In re McAdam

• Decision Date: 16 January 2009
• Docket Number: Bankruptcy No. 03-12720-MWV.,Adversary No. 08-1011-MWV.
• Parties: In re Hugh A. McADAM, III, Debtor Hugh A. McAdam, III, Plaintiff v. State of New Hampshire (Department of Employment Security), Defendant.
• Court: U.S. Bankruptcy Court — District of New Hampshire

Page 473

402 B.R. 473

2009 BNH 003

In re Hugh A. McADAM, III, Debtor

Hugh A. McAdam, III, Plaintiff v. State of New Hampshire (Department of Employment Security), Defendant.

Bankruptcy No. 03-12720-MWV.

Adversary No. 08-1011-MWV.

United States Bankruptcy Court, D. New Hampshire.

January 16, 2009.

COPYRIGHT MATERIAL OMITTED

Grenville Clark, III, Esq., Gray Wendell & Clark, P.C., Manchester, NH, for Plaintiff.

Peter C.L. Roth, Esq., State of New Hampshire, Office of the Attorney General, for Defendant.

MEMORANDUM OPINION

MARK W. VAUGHN, Chief Judge.

The Court has before it the State of New Hampshire Department of Employment Security's (the "Defendant") motion to dismiss the complaint filed by Hugh A. McAdam (the "Plaintiff") pursuant to Federal Rule of Civil Procedure 12(b)(6), made applicable to this proceeding pursuant to Federal Rule of Bankruptcy Procedure 7012(b)(6). In his complaint, the Plaintiff alleges that the Defendant violated the discharge injunction pursuant to 11 U.S.C. § 524(a) and seeks damages of $50,000.¹ The Plaintiff filed an objection, and on March 18, 2008, the Court held a hearing on the motion and took the matter under advisement.

JURISDICTION

This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and the "Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire," dated January 18, 1994 (DiClerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b).

BACKGROUND

In 2002, the Plaintiff was the president of International Paper Box Machine Co., Inc. (hereinafter, "IPBMC"). In April 2002, IPBMC incurred a liability to the Defendant for past-due unemployment contributions for the period beginning January 1, 2002, through March 31, 2002 (the "Past-Due Contributions"). The said contributions were imposed on IPBMC under Chapter 282-A:69 of the New Hampshire Unemployment Contribution Law. IPBMC did not satisfy the Past-Due Contributions and filed a chapter 11 petition on September 24, 2002. The Defendant filed a proof of claim for the Past-Due Contributions in IPBMC's case but did not recover any funds because the bankruptcy estate had insufficient assets. IPBMC's case was converted to a chapter 7 case on April 24, 2003, and closed on June 28, 2007.

On August 6, 2003, the Plaintiff filed a chapter 7 petition and received a discharge on November 20, 2003. The Defendant was notified of the filing. On or about April 27, 2007, the Defendant commenced collection procedures for the Past-Due Contributions against the Plaintiff, individually. The Defendant sent a written notice to the Plaintiff demanding a total of $15,138.43 for the Past-Due Contributions and related late fees, costs, and interest. The Defendant then filed suit against the Plaintiff to recover the same in the Concord District Court. The Concord District Court issued an order staying proceedings to allow the Plaintiff to file appropriate pleadings with this Court. On January 23, 2008, the Plaintiff commenced the instant adversary proceeding against the Defendant, alleging violation of the discharge injunction pursuant to 11 U.S.C. § 524(a).

DISCUSSION

The complaint asserts a claim for violation of the discharge injunction pursuant to 11 U.S.C. § 524(a). The Defendant moves to dismiss under Rule 12(b)(6) on the grounds that its collection efforts, including the state court action, did not violate the discharge injunction because (1) the Plaintiff is personally liable for the Past-Due Contributions under New Hampshire law and the said taxes are nondischargeable under the Bankruptcy Code; and (2) as a matter of law, suits commenced in state court to determine nondischargeability of debts do not violate the discharge injunction. The Plaintiff argues that he has a viable claim because he is not personally liable for the Past-Due Contributions and the said taxes are not nondischargeable under the Bankruptcy Code.

