Matter of Florida Park Banks, Inc.
| Decision Date | 21 February 1990 |
| Docket Number | No. 86-00547-8B7,Adv. No. 88-0535.,86-00547-8B7 |
| Parties | In the Matter of FLORIDA PARK BANKS, INC., Debtor. FEDERAL DEPOSIT INSURANCE CORPORATION, As Receiver of Park Bank of Florida, Plaintiff, v. William BRANDT, As Trustee Defendant. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Robert A. Soriano, Tampa, Fla., for Federal Deposit Ins. Corp.
William Brandt, Trustee.
Robert Mellen, III, and Margaret W. Hull, Orlando, for defendant/trustee.
ORDER ON MOTION FOR SUMMARY JUDGMENT
THE MATTER under consideration in the above-captioned adversary proceeding is an action for declaratory judgment under Title 28 U.S.C. §§ 2201 and 2202 brought by the Plaintiff, Federal Deposit Insurance Corporation (FDIC) to determine whether income tax refunds due from the Internal Revenue Service (IRS) and the State of Florida are property of FDIC or property of the bankruptcy estate. On July 19, 1989, FDIC filed a Motion for Summary Judgment in this adversary proceeding. The Court heard FDIC's Motion for Summary Judgment and granted partial summary judgment as to the amounts FDIC and Defendant, William Brandt, as Trustee for the Debtor, Florida Park Banks, agreed as belonging to FDIC. The only remaining issue is whether FDIC, as successor to Park Bank,1 or the Trustee for Florida Park Banks is entitled to tax refunds resulting from a 1985 loss carryback.
The Debtor, a holding company, along with its wholly owned subsidiary, Park Bank, and other subsidiaries (collectively referred to as the consolidated group) filed a consolidated federal tax return for the 1985 tax year. The consolidated return showed a net operating loss of $18,787,833.00 which was comprised of the following losses2 incurred by members of the consolidated group:
Florida Park Banks
(Debtor) ($ 2,327,750)
Park Banks of Florida
(now FDIC) ( 13,898,589)
Park Capital Management
(Subsidiary of Park Bank) 8,904
Park Real Property
(Subsidiary of Park Bank) ( 2,564,658)
Park Financial
(Subsidiary of Park Bank) ( 5,740)
_____________
Total Net Operating Loss ($18,787,833)
The net operating loss was then carried back3 to tax years 1983, 1982, 1980, and 1979 and offset against the income of Park Bank for each of those years.4 This offset resulted in a refund of taxes, all of which had been previously paid by Park Bank.
FDIC, contends it is entitled to the entire refund of taxes. In support, it argues the refund is entirely the result of losses incurred in 1985 by Park Bank and its subsidiaries being offset against the income of Park Bank in the prior years. In addition, FDIC points out Park Bank alone had sufficient losses in 1985 to generate the entire tax refund and none of the Debtor's losses in 1985 were needed to offset income of Park Bank. FDIC further contends the filing of a consolidated federal tax return was an administrative convenience and in no way affected the allocation of a tax refund. FDIC denies that "policy statements" set out in the minutes of the board of directors' meetings of the Debtor and Park Bank constitute an agreement to allocate tax refunds.
FDIC supports its position by In re Bob Richards Chrysler-Plymouth Corp., 473 F.2d 262 (9th Cir.1973) cert. denied sub nom. Western Dealer Management, Inc. v. England, 412 U.S. 919, 93 S.Ct. 2735, 37 L.Ed.2d 145 (1973); and Jump v. Manchester Life and Casualty Managements, 438 F.Supp. 185 (E.D.Mo.1977), aff'd, 579 F.2d 449 (8th Cir.1978). In Bob Richards, the Court refused the parent corporation's contention it should be entitled to the tax refund resulting from the carryback of a net operating loss. The parent company paid no taxes nor incurred any losses during the years in question. The Court stated the parent corporation's receipt of the refund from the Government was only in its "capacity as an agent for the consolidated group" and held on the theory of "unjust enrichment" the parent corporation was not entitled to any of the refund.
In the Jump case, a subsidiary argued it should be entitled to the entire tax refund generated by the carryback of its losses against income of other members of the consolidated group. The Court held the subsidiary was entitled to only the part of the refund which represented unrecovered taxes previously paid by the subsidiary. Because both the losses of the subsidiary and the income of the other members in the consolidated group were necessary to generate a refund, absent an agreement otherwise, the subsidiary was entitled to a refund only of taxes it had previously paid.
William Brandt, as Trustee for the Debtor, contends the refund should be allocated between the Debtor and Park Bank in the same proportion as each entity's loss is compared to the total loss. Specifically, the Trustee takes the position Park Bank's (FDIC) portion should only be 87.61% of the refund because Park Bank's 1985 net operating loss of $16,460,083.00 represents 87.61% of the total loss of $18,787,833.00. The Trustee further argues the remaining 12.39% of the refund belongs to the bankruptcy estate5 because the Debtor's 1985 loss of $2,327,750.00 represents 12.39% of the total net operating loss for the consolidated group.
The basis for the Trustee's contention that the refund should be allocated in proportion to the losses is the existence of "policy statements" which appear in the minutes of the board of directors' meetings for both the Debtor and Park Bank. The Trustee relies on these "policy statements" as binding agreements between the Debtor and Park Bank as to the filing of consolidated returns and the allocating of refunds, if any, resulting from the consolidated returns.
The Trustee argues the board's resolution regarding the allocation of tax refunds should govern in this case. Since consolidated returns were filed in compliance with the board's resolution, then, according to the Trustee, compliance with the board's policies regarding the allocation of tax refunds should follow.
This Court is not convinced there is any binding agreement between the Debtor and Park Bank as to the allocation of taxes refunded due to the filing of a consolidated tax return. The filing of a consolidated tax return by affiliated corporations does not per se affect the entitlement of tax refunds between those corporations.6 The...
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