In thе Matter of Shelli Renee JOYE; Teresa M. Joye, Debtors,
Shelli Renee Joye; Teresa M. Joye, aka Michael Joye, Maria Teresa Joye & Maria Mendoza, Plaintiffs-Appellants,
v.
Franchise Tax Board, State of California; Selvi Stanislaus Executive Officer of State of California Franchise Tax Board, Defendants-Appellees.
United States Court of Appeals, Ninth Circuit.
*1072 Robert N. Kolb, Antioch, CA, for the plaintiffs-appellants.
Edmund G. Brown, Jr., Attorney General for the State of California, Randall P. Borcherding, Supervising Deputy Attorney General, and Kristian D. Whitten, Deputy Attorney General, San Francisco, CA, for the defendants-appellees.
Before J. CLIFFORD WALLACE, SIDNEY R. THOMAS and SUSAN P. GRABER, Circuit Judges.
Opinion by Judge WALLACE; Dissent by Judge GRABER
WALLACE, Senior Circuit Judge:
Shelli Renee Joye and Teresa M. Joye (the Joyes) filed an adversary complaint in bankruptcy court against the State of California Franchise Tax Board and its Executive Director, Selvi Stanislaus (collectively, the Board), for declaratory and injunctive relief. The Joyes seek an оrder declaring that their state tax obligations from the year 2000 were discharged at the conclusion of their Chapter 13 bankruptcy proceeding in 2004. They also seek an injunction enjoining the Board from collecting these outstanding tax liabilities. The Board moved for summary judgment, and the bankruptcy court denied the motion. The district court reversed the bankruptcy court, and entered summary judgment in the Board's favor. The Joyes now appeal from the district court's summary judgment. We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 158(c)(2). We reverse and remand.
I.
The Joyes filed their Chapter 13 bankruptcy petition on March 7, 2001. The bankruptcy petition scheduled the Board as a priority creditor in the estimated amount of $10,000 for outstanding state income taxes for the year 2000. Pursuant to 11 U.S.C. § 342, official notice of the Joyes' bаnkruptcy case was then sent to all creditors scheduled in the petition. The notice indicated that the meeting of creditors would take place on April 19, 2001, and that the claims bar date for governmental claims was set for September 3, 2001. The Board does not appear to have attended the meeting of creditors, or otherwise filed objections to the Joyes' bankruptcy plan. The bankruptcy court confirmed the Joyes' bankruptcy plan on May 18, 2001. The Board did not file a proof of claim in the Joyes' case, and the claims bar date for governmental claims elapsed as scheduled.
On October 15, 2001, the Joyes filed their year 2000 state income tax return. Although this return was originally due on April 15, 2001, California law grants taxpayers an automatic six-month extension of the deadline for filing personаl income *1073 tax returns. The Joyes' year 2000 state tax return was therefore timely filed. The return showed the Joyes owing taxes and penalties totaling $28,178.00. No payment accompanied the return.
The Joyes successfully completed their bankruptcy plan on February 7, 2004. On March 4, 2004, the bankruptcy court discharged the Joyes from bankruptcy pursuant to 11 U.S.C. § 1328(a). The discharge order stated that "the debtor is discharged from all debts provided for by the plan or disallowed under 11 U.S.C. § 502," subject to a few exceptions not relevant here. The order also stated that "[a]ll creditors are prohibited from attempting to collect any debt that has been discharged in this case."
Subsequently, the Board attempted to collect the outstanding taxes reported in the Joyes' year 2000 state tax return. On March 22, 2005, the Joyes commenced аn adversary proceeding in bankruptcy court, alleging that the Board's collection efforts violated the discharge order. The Board filed a motion for summary judgment, arguing that the outstanding taxes survived discharge pursuant to 11 U.S.C. § 1305. In the alternative, the Board argued that barring its collection of these outstanding taxes would violate the constitutional guarantee of fundamental fairness to governmental entities.
