In re de Jesus

• Decision Date: 28 September 2001
• Docket Number: Bankruptcy No. 94-32597. Adversary No. 99-3342.
• Citation: 268 BR 185
• Parties: In re Juan R. DE JESUS, Debtor. Juan R. De Jesus, Plaintiff, v. United States of America and Jasmine Z. Keller, Chapter 13 Trustee, Defendant.
• Court: U.S. Bankruptcy Court — District of Minnesota

268 B.R. 185 (2001)

In re Juan R. DE JESUS, Debtor Juan R. De Jesus, Plaintiff, v. United States of America and Jasmine Z. Keller, Chapter 13 Trustee, Defendant.

Bankruptcy No. 94-32597. Adversary No. 99-3342.

United States Bankruptcy Court, D. Minnesota, Third Division.

September 28, 2001.

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Kenneth E. Keate, St. Paul, MN, for debtor.

Katja M. Eichinger, Trial Attorney, Tax Division, U.S. Department of Justice, Tulsa, OK, for defendant.

Eric J. Sherburne, Minneapolis, MN, for Chapter 13 Trustee.

ORDER GRANTING MOTION OF DEFENDANT UNITED STATES OF AMERICA FOR SUMMARY JUDGMENT

GREGORY F. KISHEL, Chief Judge.

This adversary proceeding came on before the Court for hearing on the motion of the United States of America, as Defendant, for summary judgment. The United States appeared by Katja M. Eichinger, Trial Attorney, Tax Division, U.S. Department of Justice. The Plaintiff ("the Debtor") appeared by his attorney, Kenneth E. Keate. Defendant Jasmine Z. Keller ("the Standing Trustee") appeared by her attorney, Eric J. Sherburne. Upon the record made on the motion, including the arguments of counsel at hearing, the Court makes the following order.

IDENTITY OF PARTIES AND NATURE OF ADVERSARY PROCEEDING

The Debtor is a petitioner in a case under Chapter 13 that is still pending before this Court. He commenced it by filing a voluntary petition on June 24, 1994. The United States, through the Internal Revenue Service, was scheduled as a creditor in the case. On August 30, 1994, the Court confirmed the Debtor's plan of debt adjustment.

In December, 1999, the Standing Trustee filed a motion to dismiss the Debtor's case. As grounds for dismissal, she stated that the Debtor had failed to pay her an amount sufficient to satisfy all allowed priority claims in full, and that the maximum term of his plan under statute had expired. The hearing on the Standing Trustee's motion convened on December 21, 1999. The Debtor's counsel stated that he intended to commence an adversary proceeding against the United States and the Standing Trustee, to seek an adjudication that his client had satisfied his payment responsibilities and was entitled to a discharge under Chapter 13. The same day, counsel filed the complaint in this matter.

The Debtor requests declaratory relief as to his liability to the United States for individual income taxes for 1989. He seeks a judgment that this claim is to be treated as a general unsecured claim in the administration of his plan; both Defendants had assumed that it was to be treated as a priority claim. The Debtor makes his argument under all three prongs of 11 U.S.C. § 507(a)(8)(A).¹ His positions are as follows:

1. Section 507(a)(8)(A)(i) does not afford priority to the claim of the United States, as the Debtor\'s individual income tax return for 1989 was last due on April 15, 1990, outside the three-year ambit for the statute\'s assignment of priority.

2. Section 507(a)(8)(A)(ii) does not afford priority, as it is limited to tax assessments other than those made on returns voluntarily filed by taxpayers. Because the IRS assessed the Debtor\'s 1989 tax liability on the basis of the return that he voluntarily filed on November 24, 1993, this statute simply is not triggered.

3. Finally, § 507(a)(8)(A)(iii) does not afford priority, as the pre-petition date of the IRS\'s assessment removed it from the ambit of that statute.

In the alternative, the Debtor maintains that the terms of his confirmed plan bind the United States to treatment as the holder of a general unsecured claim for his 1989 income tax liability.

In its answer, the United States variously admits and denies the fact allegations of the Debtor's complaint. It rejects the Debtor's broader statutory theory, maintaining that § 507(a)(8)(A)(ii) gives priority status to its claim. On the Debtor's plan-based theory, it argues that the language of the plan form mandates priority status because its claim was ultimately allowed with priority via the filing of original and amended proofs of claim in which it asserted that status. The United States seeks a declaratory judgment that its claim holds priority under § 507(a)(8), and a mandate that the Debtor pay the claim in full as a condition of receiving a discharge under Chapter 13.

In her answer, the Standing Trustee denies that a standing trustee under Chapter 13, as such, is subject to the binding effect of plan confirmation under 11 U.S.C. § 1327(a). While she acknowledges that the Debtor has paid her the raw dollar-amount contemplated by his plan, she argues that the plan's text obligates him to pay all allowed priority claims in full. The Standing Trustee requests that the Debtor's complaint be dismissed as to her, in its entirety.

