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6331 Bankruptcy page 5 | |
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Claude C. Lightfoot, Jr., Lilley & Lightfoot, P.C., 3500 N.
Causeway Blvd., Metairie, La., for debtors. John David Ziober,
Shockey & Ziober, P.C., 5551 Corporate Blvd., Baton Rouge, La.
70898-0286, for plaintiff. Claude C. Lightfoot, Jr., Lilley &
Lightfoot, P.C., 3500 N. Causeway, Metairie, La., John M.
Bilheimer, Department of Justice, Washington, D.C. 20530, for
defendants. MEMORANDUM OPINION BRAHNEY, This matter came before the court on a Motion to Dismiss Adversary
Proceeding or Alternatively for Adequate Protection filed by the
Department of Justice ("DOJ") on behalf of the Internal
Revenue Service (" On Hancock feared the On In response, the Debtors argue that despite the tax levy, they
still retained rights in the property and, therefore, the account
funds should be turned over to the estate. The Debtors also argue
that the funds are of great value in their efforts to reorganize.
Finally, the Debtors claim that the government should have moved
for adequate protection or to lift stay in the bankruptcy case
itself, so that the instant Motion is not properly before the
Court within this adversary proceeding. Property of the estate held by a third party must be turned over to
the trustee under the Bankruptcy Code. 11 U.S.C. §542(a). The
estate contains all legal or equitable interests of the debtor in
property as of the commencement of the bankruptcy case. 11 U.S.C.
§541(a)(1). The question, therefore, is whether the A question arises, however, as to whether the same result occurs
when the property in question is cash or an equivalent. The issue
has been considered by many courts, and two distinct lines of
analysis have evolved since the Whiting Pools decision. On
one side, courts have held that the residual property rights that
were retained in Whiting Pools are inapplicable to account
funds. Therefore, a debtor retains no interest in the property and
the This Court chooses to side with the latter line of cases. It does
not appear that all rights of the Debtors in these funds
have been lost as a result of the Third, the enforcement provisions of the Internal Revenue Code
"do not transfer ownership of the property to The Debtors, however, are not able to include these funds as
property of the estate without any further effort on their part. A
pre-petition tax levy does give the (1) requiring the trustee to make a cash payment or periodic cash
payments to such entity, to the extent that . . . use sale or
lease under section 363 of this title . . . results in a decrease
in the value of such entity's interest in such property; (2) providing to such entity an additional or replacement lien to
the extent that such stay, use, sale, lease, or grant results in a
decrease in the value of such entity's interest in such property;
or (3) granting such other relief, other than entitling such entity to
compensation allowable under section 503(b)(1) of this title as an
administrative expense, as will result in the realization by such
entity of the indubitable equivalent of such entity's interest in
such property. 11 U.S.C. §361. The Debtors apparently have been providing their other secured
creditors with monthly payments in order to protect their secured
interests. The This is an inaccurate statement of the procedures required for
adequate protection in a bankruptcy proceeding. The creditor is
not required to move for adequate protection at all. In actuality,
the debtor must offer some form of adequate protection if
required, to which the creditor may object and ask the court for a
determination of adequacy. The Bankruptcy Code does not state, nor
has this Court discovered a case that states, that a creditor is
required to move for adequate protection on his secured claim
within the main bankruptcy case if the debtor does not offer any.
The court may consider this issue at any stage of the bankruptcy
proceeding at which the creditor claims that it is a relevant
issue. Here, the Debtors are trying to retrieve the property held in trust
by the Bankruptcy Clerk and make it property of the estate under
Section 542. Presumably, they would then be able to petition the
Court to be allowed to use the collateral in the restructuring of
their business. The In their Motion to Dismiss or Alternatively for Adequate
Protection, the DOJ made two other arguments. They claimed that
the Debtors could not carry their burden to show that the tax
liens were an avoidable preference under 11 U.S.C. §547(c). They
also argued that some of the named defendants (the An appropriate order will be entered. [97-2 USTC ¶50,695] In re Quality Health Care, Debtor.