The bankruptcy court denied the Board's motion, concluding that the outstanding taxes were properly discharged. With respect to the Board's primary argument, the bankruptcy court observed that section 1305 was inapplicable to the parties' dispute because that section "has nothing to do with discharge. It has to do with whether a creditor, such as the Board, may file a claim, and if so, how that claim is trеated. But that's not our case.... [The Board] didn't file a claim and it got notice of the proceeding, and the discharge is a final order." The bankruptcy court also rejected the Board's alternative argument regarding the constitutional doctrine of fundamental fairness. The bankruptcy court held that the Board received both adequate notice of the Joyes' bankruptcy case and a meaningful opportunity to file a proof of claim for the outstanding taxes.
The district court on appeal agreed that the outstanding taxes were "technically discharged" through the Chapter 13 proceeding because the Board did not file a proof of claim. However, the district court concluded that the Board was nonetheless entitled to summary judgment because barring collection of the outstanding taxes would constitute a denial of fundamental fairness to the Board. The court held that the Board did not receive adequate notice of its right to payment on the outstanding taxes because "California's income tax system... relies on taxpayers to assess how much they owe and inform the [Board] of that amount by filing a tax return," and the Joyes did not file their state tax return until after the claims bar date for governmental claims. The court further held that scheduling the Board as a creditor in the bankruptcy petition for an estimated amount was insufficient to provide the Board with constitutionally adequate notice.
Therefore, the district court reversed the bankruptcy court's decision, and granted the Board's motion for summary judgment. Rather than remanding the case to the bankruptcy court for further proсeedings, the district court entered judgment in favor of the Board. This appeal followed.
II.
We review a district court's decision on a bankruptcy court appeal de novo. Dawson v. Wash. Mut. Bank, F.A. (In re Dawson),
The Joyes argue that the district court erred in entering
summary judgment in favor of the Board based on the constitutional doctrine of fundamental fairness. The Board defends the district court's constitutional determination, but argues in the alternative that summary judgment should be affirmed on statutory grounds. Downs v. Hoyt,
A.
Both the bankruptcy court and the district court concluded that the Joyes' outstanding tax liabilities for the year 2000 were discharged at the conclusion of their bankruptcy case pursuant to 11 U.S.C. § 1328(a). In so ruling, the two courts rejected the Board's argument that these outstanding taxes survived the bankruptcy court's discharge order under 11 U.S.C. § 1305. Indeed, both courts held that section 1305 was irrelevant to the determination of whether these outstanding taxes were subject to discharge. The Board disputes this conclusion, renewing its argument that section 1305 allows certain "post-petition" claims to survive a debtor's Chapter 13 discharge so long as the claimholder elects not to file a proof of claim. For their part, the Joyes appear to concede that if the outstanding taxes give rise to a post-petition claim under section 1305, the taxes would survive discharge.
We have not addressed whether section 1305 operates to protect certain claims from a bankruptcy discharge. However, we need not decide this open question of Ninth Circuit law because even if section 1305 can be read to shield certain claims from discharge, its protection еxtends only to "post-petition" claims, and we conclude that the Joyes' outstanding taxes cannot give rise to such a claim under section 1305. We therefore agree with the ultimate conclusions of both courts that these taxes were discharged in the Joyes' bankruptcy case.
1.
Section 1305 is entitled "Filing and allowance of post-petition claims." Subsection (a) provides that "[a] proof of claim may be filed by any entity that holds a claim against a debtor ... (1) for taxes that become payable to a governmental unit while the case is pending." 11 U.S.C. § 1305(a)(1). The parties do not dispute that the Joyes' bankruptcy case was pending from March 7, 2001 to March 4, 2004. Therefore, whether the Joyes' outstanding taxes give rise to a post-petition claim pursuant to section 1305(a)(1) depends on when these taxes became "payable" for the purpose of that section.
