In Re SLUGGO’S CHICAGO STYLE, INC., Debtor. CALIFORNIA STATE BOARD OF EQUALIZATION, Appellant, v. Harold S. TAXEL, Trustee, Appellee

Facts

The facts are undisputed. Pursuant to Cal.Rev. & Tax.Code § 6701, the California State Board of Equalization (“Board”) required security, as a condition of doing business, from Sluggo’s Chicago Style, Inc. (“debtor”) for payment of California sales and use taxes.

In April of 1984, the debtor complied by providing this security in the form of a $9,100.00 certificate of deposit (“certificate”) payable to the Board. In November of 1984, the debtor filed a petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code. At the time, the debtor owed the Board $5,334.10. Sluggo’s ceased doing business on February 28, 1986, at which time the debtor owed the Board in excess of the amount of the certificate. On August 1, 1986, the Board presented the certificate for payment. Some nineteen days later, the Chapter 11 proceeding was converted to Chapter 7.

The trustee brought the underlying action to recover the funds. On stipulated facts, the bankruptcy court granted the trustee’s Motion for Summary Judgment and denied the Board’s Cross-Motion for Summary Judgment.

The Board appealed to the Bankruptcy Appellate Panel (“BAP”). The BAP entered judgment affirming the…