Pursuant to Rule 12(b)(6), a party may move to dismiss a claim for "failure to state a claim upon which relief can be granted[.]" Fed.R.Civ.P. 12(b)(6); Fed. R. Bankr.P. 7012(b). In ruling on a Rule 12(b)(6) motion to dismiss, courts "must accept as true the well-pleaded factual allegations of the complaint" and "draw all reasonable inferences therefrom in the plaintiff's favor[.]" LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 508 (1st Cir.1998). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (internal citations omitted); Damon v. Moore, 520 F.3d 98, 102-03 (1st Cir.2008). To survive a Rule 12(b)(6) motion to dismiss, factual allegations in the complaint "must be enough to raise a right to relief above the speculative level" and cross the line between "possibility" and "plausibility" of entitlement to relief. Bell Atlantic Corp., 127 S.Ct. at 1965-66; Notinger v. Costa (In re Robotic Vision Sys., Inc.), 374 B.R. 36, 43 (Bankr.D.N.H.2007). The focus of a Rule 12(b)(6) inquiry is not "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Gilbert v. Essex Group, Inc., 930 F.Supp. 683, 686 (D.N.H. 1993) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

I. Nondischargeability under the Bankruptcy Code

The first issue before the Court is twofold: (1) whether the Plaintiff is personally liable for the Past-Due Contributions under N.H. Rev. Stat § 282-A; and (2) if so, whether the Past-Due Contributions are nondischargeable taxes under 11 U.S.C. § 523(a)(1)(A) and (B).

A. Personal Liability under N.H.Rev. Stat. Ann. § 282-A

To start, the Court notes that the Past-Due Contributions are state taxes. N.H.Rev.Stat. Ann. § 282-A:69(I) imposes unemployment contributions on employers.² "`Contributions' means the money payments due from an employer to the state required by this chapter." § 282-A:6. Such a contribution "is an involuntary exaction levied against an employer for the public expense" and thus, "is a tax." State of New Hampshire v. Thayer, 118 N.H. 819, 395 A.2d 500, 502 (1978).

New Hampshire law governs the issue of personal liability for unpaid contributions. Section 282-A:8 defines "employer" as various employing units but makes no reference to corporate presidents or other officers. See N.H.Rev.Stat. § 282-A:8(I)-(VIII). Section 282-A:143, however, provides that "[f]or the purposes of RSA 282-A:141-155, `employer' in the case of corporations or limited liability companies includes the president, treasurer, members, or any other person in a managerial capacity of said corporation or limited liability company." § 282-A:143 (emphasis added). Thus, by its plain language, section 282-A:143 extends liability for past-due contributions to a corporation's president. The expanded definition of "employer" set forth in section 282-A:143 is not limited to that provision, but also applies to "RSA 282-A:141-155." § 282-A:143. Section 282-A:152 in relevant part provides:

Upon the failure of any person to pay any contribution due to the state within 30 days from its due date, the commissioner of the department of employment security or his duly authorized representative charged by law with its collection shall add thereto such penalty or interest or both as shall be prescribed by law. The attorney general may collect any such contribution by a civil action, or the commissioner or his duly authorized representative charged by law with the collection of such contribution may make out and sign a warrant directed to any serving officer for distraint upon the goods, realty or body of such person.

§ 282-A:152(II). As such, the state may seek past-due taxes "by a civil action" from a corporate president pursuant to section 282-A:152(II), and a corporate president may be personally liable.³

In the instant case, the Plaintiff conceded that he was IPBMC's president at the time the Past-Due Contributions were incurred. Thus, he was an "employer" and personally liable for the taxes. Although the Plaintiff alleges that he did not manage IPBMC at that time and that Resolution Capital of Boston may have managed it, New Hampshire statutory and case law is silent on whether a president must be acting in managerial capacity at the time the unemployment taxes are incurred for individual liability. The Court concludes that section 282-A:143 does not require such condition. In addition, the Plaintiff's argument that section 282-A:143 creates an in rem remedy, not personal liability, does not help him because section 282-A:152(II) provides the Defendant in personam process for collecting taxes. Thus, the Plaintiff is personally liable for the Past-Due Contributions.

Lastly, the Defendant requests the Court find the Plaintiff liable for certain interest, late fees, and costs incurred in connection with the Past-Due Contributions.⁴ The issue before the Court is whether it should dismiss the complaint, and thus, it will not make a finding as to the dollar amount owed by the Plaintiff for the Past-Due Contributions. The Court, nonetheless, concludes that a "contribution" includes "not only the principal of any contribution but also all interest, penalties, fees and other charges added thereto by law ..." § 282-A:152(I). To the extent the Past-Due Contributions reflect such interest and fees described in section 282-A: 152(I), the Court finds that the Plaintiff is personally liable for such amounts.

In short, the Past-Due Contributions are a debt in the Plaintiff's personal bankruptcy case. To determine whether the Court should dismiss the complaint, the...