In re Johnny Leroy WHEELER, Debtor. Johnny Leroy WHEELER, Plaintiff, v . UNITED STATES of America (INTERNAL REVENUE SERVICE), Defendant., United States Bankruptcy Court, W.D. Oklahoma., 183 B.R. 267, Bankruptcy No. BK-91-04696-LN. Adv. No. ADV-93-1252-LN., May 18, 1995

In re Johnny Leroy WHEELER, Debtor. Johnny Leroy WHEELER, Plaintiff, v . UNITED STATES of America (INTERNAL REVENUE SERVICE), Defendant.

United States Bankruptcy Court, W.D. Oklahoma.

183 B.R. 267

Bankruptcy No. BK-91-04696-LN. Adv. No. ADV-93-1252-LN.

May 18, 1995.

James S. Matthews, Oklahoma City, OK, for debtor.

Stephen P. Kranz, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, for defendant.

ORDER ON MOTION FOR RECONSIDERATION

PAUL B. LINDSEY, Chief Judge.

This adversary proceeding was commenced on July 22, 1993. It was allowed to languish for many months, apparently because of on╜going settlement negotiations, which were ultimately only partially fruitful. The issues before the court at this time arise out of an amended complaint filed by plaintiff, with leave of court, on September 30, 1994. In that complaint, plaintiff sought, a determina╜tion of the amount and the dischargeability of certain trust fund tax liability pursuant to 26 U.S.C. ╖ 6672, assessed against plaintiff, and a preliminary injunction staying defendant from further collection efforts with regard to the liability pending determination of the is╜sues raised in this adversary proceeding. On October 13, 1994, defendant filed its motion to dismiss and for summary judgment, in which it is urged that: The tax liability as╜sessed against plaintiff is excepted from debtor's discharge; no portion of the liability assessed relates to a dischargeable penalty; there has been no waiver of sovereign immu╜nity to permit this suit against the defendant; and the injunctive relief sought is prohibited by 26 U.S.C. ╖ 7421 (the Anti-Injunction Act). On November 14, 1994, plaintiff re╜sponded to defendant's motion. On Decem╜ber 9, 1994, defendant filed its reply, and its motion for the court to abstain from deter╜mining the amount of plaintiff's liability.

On March 7, 1995, this court entered its order denying the motion for abstention and for summary judgment. In that order, the court concluded that defendant had with╜drawn its motion to dismiss in its entirety, and therefore took no action with regard to that motion.

On March 16, 1995, defendant filed its motion seeking reconsideration of this court's action denying the motion for summary judg╜ment, asserting that the withdrawal of defen╜dant's motion to dismiss had been limited to the sovereign immunity issue, and urging that the court address the portion of its motion to dismiss based upon the Anti-In╜junction Act. Defendant also sought, and was granted, an extension of time within which to file a supporting brief. Defendant did not seek reconsideration of this court's decision not to abstain.

This court has reviewed defendant's mo╜tion, the order of March 7, and the pleadings and brief which preceded it. The motion to reconsider will be granted and upon recon╜sideration, the court will reaffirm its decision to deny defendant's motion for summary judgment, for the reasons stated in the order of March 7. With regard to defendant's motion to dismiss, however, the court agrees that the withdrawal of that motion by defen╜dant was limited to its contention related to sovereign immunity, and that the remainder of the motion, based upon the Anti-Injunc╜tion Act, should have been addressed by the court. It will therefore be addressed at this time.

Under the Anti-Injunction Act, except in limited circumstances not present here:

"[n]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was as╜sessed."

26 U.S.C. ╖ 7421(a).

Defendant cites Enochs v. Williams Pack╜ing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962) and Lonsdale v. United States, 919 F.2d 1440 (10th Cir.1990), in which the court basically held that the statute means what it says, and that, with only extremely narrow exceptions, the dis╜trict courts were prohibited from granting injunctive relief to prevent the collection of taxes.

