Opinion
No. 7-01-10779 SA, Adv. No. 03-1122 M
December 23, 2003
MEMORANDUM OPINION
THIS MATTER is before the Court on the New Mexico Taxation and Revenue Department's (the "Department") Motion for Summary Judgment filed on July 9, 2003 by and through Patricia A.
Madrid, Attorney General (James C. Jacobsen, Assistant Attorney General) (the "Motion for Summary Judgment"). Plaintiff, Yvette Gonzales, Trustee of the Debtor ("Trustee") filed a Complaint to Avoid Preferential Transfers against the Department and a First Amended Complaint To Avoid Preferential Transfers (collectively, the "Complaint") on February 7, 2003 . The Trustee, Yvette Gonzales, filed a Response and Opposition to Defendant's Motion For Summary Judgment (the " Response"), on August 25, 2003 by and through her attorney, Paul D. Barber. The Department then filed a Reply Memorandum. The Department seeks summary judgment dismissing the Complaint arguing that this Court has no jurisdiction over it in this proceeding because the Department is an arm of the state and immune from suit to recover preferential transfers. If it is determined that the Department is subject to this Court's jurisdiction, the Department argues that the payments at issue were not made on account of antecedent debts as required by 11 U.S.C. § 547(a)(4) or, in the alternative, were not preferences because the payments were made in the ordinary course of business, and therefore, are not avoidable preferences under 11 U.S.C. § 547(c)(2). After reviewing the motions and memoranda, considering the applicable code sections and relevant case law, and being otherwise informed, the Court finds the undisputed material facts as follows:
UNDISPUTED MATERIAL FACTS
1. This bankruptcy was filed on February 8, 2001 under Chapter 11 of the Bankruptcy Code. The case converted to Chapter 7 on December 19, 2001.
2. Furr's operated a chain of grocery stores in New Mexico and Texas. In connection with its business operations, Furr's was obligated to report and pay on a monthly basis New Mexico state taxes, including Gross Receipts Tax, Compensating Tax, Cigarette Tax and Employee Withholding Tax. See NMSA §§ 7-1-1, et seq, 7-3-1, et seq., and 7-9-1, et seq. (2001 Repl. Pamp.).
3. Gross Receipts Tax, Compensating Tax, and Employee Withholding Tax are delineated by the Department as "CRS Liabilities," and are reported on the "CRS-1" form. See N.M. Admin. Code § 3.1.4.7 (hereinafter referred to as "CRS Taxes"). Monthly CRS Tax reports and payments are due on the 25th of the month following the month in which a taxable event occurs. § 7-9-11 NMSA (2001 Repl. Pamp.). However if the 25th falls on a weekend or holiday, the report is due, and the tax is last payable without penalty, on the first business day thereafter. N.M. Admin. Code § 3.4.1.10.
The taxable event for computing gross receipts tax is the receipt of money from the sale or lease of property in New Mexico. The taxable event for computing compensating taxes is the use, consumption or storage of property in the ordinary course of business. See generally, § 7-9-3 NMSA (2001 Repl. Pamp.).
4. By letter dated October 2, 1992, Furr's was given permission to account for the monthly amount of CRS Taxes owed under a fiscal accounting system, consisting of 13 four-week periods. See Affidavit of Angela Camp, Tax Examiner for the Department (the "Camp Affidavit") at ¶ 9; and Letter from David M. Fergeson, Assistant Director of Audit and Compliance Division of the Department (here in after referred to as "the 1992 Letter Agreement"). The four-week periods will be referred to as "Fiscal Months."
5. The Trustee seeks to recover all or part of the last three payments made by the Debtor for CRS Taxes before filing bankruptcy as follows:
November 27, 2000 $4,159,824.63
December 26, 2000 $2,101,896.91
January 25, 2001 $2,107,168.80
6. During the ninety day period before the bankruptcy, the Department and Furr's were acting under the provisions of the 1992 Letter Agreement.
7. Furr's was licensed to sell cigarettes as part of its retail business. Affidavit of Stephanie Dennis, Tax Compliance Specialist for the Department, attached to Department's Motion for Summary Judgment (hereinafter, the "Dennis Affidavit") at ¶ 7. New Mexico imposes an excise tax on each cigarette sold, given or consumed in the state. § 7-12-3 NMSA (2001 Repl. Pamp.) (hereinafter, the "Cigarette Tax").