Gordon E. Gouveia, Trustee, Plaintiff v. Internal Revenue Service
of The United States of America, Defendant U.S. Bankruptcy Court, No. Dist. Ind., Hammond
Div. at Gary, 96-61064, [Code
Sec. 6871 ] LINDQUIST, Bankruptcy Judge: This Adversary Proceeding came before the Court on a Motion for
Summary Judgment filed by the Defendant, United States of America
(hereinafter: "U.S.A.") on behalf of its Agency, the
Internal Revenue Service, (hereinafter: " By Order of this Court dated A Response or Answer to said Motion for Summary Judgment was filed
by the Trustee on March 27, 1997. A Reply to said Answer was filed by the U.S.A., the movant, on
April 11, 1997. The Trustee's Complaint filed on September 25, 1996 alleges: 1. Debtor Quality Health Care, Inc., filed its
Petition for Relief under Chapter 7 of the United States
Bankruptcy Code on May 7, 1996. 2. The Plaintiff, Gordon E. Gouveia, was
appointed trustee in the above-entitled action and duly qualified
as such on May 7, 1996. 3. That at the time of the filing of the
aforesaid bankruptcy proceeding, the Debtor possessed monies in a
checking account held with the Calumet National Bank under Account
No. 098-161-1. 4. That the Defendant caused a Notice of Levy to
be sent to the Calumet National Bank on 5. That the Defendant seized the Debtor's funds
in the aforesaid checking account on May 23, 1996, in the amount
of $1,928.01. 6. The funds seized by the Defendant were
property of the estate pursuant to 11 U.S.C. Section 541(a)(1),
and the action taken by the Defendant occurred post-petition, when
the automatic stay was in effect. 7. On August 13, 1996, Plaintiff made a written
demand on the Defendant requiring turnover of the aforesaid
property. That a copy of Plaintiff's correspondence dated August
13, 1996, is attached hereto and made a part hereof as Exhibit
"B". 8. The Defendant has failed and refused to
deliver the aforesaid property of the estate to the Plaintiff and
wrongfully retains possession thereof without right. The Trustee prayed that the Court enter an Order
requiring the U.S.A. to turn over the estate property seized
"post-petition", for attorneys fees, costs and other
just relief. The U.S.A. filed an Answer on November 1, 1997, which alleges, in
part, as follows: 3. The United States admits that at the time of
the filing of the bankruptcy petition, funds were being held in a
checking account at Calumet National Bank under the name of the
Debtor. The United States lacks sufficient knowledge or
information to form an opinion regarding the truth of the
remaining allegations contained in paragraph 3. 4. The United States admits that the Internal
Revenue Service served a Notice of Levy upon Calumet National
Bank, however, the United States further avers that the Notice of
Levy was served upon Calumet National Bank on April 30, 1996. The
United States denies the remaining allegations of paragraph 4. 5. The United States denied the allegations
contained in paragraph 5 and further avers that, on May 23, 1996,
the balance of the checking account of Quality Health Care, Inc.
in the amount of $ 1,903.01, held at Calumet National Bank was
turned over to the United States by the Bank. 6. To the extent the allegations contained in
this paragraph require a legal analysis and seek a legal
conclusion, no response is necessary. The United States denies the
remaining allegations contained in paragraph 6. 7. The United States admits that Plaintiff made a
written demand upon the Internal Revenue Service for turnover of
the funds received by the Internal Revenue Service on May 23,
1996, from the Calumet National Bank account on or about August
13, 1996. The United States further admits that a copy of a
portion of Plaintiff's written demand is attached to the adversary
complaint at Exhibit B. 8. The United States admits that the Internal
Revenue Service has refused to deliver the funds sent by Calumet
National Bank to the Trustee. The United States denies the
remaining allegations of paragraph 8. The Answer also sets out the following
Affirmative Defenses: 1. The Court lacks jurisdiction over the United
States because the United States was not properly served with the
adversary complaint. 2 2. The Internal Revenue Service is not an
appropriate party to this action. The only appropriate party is
the United States of America. 3 3. The adversary complaint fails to state a claim
upon which relief can be granted. 4. The Plaintiff is not entitled to turnover of
the funds because he has not identified the use for which the
funds will be put. 5. The Plaintiff has not established that he can
provide adequate protection for the funds for which he seeks
turnover. 4 II No objections were made by the parties to the subject-matter
jurisdiction of this Court, and the Court concludes that it has
subject matter jurisdiction over this Proceeding pursuant to 28
U.S.C. §1334(b), and that this Adversary Proceeding is a core
proceeding pursuant to 28 U.S.C. §157(b)(2)(E). In addition,
notwithstanding the fact that, in its Answer as an affirmative
defense, the U.S.A. alleges that this court is without in personam
jurisdiction based on the alleged improper service of the
Complaint by the Trustee upon it, the Court concludes that it has
in personam jurisdiction over the U.S.A. as service of the
Complaint and Summons upon the U.S.A. appears to fully comport
with the requirements of Fed. R. Bk. P. 7004(b)(4) and (5), and
was not raised by the U.S.A. in its Motion for Summary judgment.
However, as observed in footnote 2, the U.S.A. is correct as to
its Second Affirmative Defense as the Internal Revenue Service is
not a proper party defendant. Nevertheless, the U.S.A. did not
address this issue in its Motion for Summary judgment, and
proceeded to argue the case on the merits. As a condition of any
final order entered in this Adversary Proceeding, the Trustee will
be required to amend his Complaint to name the USA as the proper
party defendant. B Under Rule 56(c) Fed. R. Civ. P., as made applicable by Fed. R. Bk.