*1075 We have yet to construe the term "payable" as used in section 1305(a)(1). See In re Savaria,
In Dixon v. IRS (In re Dixon),
The reasoning of the Tenth Circuit Bankruptcy Appellate Panel is persuasive. As the court in Ripley acknowledged, the word "payable" is susceptible to more than one interpretation. Ripley,
In that regard, the panel in Dixon rightly stated that Chapter 13 of the Code is generally concerned with satisfying or discharging "claims" against a given debtor. Dixon,
Further examination of the statutory scheme confirms this interpretation. Like section 1305(a)(1), section 502(i) of the Code also addresses tax claims held by governmental entities. This section provides that "[a] claim [for certain tax liabilities owed to governmental units] that does not arise until after the commencement of the case ... shall be determined, and shall be allowed ... the same as if such claims had arisen before the date of the filing of the petition." 11 U.S.C. § 502(i). Reconciling section 502(i) with section 1305(a)(1), Collier on Bankruptcy concludes that the "taxes covered by[section 502(i)] are those which are incurred prepetition that do not come due until after the petition is filed. If a tax is incurred postpetition, it can be treated ... only as a postpetition claim under section 1305." 8 Collier on Bankruptcy ¶ 1300.71[10] (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev.) (emphasis added); see also In re Flores,
Moreover, as stated in Dixon, the legislative history of the Bankruptcy Code indicates that section 1305(a) was meant to address taxes "incurred after the filing of the chapter 13 case." Dixon,
Reviewing the statutory scheme of the Bankruptcy Code and the relevant legislative history, we conclude that Congress meant section 1305(a)(1) to refer to taxes that were incurred by the debtor during the pendency of the debtor's bankruptcy case. We would frustrate this congressional intent were we to construe the word "payable" to refer to only those taxes that have become "legally enforceable" or "justly due." Ripley,
Applying this construction here, we hold that the Joyes' outstanding state taxes for the year 2000 cannot give rise to a post-petition claim pursuant to section 1305(a)(1). Under California law, personal taxes are calculated based on the given taxpayer's income earned "for each taxable year." Cal. Rev. & Tax.Code § 17041(a)(1). A "taxable year" is in turn defined as a calendar year. Cal. Rev. & Tax.Code § 17010. Thus, the Joyes could have technically determined and paid their year 2000 taxes on the day after the close of the corresponding calendar year. Although the Joyes were not required to pay these taxes until April 15, 2001 (or at the latest October 15, 2001), their tax liability to the state for the year 2000 was nonetheless capable of being paid, and thus payable, as of January 1, 2001.
Because this date fell prior to the date the Joyes filed their bankruptcy petition on March 7, 2001, these taxes cannot give rise to a post-petition claim under section 1305(a)(1). Therefore, even if section 1305 shields post-petition claims from discharge (which we do not decide), it would not operate to protect the Board's claim to the Joyes' outstanding taxes from discharge. These taxes were thus properly discharged at the conclusion of Joyes' bankruptcy case.[4]
2.
The Board presents an array of internally inconsistent, and ultimately unsuccessful, arguments against adopting the broader definition of "become payable" suggested in Dixon. First, the Board appeаrs to argue that the Ninth Circuit has adopted the "same analysis [as Ripley] to determine when taxes become payable." On this point, the Board mentions that it believes that Ripley interprets "payable" under the Internal Revenue Code. Yet, later in the Board's brief, the Board attempts to distinguish Dixon on the same *1078 grounds, arguing that, "[i]n this case, the issue is not when taxes `become payable' under the Internal Revenue Code, but when they `become payable' under the California [Revenue and Tax Code]."
