U.S. v. White

• Decision Date: 11 October 2006
• Docket Number: No. 05-15857.,05-15857.
• Citation: 466 F.3d 1241
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. James W. WHITE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

466 F.3d 1241

UNITED STATES of America, Plaintiff-Appellant, v. James W. WHITE, Defendant-Appellee.

No. 05-15857.

United States Court of Appeals, Eleventh Circuit.

October 11, 2006.

Carol A. Barthel, Thomas J. Clark, U.S. Dept. of Justice, Tax Div., Washington, DC, for U.S.

Shawn D. Scott, William Charles Buhay, Weinberg, Wheeler, Hudgins, Gunn & Dial, LLC, Atlanta, GA, for White.

Appeal from the United States District Court for the Northern District of Georgia.

Before ANDERSON, HULL and CUDAHY,^* Circuit Judges.

ANDERSON, Circuit Judge:

The United States appeals the invalidation of its assessment of a tax liability against James White following confirmation of White's Chapter 11 bankruptcy plan. We reverse and direct entry of summary judgment for the Government.

I. BACKGROUND

A. Facts

White was president and sole shareholder of WCC, Inc. On May 3, 1993, White filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. The bankruptcy court confirmed his reorganization plan on May 18, 1994. The plan provided that the title and ownership of the estate's assets would revest in White as of the "Effective Date," defined as "the date sixty (60) days following the date after which the Order of Confirmation is no longer subject to appeal and on which date no such appeal is pending," or July 17, 1994. The final decree was entered in White's Chapter 11 proceeding on December 12, 1994.

On July 4, 1994, the IRS assessed a liability in the total amount of $109,724.30 pursuant to I.R.C. § 6672 against White for willfully failing to pay the IRS the income and social security taxes required to be withheld from his employees' paychecks. The IRS later sued White for collection in the Northern District of Georgia.

On May 3, 2005, the district court entered judgment for White and the Government timely filed this appeal.

B. Statutory Framework

Before discussing the merits of the parties' arguments, it will be useful to outline statutory provisions which were in effect and governed the 1994 events in this case.¹ A debtor who has filed for Chapter 11 bankruptcy enjoys an automatic stay against actions to enforce, collect, assess or recover claims against the debtor or against property of the estate. 11 U.S.C. § 362(a). It is the law of this Circuit that "[a]ctions taken in violation of the automatic stay are void and without effect." Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.1982). Section 362(c)(1) provides that the stay of an act against the property of the estate continues until such property is no longer property of the estate. Section 362(c)(2) provides that the stay of any other act continues until the earliest of (A) the time the case is closed, (B) the time the case is dismissed, or (C) the time a discharge is granted.

This case involves the application of § 362(c)(2)(C) providing that the automatic stay is lifted at the time a discharge is granted.² The discharge of the debtor here was effected by confirmation of the plan pursuant to 11 U.S.C. § 1141(d)(1)(A). Section 1141(d)(1)(A) provides that except as otherwise provided in the plan, the confirmation of the plan discharges the debtor.³

II. DISCUSSION

We review a district court's grant of summary judgment de novo. Morris Communications Corp. v. PGA Tour, Inc., 364 F.3d 1288 (11th Cir.2004). The district court held that the IRS' assessment of White's tax liability was void because it was made while White enjoyed an automatic stay against collection of the tax.⁴ White makes basically three arguments in support of the district court's ruling: (A) that the district court correctly held that the confirmation of White's reorganization plan, although it discharged the debtor, had no effect on the automatic stay with respect to the tax because the tax was a non-dischargeable debt; (B) that the automatic stay remained in effect and the assessment was thus void because the effective date of the plan was delayed until after the assessment;⁵ and (C) that the district court correctly held alternatively that the assessment was an act against the property of the estate and thus the automatic stay continued until the property revested in the debtor which occurred upon the effective date of the plan (i.e., after the assessment), all of which meant that the automatic stay continued until after the assessment and thus the assessment was void. We address and reject each argument in turn, and reverse the district court.⁶

A. The District Court Erred in Holding that the Automatic Stay Against Collection of Non-dischargeable Debts is Not Terminated After a Grant of Discharge.