P. 7056, summary judgment is proper if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law. Celotex Corp. v. Catrett, 477
U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 65 (1986); Anderson
v. Liberty Lobby Inc., 477 U.S. 242, 247, 106 S. Ct. 2505,
2509-10, 91 L. Ed. 2d 202 (1986); Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U. S. 574, 585-86, 106 S. Ct. 1348,
1355, 89 L. Ed. 2d 538 (1986). The inquiry that the court must
make is whether the evidence presents a sufficient disagreement to
require trial or whether one party must prevail as a matter of
law. Anderson, 477 U.S. at 251-252, 106 S. Ct. at 2511-12. The moving party bears the burden of showing that there is an
absence of evidence to support the nonmovant's case. Celotex
Corp. v. Catrett, 106 S. Ct. at 2554, supra. Stated
differently, the moving party, in making a motion for summary
judgment, "has the burden of establishing the lack of a
genuine issue of material fact." Big O Tire Dealers, Inc.
v. Big O Warehouse, 741 F.2d 160, 163 (7th Cir. 1984); Korf
v. Ball State University, 726 F.2d 1222, 1226 (7th Cir. 1984). Federal Rule of Civil Procedure 56(e) provides in part as follows: When a motion for summary judgment is made and
supported as provided in this rule, an adverse party may not rest
upon the mere allegations or denials of the adverse party's
pleading, but the adverse party's response, by affidavits or as
otherwise provided in this rule, must set forth specific facts
showing that there is a genuine issue for trial. If the adverse
party does not so respond, summary judgment, if appropriate, shall
be entered against the adverse party. When a motion for summary judgment is made and supported by the
movant, Fed. R. Civ. P. 56(e) requires the non-moving party to set
forth specific facts demonstrate that genuine issues of fact
remain for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 106 S. Ct. at 1355, supra. Accordingly,
once a moving party has met its initial burden, the opposing party
must "set forth specific facts showing that there is a
genuine issue for trial" and that the disputed fact is
material. Posey v. Skyline Corp., 702 F.2d 102, 05 (7th
Cir. 1983), cert. den., 464 U.S. 960, 104 S. Ct. 392, 78 L.
Ed. 2d 336 (1983). Thus, if the movant carries his initial burden,
the opposing party may not defeat the motion by merely relying on
the allegations or denials in its pleadings. Rather, its response
must set forth in the required filings specific facts showing that
there is a genuine issue for trial. Celotex, 477 U.S. at
324, 106 S. Ct. at 2553; Anderson, 477 U.S. at 248, 106 S.
Ct. at 2510; Matsushita, 475 U.S. at 587, 106 S. Ct. at
1356. See also, First National Bank v. Cities Service Co.,
391 U.S. 253, 289-90, 88 S. Ct. 1575, 1593, 20 L. Ed. 2d If the non-movant does not come forward with evidence that would
reasonably permit the finder of fact to find in the non-movant's
favor on a material question, then the Court must enter Summary
Judgment against the non-movant. Waldridge v. American Holchst
Corp., 24 F.3d 918, 920 (7th Cir. 1994). The burden on the
non-movant is not onerous. Id., 24 F.3d at 920. The non-movant
need not tender evidence in a form that could be admissible at
trial. Id., 24 F.3d at 921. Of course, the evidence set
forth must be of a kind admissible at trial. Id., 24 F.3d
at 921, n. 2. Moreover, the non-movant need not match the movant
witness for witness, nor persuade the Court that the non-movant's
case is convincing, the non-movant need only come forward with
appropriate evidence demonstrating there is a pending dispute of
material fact Id., 24 F.3d at 921 (Collecting cases). C The ultimate burden of proof at the trial of this Adversary
Proceeding is or the Trustee who is the Nonmovant. Hunter v.
Patton (In re Patton), 200 B.R. 172, 174 (Bankr. N.D.
Ohio 1996) (Trustee bears the burden of proof on a complaint for
turnover). In re Amco Products, Inc., 50 B.R. 723, 725 (W.D.
Mo. 1983); Yaquinto v. Greer 81 B.R. 870, 878 (N.D. Texas
1988); In re Galster, 38 B.R. 72, 75 (Bankr. W.D. Mo.
1984). As to the standard of proof, it should be noted that the
Supreme Court in the case of Anderson, et. al. v. Liberty
Lobby, Inc. and Willis A. Carto, 477 U.S. 242, 106 S. Ct.
2505, 91 L. Ed. 2d 202 (1986) held that in determining whether a
factual dispute exists on a motion for summary judgment, the court
must be guided by the substantive evidentiary standards of the
case that are applicable at trial, and thus in ruling on a motion
for summary judgment the Supreme Court held that the court must
apply the clear and convincing standard in a case where the actual
malice rule applied, as this was thus the standard of proof for
such a claim. Here the standard of proof at trial as to the Trustee as the
Nonmovant is by the preponderance-of-the-evidence. Hunter v.
