1141(d)(2) that the confirmation of a plan of reorganization does not fix tax liabilities made nondischargeable under 11 U.S.C. Sec. 523. ³ Moreover, the Code states that these taxes are nondischargeable "whether or not a claim for such tax was filed or allowed." Section 523(a)(1)(A).

As to Gurwitch's policy arguments, it is apparent to us that Congress has made the choice between collection of revenue and rehabilitation of the debtor by making it extremely difficult for a debtor to avoid payment of taxes under the Bankruptcy Code. See In re Becker's Motor Transportation, Inc., 632 F.2d 242, 248 (3d Cir.1980), cert. denied, 450 U.S. 916, 101 S.Ct. 1358, 67 L.Ed.2d 341 (1981). We cannot override what we view as a clear policy judgment by Congress. United States v. Sotelo, 436 U.S. 268, 279, 98 S.Ct. 1795, 1802, 56 L.Ed.2d 275 (1978). Therefore, we conclude...