In re Silver, BAP No. NM-03-042.

CourtBankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit
Writing for the CourtClark
Citation303 B.R. 849
PartiesIn re A. David SILVER and Jerilyn H. Silver, Debtors. Yvette J. Gonzales, Trustee, and The Lincoln National Life Insurance Company, individually and as Assignee of Santa Fe (Jointly Administered) Private Equity Fund II, L.P., Plaintiffs-Appellees, v. United States of America (Internal Revenue Service), Defendant-Appellant.
Decision Date16 January 2004
Docket NumberBankruptcy No. 7-96-11878-SS.,Bankruptcy No. 7-96-11879-SS.,Adversary Nos. 99-1240-S.,BAP No. NM-03-042.
303 B.R. 849
In re A. David SILVER and Jerilyn H. Silver, Debtors.
Yvette J. Gonzales, Trustee, and The Lincoln National Life Insurance Company, individually and as Assignee of Santa Fe (Jointly Administered) Private Equity Fund II, L.P., Plaintiffs-Appellees,
v.
United States of America (Internal Revenue Service), Defendant-Appellant.
BAP No. NM-03-042.
Bankruptcy No. 7-96-11879-SS.
Bankruptcy No. 7-96-11878-SS.
Adversary Nos. 99-1240-S.
United States Bankruptcy Appellate Panel of the Tenth Circuit.
January 16, 2004.

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William J. Arland (Edward Ricco with him on the brief) of Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, for Plaintiffs-Appellees Yvette J. Gonzales, Trustee and The Lincoln National Life Insurance Company, individually and as assignee of Santa Fe Private Equity Fund, II, L.P. (Clifford C. Gramer, Jr., Albuquerque, NM, with him on the brief for Yvette J. Gonzales, Trustee).

Jon E. Fisher, Attorney (David Iglesias, United States Attorney, with him on the brief) United States Department of Justice, Dallas, TX, for Defendant-Appellant United States of America (Internal Revenue Service).

Before CLARK, MICHAEL, and BROWN, Bankruptcy Judges.

OPINION

CLARK, Bankruptcy Judge.


The United States of America (IRS) timely appeals a final Amended Judgment of the United States Bankruptcy Court for the District of New Mexico1 in favor of the Chapter 7 trustee of the debtors' jointly administered cases (Trustee) and Lincoln National Life Insurance Company (Lincoln), an unsecured creditor of one of the debtors. The parties have not elected to have this appeal heard by the United States District Court for the District of New Mexico and, therefore, they consent to this Court's jurisdiction.2 For the reasons stated below, we RETAIN JURISDICTION over a limited portion of the Amended Judgment pending receipt of a Supplemental Appendix as more fully set forth below, REVERSE the Amended Judgment in part, and AFFIRM it in part.

I. Background

David Silver, one of the Chapter 7 debtors (David), is a self-described venture capitalist who lived in Santa Fe, New Mexico with co-debtor, Jerilyn Silver (Jerilyn) (collectively, the "Debtors"). David and Jerilyn were married during most of the periods relevant to this case, but they divorced in 1995. Although no longer married, the Debtors each filed Chapter 7 petitions in New Mexico on May 2, 1996, and their cases are being jointly administered. The Trustee is the Chapter 7 trustee of the jointly administered cases. Lincoln holds a nondischargeable judgment against David exceeding $24 million, and it is the assignee of a limited partnership interest formerly held by David. The Trustee and Lincoln (collectively, the "Plaintiffs") are parties to a court-approved Joint Prosecution Agreement under which Lincoln funds litigation related to the Debtors' assets.

The Plaintiffs commenced an adversary proceeding against the IRS in the Debtors' jointly administered cases (IRS Proceeding), seeking a determination as to the extent of the IRS's tax liens against property owned by the Debtors. After a trial, the bankruptcy court entered a Judgment and Amended Judgment in favor of the Plaintiffs, and it is the Amended Judgment that the IRS appeals.

