Matter of Cudaback, Bankruptcy No. BK81-213

• Decision Date: 08 September 1982
• Docket Number: Bankruptcy No. BK81-213,Adv. No. A81-161.
• Citation: 22 BR 914
• Parties: In the Matter of Barbara E. CUDABACK, Debtor. Barbara E. CUDABACK, Plaintiff, v. George LANGDALE and United States of America, Department of Treasury, Internal Revenue Service, Defendants.
• Court: U.S. Bankruptcy Court — District of Nebraska

22 B.R. 914 (1982)

In the Matter of Barbara E. CUDABACK, Debtor Barbara E. CUDABACK, Plaintiff, v. George LANGDALE and United States of America, Department of Treasury, Internal Revenue Service, Defendants.

Bankruptcy No. BK81-213, Adv. No. A81-161.

United States Bankruptcy Court, D. Nebraska.

September 8, 1982.

James A. Cada, Lincoln, Neb., for plaintiff.

Richard H. Gregory, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., and Sally R. Johnson, Asst. U.S. Atty., Lincoln, Neb., for defendants.

MEMORANDUM

DAVID L. CRAWFORD, Bankruptcy Judge.

Barbara E. Cudaback, the plaintiff and a debtor in a Chapter 13 debtor-relief proceeding, brought this adversary proceeding against the defendants for a determination that the defendants are in contempt of court for knowingly violating the automatic stay of 11 U.S.C. § 362 and for a determination that monies claimed by her in the amount of $438.73 be returned to her by the defendants.

The order on pretrial conference provides the following uncontroverted facts:

"1. On January 28, 1981, Revenue Officer George Langdale of the Internal Revenue Service served a Notice of Levy on Salary, Wages and Other Income on the Lincoln Telephone Company with respect to a tax debt in the amount of $24,881.05 owed to the United States by Barbara Cudaback.

"2. On February 2, 1981, Barbara Cudaback, through her attorney James Cada, filed a Petition in Bankruptcy under Chapter 13 of the Bankruptcy Reform Act of 1978.

"3. On February 5, 1981, Revenue Officer Langdale served a Release of Levy on the Lincoln Company. The release relieved the Company of any obligation to pay over to the United States any wages, salary or other income then owed or becoming payable to Barbara Cudaback after the effective date of the release which was February 2, 1981.

"4. On February 9, 1981, the Lincoln Telephone Company forwarded a check for $438.73 to the Internal Revenue Service. The check represented wages earned by Barbara Cudaback during the pay period from January 11 through 24, 1981, less wage withholdings and less an amount of wages exempt from levy by statute."

Following submission of the order on pretrial conference, the parties each filed a motion for summary judgment and the matter is now before me on those motions. The order on pretrial conference provides that the declaration of Robert Cockle, dated July 20, 1981, and the statement of Robert Cockle, dated July 17, 1981, could be admitted into evidence. A declaration of Robert Cockle is attached to the motion for summary judgment filed by the defendants. That declaration is dated July 20, 1981, and discloses the following facts:

"1. I have been employed as the payroll supervisor for the Lincoln Telephone & Telegraph Co. at all times relevant to these proceedings.

"2. On January 29, 1981, our office was served with an Internal Revenue Service Notice of Levy with respect to wages of Barbara E. Cudaback, one of the telephone company\'s employees.

"3. Shortly thereafter, our office received a telephone call from James Cada representing Ms. Cudaback. Mr. Cada indicated that Ms. Cudaback had filed bankruptcy on February 2, and that any wages she had earned should be sent to him rather than to the Internal Revenue Service.

"4. On February 6, our office received a release of the levy as to wages earned by Ms. Cudaback on or after February 2, when the bankruptcy petition was filed.

"5. After receiving the release, I contacted the Internal Revenue Service to ask for advice as to what the telephone company should do in light of the levy, the release, and the conflicting claims to the wages. I spoke with Revenue Officer George Langdale who indicated to me that the Internal Revenue Service only claimed wages earned prior to February 2 in light of the bankruptcy petition. He suggested that we send a check to the Internal Revenue Service for the wages earned prior to that date.