8. The Department collects the Cigarette Tax by selling stamps to cigarette vendors and requiring vendors to affix a stamp to each package of cigarettes in its inventory. § 7-12-5 NMSA (2001 Repl. Pamp.).
9. The Department gives each cigarette vendor an invoice for the Cigarette Taxes that are due when the Cigarette Tax Stamps are received by the vendor. Payment for the tax stamps is due on or before the twenty-fifth day of the month following the month in which the Department sells and invoices the stamps to the vendor. § 7-12-7(C) NMSA (2001 Repl. Pamp.); Dennis Affidavit at ¶ 6.
10. Furr's was required to post a bond to ensure payment of Cigarette Taxes. § 7-1-54 NMSA (2001 Repl. Pamp.); Dennis Affidavit at ¶ 8. Furr's Cigarette Tax obligation was bonded by Zurich American Insurance Company. Dennis Affidavit at ¶ 9.
11. The Trustee states that Furr's made the following payments for Cigarette Taxes during the ninety days before bankruptcy:
Date of Invoice Date of Payment Check No. Amount of Payment 10/23/00 11/17/00 25130099 $18,240.90 11/17/00 11/21/00 25130515 $ 58.82 11/08/00 12/01/00 25132073 $18,144.00 11/15/00 12/08/00 25133075 $12,111.00 11/01/00 12/15/00 25134454 $ 40.01 11/28/00 12/15/00 25134454 $20,166.30 12/20/00 01/12/01 25138342 $18,222.00 12/11/00 01/09/01 25137690 $18,144.00 01/15/01 01/16/01 25138739 $ 33.63 Exhibit A to Amended Complaint.12. The payment of $18,144.00 made on January 9, 2001 was made by the Zurich American Insurance Company after the Department made a claim on Furr's cigarette bond. Dennis Affidavit at ¶ 12.
CONCLUSIONS OF LAW
Summary judgment shall be entered 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. Fed.R.Bankr.Proc. 7056(c). In determining whether summary judgment should be granted, the Court will view the record in the light most favorable to the party opposing summary judgment. In re Steele 292 B.R. 422, 426 (Bankr. D. Colo. 2003 ) (citing In re Harris, 209 B.R. 990, 995 (10th Cir. BAP 1997)).
I. Sovereign Immunity Defense
As a threshold matter, the Court must address the Department's jurisdictional argument that it is immune from suits under the Eleventh Amendment to the U.S. Constitution. The Department argues that as a state agency, it can assert sovereign immunity against the Trustee's action to recover preferential transfers. The Department argues that even though Congress abrogated sovereign immunity in § 106(a) of the Code, this abrogation is considered by many courts to be unconstitutional. See Straight v. Wyoming Dept. of Transportation (In re Straight), 248 B.R. 403, 416 (10th Cir. BAP 2000) (concluding that Congress' Article I power does not include the power to abrogate sovereign immunity). This conclusion is based on the Supreme Court's opinion in Seminole Tribe v. Florida, 517 U.S. 44, 55, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996) and its progeny. In Seminole Tribe the Supreme Court held that the Indian Commerce Clause, which authorizes Congress to "regulate Commerce . . . with the Indian Tribes," U.S. Const., Art. I, § 8, does not grant Congress the power to abrogate the sovereign immunity of Indian tribes. Many Federal Circuit Courts of Appeal, including the Tenth Circuit Bankruptcy Appellate Panel, have concluded that under the holding in Seminole Tribe, Congress may not validly abrogate state sovereign immunity using any of its Article I powers. According to these courts, because Congress' power to "establish . . . uniform Laws on the subject of Bankruptcies . . ." U.S. Const. Art. I, § 8, cl. 4, also stems from Article I of the Constitution, Congress does not have the power to abrogate state sovereign immunity in bankruptcy. See e. g. Nelson v. La Crosse County Dist. Attorney (In re Nelson), 301 F.3d 820, 832 (7th Cir. 2002); Mitchell v. Franchise Tax Bd. (In re Mitchell), 209 F.3d 1111, 1121 (9th Cir. 2000); Sacred Heart Hosp. of Norristown v. Pennsylvania (In re Sacred Heart Hosp. of Norristown), 133 F.3d 237, 243 (3rd Cir. 1998); Fernandez v. PNL Asset Mgmt. Co. LLC (In re Fernandez), 123 F.3d 241, 245 (5th Cir.), amended by 130 F.3d 1138, 1139 (5th Cir. 1997); Schlossberg v. Maryland (In re Creative Goldsmiths of Washington, D.C.) 119 F.3d 1140, 1145-46 (4th Cir. 1997), cert. denied, 523 U.S. 1075, 118 S.Ct. 1517, 140 L.Ed.2d 670 (1998); Straight 248 B.R. at 416 (10th Cir. BAP 2000) (all concluding that Article I does not give Congress power to abrogate sovereign immunity in the bankruptcy context). Following this line of cases, the Department argues that summary judgment should be granted dismissing this proceeding because it is immune from suit in bankruptcy court and that immunity has not been validly abrogated.