Our review of the Amended Judgment is based on the following record: (1) the Plaintiff's Complaint against the IRS initiating the IRS Proceeding, attached to which as an exhibit is a portion of a default judgment in an adversary proceeding captioned as Gonzales v. Silver (In re A. David Silver), Ad. No. 98-1092 (Bankr.D.N.M.) (the "Fraudulent Transfer Action");3

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(2) the IRS's Answer to the Complaint,4 attached to which as an exhibit is an "Order Granting Intervenor Los Alamos National Bank's Motion for Interpleader" (Intervenor Order) filed in a proceeding captioned as: ADS Financial Services, Inc. v. United States, Civ. No. 95-1469 LH/RLP (D.N.M.) (the "Intervenor Action");5 (3) a pretrial scheduling order entered in the IRS Proceeding;6 (4) a trial transcript of the IRS Proceeding;7 (5) exhibits offered by the IRS and entered into evidence in the IRS Proceeding;8 (6) the bankruptcy court's Judgment and Memorandum in Support of Judgment;9 (7) the bankruptcy court's Amended Judgment;10 (8) the docket sheet for the IRS Proceeding;11 (9) the IRS's post-trial brief filed in the IRS Proceeding;12 (10) a "Time Line" that was referred to by the bankruptcy court and the parties during the IRS Proceeding;13 and (11) docket sheets in the Debtors' cases.14

The IRS has also submitted as part of the appellate record a paper titled: "Intervenor Los Alamos National Bank's Motion for Interpleader,"15 which was filed in the Intervenor Action. We will not consider this paper as part of the record on review, however, because the IRS admits that it was not before the bankruptcy court below.16

Omitted from our appellate record are the Plaintiffs' ten exhibits (Plaintiffs' Exhibits). The Plaintiffs' Exhibits were admitted into evidence by the bankruptcy court pursuant to a stipulation of the parties.17 The bankruptcy court relied on the Plaintiffs' Exhibits in entering its Amended Judgment.18 From the record, however, we cannot identify the Plaintiffs Exhibits, and know only that some of Plaintiffs' Exhibits overlap the IRS's exhibits.19

Based on this record, we set forth the following background.

1. The IRS's Prepetition Tax Liens

Prior to filing their Chapter 7 petitions, the Debtors failed to pay certain income tax debts to the IRS. As a result, federal tax liens were created pursuant to 26 U.S.C. § 6321, and the IRS filed numerous notices of tax liens against the Debtors' real and personal property. Specifically, between 1987 and March 1996, the IRS filed several notices of tax liens against real and personal property owned by David and/or Jerilyn located in New Mexico.

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In March 1994, the IRS filed a notice of tax lien against real and personal property owned by David and/or Jerilyn located in New York (collectively, the "Prepetition Tax Liens"). It is undisputed that at some point the Prepetition Tax Liens encumbered the Debtors' personal property, including property that is generally referred to as the "Art" and the "Stock."

2. The LANB Foreclosure and the Intervenor Action

Los Alamos National Bank (LANB) had a lien interest in the Debtors' property. Although we have absolutely no record regarding the extent and nature of the interests held by LANB in the Debtors' property, the following information is undisputed by the parties. LANB's lien interest extended to the Debtors' real property located in New Mexico and New York. In 1995, the exact date not being known from the record but after the IRS filed its Prepetition Tax Liens, LANB obtained foreclosure judgments against some of the Debtors' property (LANB Foreclosure). As a result of the LANB Foreclosure, LANB came into possession of the Art — the basis for its possession, however, is unknown.

Also in 1995, ADS Financial Services, Inc. (ADS), an entity that was formed by and possibly controlled by David, commenced what is defined above as the "Interpleader Action" against the IRS in the District of New Mexico. The relief sought by ADS in the Interpleader Action is wholly unknown from the record, but the Intervenor Order, the only paper of record existing from that Action, makes clear that it involved a dispute related to ownership of the Art. ADS's purported interest in the Art cannot be discerned from the record, except that the Time Line that was relied on by the bankruptcy court (but which does not appear to have been admitted into evidence and was not subject to stipulation by the parties) states that in August 1995, ADS paid LANB $190,000 to settle a lawsuit, and it purchased the Art from LANB.20

In September 1996, after the Debtors' Chapter 7 petitions had been filed, the district court entered an Order in the Intervenor Action granting LANB "leave to intervene and file an interpleader action under Rule 22 [of the Federal Rules of Civil Procedure.]"21 LANB promptly filed such a motion, described above as the "Intervenor Motion," seeking in relevant part, to interplead "artwork" located in New Mexico and New York.22 No one disputes that this "artwork" is the Art in question in this appeal.

In November 1996, the district court granted LANB's Intervenor Motion finding that "the factual and legal standards for interpleading the ... artwork into the custody of the Court or the Court's designated custodian have been met [.]"23 It further stated that it was required to "appoint a custodian for the [Art] until the merits of the action of this case can be determined and the ownership of the [Art] can be determined ...."24 Based on these findings, the district court ordered that the IRS "immediately take custody and control of the [Art], and maintain custody and

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control until further order of the Court[.]"25 Pursuant to this Order, the IRS took custody and control of the Art.

