In re Henderson

• Decision Date: 05 September 1991
• Docket Number: Bankruptcy No. 90-13315-FM.
• Parties: In re B. Thomas HENDERSON, Debtor.
• Court: United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Western District of Texas

133 B.R. 813 (1991)

In re B. Thomas HENDERSON, Debtor.

Bankruptcy No. 90-13315-FM.

United States Bankruptcy Court, W.D. Texas, Austin Division.

September 5, 1991.

Gray Byron Jolink, Austin, Tex., for debtor, B. Thomas Henderson.

William R. Leighton, Sp. Asst. U.S. Atty., Austin, Tex., for the U.S. (I.R.S.)

MEMORANDUM OPINION ON DEBTOR'S OBJECTION TO PRIORITY AND SECURED CLAIM OF THE INTERNAL REVENUE SERVICE

FRANK R. MONROE, Bankruptcy Judge.

A hearing was held on July 2, 1991 on the Objection to B. Thomas Henderson, Debtor, to Priority and Secured Claim of the Internal Revenue Service ("IRS").

This Court has jurisdiction of this case pursuant to 28 U.S.C. §§ 1334(b) and (d), 28 U.S.C. §§ 157(a) and (b)(1) and the standing Order of Reference existing in this District. This contested matter is a core proceeding under 28 U.S.C. § 157(b)(2)(B). This Memorandum Opinion constitutes the Court's Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 7052.

SETTING THE STAGE

On October 22, 1990, the Debtor filed his voluntary petition under Chapter 13 of the Bankruptcy Code. The Debtor previously filed a Chapter 7 case on July 3, 1987, and the Debtor received a discharge on March 28, 1988. The Debtor then filed a Chapter 13 case on December 27, 1989 which was dismissed on April 5, 1990. The IRS timely filed a proof of claim in this case to which the Debtor objected. After the IRS responded, the Debtor requested that Part VII of the Bankruptcy Rules be applied to this contested matter, which the Court approved.

The Debtor's Objection contained allegations that the IRS's claim includes an improper assessment of interest and penalties on the taxes owed during the pendency of the Debtor's two prior bankruptcy cases, and that since the IRS failed to follow Texas law in filing its Notice of Tax Lien it was filed only in the real property records of Travis County, Texas and without a designation of personal property its lien is only secured against the Debtor's real property but not personal property. These objections were not urged at trial. Instead, by agreement of the parties, the issues tried are those specifically addressed in this Memorandum Opinion.

FINDINGS OF FACT

1. The IRS timely filed a proof of claim in the amount of $50,402.89, an amount derived from audit assessments regarding the Debtor's federal income tax liabilities for the years 1982, 1983, 1984, and 1985.

2. The IRS filed Notices of Federal Tax Lien on December 27, 1989 in the records of the County Clerk for Travis County, Texas. The Notices were filed prepetition.

3. The parties agreed that the proof of claim amount of $50,402.89 should be reduced by $365.21 collected by the IRS from the Debtor after the first chapter 7 case and that the remaining amount is owed.

4. The Debtor had $4,000.00 in cash in a checking account at First State Bank of Austin on the petition date which he did not claim as exempt.

5. The Debtor also owned on the petition date a contingent referral fee arising out of a lawsuit he had referred to another attorney on a prior occasion. This asset, however, was not scheduled.

6. The Debtor received approximately $41,000.00 in payment of his contingent referral fee on February 25, 1991, after the petition date.

7. The cash and referral fee are non-exempt assets of the estate.

ISSUES

1. Is IRS's proof of claim properly secured by personal property of the Debtor, specifically the cash and the referral fee?

2. Does the Debtor have standing to assert the trustee's avoidance power set forth in § 545(2) to avoid the alleged statutory tax lien of the IRS if it is otherwise properly secured by property of the Debtor?

3. If standing exists, does the interplay between § 545(2) and § 6323(b) of the Internal Revenue Code result in the exclusion of the cash and referral fee from the federal tax lien?

DISCUSSION AND CONCLUSIONS OF LAW

1. The Secured Status of the IRS's Claim

The IRS alleges that its proof of claim is secured by personal property of the Debtor, specifically the cash and the referral fee. Section 6321 provides the IRS with a broad lien:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

26 U.S.C. § 6321.

To perfect a tax lien, the Internal Revenue Code defers to state law to designate the place and manner of filing notices of lien. 26 U.S.C. § 6323(f). In Texas, notices of liens upon real property must be filed in the county clerk's office where the real property is situated, and if the delinquent taxpayer is an individual, notices of liens upon personal property must be filed in the county clerk's office where the person resides. Tex.Prop.Code Ann. § 14.002 (Vernon Supp.1991). In Travis County, where the Debtor resides, all federal tax liens are filed in the real property records. The IRS's Notices of Tax Lien were filed in a manner complying with 26 U.S.C. § 6323(f) and state law and are, therefore, properly perfected thereunder. The lien covers both real and personal property pursuant to 26 U.S.C. §§ 6321 and 6323(f). In re Williams, 109 B.R. 179, 180 (Bankr. W.D.N.C.1989).