"6. On February 9, our office did in fact mail a check for $438.73 to the Internal Revenue Service for wages earned by Ms. Cudaback prior to February 2."

In addition, there is attached to the defendants' motion for summary judgment a declaration of George Langdale which discloses the following:

"1. I am employed as a Revenue Officer with the Internal Revenue Service in Lincoln, Nebraska. I have been a Revenue Officer since July, 1964, and have been assigned to work in Lincoln since February, 1967.

"2. In connection with my official duties, I was assigned to collect taxes, penalties, and interest owed to the United States by Barbara E. Cudaback. The taxes were social security (F.I.C.A.) taxes and income taxes withheld from wages of Ms. Cudaback\'s employees for the fourth quarter of 1978, all quarters of 1979, and the first three quarters of 1980. Also involved were unemployment taxes (F.U.T.A.) for 1979.

"3. In connection with collecting these taxes, I got in touch with Ms. Cudaback. However, no satisfactory progress toward paying the tax liability was made. Therefore, on December 11, 1980, I mailed to her a final notice that the taxes were due and that seizure of her assets would follow if payment was not made.

"4. In working on this case, I learned that Ms. Cudaback was employed by Lincoln Telephone & Telegraph Co. Therefore, on January 28, 1981, I telephoned Robert Cockle at Lincoln Telephone concerning a levy on Ms. Cudaback\'s wages. I was informed that Lincoln Telephone employees would be paid on Friday, January 30, with respect to wages earned from Sunday, January 11 through Saturday, January 24.

"5. In speaking with Mr. Cockle, I informed him that the Internal Revenue Service did not claim Ms. Cudaback\'s entire wages and that she was entitled to receive a portion of the wages she had earned. See 26 U.S.C., Section 6334(a)(9), (d).

"6. On January 28, 1981, the taxpayer owed the United States $24,881.05. I prepared a Notice of Levy on Wages, Salary, and Other Income showing her tax debts, and on the above date I served the levy on Lincoln Telephone. A copy of the levy is attached to my Declaration as Exhibit 1.

"7. On January 29, 1 received a call from Lincoln Telephone saying that Ms. Cudaback\'s net pay was $713.50, and that the company would cut new checks in light of the statutory exemption.

"8. On February 2, 1981, our office received a telephone call from James Cada, Ms. Cudaback\'s attorney. He left a message that his client had filed a petition under Chapter 13 of the Bankruptcy Reform Act of 1978.

"9. In view of the fact that Chapter 13 proceedings had been filed, I consulted with my Group Manager regarding the effect of bankruptcy proceedings on the Internal Revenue Service levy. I was told that the petition did not affect the levy as to pre-petition earnings. However, it did affect our rights as to post-petition wages. Therefore, I was instructed to release the levy as to all post-petition paychecks. On February 5, I prepared a Release of Levy as per these instructions, and I sent it to Lincoln Telephone. A copy of the Release is attached as Exhibit 2.

"10. After mailing the release, I received a telephone call from Robert Cockle. He asked me for advice as to what to do concerning the levy. He mentioned to me that Attorney Cada had called Lincoln Telephone and had indicated that all wage checks for Ms. Cudaback should be sent to him. I told him that the Government claimed a portion of the wages relating to the January 30 payday regardless of the petition, but that we made no claim to later paychecks. I also mentioned to him that there was a statute which would afford protection to the Telephone Company if it honored the levy, and that the language of the statute was provided on the reverse side of his copy of the levy. See 26 U.S.C., Section 6332(d).

"11. My statements to Mr. Cockle were offered in the spirit of advice. At no time did I demand payment from Lincoln Telephone. Nor did I at any time make any threat as to what would happen if the Telephone Company did not pay the money to the Internal Revenue Service.

"12. After my conversation with Mr. Cockle, I received on February 9 a check from Lincoln Telephone representing Ms. Cudaback\'s net

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