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In re Gurwitch

United States Court of Appeals, Eleventh Circuit
Jul 21, 1986
794 F.2d 584 (11th Cir. 1986)

Summary

holding that following confirmation of the debtor's Chapter 11 plan, the Internal Revenue Service could collect a nondischargeable tax claim that was not listed in the IRS's bankruptcy claim

Summary of this case from In re Hubbard

Opinion

No. 85-5571.

July 21, 1986.

Robert A. Schatzman, Britton, Cassel, Schantz Schatzman, Scott Alan Orth, Miami, Fla., for Harry Gurwitch.

Leon Kellner, U.S. Atty., Miami, Fla., Glenn L. Archer, Jr., Michael L. Paup, Wynette J. Hewett, Matthew J. Anderton, Tax Div., Dept. of Justice, Washington, D.C., for U.S.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY and KRAVITCH, Circuit Judges, and HENLEY, Senior Circuit Judge.

Honorable J. Smith Henley, Senior U.S. Circuit Judge for the Eighth Circuit, sitting by designation.


CORRECTED OPINION


Harry Gurwitch filed a petition for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101-1174, in January, 1980. He was a major shareholder and perhaps only shareholder in EMC Film Corporation (EMC) and American Contemporary Art Corporation (ACA), both of which ceased operations in August, 1979. In his schedule of liabilities he listed a withholding tax claim of $12,435.93 as to EMC, and in his disclosure statement he acknowledged that the IRS was seeking to collect a like claim of $21,000.00 with respect to ACA, which he was disputing. The IRS filed a proof of claim for a combination of income and withholding tax liabilities totalling $7,756.41. The plan, which was confirmed in August, 1981, allowed for payment of 100% of the IRS claim.

Before the case was closed the IRS began collection efforts for the withholding taxes of EMC and ACA. Gurwitch advised the IRS of the bankruptcy proceedings and of his continuing dispute as to liability. After closure the IRS placed a lien on his real estate holdings for payment of these tax claims.

Gurwitch then had the case reopened. The bankruptcy court held that the amount of the claim had been determined at confirmation and was binding on the parties. The district court reversed, stating that the tax debt was nondischargeable. In re Gurwitch, 54 B.R. 927 (Bankr.S.D.Fla. 1985).

The Honorable Thomas C. Britton, United States Bankruptcy Judge, Southern District of Florida.

The Honorable Alcee L. Hastings, United States District Judge, Southern District of Florida.

Gurwitch appeals arguing that on the basis of res judicata, policy considerations, and equitable estoppel the amount of the tax claim should be fixed by the confirmation of the plan. We affirm.

Appellant first argues that the bankruptcy proceedings were a final determination of his tax liabilities, and therefore res judicata prevents the IRS from making a claim after closure of his case. He also contends that allowing this claim inhibits reorganization, defeats the rehabilitative purpose of the Code, and discourages the IRS from participating in reorganization proceedings.

Appellant's res judicata argument is not persuasive. The Bankruptcy Code makes clear under 11 U.S.C. § 1141(d)(2) that the confirmation of a plan of reorganization does not fix tax liabilities made nondischargeable under 11 U.S.C. § 523. Moreover, the Code states that these taxes are nondischargeable "whether or not a claim for such tax was filed or allowed." Section 523(a)(1)(A).

The tax claim in issue here is for nondischargeable taxes. See United States v. Sotelo, 436 U.S. 268, 282, 98 S.Ct. 1795, 1803-1804, 56 L.Ed.2d 275 (1978).

As to Gurwitch's policy arguments, it is apparent to us that Congress has made the choice between collection of revenue and rehabilitation of the debtor by making it extremely difficult for a debtor to avoid payment of taxes under the Bankruptcy Code. See In re Becker's Motor Transportation, Inc., 632 F.2d 242, 248 (3d Cir. 1980), cert. denied, 450 U.S. 916, 101 S.Ct. 1358, 67 L.Ed.2d 341 (1981). We cannot override what we view as a clear policy judgment by Congress. United States v. Sotelo, 436 U.S. 268, 279, 98 S.Ct. 1795, 1802, 56 L.Ed.2d 275 (1978). Therefore, we conclude that these tax claims are not barred by reasons of res judicata or matters of policy.

Gurwitch also argues that the bankruptcy court's decision is supportable on the basis of equitable estoppel in that he justifiably relied to his detriment on the government's representations and actions.

This argument falls short, for "[i]nasmuch as [these taxes] are nondischargeable, . . . a reasonable debtor should expect that the IRS will seek to enforce such claims." Becker's Motor Transportation, 632 F.2d at 249. While IRS well could have been more diligent in pursuing its collection efforts, we cannot find legally justifiable Gurwitch's reliance on the IRS proof of claim as signifying the total amount owed the government.

Accordingly, we AFFIRM the judgment of the district court.


Summaries of

In re Gurwitch

United States Court of Appeals, Eleventh Circuit
Jul 21, 1986
794 F.2d 584 (11th Cir. 1986)

holding that following confirmation of the debtor's Chapter 11 plan, the Internal Revenue Service could collect a nondischargeable tax claim that was not listed in the IRS's bankruptcy claim

Summary of this case from In re Hubbard

holding that the IRS could assert new claims against the debtor for withholding taxes even after his Chapter 11 plan had been confirmed

Summary of this case from In re Olsen

concluding that confirmation of a debtor's chapter 11 plan does not bar the IRS from collecting a debtor's nondischargeable tax liabilities by reasons of res judicata

Summary of this case from In re Wood

rejecting the debtor's argument that the IRS's filing of a proof of a claim and the bankruptcy court's confirmation of a plan that provided for payment in full of that claim amounted to a final determination of the debtor's tax liabilities, thereby preventing the IRS from collecting pre-petition tax delinquencies after the discharge; explaining that res judicata did not apply because the Bankruptcy Code made clear that the taxes were not dischargeable regardless of whether a bankruptcy claim was filed or allowed

Summary of this case from In re Diaz

rejecting debtor's res judicata argument and affirming district court decision allowing IRS to assess and collect taxes beyond pre-petition claim

Summary of this case from In re Sage

allowing the IRS to seek collection of tax liabilities after confirmation of bankruptcy plan and before closure of the case

Summary of this case from U.S. v. White
Case details for

In re Gurwitch

Case Details

Full title:IN RE HARRY GURWITCH, DEBTOR. UNITED STATES OF AMERICA…

Court:United States Court of Appeals, Eleventh Circuit

Date published: Jul 21, 1986

Citations

794 F.2d 584 (11th Cir. 1986)

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