In re Vines
| Decision Date | 27 September 1996 |
| Docket Number | 95-07226-8C3.,Bankruptcy No. 96-932-CIV-T-17A |
| Citation | 200 BR 940 |
| Parties | In re Robert L. VINES, Debtor. Robert L. VINES, Appellant, v. INTERNAL REVENUE SERVICE, Appellee. |
| Court | U.S. District Court — Middle District of Florida |
COPYRIGHT MATERIAL OMITTED
Robert L. Vines, St. Petersburg, FL, pro se.
Michael A. Cauley, U.S. Attorney's Office, Middle District of Florida, Tampa, FL, David N. Geier, U.S. Dept. of Justice, Tax Division, Washington, DC, for appellee.
APPEAL FROM A JUDGMENT BEFORE THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF FLORIDA
ORDER
This cause is before the Court on appeal from the "Order Denying Confirmation and Dismissing Case" entered on February 16, 1996, by Bankruptcy Judge C. Timothy Corcoran, III. Jurisdiction over appeals from the final judgments, orders and decrees of the Bankruptcy Court is vested in the Federal District courts. 28 U.S.C. § 158(a).
The issue presented for this Court's review is whether the Bankruptcy Court erred in denying confirmation and granting the United States' Motion to dismiss for cause.
The District court is bound by the findings of fact made by the Bankruptcy Court unless it determines them clearly erroneous. The burden is on the appellant to show that the Bankruptcy Court's finding is clearly erroneous. Federal Rules of Bankruptcy Procedure, Rule 8013; In re Downtown Properties, Ltd., 794 F.2d 647 (11th Cir.1986). Appellant is entitled to an independent, de novo review of all conclusions of law and the legal significance accorded to the facts. In re Owen, 86 B.R. 691 (M.D.Fla. 1988).
A complete background is relevant to a full understanding of this case. In 1993, Vines filed for Chapter 13 in North Carolina, where he was ordered to file his 1991 1040 return. Vines responded by filing a return with all zeros and attaching an affidavit indicating that he filed zeros due to duress and coercion caused by the Court order. Vines was found to have made substantial income in 1991, and the IRS assessed his taxes close to $20,000.00.
The bankruptcy court dismissed the North Carolina case in May, 1993, after which Vines moved to Florida's Middle District where he filed for Chapter 13 in Case No. 94-9578-8C3. Vines was ordered again to file tax returns. That case was dismissed on April 19th, 1995.
While the order to dismiss the first attempt, in this District, to file Chapter 13 was pending appeal, Vines filed again for Chapter 13 relief on July 21, 1995. The Internal Revenue Service (IRS) filed objection to confirmation because the Plan failed to recognize and provide for payment for secured and priority claims as required by the Code. The IRS filed two Proofs of Claim; the first on November 1, 1995, and an amended Proof on November 2, 1995. On January 16, 1996, Vines filed objections to the Proofs of Claim stating as justification that the first was not signed and neither had supporting documentation attached.
On February 7, 1996, the Bankruptcy Court conducted a confirmation hearing on Vines' Chapter 13 plan and heard argument on the IRS's Motion to Dismiss for Cause. The IRS contented that Vines willfully failed to abide by an order of the Bankruptcy Court requiring him to file delinquent federal tax returns. In addition, the trustee advised the court that Vines' Plan did not provide for the payment of the government's secured or priority claim.
In response to failure to file tax returns, Vines responded with numerous arguments. For instance, he stated that he was confused as to which form he was supposed to file, and that the 1040 only applied to non-resident aliens or those subject to the social security program. Because he was not a non-resident alien and he had filed for recession of his signature from his social security application, he contended the 1040 did not apply to him. Further, he argued that taxes were voluntary. He then stated that he did not understand the tax program and had requested assistance from the IRS but had not received help. He argued that he could not file a tax return because a proper return had to be signed under penalties of perjury and his lack of comprehension of the tax laws prevented him from signing. Finally, he argued that the IRS Secretary was obligated to file a tax return on his behalf.