In 1997, the Intervenor Action was dismissed on procedural grounds.26 Specifically, the district court dismissed the Action because ADS, a corporation, was required to be represented by an attorney, and it failed to retain an attorney.27 As a result, no ruling was ever made as to ADS's purported ownership interest in the Art.

Subsequently, between March and June 1998, the IRS served and published notices of public auction, indicating its intent to sell the Art in New York. The IRS cancelled the auction when the Trustee informed it that the Debtors' estates had a potential interest in the Art (the nature of this interest being unknown from the record, other than that the "Fraudulent Transfer Action" was commenced against ADS and other insiders of the Debtors during this time).28 As a result of this potential interest, the IRS, no longer required to serve as custodian of the Art in the...

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  • In re Murray Metallurgical Coal Holdings, LLC, Case No. 20-10390
    • United States
    • U.S. Bankruptcy Court — Southern District of Ohio
    • January 11, 2021
    ...§ 541(a)(7) )[.]" Gonzales v. United States (In re Silver) , 302 B.R. 720, 725 (Bankr. D.N.M. 2003), aff'd in part, rev'd in part , 303 B.R. 849 (B.A.P. 10th Cir. 2004), supplemented by 305 B.R. 381 (B.A.P. 10th Cir. 2004).This makes sense because, just as prepetition claims are property of......
  • Gordon v. Internal Revenue Serv. (In re Johnson), CASE NO. 16-51072-PMB
    • United States
    • United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia
    • August 10, 2018
    ...*4 (see note 33, supra ). Similarly, the court in In re Silver , 302 B.R. 720, 724 (Bankr. D. N.Mex. 2003), aff'd in part, rev'd in part , 303 B.R. 849 (10th Cir. BAP 2004), sought to distinguish Lively,supra , on grounds that, unlike Georgia law, New Mexico law only makes such transfers vo......
  • Patricia Cocoma & Cusco Jacks, Inc. v. Nigam (In re Nigam), BAP No. CO-17-044
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit
    • August 9, 2018
    ...and debtor acted in good faith). 102. Dismissal Order, in Appellants' App. at 615. 103. Gonzales v. Internal Revenue Serv. (In re Silver), 303 B.R. 849, 857 (10th Cir. BAP...
  • In re Duffin, No. 09-28879
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Utah
    • April 12, 2010
    ...§ 544, the trustee is commonly referred to as a hypothetical creditor. In re Colon, 563 F.3d 1171, 1174 (10th Cir.2009); In re Silver, 303 B.R. 849, 861 (10th Cir. BAP 2004). The provisions of § 544(a)(1) and (2) give the bankruptcy trustee the rights and powers of hypothetical creditors (§......
  • Request a trial to view additional results
10 cases
  • In re Murray Metallurgical Coal Holdings, LLC, Case No. 20-10390
    • United States
    • U.S. Bankruptcy Court — Southern District of Ohio
    • January 11, 2021
    ...§ 541(a)(7) )[.]" Gonzales v. United States (In re Silver) , 302 B.R. 720, 725 (Bankr. D.N.M. 2003), aff'd in part, rev'd in part , 303 B.R. 849 (B.A.P. 10th Cir. 2004), supplemented by 305 B.R. 381 (B.A.P. 10th Cir. 2004).This makes sense because, just as prepetition claims are property of......
  • Gordon v. Internal Revenue Serv. (In re Johnson), CASE NO. 16-51072-PMB
    • United States
    • United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia
    • August 10, 2018
    ...*4 (see note 33, supra ). Similarly, the court in In re Silver , 302 B.R. 720, 724 (Bankr. D. N.Mex. 2003), aff'd in part, rev'd in part , 303 B.R. 849 (10th Cir. BAP 2004), sought to distinguish Lively,supra , on grounds that, unlike Georgia law, New Mexico law only makes such transfers vo......
  • Patricia Cocoma & Cusco Jacks, Inc. v. Nigam (In re Nigam), BAP No. CO-17-044
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit
    • August 9, 2018
    ...and debtor acted in good faith). 102. Dismissal Order, in Appellants' App. at 615. 103. Gonzales v. Internal Revenue Serv. (In re Silver), 303 B.R. 849, 857 (10th Cir. BAP...
  • In re Duffin, No. 09-28879
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Utah
    • April 12, 2010
    ...§ 544, the trustee is commonly referred to as a hypothetical creditor. In re Colon, 563 F.3d 1171, 1174 (10th Cir.2009); In re Silver, 303 B.R. 849, 861 (10th Cir. BAP 2004). The provisions of § 544(a)(1) and (2) give the bankruptcy trustee the rights and powers of hypothetical creditors (§......
  • Request a trial to view additional results

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