In Re Rosemary K. Sissine

• Decision Date: 27 May 2010
• Docket Number: Adversary No. 09-06091-MGD.,Bankruptcy No. 04-65718-MGD.
• Citation: 432 B.R. 870
• Parties: In re Rosemary K. SISSINE, Debtor.Neil C. Gordon, Trustee for the Estate of Rosemary K. Sissine, Plaintiff,v.United States of America and Georgia Department of Revenue, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

432 B.R. 870

In re Rosemary K. SISSINE, Debtor.Neil C. Gordon, Trustee for the Estate of Rosemary K. Sissine, Plaintiff,v.United States of America and Georgia Department of Revenue, Defendants.

Bankruptcy No. 04-65718-MGD.

Adversary No. 09-06091-MGD.

United States Bankruptcy Court,

N.D. Georgia,

Atlanta Division.

May 27, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Rosemary K. Sissine, pro se.

ORDER GRANTING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

MARY GRACE DIEHL, Bankruptcy Judge.

This matter is before the Court on cross motions for summary judgment. ¹ (Docket Nos. 33, 36 & 37). The Chapter 7 Trustee (“Trustee”) commenced this adversary proceeding on February 17, 2009, against Georgia Department of Revenue (“GDOR”) and United States of America (“U.S.” or “IRS”) (collectively, “Defendants”).² Trustee asserts six claims against Defendants. Count I alleges a willful violation of the automatic stay under 11 U.S.C. § 362(h)(1).³ (Second Amended Complaint (“SAC”) ¶¶ 19-23). Count II alleges that self-executing tax liens asserted against Debtor's estate are subordinated to outstanding administrative expenses under 11 U.S.C. § 724(b). (SAC ¶¶ 24-33). Counts III and IV seek avoidance and recovery of alleged postpetition transfers of property of the estate pursuant to 11 U.S.C. §§ 549 and 550. (SAC ¶¶ 34-42). Count V seeks immediate turnover to Trustee of claimed tax refunds or the value thereof. (SAC ¶¶ 43-46). Count VI asserts a monies had and received claim. (SAC ¶¶ 47-52).

GDOR moved to dismiss or for judgment on the pleadings with respect to Counts II through IV on August 14, 2009.⁴ (Docket No. 32). On August 28, 2009, GDOR moved for summary judgment on all Counts. (Docket No. 33). On August 31, 2009, the U.S. and Trustee moved for summary judgment. ⁵ (Docket Nos. 36 & 37). On February 17, 2010, the Court issued a notice of hearing for oral arguments to be held on the motions for summary judgement.⁶ (Docket No. 58).

This is a core proceeding under 28 U.S.C. § 157(b)(2) and jurisdiction and venue are proper. For the reasons set forth below, Plaintiff's Motion for Summary Judgment is denied, and GDOR's Motions for Summary Judgment is granted. U.S.'s Motion for Summary Judgment is granted as to Counts I through V, and Count VI is dismissed for lack of jurisdiction.

In accordance with Rule 56 of the Federal Rules of Civil Procedure, applicable to this Court pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure, summary judgment is appropriate only if “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). “Material facts” are those which might affect the outcome of a proceeding under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Further, a dispute of fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. Lastly, the moving party has the burden of establishing the right of summary judgment. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991); Clark v. Union Mut. Life Ins. Co., 692 F.2d 1370, 1372 (11th Cir.1982). Where the nonmoving party bears the burden of proof at trial, the burden can be satisfied if the moving party demonstrates the absence of evidence supporting the nonmoving party's case. Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1259 (11th Cir.2004). In determining whether a genuine issue of material fact exists, the Court must view the evidence in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Rosen v. Biscayne Yacht & Country Club, Inc., 766 F.2d 482, 484 (11th Cir.1985). It remains the burden of the moving party to establish the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The material facts are undisputed; therefore, summary judgment is appropriate.

I. STATEMENT OF FACTS

This adversary proceeding involves tax returns filed postpetition by Rosemary Sissine (“Debtor”) and her non-debtor spouse, James Sissine, for the prepetition tax years of 2001, 2002, and 2003. In each of those prepetition years, it was ultimately determined that withholdings by Debtor and Mr. Sissine exceeded their collective income tax liability imposed by the Internal Revenue Code and Georgia Public Revenue Code. On April 5, 2004, Debtor filed a voluntary petition for relief under Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). Her case was converted to a case under Chapter 7 of the Bankruptcy Code on April 26, 2005. (Case No. 04-65718). Prior to filing for bankruptcy, Debtor and Mr. Sissine had outstanding federal tax liabilities, resulting from their ownership positions with Portfolio Homes International, Inc., which had failed to pay employment taxes. (IRS Statement of Facts (“SOF”) ¶ 2).

At the time of Debtor's Chapter 11 petition, Debtor and Mr. Sissine had not filed personal tax returns for 2001, 2002, and 2003. (Trustee SOF ¶ 5). The Sissines filed their 2001 return prior to the conversion of Debtor's bankruptcy case to Chapter 7. After his appointment, Trustee directed Debtor to file the past due tax returns before the expiration of the applicable statute of limitation. (Trustee SOF ¶ 5). Debtor complied, subsequently filing joint tax returns on April 14, 2006 for 2002 and April 15, 2007 for 2003.

