United States v. Daniel (In re R & T Roofing Structures & Commercial Framing, Inc.)

OVERVIEW

The United States appeals from a grant of summary judgment in favor of the debt- or’s trustee in bankruptcy. The bankruptcy court and the district court both held that the government’s pre-petition seizure of the debtor’s only bank account constituted a voidable preferential transfer under the Bankruptcy Code, 11 U.S.C. § 547 (b) (1982 and Supp. IV 1986). The government seized the account to satisfy the debtor’s delinquent Federal Insurance Contributions Act (“FICA”) and employee withholding taxes. The government argues that summary judgment should not have been granted because a factual question exists in whether the funds seized can be traced to unpaid taxes and that if they can, these funds are not the property of the debtor and not subject to section 547.

We find that the government failed to carry its burden of establishing the existence of a genuine issue of material fact in responding to the trustee’s motion. Accordingly, the decision of the court below is affirmed. 79 B.R. 22 .

FACTS AND PROCEEDINGS BELOW

The debtor, R & T Roofing, failed to pay over certain federal taxes to the government which it withheld from its employees’ wages during the last quarter of…

concurring:

I concur in Judge Brunetti’s opinion, but add an additional observation.

The delinquent taxes for which the levy and seizure were made were for the fourth quarter of 1979. The funds seized by the IRS in the fourth quarter of 1980 were funds in a general commercial account of the debtor. There was no evidence presented to show that the withheld tax funds were ever kept in the account. Although the government was furnished copies of the statements of the account, it did not present the statements or any summaries thereof to the court, nor did the government claim that the statements demonstrated any commingling of trust funds.

The case is one where the government failed to produce any evidence that the general account on the date of seizure consisted of any amounts of money collected and withheld from employee wages. In fact, the government in its pleadings admitted twice that it seized the property of the debtor.

The government was lethargic in prosecution of the litigation and, as a result, lost.