IN RE COMMUNITY HOSPITAL, ETC., Bankruptcy No. 79 B-20074.

• Decision Date: 02 January 1980
• Docket Number: Bankruptcy No. 79 B-20074.
• Citation: 5 BR 11
• Parties: In re The COMMUNITY HOSPITAL OF ROCKLAND COUNTY, Debtor. The COMMUNITY HOSPITAL OF ROCKLAND COUNTY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Southern District of New York

5 B.R. 11 (1980)

In re The COMMUNITY HOSPITAL OF ROCKLAND COUNTY, Debtor The COMMUNITY HOSPITAL OF ROCKLAND COUNTY, Plaintiff-Appellant, v. UNITED STATES of America, Defendant.

Bankruptcy No. 79 B-20074.

United States District Court, S.D. New York.

January 2, 1980.

WERKER, District Judge.

Decision of the Court.

THE COURT: Appellant, The Community Hospital of Rockland County (the "debtor") appeals from an order of Bankruptcy Judge Howard Schwartzberg dismissing debtor's complaint in which the debtor sought to compel the Government to pay to it the sum of $92,144.99. See 5 B.R. 7.

The Debtor filed a petition under Chapter 11 of the Bankruptcy Code of 1978 on December 14, 1979. Between November 14 and December 5, 1979, the IRS had served notices of levy on seven entities which were indebted to the Debtor for the purpose of obtaining monies allegedly due from the Debtor to the IRS for taxes. The IRS has collected $38,502.89 pursuant to said levies.

The Debtor commenced an adversary proceeding seeking to recover approximately $92,000 from the Government on which Debtor contends is needed to meet its payroll on December 28, 1979 for the preceding two-week period.

After a hearing on December 27, 1979 at which the Debtor proceeded only on his first cause of action which alleged that the Government's tax lien claims were subordinated to these wage claims under 11 U.S.C. Section 724, the bankruptcy court ruled that since the Government had not filed a claim in the underlying Chapter 11 proceeding, it had not waived its sovereign immunity, and moreover, that Section 724 was inapplicable to Chapter 11 proceedings.

I find that Bankruptcy Judge Schwartzberg correctly dismissed the debtor's first cause of action upon each of these alternative grounds for the following reasons.

The Debtor argues that the Bankruptcy Code strips the Government of sovereign immunity. In support of this contention, the Debtor relies upon 11 U.S.C. Section 1111(a) which provides that a proof of claim is deemed filed if it is scheduled by the bankrupt in its schedules filed with the court. Since the Government is listed as a creditor, the Debtor argues that the Government has filed a claim and has therefore waived its sovereign immunity.

However, Section 106 of the Bankruptcy Code was intended to qualify Section 1111(a) with respect to the Government. The legislative history to this section makes clear that in order to waive sovereign immunity, it is not enough that the...