Defendant also cites court of appeals au╜thorities decided in the context of bankruptcy proceedings, as follows: In re American Bi╜cycle Association, 895 F.2d 1277 (9th Cir. 1990), LaSalle Rolling Milts, Inc. v. United States, 832 F.2d 390 (7th Cir.1987), and A to Z Welding & Manufacturing Co. v. United States, 803 F.2d 932 (8th Cir.1986). In each of these cases, it was held that the Anti-╜Injunction Act prevented bankruptcy courts from enjoining the assessment or collection of the 100% penalty tax under 26 U.S.C. ╖ 6672 from non-debtor officers of a corpo╜rate debtor in bankruptcy which had failed to remit trust fund taxes. Those cases differ from the case before this court. Here, in╜junctive relief is sought by a debtor in bank╜ruptcy who is alleged to have been a respon╜sible person of a non-debtor corporation which failed to remit trust fund taxes.

In Bostwick v. United States, 521 F.2d 741 (8th Cir.1975), debtor sought and obtained from the bankruptcy court a determination of the dischargeability of certain tax debts and injunctive relief against collection efforts as to such taxes until the dischargeability could be determined. On appeal, the district court and the court of appeals affirmed. The court of appeals was of the view that the Anti╜Injunction Act was not relevant to the case, "inasmuch as Congress has evidenced an in╜tention to enact a complete scheme govern╜ing bankruptcy which overrides the general policy represented by the `anti-injunction' act." Bostwick, 521 F.2d at 744.

Bostwick was decided under the Bankrupt╜cy Act, prior to the enactment in 1978 of the present Bankruptcy Code, 11 U.S.C. ╖╖ 101╜1330. The basic policies of the two enact╜ments remain the same, however, and the statutory scheme is at least as comprehen╜sive under the Code as it was under the Act. The bankruptcy court is empowered to: Is╜sue any order, process, or judgment that is necessary or appropriate to carry out the provisions of the Code [╖ 105(a) ]; determine the amount or legality of any tax, any fine or penalty relating to a tax, or any addition to tax [╖ 505(a)(1) ]; and determine the dis╜chargeability of debts, including debts for taxes [╖ 523(a)(1) and Rule 7001(6), Fed. R.Bankr.P.].

The only reported decision directly on point in the Tenth Circuit appears to be In re Jon Co., Inc. 30 B.R. 831 (D.Colo.1983). In that case, the court notes that it found no decisional authority on this subject within the Tenth Circuit, and that a split existed be╜tween the two circuits which had addressed the issue, citing Bostwick and Matter of Becker's Motor Transportation, Inc., 632 F.2d 242 (3rd Cir.1980) (refusing to grant equitable relief, but granting declaratory re╜lief in spite of the limitation on such relief with respect to Federal Taxes contained in 28 U.S.C. ╖ 2201). The Jon Co. court con╜cluded that Bostwick was the better reasoned of the two cases, and that therefore a collec╜tion summons for a 26 U.S.C. ╖ 6672 penalty could be enjoined by the bankruptcy court.

This court is also of the view that Bostwick represents the better reasoned view, and that in a proper case, collection actions by taxing authorities may be enjoined by bankruptcy courts pending determination of other related issues, such as liability of the debtor for the taxes in question, the amount of such liability, and the dischargeability of the liability.

In Jon Co. the case was remanded for a determination of whether the necessary pre╜requisites to the issuance of an injunction were present, an issue which had not been addressed before the bankruptcy court. As the court pointed out, a debtor seeking in╜junctive relief must show:

1) Irreparable harm to the bankruptcy estate if the injunction does not issue;

2) A strong likelihood of success on the merits;

3) No harm or minimal harm to the other party or parties; and

4) A determination of what action better serves the public interest.

Jon Co. , 30 B.R. at 835.

In this case, debtor received his discharge under 11 U.S.C. ╖ 727 in October 1991. This adversary proceeding was filed in July 1993 and the amended complaint, in which injunc╜tive relief was first sought, was filed in Sep╜tember 1994. Yet at no time has debtor filed an application for a temporary restraining order or for a preliminary injunction.

Injunctive relief is by its very na╜ture extraordinary relief, and it may not be granted in the absence of proof that the circumstances are sufficiently extraordinary to warrant the granting of such relief. In the circumstances present here, it is difficult to envision debtor being able to provide a level of proof sufficient to meet the necessary prerequisites for injunctive relief.

Based upon the foregoing, this court grants defendant's motion for reconsidera╜tion. Upon reconsideration, the court reaf╜firms its denial of defendant's motion for summary judgment and denies defendant's motion to dismiss based upon the Anti-In╜junction Act. The issue of whether injunc╜tive relief is warranted in this case is not presently before the court.

IT IS SO ORDERED.

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