California Franchise Tax Board v. Kendall (In Re Jones)
657 F.3d 921
| 9th Cir. | 2011Background
- Jones and spouse filed Chapter 13 in 2002, plan confirmed in 2002, and they filed a joint 2002 tax return with about $6,000 due, which remained unpaid.
- Jones alone filed a Chapter 7 petition in 2007 and received a discharge in 2008; the tax debt appeared to be pre-petition but may be affected by suspension tolling.
- FTB sought to reopen Chapter 7 in 2009 to argue the tax debt was excepted from discharge under § 523(a)(1)(A) and § 507(a)(8).
- Tax debt arose from 2002 tax year, due in 2003, thus ordinarily within lookback period defined by § 507(a)(8)(A) with respect to the Chapter 7 petition.
- Whether the three-year lookback could be extended by statutory suspension or equitable tolling depended on whether the stay in Jones’s prior Chapter 13 proceeding precluded collection under § 362(a)(3)/(a)(4).
- Court held the lookback was not suspended and the debt was discharged, because property revested in Jones upon plan confirmation and the FTB was not precluded from collection by stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the three-year lookback period is tied to Jones’s Chapter 7 petition | Jones; lookback runs from Chapter 7 petition | FTB; lookback may extend due to suspension provision | Lookback defined by Chapter 7 petition; it did not extend |
| Whether the suspension provision in § 507(a)(8) applies to Jones’s debt | FTB argues suspension applies via stay in prior case | Jones argues suspension limited to preclude collection under stay | Suspension applies only if stay precluded collection; not here |
| Whether automatic stay under § 362 precluded collection during Chapter 13 | FTB contends stay preserved claim | Jones contends revesting relieved stay effect | Property revested at plan confirmation; stay did not preclude collection post-confirmation |
| Whether equitable tolling applies to extend lookback | FTB could toll due to uncertainties in 1306(a)/1327(b) | Jones argues no tolling since no preclusion and FTB did not act timely | Equitable tolling not applicable; debt discharged |
Key Cases Cited
- Young v. United States, 535 U.S. 43 (U.S. 2002) (lookback tolled when IRS prevented from collecting during bankruptcy)
- In re Kagenveama, 541 F.3d 868 (9th Cir. 2008) (statutory lookback interpretation in § 507(a)(8))
- In re Leavitt, 171 F.3d 1219 (9th Cir. 1999) (may affirm on alternative grounds; statutory interpretation guidance)
- In re Nash, 765 F.2d 1410 (9th Cir. 1985) (definition of vesting of estate under § 349(b)(3))
- Barstow v. IRS (In re Bankr. Estate of MarkAir, Inc.), 308 F.3d 1038 (9th Cir. 2002) (interpretation of suspension provision in § 507(a)(8))
- Hamilton v. Lanning, 130 S. Ct. 2464 (2010) (statutory tolling and limitations construction)