525 B.R. 697
Bankr. N.D. Ill.2014Background
- Debtor Jordon Kaiser filed Chapter 7 on Oct. 12, 2011; Trustee Deborah Ebner sued to avoid multiple transfers as actual and constructive fraudulent transfers under 11 U.S.C. §§ 544, 548 and the Illinois UFTA.
- Trustee's adversary complaint (filed Oct. 15, 2013) alleges transfers to relatives and trusts, some occurring before Oct. 12, 2007; Trustee invoked IRS claim as a potential "golden creditor."
- IRS filed Proof of Claim No. 7‑1 on Sept. 30, 2013 for a $5,000 2010 tax liability; Objecting defendants challenged allowance of that claim in main case.
- Objecting defendants moved to disallow the IRS claim as untimely and argued that, without an allowable IRS claim, many UFTA avoidance claims are time‑barred by the 4‑year state statute and § 548’s 2‑year rule.
- Court denied defendants’ Motion to Disallow for lack of standing and because untimeliness in Chapter 7 leads to priority changes (11 U.S.C. § 726(a)), not disallowance under § 502(b).
- On the Motions to Dismiss the court held § 548 claims untimely for transfers on or before Oct. 12, 2009 (outside § 548’s 2‑year window), but declined to dismiss § 544/UFTA claims relying on the IRS as a golden creditor at the Rule 12(b)(6) stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Objecting Defendants had standing to move to disallow the IRS proof of claim | Trustee: IRS proof of claim is allowable; objections should be resolved in adversary, not by these defendants | Defendants: IRS claim untimely (bar date) and mooted by later filing of tax return by Debtor’s spouse | Court: Defendants lack standing; Motion to Disallow denied; untimeliness in Chap. 7 not a §502(b) disallowance ground because §726 prioritizes tardy claims |
| Whether § 548 avoidance claims are time‑barred | Trustee: §548 claims timely as pled (trustee filed within statutory period for some transfers) | Defendants: many transfers occurred >2 years pre‑petition, so §548 claims must be dismissed | Court: Grants dismissal only as to transfers on or before Oct. 12, 2009 (outside §548 2‑year window); other §548 allegations survive |
| Whether Trustee may invoke IRS as the §544(b) "golden creditor" to obtain a longer limitations period than Illinois UFTA provides | Trustee: Trustee may step into IRS’s shoes if IRS filed an allowable claim, thereby accessing IRS assessment/collection limitations (longer) | Defendants: Allowing this undermines state UFTA limits and rewards trustees/creates policy problems; IRS claim later amended to $0 | Court: §544(b) plain language permits Trustee to choose any unsecured creditor whose claim is allowable; at pleading stage, Trustee may rely on IRS claim as alleged; therefore §544/UFTA timeliness cannot be resolved on 12(b)(6) |
| Effect of post‑petition amendment/ satisfaction of IRS claim on Trustee’s ability to rely on IRS as golden creditor | Trustee: Rights are fixed as of petition and as pleaded IRS was an allowable creditor when action commenced; later amendment doesn't defeat trustee’s standing | Defendants: IRS amended its claim to $0 after Doris filed return; thus IRS is no longer an allowable creditor | Court: Later satisfaction/amendment does not defeat trustee’s right to rely on IRS as golden creditor where claim existed when adversary was commenced; factual issues remain for later stages |
Key Cases Cited
- Equip. Acquisition Res., Inc. v. N. Ill. Gas Co., 742 F.3d 743 (7th Cir. 2014) (trustee derivative rights under §544(b) are subject to defenses available to the underlying creditor)
- Leonard v. Shearer, 125 F.3d 543 (7th Cir. 1997) (trustee can use §544(b) to reach assets any unsecured creditor could reach)
- Cancer Found., Inc. v. Cerberus Capital Mgmt., LP, 559 F.3d 671 (7th Cir. 2009) (complaint may be dismissed on limitations grounds when plaintiff pleads facts establishing untimeliness)
- United States v. Ron Pair Enterprises, Inc., 489 U.S. 235 (U.S. 1989) (statutory interpretation begins with plain language)
- Diebold Found., Inc. v. Comm’r, 736 F.3d 172 (2d Cir. 2013) (transferee liability substantive elements governed by state fraudulent‑transfer law even when IRS collects)
- Mirant Corp. v. Commerzbank A.G. (In re Mirant Corp.), 675 F.3d 530 (5th Cir. 2012) (declined to let trustee invoke FDCPA via §544(b))
- Acequia, Inc. v. Clinton, 34 F.3d 800 (9th Cir. 1994) (post‑petition settlement of claims does not moot §544(b) avoidance actions)
- Stalnaker v. DLC, Ltd. (In re DLC, Ltd.), 295 B.R. 593 (8th Cir. BAP 2003) (later payment of creditor claims does not defeat trustee’s §544 avoidance rights)