Section 106(a) states in pertinent part:
(a) Notwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to the following:
(1) [Section] . . . 547 of this title.
In contrast to the other Circuit opinions, the Sixth Circuit in Hood v. Tennessee Student Assistance Corp. (In re Hood), 319 F.3d 755 (6th Cir. 2003) concluded that § 106(a) was a valid abrogation of state sovereign immunity based on the Constitution's uniformity requirement in Article 1 § 8. Id. at 762, cert. granted, 124 S.Ct. 45, 71 USLW 3724 (Sept. 30, 2003 ). See also, Mayes v. Cherokee Nation (In re Mayes), 294 B.R. 145, 161 (10th Cir. BAP 2003 )(McFeeley, C.J., dissenting) (agreeing with the Sixth Circuit's conclusion in Hood that Congress validly abrogated sovereign immunity under § 106(a)); and Flores v. Ill. Dept. of Public Health (In re Flores), 300 B.R. 599, 609 (Bankr. D. Vt. 2003) (agreeing with Hood and finding that Congress' abrogation of sovereign immunity was "effected within its constitutionally granted powers under the Bankruptcy Clause of the Constitution."). The U.S. Supreme Court is set to address this issue in its review of Hood. Hopefully, the Supreme Court will uphold § 106(a) as a valid use of Congress' mandate under the Bankruptcy Clause to provide a single federal forum to ensure uniform procedural treatment of every type of claimant in bankruptcy. Mayes, 294 B.R. at 162 (McFeeley, C.J., dissenting) (noting that allowing states to assert immunity in bankruptcy defeats the very purpose of uniform bankruptcy law, the avoidance of preferences among creditors). While the Court feels bound to follow Straight, it notes what strange and inconsistent results are the offspring of such a holding. However, in this case, whether § 106(a) is a constitutional abrogation of sovereign immunity is not determinative of whether the Department can be sued in this adversary proceeding.
II. Waiver of Sovereign Immunity
The Trustee argues that the Department has waived immunity in this case by filing a proof of claim for unpaid taxes in the bankruptcy case. The Code provision on waiver of sovereign immunity states:
The Department filed a proof of claim for pre-petition Gross Receipts and Compensating Taxes for the January 2001 reporting period in the amount of $1,767,851. 02, and for the period of January 1, 1996 through March 31, 1999, in the assessed amount of $1,310, 246.31.
A governmental unit that has filed a proof of claim in the case is deemed to have waived sovereign immunity with respect to a claim against such governmental unit that is property of the estate and arose out of the same transaction or occurrence out of which the claim of such governmental unit arose.
It is undisputed that this preference action is "a claim against a governmental unit that is property of the estate." Id. See U.S. v. Pullman Construction Industries, Inc., 153 B.R. 539, 541 (N.D. Ill. 1993) (finding Debtor's preference claim for pre-petition tax payments was property of the estate). However the Department disputes the Trustee's assertion that the claims filed by the Department are sufficiently related to the preference action to constitute a waiver of its sovereign immunity under § 106(b).
The test for waiver under § 106(b) is the same as the test for compulsory counterclaims under Federal Rule of Civil Procedure 13.
To determine whether the trustee's claims against a governmental unit arise out of the same transaction or occurrence as the claims filed by the governmental unit, courts apply the logical relationship test of Fed.R.Civ.P. 13(a). . . . A logical relationship exists "when the counterclaim arises from the same aggregate set of operative facts as the initial claim, in that the same operative facts serve as the basis of both claims. . . .
