444 B.R. 10
Bankr. D. Mass.2011Background
- Debtor Edward R. Szwyd filed Chapter 13, converted to Chapter 7, Trustee appointed in 2006.
- Residence and Maple Avenue Property in Great Barrington, MA subject to US tax liens totaling $87,571.53.
- Massachusetts Homestead exemption protects Residence, but exempts tax claims; excess equity available to satisfy IRS.
- Maple Avenue Property sold for more than mortgage; approx. $26,000 held for creditors after costs and fees.
- IRS holds secured lien; funds on hand insufficient to satisfy IRS claims; IRS will seek remaining equity from Residence.
- Trustee sought marshaling to require IRS to pursue Residence; IRS moved to dismiss; court denied dismissal and later addressed marshaling issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is marshaling appropriate against the United States in this case? | Szwyd; equity supports marshaling to benefit unsecured creditors. | IRS; marshaling intrudes on homestead exemptions and is improper. | Yes; marshaling appropriate under law of the case. |
| Does Cunningham limit marshaling against exempt property in this context? | Cunningham supports consideration of exceptions to exemptions for tax debts. | Cunningham bars using post-petition proceeds to satisfy prepetition nondischargeable debts and limits marshaling. | Cunningham does not control; marshaling remains appropriate. |
| Do priority unsecured claims defeat marshaling here? | Marshaling benefits unsecured creditors even if priorities exist; trustee represents all unsecured creditors. | Priority claims erode funds, making marshaling pointless for general unsecureds. | Marshaling serves creditors and is permissible despite priority claims. |
Key Cases Cited
- Meyer v. United States, 375 U.S. 233 (1963) (relevance to exemptions vs. marshaling under tax claims)
- In re Cunningham, 513 F.3d 318 (1st Cir. 2008) (exemption to tax debts; postpetition sale of exempt property)
- Kowal v. Malkemus (In re Thompson), 965 F.2d 1136 (1st Cir. 1992) (trustee represents all unsecured creditors; marshaling context)
- Szwyd I, 394 B.R. 230 (Bankr. D. Mass. 2008) (initial marshaling holding; equity necessitates marshaling; state homestead law applied)
- Szwyd II, 394 B.R. 242 (Bankr. D. Mass. 2008) (reaffirmed marshaling; addressed sovereign immunity/Anti-Injunction Act; homestead exception noted)
- Szwyd III, 408 B.R. 547 (Bankr. D. Mass. 2009) (District Court affirmed marshaling; law of the case controlling)