A. Georgia Department of Revenue.

Defendant GDOR did not receive any notices of Debtor's Chapter 11 case or of the conversion to Chapter 7 because it was not a named creditor in the bankruptcy case and was not included on the creditor matrix. GDOR did not file a proof of claim. (Case No. 04-65718, Docket No. 1; GDOR SOF ¶¶ 8-10).

On or about April 14, 2005, Debtor and Mr. Sissine filed a joint income tax return for the 2001 tax year. (Trustee's SOF ¶ 6). On July 13, 2005, GDOR issued a 2001 tax refund check in the amount of $10,489.00 made payable to Debtor and non-debtor spouse. (GDOR SOF ¶¶ 1 & 2).

On or about April 14, 2006, Debtor and Mr. Sissine filed a joint income tax return for the 2002 tax year. (Complaint ¶ 12).

On May 5, 2006, Trustee sent a letter to “Bo Fears, Esquire” at the “Georgia Department of Law” concerning Debtor's state tax refunds. (Trustee SOF ¶ 12; Docket No. 37, Exh. F). Neither Mr. Fears nor any other attorney at the Georgia Department of Law had appeared in any capacity in Debtor's bankruptcy case. Trustee's May 5, 2006 letter stated that 84.21% of the 2002 refund was property of the estate, and, based on negotiations with Debtor, “the entire $10,766 refund amount needs to end up in the bankruptcy Estate.” (Docket No. 37, Exh. F). The letter closed by stating, “Please do what you can to have Georgia Revenue pay the entire return to the Bankruptcy Trustee.” (Docket No. 37, Exh. F).

On July 27, 2006, GDOR issued a 2002 tax refund in the total amount of $10,766.00 made payable to Debtor and her Mr. Sissine. (GDOR SOF ¶¶ 3 & 4). At the request of the IRS, $6,868.16 of the 2002 tax refund was turned over to the IRS and $3,897.84 was refunded to Debtor and Mr. Sissine. (GDOR SOF ¶ 4). Debtor and Mr. Sissine received the $3,897.84 directly. At the oral argument hearing on March 4, 2010, U.S. announced that it would deliver the $6,868.16 it received from the 2002 state refund to the Trustee.

On April 15, 2007, the Sissines filed a joint personal income tax return for the 2003 tax year, claiming a state income tax refund in the amount of $10,536.40. (Trustee SOF ¶ 20). On January 17, 2008, GDOR issued the 2003 state tax refund in the amount of $10,536.40 payable to Debtor and Mr. Sissine. (GDOR SOF ¶¶ 5 &amp 6). Debtor and Mr. Sissine received the refund directly.

B. United States of America/Internal Revenue Service

On or about April 14, 2005, Debtor and Mr. Sissine filed a joint income tax return for the 2001 tax year, claiming a federal refund in the amount of $44,996.57. (Trustee SOF ¶ 6). On May 5, 2005, IRS filed a proof of claim alleging an unsecured priority claim in the amount of $84,244.40 related to unpaid federal personal income taxes for tax years 2001-2004. (Trustee SOF ¶ 7; Claim No. 55). On June 6, 2005, Neil C. Gordon, who was initially appointed as Interim Trustee, became the permanent Trustee following the conclusion of the meeting of creditors. (Trustee SOF ¶ 2).

On July 15, 2005, IRS Insolvency Specialist Deborah Fowler decided that additional examination of the 2001 return was needed to determine whether the return was accurate. (IRS SOF ¶ 6). On July 19, 2005, Fowler sent a memo to Jackie Lynch referring the 2001 return for examination. That examination, however, never took place, and on September 27, 2005, Fowler was informed that her referral would not be accepted due to a lack of staffing. Consequently, Fowler issued a refund in the amount of $43,619.00, plus interest, to Trustee sometime between September 30, 2005 and October 18, 2005. (Trustee SOF ¶ 6; IRS SOF ¶ 7).

On March 23, 2006, Trust Fund Recovery Penalty (“TFRP”) liabilities of $145,084.42 were assessed against Debtor and Mr. Sissine, pursuant to 26 U.S.C. § 6672, for allegedly willfully failing to collect, account for, and pay over the trust fund portion of the federal employment taxes of Portfolio Homes, LLC. (IRS SOF ¶ 8; Trustee SOF ¶ 8). These liabilities were for the tax periods ending September 30, 2002, December 31, 2002, March 31, 2003, June 30, 2003, and September 30, 2003.⁷ (Trustee SOF ¶ 8). At the time IRS assessed the TFRP liabilities against Debtor and Mr. Sissine, the IRS had knowledge of Debtor's bankruptcy filing. (Trustee SOF ¶ 9).

On or about April 14, 2006, Debtor and Mr. Sissine filed a joint income tax return for the 2002 tax year, claiming a...