Patton (In re Patton), 200 B.R. at 174-75, supra.
In Hunter, the court distinguished Oriel v. Russell,
278 U.S. 358, 362, 49 S. Ct. 173, 174, 73 L. Ed. 419 (1929), which
held that the clear and convincing evidence standard applied under
the bankruptcy act of 1898 in a case for the turnover of assets,
by reasoning: (1) that a turnover proceeding is not an action for
fraud; (2) referring to the holding in Grogann v. Gardner,
498 U.S. 279, 286, 111 S. Ct. 654, 659, 112 L. Ed. 2d 755 (1991),
1 that the preponderance of evidence standard generally applies in
civil actions between private litigants; and, (3) noting that a
turnover proceeding under §542(a) does not imply coercive methods
or imprisonment. Hunter, 200 B.R. at 174-75. Thus, the
court must apply the preponderance-of-the-evidence standard of
proof to the Trustee in this Adversary Proceeding in testing the
sufficiency of the Motion for Summary Judgment by the U.S.A. 5 D Federal Rule of Civil Procedure 56(c) provides as follows: (c) Motion and Proceedings Thereon. The motion shall be served at
least 10 days before the time fixed for the hearing. The adverse
party prior to the day of hearing may serve opposing affidavits.
The judgment sought shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law. A summary judgment,
interlocutory in character may be rendered on the issue of
liability alone although there is a genuine issue as to the amount
of damages. (Emphasis added). The court has reviewed the following materials that have been filed
of record to determine if they may be properly considered in
ruling on the Motion for Summary judgment by the U.S.A. 1. The Trustee's Complaint and attached Exhibit "A"
(Notice of Levy by Lake County Sheriff on behalf of the Indiana
Dept. of Treasury to Calumet National Bank, dated 2. The U.S.A.'s Answer and Affirmative Defenses to the Trustee's
Complaint filed on 3. The U.S.A.'s Motion for Summary Judgment, which included a
Statement of Material Facts with Supporting Materials and Brief
filed on Attached to the USA's Statement of Material Fact as Exhibit
"1" is a Notice of Levy by the 4. The Response by the Trustee to the U.S.A.'s Motion for Summary
Judgment and Brief filed on 5. The U.S.A.'s Reply Brief in support of its Motion for Summary
Judgment filed on STATEMENT OF MATERIAL FACTS FILED BY U.S.A. Local Bankruptcy Rule B-756, Motions for Summary Judgment, states
as follow: In addition to complying with the requirements of
N.D. Ind. L.B.R. B-707.1, all motions for summary judgment shall
be accompanied by a "Statement of Material Facts" which
shall either be filed separately or as part of the movant's
initial brief. The "Statement of Material Facts" shall
identify those facts as to which the moving party contends there
is no genuine issue and shall be supported by appropriate
citations to discovery responses, depositions, affidavits, and
other admissible evidence. Any party opposing the motion shall,
within thirty (30) days of the date the motion is served upon it,
serve and file a "Statement of Genuine Issues" setting
forth all material facts as to which it is contended there exists
a genuine issue, supported with appropriate citations to discovery
responses, affidavits, depositions or other admissible evidence,
together with any affidavits or other documentary material
controverting the movant's position. The "Statement of
Genuine Issues" may either be filed separately or as part of
the responsive brief. In determining the motion for summary
judgment, the court will assume that the facts as claimed and
supported by admissible evidence by the moving party are admitted
to exist without controversy, except to the extent that such facts
are controverted in the "Statement of Genuine Issues"
filed in opposition to the motion, as supported by the
depositions, discovery responses, affidavits and other admissible
evidence on file. 7 Pursuant to Local Rules, if a summary judgment respondent fails to
file a timely statement of disputed material facts, uncontroverted
statements in the moving party's statement in support of summary
judgment are deemed admitted. Gianopolous v. Brach & Brock
109 F.3d 406, 412 (7th Cir. 1997) (collecting cases); Wienco v.
Katahn Associates, Inc., 965 F.2d 565, 567 (7th Cir. 1992); Schulz
v. Serfilco, Ltd., 965 F.2d 516, 518-19 (7th Cir. 1992).
However, the party opposing summary judgment is deemed to have
admitted through failure to controvert, only those facts as set
forth in the moving party's statement. Wolf v. Buss America
Inc., 77 F.3d 914, 922 (7th Cir. 1996). The U.S.A. on On The Notice of Levy by the The Internal Revenue Code provides that there is a lien for the amount that is owed. Although we have given the notice and demand required by the Code, the amount has not been paid. This levy requires you to turn over to us this person's |