The bankruptcy court determined that the failure to file tax returns denied the IRS the opportunity to make a reasoned determination with respect to the debtor's tax liabilities in order to file a meaningful claim and precluded the court from determining legitimate preconfirmation disputes between the IRS and the debtor. In addition, the court found that the delay caused by Vines in failing to file the ordered returns resulted in unreasonable delay for all creditors which was specific cause for dismissal under Section 1307(c)(1) of the Bankruptcy Code.
The court further found that if the case were determined from the record, confirmation would not be possible due to the failure of the Plan to provide for payment of the IRS secured and priority claim. The court noted that this was a "classic repeat filing with no change in circumstances whatsoever." In addition, the Court found the merits of this case identical to Vines' earlier attempt to file bankruptcy in the Middle District of Florida. The same issues and disputes which caused that case to be dismissed were carried forward in this case. As the Bankruptcy Court noted, Vines had a good job, is obviously an intelligent hard-working person, and for him to have failed to take the steps necessary to prepare the file for confirmation is a "real tragedy." Given all the facts in this case, Judge Corcoran properly denied confirmation and dismissed the case with prejudice.
Vines does not clearly set forth the issues for appeal as they are buried in emotional ramblings; the issues presented for appeal as this Court sees them are:
Vines was ordered on at least three (3) occasions to file tax returns which he continually failed to do. The failure to comply with the court order entered in July 1995, requiring the filing of delinquent tax returns resulted in prejudicial delay to creditors as found by the Bankruptcy Court. Vines makes several arguments as to why he does not need to file tax returns, all of which are without merit.
Vines argues that there is no requirement to file tax returns and filing of such returns is purely voluntary. He argues that the Internal Revenue Code (IRC) does not require American citizens to file tax returns unless they have foreign income, or are subject to the social security administration. This argument is entirely meritless and is clearly contrary to established law. In addition to the legal requirement, the filing of taxes is also a necessary element for full disclosure in the bankruptcy court which is a court of equity.
Title 26 of the United States Code, Section 6012, the IRC requires that returns be made by every individual whose gross income is greater than or equal to the exemption amount. In addition, under Section 7203, failure to file a return constitutes a criminal offense.
As the Bankruptcy Court noted, the failure to file tax returns resulted in a prejudicial delay to creditors in bankruptcy proceedings because it precluded and denied the Internal Revenue Service the opportunity to make a reasoned determination with respect to the debtor's tax liabilities so that they could file a meaningful Proof of Claim. In addition, it precluded the Court from determining preconfirmation any legitimate dispute between the IRS and the debtor with respect to tax liability. This unreasonable delay was prejudicial to all creditors and was specific cause for dismissal under Section 1307(c)(1) of the Bankruptcy Code. It was the debtor's obligation to put the case in order for confirmation on the merits at the confirmation hearing, and as noted by the Bankruptcy Court, Vines failed to do so in this case.
Income tax returns are "quintessential documents `from which the debtor's financial condition or business transactions might be ascertained.'" In re Wolfson, 152 B.R. 830, 833 (S.D.N.Y.1993). Furthermore, tax returns are essential to orderly administration of debtors' estates because in absence of a return, trustees are asked to blindly accept the debtor's statements as contained in their schedules. In order for a debtor to be allowed the equitable remedy of bankruptcy, he or she must make full presentation of his or her financial affairs. Lubman v. Hall, 174 B.R. 210 (Bankr.E.D.Va.1994). Vines' adamant refusal to file income tax returns, in violation of his legal obligation to do so, only reinforces this Court's belief that he should not be permitted to take advantage of any presumption in favor of discharge without first providing a complete and accurate account of his financial affairs.
Vines argues that under 26 U.S.C. § 7206(1) (West 1989), the willful making or subscribing a return under penalty of perjury which the taxpayer "does not believe to be true and correct as to every material matter," constitutes a felony, and his fear of violating that statute explains his failure to file returns. This Court rejects this argument as it is clearly not the law. In this case, Vines has not offered any evidence that he is indigent and could not afford to seek assistance in preparing his returns if his financial situation was complex, nor that he was unable to take advantage of the free...
To continue reading
Request your trial