As noted above, the relevant statutory provisions provide that confirmation of the plan discharges the debtor,⁷ and that discharge of the debtor lifts the automatic stay.⁸ White argues, and the district court so held, that the confirmation of the plan in this case, and the consequent discharge of the debtor, had no effect at all with respect to the instant tax because the instant tax is a non-dischargeable debt. In other words, White argues that, although the debtor was discharged with respect to dischargeable debts, the discharge had no effect at all with respect to the instant non-dischargeable taxes. This position finds no support in the case law, and, indeed, is contrary to the law of this Circuit. It is generally recognized that once confirmation has been entered, and a discharge granted, holders of non-dischargeable debts can seek repayment from the debtor for the original amount. See In re Gurwitch, 794 F.2d 584, 585-86 (11th Cir. 1986) (allowing the IRS to seek collection of tax liabilities after confirmation of bankruptcy plan and before closure of the case); see also In re DePaolo, 45 F.3d 373, 375 (10th Cir.1995) ("The party to whom [a nondischargeable] debt is owed is entitled after confirmation to enforce his or her rights as they would exist outside of bankruptcy.") (internal citations omitted).

In addition, the rule suggested by the district court contradicts a plain reading of the relevant statutes. Section 1441 of the Bankruptcy Code states that "the confirmation of a plan ... discharges the debtor from any [dischargeable] debt" and it does not make the discharge contingent upon the types of debts the debtor owes. A debtor cannot receive different discharges for different types of debt but can be granted only a single discharge applicable to all debts. In re Cardillo, 172 B.R. 146, 151 (Bankr.N.D.Ga.1994). Confirmation of a bankruptcy plan grants the debtor a discharge that replaces the automatic stay with a permanent injunction pursuant to § 524 of the Bankruptcy Code.⁹ But that injunction prohibits collection only with respect to dischargeable debts and does not apply to nondischargeable debts. Thus, once a plan has been confirmed, holders of nondischargeable debts can generally pursue collection unless the plan has provided otherwise or unless the court otherwise orders.

B. The Plan Did Not Provide for the Effective Date to be the Date of Discharge.

The validity of the IRS' assessment depends upon whether a discharge was granted on the date of the plan's confirmation, May 18, 1994, which was prior to the date of assessment, July 4, 1994. The plan did not contain any provisions explicitly stating that the discharge would take place after confirmation, but the plan did say that it would take effect sixty days after the Order of Confirmation could no longer be appealed, i.e. July 17, 1994. Thus, we must determine whether a discharge was granted upon confirmation of the plan or upon the plan's effective date. We conclude that a plan's identification of a post-confirmation effective date is not sufficient to delay the grant of discharge.

We begin by noting that the statutory language does not explicitly refer to an effective date.¹⁰ It does, however, allow that confirmation of a plan need not grant the debtor a discharge if the plan provides otherwise. Thus, White can prevail only if the plan's stipulation of a post-confirmation effective date satisfies the "otherwise provided" condition. We hold that it does not.

First, we note that while the Bankruptcy Code makes numerous references to the effective date of the reorganization plan, it does not in the instant provision. If the plan could delay the grant of discharge merely by having a post-confirmation effective date, then Congress' statement that "the confirmation of a plan ... discharges the debtor from any debt ..." would be in error. The reason is that, under this interpretation of § 1141(d)(1), confirmation of a plan would discharge debts only when the plan takes effect upon confirmation. That is to say, the triggering event for discharge would not actually be the plan's confirmation but the plan's taking effect. Because of the Bankruptcy Code's numerous references to the reorganization plan's effective date elsewhere, we should assume that had Congress intended to condition discharges on a plan's taking effect, it would have done so explicitly. See, e.g., Nunnally v. Equifax Information Services, L.L.C., 451 F.3d 768, 774 (11th Cir. 2006) ("Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.") quoting Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 300, 78 L.Ed.2d 17 (1983). Thus, it would seem contrary to Congress' intent to hold that confirmation of the plan did not grant White a discharge.¹¹

Second, our interpretation of § 1141 is consistent with the policy aims behind the Bankruptcy Code's identification of taxes as nondischargeable debts. Nondischargeable debts are those types of debts, such as taxes or child support payments, that Congress thought important enough to be paid in full, even if doing so impeded the debtor's ability to make a fresh start. "It is apparent to us that Congress...