In re Deel
| Decision Date | 23 September 1986 |
| Docket Number | Bankruptcy No. 7-84-00214-A,Adv. No. 7-86-0070. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia |
| Parties | In re Lando DEEL, Betty J. Deel, Debtors. Lando DEEL, et uxor, Plaintiffs, v. UNITED STATES of America/INTERNAL REVENUE SERVICE, Defendant. |
Copeland, Molinary & Bieger, Abingdon, Va., for debtor/plaintiffs.
John Perry Alderman, U.S. Atty., Roanoke, Va., and Robert K. Coulter, Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendant.
Robert E. Wick, Jr., Bristol, Va., trustee.
The issue is this Court's jurisdiction to hear the within Complaint.
The Debtors filed in this Court their petition under Chapter 7 and, thereafter, on March 14, 1986, filed the within Complaint seeking a determination of the dischargeability of a tax liability asserted by the Internal Revenue Service ("IRS"). The United States filed a motion to dismiss, as well as an Answer to the Complaint constituting a general denial of the allegations. The motion to dismiss asserts that the Court is without jurisdiction and that the Plaintiffs do not have standing to bring the action. For the reasons hereafter stated, the motion to dismiss is denied and this adversary proceeding shall continue for hearing on the merits.
The Complaint alleges that the Court's jurisdiction is invoked for the purpose of determining the dischargeability of a tax liability in the sum of $18,295.89, constituting taxes and penalties for the tax years 1982, 1983 and 1984 on taxes owed by Virginia Fuels, Inc., a corporation in which the Debtors were owners and alleged responsible officers for the collection and paying over of the corporate taxes due the IRS. Plaintiffs contend that the alleged taxes are not owed and are dischargeable.
The parties filed briefs in support of their respective positions as to the motion to dismiss. The brief of the United States seems to take the position that the Complaint is, in effect, an objection to a claim in this Chapter 7 case by the Debtors. The Plaintiffs (Debtors) contend that the Complaint is one for a determination of the dischargeability of the IRS tax liability asserted against the Plaintiffs. Indeed, the Complaint seeks a determination of the dischargeability of the debt as to these Plaintiffs, which necessarily requires a determination of the tax liability.
The Government cites as authority for its position 3 Collier on Bankruptcy, ¶ 51.04, for the principle that a debtor in a no-asset liquidating Chapter 7 case, as here, does not have standing to challenge the claim of IRS herein. Its brief further cites the case of In re Lapointe, 39 B.R. 80 (Bankr.W.D. Ky.1984), in support of its position. The court in Lapointe did, in fact, so hold that where a no-asset case is being administered and no distribution of assets is to be made to creditors, the debtor does not have standing to object to a claim. The Court decided the issue as an objection to a claim and does not deal with the dischargeability question.
The Bankruptcy Reform Act of 1978 ("the Code"), as amended, 28 U.S.C. § 157, enacted on July 10, 1984 as an amendment to the 1978 Act to cure the jurisdictional defect posed by a recent decision of the Supreme Court of the United States in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598, 9 B.C.D. 67, 6 C.B.C.2d 785 (1982), contains the procedural direction which the court shall apply. In § 157, there is vested in the Bankruptcy Courts jurisdiction to determine core proceedings. In § 157(b)(2)(B)1, a core proceeding includes allowance or disallowance of claims, and (2)(I)2 includes jurisdiction to determine the dischargeability of particular debts. Additionally, 11 U.S.C. § 5053 vests in this Court jurisdiction to determine tax liability. Further, 28 U.S.C. § 13344 clearly vests adequate jurisdiction in this Court to determine the dischargeability of claims, including tax claims.
To implement the statutory terms of the Code, Federal Rules of Bankruptcy Procedure, Rule 7001(6), provides for the filing of a Complaint to determine the dischargeability of a debt; Rule 4005 provides for the burden of proof; and Rule 4007 provides for procedural aspects for making such determination.
The sole issue presently before this Court is the Government's motion to dismiss the Complaint upon jurisdictional grounds and the standing of the Debtors to challenge the Government's assessment. The merits of the claim and its dischargeability will abide hearing of the facts and circumstances bearing upon the manner in which the tax arose and the liability of these Debtors.
Contrary to the narrow jurisdictional and procedural grant existing under the Bankruptcy Act of 1898, as amended, the Bankruptcy Reform Act of 1978, as now amended, sought to vest in this Court the power to determine issues arising out of a case for the benefit of the debtor and creditors to the extent possible. Under the Code, this Court's jurisdiction extends further than sequestering, liquidation, and distribution of assets in a Chapter 7 case. It vests in this Court a broad range of jurisdictional grants, including authority to determine dischargeability of asserted claims against debtors. It should...
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