Matter of Hester, Bankruptcy No. 83-2444

• Decision Date: 16 September 1986
• Docket Number: Adv. No. 84-260.,Bankruptcy No. 83-2444
• Citation: 65 BR 542
• Parties: In the Matter of Walter L. HESTER, f/d/b/a Walter Hester Insurance Agency and Carol Hester, Debtor. George T. HADLEY, Trustee, Plaintiff, v. INTERNAL REVENUE SERVICE, Frederick Larry Linville, Mary Louis Linville and State Farm Insurance Company, Defendants.
• Court: U.S. Bankruptcy Court — Middle District of Florida

65 B.R. 542 (1986)

In the Matter of Walter L. HESTER, f/d/b/a Walter Hester Insurance Agency and Carol Hester, Debtor George T. HADLEY, Trustee, Plaintiff, v. INTERNAL REVENUE SERVICE, Frederick Larry Linville, Mary Louis Linville and State Farm Insurance Company, Defendants.

Bankruptcy No. 83-2444, Adv. No. 84-260.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

September 16, 1986.

Jary C. Nixon, Tampa, Fla., for plaintiff.

George T. Rita, Washington, D.C., for defendants.

ORDER ON MOTION FOR SUMMARY JUDGMENT

ALEXANDER L. PASKAY, Chief Judge.

THE MATTER under consideration in this Chapter 7 adversary proceeding is a Complaint for Turnover pursuant to 11 U.S.C. § 363, filed by George T. Hadley, Trustee of the Chapter 7 estate (Trustee). The Trustee and the Defendant, The United States of America, Internal Revenue Service (Government) have filed Cross-Motions for Summary Judgment, alleging that there are no genuine issues of material fact and that the issues may be decided as a matter of law. The underlying facts, as they appear from the record, are undisputed and are as follows:

Walter L. Hester (Debtor) is a former insurance agent who, prior to his retirement, sold insurance for State Farm Mutual Automobile Insurance Company (State Farm). Upon his retirement in May of 1980, the Debtor and State Farm entered into a "State Farm Agent's Agreement" which provided, inter alia, that the Debtor was to receive monthly termination in pay in varying amounts of approximately $800 for a period of 5 years. The termination pay was for commissions for general liability and life insurance policies previously sold by the Debtor which were still in effect. State Farm made these monthly payments to the Debtor until March of 1982, when Fredrick and Mary Linville (Linvilles) filed an attachment summons in the General District Court of Albemarle County, North Carolina, and attached the Debtor's interest to the extent of their claim against the Debtor. When the attachment was served on State Farm, State Farm froze the Debtor's account and held the termination pay in escrow until July 15, 1982 when pursuant to an agreement between the Debtor and the Linvilles, the Debtor authorized State Farm to turnover the termination pay checks to the Linvilles' attorney. The Linvilles' attorney, who had been given a limited power of attorney by the Debtor, endorsed the checks and paid out part of the proceeds to the Linvilles and part to the Debtor. Because of this arrangement, the attachment was dismissed in July, 1982.

In November, 1982, the Government filed a notice of levy against State Farm, levying against all right to property, money, and credits belonging to the Debtor and being held by State Farm. Because of the prior attachment and the current payment arrangement between the Debtor and the Linvilles, State Farm froze the Debtor's account and placed the accruing sums of money in escrow. On November 23, 1983, the Debtor filed his Petition in Bankruptcy in this Court.

In June of 1984, the Trustee filed this Complaint for Turnover and named as defendants the Government, the Linvilles, and State Farm. State Farm has not filed an answer to the Complaint and is currently in default. The Trustee represented to this Court that the controversy with the Linvilles has been compromised, so that the only parties at issue now are the Debtor and the Government.

The precise question that this Court must answer is whether the Government's notice of levy was sufficient to attach a tax lien on property the Debtor was to receive in the future. A federal tax lien gives the Internal Revenue Service no greater right to property than the taxpayer himself has at...