Warfield v. The Navajo Nation (In re Davis Chevrolet, Inc.), 282 B.R. 674, 678 (Bankr. D. Ariz. 2002), quoting, Schulman v. State of California (In re Lazar), 237 F.3d 967, 979 (9th Cir. 2001), cert. denied, 534 U.S. 992, 122 S.Ct. 458, 151 L.Ed.2d 377 (2001). Here, the preference action is based on tax payments made by Furr's, and the Department's claim is for unpaid pre-petition taxes. Moreover, a portion of both the Department's and the Trustee's claims are for CRS Taxes. Clearly there is a logical relationship between the claim and the preference action because both involve Furr's pre-petition tax liability imposed on the privilege of doing business in New Mexico. Consequently, the Court holds that the Department has waived its immunity for purposes of adjudicating this preference action and is, therefore, subject to this Court's jurisdiction. See Pullman Construction Industries, Inc., 153 B.R. at 541-42 (finding that United States waived its immunity with regard to preference claim for pre-petition tax payments made to cover shortfall in non trust fund tax payments when it filed a proof of claim for unpaid pre-petition and post-petition taxes).
III. Preference Action
A. CRS Taxes
Having determined that the Department is subject to the Court's jurisdiction, the Court will address the substantive portion of the Complaint. Section 547 provides as follows:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property —
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition if such creditor at the time of such transfer was an insider; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
(5) that enables such creditor to receive more than such creditor would receive if —
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547(b) (emphasis added).
The Trustee bears the burden to establish all of the elements of a preference by a preponderance of the evidence. 11 U.S.C. § 547(g); see U.S. v. Pullman Construction Industries, Inc., 210 B.R. 302, 306 (N.D. Ill. 1997).
The Department argues that as a matter of law the CRS Tax payments at issue were not "on account of an antecedent debt" and therefore, are not preferences. With respect to taxes, the Code provides that "a debt for a tax is incurred when such tax is last payable without penalty, including any extension." 11 U.S.C. § 547(a)(4). Based on this section, if each CRS Tax payment was made on or before the date when last payable without penalty, then each was paid when incurred, and not on account of an antecedent debt. It is the Department's contention that all three of the CRS Tax payments at issue were made on time, that is, on the date when each payment was due without penalty.
The Trustee claims that the Department cannot obtain summary judgment as to a portion of the payments because fact issues exists as to when each CRS Tax payment was legally due. Specifically, the Trustee claims that Furr's paid a portion of the November 27, 2000 payment and all of the January 25, 2001 payment after they were last payable without penalty; therefore, those payments were made on account antecedent debts.
The Trustee argues that the arrangement set forth in the 1992 Letter Agreement allowing Furr's to use Fiscal Months to calculate its monthly tax debt, yet allowing Furr's to pay according to the calendar month system was an illegal arrangement under New Mexico tax law. The 1992 Letter Agreement outlines each Fiscal Month that Furr's was allowed to use in calculating its CRS tax liability, and also lists the due dates for 12 monthly payments on the 25th day of the calendar month following each of the Fiscal Months. In the 1992 Letter Agreement, the Department instructed Furr's to enter calendar months on each of its CRS-1 forms as the reporting period to coincide with the Department's computerized calendar month reporting system. The 1992 Letter Agreement outlines Furr's 1992 CRS tax payment structure as follows: Fiscal Accounting Period Tax Period Reported Filing Due Date
1. 01/25/92 — 02/22/92 02/01/92 — 02/29/92 Mar. 25, 1992 2. 02/23/92 — 03/21/92 03/01/92 — 03/31/92 Apr. 25, 1992 3. 03/22/92 — 04/10/92 04/01/92 — 04/30/92 May 25, 1992 4. 04/11/92 — 05/16/92 05/01/92 — 05/31/92 June 25, 1992 5. 05/17/92 — 06/13/92 06/01/92 — 06/30/92 July 25, 1992 6. 06/14/92 — 07/11/92 07/01/92 — 07/31/92 Aug. 25, 1992 7. 07/12/92 — 08/08/92 08/01/92 — 08/31/92 Sept. 25, 1992 8. 08/09/92 — 09/05/92 09/01/92 — 09/30/92 Oct. 25, 1992 9. 09/06/92 — 10/03/92 10/01/92 — 10/31/92 Nov. 25, 1992 10. 10/04/92 — 10/31/92 10/01/92 — 10/31/92 Nov. 25, 1992 11. 11/01/92 — 11/28/92 11/01/92 — 11/30/92 Dec. 25, 1992 12. 11/29/92 — 01/02/93 12. 12/01/92 — 12/31/92 Jan. 25, 1993 As illustrated above, the first column lists the actual period from which Furr's was to calculate its monthly CRS Tax payment. The second column is the fictitious calendar month period that Furr's was instructed to use on its report to coincide with the Department's computer system. The third column lists the due dates for payments of CRS Taxes. As stated by Lisa Flores, Furr's tax manager, this Fiscal Month system of accounting allowed Furrs to postpone payment of taxes for a number of days each calendar month until later in the year (i. e. November 25) when a larger " catch-up" payment was made. Flores Affidavit ¶ 5.The Trustee argues that the Department's employees had no authority to allow Furr's to account for taxes based on Fiscal Months while determining the payment due date on a calendar month basis.