MOTION AT BAR

The United States now moves for summary judgment on the issue of the discharge ability of the Debtor's tax liabilities for 1989. The governing rule is FED. R. BANKR. P. 7056.²

To merit the summary adjudication of a dispute under this rule, the Court must make a threshold determination that there is "no genuine issue as to any . . . fact" that is material to the claims or defenses at issue on the motion. In re Circuit Alliance, Inc., 228 B.R. 225, 229-230 (Bankr.D.Minn.1998). To get beyond this threshold, the movant for summary judgment must establish a lack of triable fact issues. Where the movant seeks an affirmative adjudication—like here, where the United States requests a declaratory judgment—it may meet this burden by gleaning the elements of its legal theory, amassing the evidentiary fruits of discovery and investigation, and then "pointing out," Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), that the evidence meets those elements without making out any affirmative defense. In re Hauge, 232 B.R. 141, 144 (Bankr.D.Minn.1999). The movant then must show that the governing law lies in its favor, under the facts thus established. Guinness Import Co. v. Mark VII Distributors, Inc., 153 F.3d 607, 610-611 (8th Cir.1998); Osborn v. E.F. Hutton & Co., 853 F.2d 616, 618 (8th Cir.1988).

If the movant does this, the respondent has several options to avoid entry of summary judgment adverse to it. In re Hauge, 232 B.R. at 144-145. Two of them fit to the matter at bar. First, the respondent may challenge the sufficiency—that is, the logical probity—of the movant's evidence to meet one or more of the relevant elements. Alternatively, it can produce admissible, probative evidence of its own, that would support a finding on one or more elements contrary to that propounded by the movant. E.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Firemen's Fund Ins. Co. v. Thien, 8 F.3d 1307, 1310 (8th Cir.1993); Heideman v. PFL, Inc., 904 F.2d 1262, 1265 (8th Cir. 1990) (all holding that movant's meeting of initial burden on lack of genuine issue of material fact shifts burden of production of evidence to respondent).

The Eighth Circuit has noted many times that summary judgment is a particularly appropriate means of judicial decision-making where the issues in litigation are "primarily legal rather than factual." E.g., Gordon v. City of Kansas City, 241 F.3d 997, 1002 (8th Cir.2001); Buettner v. Arch Coal Sales Co., Inc., 216 F.3d 707, 713 (8th Cir.2000), United States Fidelity and Guaranty Co. v. Housing Auth. of the City of Poplar Bluff, 114 F.3d 693, 695 (8th Cir.1997); Crain v. Board of Police Comm'rs, 920 F.2d 1402, 1405-1406 (8th Cir.1990). See also State, Dept. of Revenue v. United States, 184 F.3d 725, 728 (8th Cir.1999) (where dispute is presented on stipulated or uncontested facts and presents only questions of law, disposition by summary judgment is appropriate).

While not moving for summary judgment as such, the Debtor used the closing section of his responsive memorandum to request a determination that his tax liability for 1989 was dischargeable and had been discharged. The lack of a formal motion would not bar the Court from granting such relief to him, were there no triable fact dispute and were the law to merit that result. Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986) (federal trial courts may grant summary judgment to a party sua sponte, where record merits it and no purpose would be served by delaying disposition); Interco Inc. v. Nat'l Surety Corp., 900 F.2d 1264, 1268 (8th Cir.1990); In re Mid-City Hotel Assoc., 114 B.R. 634, 646 (Bankr.D.Minn.1990) (respondent that did not move for summary judgment in its own right may nonetheless receive it in context of movant's motion, where facts are uncontested and law requires judgment in respondent's favor).

UNDISPUTED FACTS

The record establishes a number of material facts as undisputed. They are:

1. In 1989, the Debtor received taxable income from wages and additional taxable income from conducting a "consulting" business.

2. The Debtor did not file a personal income tax return for 1989 by April 15, 1990, when it was due.

3. On July 27, 1993, the Debtor filed a voluntary petition for bankruptcy relief under Chapter 7 in this Court. He received a discharge in that case on October 20, 1993.

4. On November 24, 1993, the District Director of the Internal Revenue Service at Minneapolis, Minnesota, received the Debtor's personal income tax return for 1989 on Form 1040.

5. On May 30, 1994, the IRS assessed the Debtor's personal income tax liability for 1989 in the amount of $13,181.00. After crediting against the base liability on his account for withholding and excess FICA withholding, it assessed additional liabilities for interest, and penalties for underpayment of estimated tax, late filing, and late payment.

6. This assessment was part of the total of assessments for individual income tax against taxpayers serviced by the IRS's Kansas City regional center that were outstanding on the rolls of the...