Official Creditors Committee v. Tuchinsky (In re Major Dynamics, Inc.)

This is a declaratory relief action in which the former president of the debtor in possession contends that the trustee in bankruptcy breached a duty to pay over to the federal and state government taxes withheld from employees during the former president’s operation of the company.

We are asked to decide whether post-petition withholding subjects such funds to a trust created in favor of the Internal Revenue Service (“IRS”) (at least so far as federal tax is concerned) or whether such funds are merely subject to a priority among competing claims against the bankrupt estate.

I

Tuchinsky operated Major Dynamics, Inc. (“debtor”) as president and chief executive officer from shortly before the debtor filed a petition in Chapter 11 on March 16, 1981 until April 1, 1982. During his term in office, Tuchinsky withheld taxes from wages paid to the debtor’s employees, as required by state and federal tax laws. Tuchinsky, however, did not segregate the withheld funds; he commingled them with other monies in the debtor’s operating account.

On April 2, 1982, the bankruptcy court removed Tuchinsky as president .and chief executive officer and appointed Goldberg as trustee. Goldberg alleges…