The Trustee cites NMSA § 7-9-11 as the basis for this conclusion. Section 7-9-11 states as follows:
The taxes imposed by the Gross Receipts and Compensating Tax Act [Chapter 7, Article 9 NMSA 1978] are to be paid on or before the twenty-fifth day of the month following the month in which the taxable event occurs.
The Trustee contends that the 1992 Letter Agreement properly allowed a fiscal accounting system for accounting amounts of taxes owed. Response at p. 2. However, according to the Trustee, in order to comply with § 7-9-11, the 1992 Letter Agreement should have required Furr's to pay on the 25th day of the Fiscal Month following the Fiscal Month in which the taxable event occurred. Under the Trustee's theory, Furr's was legally required to make 13 CRS Tax payments per year on the 25th day of each succeeding Fiscal Month despite the specific terms of the 1992 Letter Agreement.
With regard to the payments at issue, the Trustee argues that the CRS Tax payment for the10th Fiscal Month, covering the period from September 10, 2000 through October 7, 2000 should have been paid on November 1, 2000, the 25th day of the next Fiscal Month. As for the tax payment for Fiscal Month 11, which encompassed the period from October 8, 2000 through November 4, 2000, the Trustee states that the tax payment was due on November 29, 2000. The payment was made for both of these Fiscal Months on November 27, 2000. According to the Trustee, the portion of the November 27, 2000 payment covering the taxes for Fiscal Month 10 was late. The Trustee contends that the because the payment for Fiscal Month 10 was late, it is therefore, on account of an antecedent debt and is recoverable under § 547, if the other elements are proven. The Trustee also argues that the January 25, 2001 payment was for Fiscal Month 13, which encompassed the period from December 3, 2000 through December 30, 2001, and was due on January 24, 2001. Under the Trustee's theory, this payment was one day late and is also recoverable as a payment on account of an antecedent debt, if the other elements are proven.
The Department maintains that the 1992 Letter Agreement, including the due dates for payments, was a proper arrangement under the law. The Department may allow certain taxpayers to obtain permission to use other forms of accounting in computing their tax liabilities under §§ 7-1-10, 7-4-19 and 7-4-20 NMSA (2001 Repl. Pamp.). Section 7-1-10 provides,
Prior to changing his method of reporting taxes, other than for changes required by law, a taxpayer shall first secure the consent of the secretary or the secretary's delegate. Consent shall be granted or withheld pursuant to the provisions of Section 7-4-19 NMSA 1978.
Section 7-4-19 provides,
. . . the taxpayer may petition for, or the department may require, in respect to all or any part of the taxpayer's business activity, if reasonable:
. . .
D. the employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income.
Section 7-4-20 provides:
In circumstances within the scope of Section 7-4-19 NMSA 1978 and in other circumstances where the revenues of this state would not be adversely affected, the secretary is authorized to enter into an agreement in writing with any person with respect to apportionment and allocation of that person's income.
These sections, as cited from the 2001 Replacement Pamphlet, are substantively the same as they were in 1992.
The Court finds that the Department had the authority to enter into the 1992 Letter Agreement allowing Furr's to apportion its income according the Fiscal Month accounting system and pay on the succeeding calendar month. The 1992 Letter Agreement does not allow an illegal delay in payment. The effect of the 1992 Letter Agreement was simply to alter the amount due on the 25th day of each calendar month. Although the Court questions the wisdom of an arrangement that mixes Fiscal Month accounting with calendar month reporting, the Court concludes that the Department had the authority under the New Mexico Tax Administration Act to operate under the 1992 Letter Agreement with respect to Furr's CRS Tax payments.
