In re Design Store Corp.
Decision Date | 05 December 1986 |
Docket Number | Adv. No. 86-0035A.,Bankruptcy No. 82-1-0225 |
Citation | 67 BR 325 |
Parties | In re The DESIGN STORE CORPORATION, Debtor. Charles A. DOCTER, Trustee, Plaintiff, v. UNITED STATES of America, Defendant. |
Court | U.S. Bankruptcy Court — District of Maryland |
Marcia Docter, Washington, D.C., for trustee of Chapter 7 estate.
Charles Baer, Washington, D.C., representing I.R.S.
Robert Gordon, Washington, D.C., from Tax Div., Dept. of Justice.
(Plaintiff's Motion for Summary Judgment)
(Defendant's Motion for Summary Judgment)
This is an action to recover as a preferential payment pursuant to 11 U.S.C. § 547 six payments totalling $51,066.01 said to be received by the Internal Revenue Service within 90 days of the filing of the debtor's voluntary Chapter 11 petition on February 17, 1982. On May 4, 1984, the case was converted to Chapter 7 by an order of this court.
There is a genuine issue of fact as to whether the IRS received a $300 check on or about December 7, 1981. Another genuine issue of fact exists as to whether the Internal Revenue Service received a payment of $3,894.90 on any liability of the debtor near January 6, 1982, by virtue of a levy upon debtor's Maryland National Bank account.
After deducting $50 in bank service charges, IRS received $46,821.11 within 90 days of the petition date. The actual transfers are described in the Affidavit of Marilyn Berdansky, items 3(c), 3(d), 3(e), and 3(f), describing three debit memos, all reflecting a levy of the IRS from the Design Store Corporation account, and the fourth a certified check in the amount of $41,642.04 issued payable to the Internal Revenue Service from the Design Store's account in the First Womans Bank of Maryland. The latter was a voluntary payment and applied to the trust fund portion of debtor's 941 liability for the second quarter of 1981. The only item paid not from an alleged trust fund payment was the Columbia Bank and Trust Company debit applied to Form 940 (Unemployment Tax and Corporate Income Tax Liability). All of the admitted credits are for trust fund taxes.
In support of its position that the debtor had no interest in the transferred funds, the United States relies upon dicta in the case of In re Nashville White Trucks, Inc., 22 B.R. 578, 586-87 (BC M.D.Tenn.1982),1 and the admonition in In Re Fidelity Financial Services, Inc., 36 B.R. 508, 513 (BC S.D.Fla.1983), that courts "be liberal in tracing tax `trust funds' which have been commingled with the debtor's funds," as well as In re Rodriguez, 50 B.R. 576 (BC E.D.N.Y.1975), and In re Razorback Ready-Mix Concrete Co., 45 B.R. 917 (BC E.D.Ark.1984). Conversely, the trustee relies upon United States v. Randall, 401 U.S. 513, 91 S.Ct. 991, 28 L.Ed.2d 273 (1971), as well as Slodov v. United States, 436 U.S. 238, 98 S.Ct. 1778, 56 L.Ed.2d 251 (1978), for the proposition that where an estate has insufficient assets to pay priority claims that were to be paid before tax claims, the statutory trust fund impressed by 26 U.S.C. § 7501(a) would not be recognized where the debtor did not actually segregate the trust fund taxes in a special account. See Slodov v. United States, 436 U.S. 238, 255-56, 98 S.Ct. 1778, 1789-90, 56 L.Ed.2d 251 (1978) () . The trustee also relies on United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 2313-14 n. 10, 76 L.Ed.2d 515 (1983), indicating that imposition of the trust requires tracing of funds. See also, In re Community Hospital of Rockland County, 15 B.R. 785 (BC S.D.N.Y.1981).
The court's research has disclosed the recent cases such as In re Major Dynamics, 59 B.R. 697 (BC S.D.Cal.1986) (Randall is controlling), and a most interesting decision out of the Southern District of Florida the case of In re Air Florida Systems, Inc., 50 B.R. 653 (BC S.D.Fla.1985) aff'd No. 85-3308 (D.Fla. Feb. 19, 1986). In Air Florida, the IRS had recorded federal tax liens in the appropriate courts amounting to $8,021,209.28 and which subsequently was paid by the debtor within 90 days of the bankruptcy filing. In dealing with a similar situation to that at hand, the bankruptcy court noted:
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