The lien imposed under § 6321 "arises at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time." 26 U.S.C. § 6322; see In re Ridgley, 81 B.R. 65, 69 (Bankr.D.Or.1987). The lien "is entitled to priority as to all liens except those persons and liens specifically enumerated by statutes, such as I.R.C. § 6323." In re May Reporting Services, Inc., 115 B.R. 652, 656 (Bankr.D.S.D.1990). Further, "the extent of the IRS's secured claim is measured by the value of the collateral as of the date of the filing of the bankruptcy petition." Matter of Driscoll, 57 B.R. 322, 327 (Bankr.W.D.Wis.1986).

The testimony presented at the hearing on the Debtor's Objection shows that the Debtor received approximately $41,000.00 for his contingent referral fee on February 25, 1991 and that he had approximately $4,000.00 in a bank account as of the petition date. Since the referral fee (intangible, contingent and unliquidated upon the date of filing) became tangible, noncontingent and fully liquidated shortly thereafter, and since it is now in the Debtor's possession, it is the best evidence of its own value as of the petition date. Its value is, therefore, $41,000.00. The IRS's secured claim in the Debtor's case is $45,000.00 and its unsecured, priority claim is $5,037.68, totalling $50,402.68.¹

2. The Debtor's Ability to Assert Avoidance Powers

Section 545(2) provides that "The trustee may avoid the fixing of a statutory lien on property of the debtor to the extent that such lien is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser that purchases such property at the time of the commencement of the case, whether or not such purchaser exists." 11 U.S.C. § 545(2). In this situation, it is the Debtor and not the Trustee who is attempting to assert the avoidance powers granted the trustee in § 545(2); therefore, the question presented is whether the Debtor has standing to assert such powers.

Courts dealing with avoidance powers have failed to reach a consensus in their answers. Some courts have granted avoidance powers to chapter 13 debtors. See, e.g., Matter of Ware, 99 B.R. 103 (Bankr. M.D.Fla.1989) (debtor has standing to avoid preferential transfer under § 547); In re Freeman, 72 B.R. 850 (Bankr.E.D.Va.1987) (debtor can assert § 544(a) powers); In re Weaver, 69 B.R. 554 (Bankr.W.D.Ky.1987) (debtor is vested with strong-arm powers of § 544(a)); Matter of Ottaviano, 68 B.R. 238 (Bankr.D.Conn.1986) (debtor can bring fraudulent transfer action); Matter of Einoder, 55 B.R. 319 (Bankr.N.D.Ill.1985) (debtor can assert § 547(b) and § 522(f)(1) actions); In re Boyette, 33 B.R. 10 (Bankr. N.D.Tex.1983) (debtor is vested with the avoiding powers of a bona fide purchaser for value under § 544(a)(3)). Other courts have restricted standing to bring avoidance actions to the Chapter 13 trustee. See, e.g., In re Houston, 96 B.R. 717 (Bankr. W.D.Tex.1989) (section 1303 grants standing only to the trustee to exercise avoidance powers); Matter of Mast, 79 B.R. 981 (Bankr.W.D.Mich.1987) (debtor has no standing to avoid preferential transfer under § 547); In re Walls, 17 B.R. 701 (Bankr.S.D.W.Va.1982) (trustee has exclusive right to use avoiding powers under § 547).

Courts dealing with § 545 have likewise not reached consistent results. One court granted standing to pursue a § 545(2) action to avoid federal tax liens and stated "it is without dispute that Chapter 13 debtors are empowered and have the ability to exercise the Trustee's lien avoidance powers under Chapter 5." Matter of Coan, 72 B.R. 483, 485 (Bankr.M.D.Fla. 1987) (citing courts which have granted avoidance powers to the Chapter 13 trustee under other avoidance sections of the Code but not including § 545). However, other courts have denied the debtor the right to pursue actions to avoid tax liens on exempt property based on their interpretation of two subsections of § 522. The Court agrees with these latter decisions and finds their reasoning applicable to the situation at hand.

The Bankruptcy Code "unambiguously gives avoidance powers to bankruptcy trustees and to chapter 11 and 12 debtors, but not to chapter 13 debtors," In re Perry, 90 B.R. 565, 567 (Bankr.S.D.Fla.1988) (citing §§ 1107(a), 1203, and 1303); cf., In re Sierer, 121 B.R. 884 (Bankr.N.D.Fla. 1990) (chapter 11 debtor granted the trustee's status of hypothetical bona fide purchaser...