In addition to her argument that the arrangement set forth in the 1992 Letter Agreement was illegal, the Trustee attempts to set forth disputed material fact issues in these areas: 1) what actual period each report covered; and 2) what period was stated on each report as the tax period. As for the first disputed fact, what accounting period was covered in each report, the dates constituting the taxable period are only material to this case if they dictate the exact date upon which payments were due. Under the 1992 Letter Agreement, the accounting period did not specifically dictate when each payment was due. The dates given by the Trustee would not have altered the due date for payments under the 1992 Letter Agreement. Any discrepancy in the actual period is immaterial to the preference decision.
The Trustee states that Fiscal Months 10 and 11 actually covered the period from September 10, 2000 to November 4, 2000. The Department stated that the period covered the period from September 6, 2000 to October 31, 2000. The Trustee also states that Fiscal Month 12 covered the period from November 5, 2000 to December 2, 2000 unlike the Department's assertion that the period was from November 1, 2000 to November 28, 2000. The Trustee states that the final Fiscal Month 13 covered the period from December 3, 2000 to December 30, 2000 while the Department asserts that the Fiscal Month 13 covered the period from November 29, 2000 to January 2, 2001.
The Trustee next disputes the Department's assertion that it instructed Furr's to state each tax period as a calendar month to coincide with its computer system. However, the 1992 Letter Agreement clearly instructs Furr's to report on a calendar month basis. The Trustee has failed to counter this with any evidence that Furr's reported tax periods other than calendar months. Again, this issue is not material to the decision in this case because it does not dictate when each payment was due.
In sum, according to the 1992 Letter Agreement, Furr's CRS Taxes were reported and payable on a calendar month basis. Only the amount of each payment was dictated by the Fiscal Month system. The undisputed material facts show that Furr's had a legal arrangement with the Department as evidenced by the 1992 Letter Agreement and paid its CRS Taxes on the due date for each of the months during the ninety day period before bankruptcy. November 25, 2000 fell on a Saturday, making the payment due on November 27, 2000, the date upon which Furr's paid the CRS taxes for Fiscal Months 10 and 11. December 25, 2000, the due date for taxes incurred in Furr's 12th Fiscal Month, fell on a holiday; therefore, the due date for CRS Taxes was December 26, 2000, the date upon which Furr's paid its CRS Taxes for Fiscal Month 12. January 25, 2001 did not fall on a holiday or weekend so it is the due date for Furr's CRS Taxes for Fiscal Month 13, and Furr's paid those taxes on January 25, 2001. Because each payment was made on or before the date the payment was due without penalty, each payment was made when the tax debt was incurred under 11 U.S.C. § 547(a)(4). As a result, these payments were not made on account of antecedent debts. Therefore, the Court will grant the Department summary judgment that each of the CRS Tax payments at issue were not made on account of an antecedent debt, and were not preferences.
B. Cigarette Taxes
Like the CRS Tax payments during the ninety days before bankruptcy, Furr's paid its Cigarette Taxes on or before the day when they were last payable without penalty. All of the payments listed on Exhibit A to the Complaint are not recoverable but for different reasons. First, the payment made on January 9, 2001 in the amount of $18,144.00 was actually from Zurich American Insurance Company after the Department made a claim on Furr's bond; therefore, it is not a preferential payment from Furr's to the Department. As for three of the payments listed on Exhibit A, Stephanie Dennis, Tax Compliance Specialist with the Department, states that she could not find matching Cigarette Tax invoices in the Department's records. These payments are listed on Exhibit A as follows: 1) payment made on November 21, 2000 by check no. 25130515 in the amount of $58.82; 2) payment made on December 15, 2000 by check no. 25134454 in the amount of $40.01; and 3) payment made on January 16, 2000 by check no. 25138739 in the amount of $33.63. The Trustee does not dispute this assertion and has failed to produce cancelled checks evidencing the payments. Therefore, the Court finds that these payments are not recoverable as preferences because no evidence shows that these payments were actually made by Furr's to the Department. The remaining payments listed on Exhibit A are not preferences because they were paid on or before they were due and as a consequence, were not made on account of antecedent debts. Summary judgment will be granted to the Department that none of the Cigarette Taxes listed on Exhibit A are recoverable as preferences.
An appropriate order will be entered in accordance with this Memorandum Opinion.