To the extent that the Board argues that cases interpreting "payable" under the Internal Revenue Code are not particularly instructive, we agree. As aptly stated in Dixon, "words used in the Bankruptcy Code do not necessarily mean the same thing they might mean in the Internal Revenue Code." Dixon,
For similar reasons, we also reject the Board's argument that "payable" under section 1305(a)(1) should be construed by reference to the California Revenue and Tax Code. On this issue, the Board confuses the substantive determination to be made under sectiоn 1305(a)(1) with the task of construing the statutory provision in the first instance. True, under Raleigh v. Ill. Dep't of Revenue,
The Board also suggests that this circuit in Pan American Van Lines v. United States,
The other cases relied on by the Board are also unhelpful. In Schatz v. Franchise Tax Board,
The same reasoning distinguishes Franchise Tax Board v. Bracey (In re Bracey),
For these reasons, we disagree with the Board's argument that the Joyes' outstanding taxes "became payable" on the date their state tax return was due. As dеscribed above, those taxes "became payable" at the close of the year 2000 taxable year. Because the date the taxes became payable fell before the date the Joyes filed their bankruptcy petition, the taxes were properly discharged in their bankruptcy case.
B.
Having concluded that the Board is not entitled to summary judgment on statutory grounds, we are now required to address the parties' constitutional arguments. We must decide whether barring the Board from collecting the Joyes' outstanding taxes would constitute a denial of fundamental fairness in state proceedings guaranteed by the Constitution. In Mullane v. Central Hanover Bank & Trust Co.,
We assessed the constitutional adequacy of the official notice provided in bankruptcy proceedings in Matter of Gregory,
Gregory controls here. The Joyes filed their bankruptcy petition on March 7, 2001. The petition scheduled the Board as a priority creditor in the estimated amount *1080 of $10,000. The bankruptcy court then sent the Board official notice of the petition. The notice indicated that the meeting of crеditors would be held on April 19, 2001, and that the claims bar date for governmental claims was September 3, 2001. The parties do not dispute that this notice complied with the requirements of the Bankruptcy Code. Moreover, the Board does not contend that it did not receive this official notice. Therefore, like the creditor in Gregory, the Board received constitutionally adequate notice of its right to paymentin the form of the official notice mandated by the Bankruptcy Codeand it ignored the Joyes' bankruptcy proceeding "at its peril." Gregory,
The Board argues that even though it received this official notice, it could not determine the Joyes' actual tax liability until after October 15, 2001 because California's income tax system relies on taxpayers to assess how much they owe and inform the Board of that amount through a tax return. But this does not change the fact that the Board received actual notice of the Joyes' bankruptcy petition, which had scheduled the Board as a priority creditor for an estimated $10,000. Although this estimate was below the actual amount owed, the estimate certainly put the Board on notice that it may be entitled to some amount of payment from the Joyes' Chapter 13 estate. Cf. In re Coastal Alaska Lines, Inc.,
Moreover, as the Joyes correctly point out, if the Board had doubts about the tax estimate, it could have either requested an extension of time in which to file a claim, or filed an estimated claim in any amount, and then sought an amendment of that claim prior to the distribution. See, e.g., Lompa v. Price (In re Price),
Our decision in Manufacturers Hanover v. Dewalt (In re Dewalt),
Similarly, Ellett v. Stanislaus,
Finally, we address the district court's observation that recent amendments to the Bankruptcy Code evidence Congress' concern that situations like this case "could result in the denial of fundamental fairness to taxing authorities." These amendments were enacted in 2005, and were therefore inapplicable at the time the Joyes filed their bankruptcy petition. In Gardenhire v. IRS (In re Gardenhire),
III.
In conclusion, we hold that the Joyes' outstanding taxes for the year 2000 were properly discharged pursuant to 11 U.S.C. § 1328(a). Those taxes do not give rise to a post-petition claim under 11 U.S.C. § 1305(a)(1); therefore, the Board cannot rely on that provision to save its claim to these taxes from discharge. We also hold that the Board received constitutionally adequate notice of its right to payment on these outstanding taxes. Thus, barring the Board from collecting these taxes would not constitute a denial of fundamental fairness.
We acknowledge that the Board has the unenviable task of maintaining complete and accurate records for the millions of taxpayers in the State of California. But we are not at liberty to rework the Bankruptcy Code in order to lighten its burden. The Joyes did all that was required of them to provide the Board with notice of their tax liabilities. Accordingly, we reverse the summary judgment of the district court, and remand this case for proceedings consistent with this opinion.
REVERSED and REMANDED.
GRABER, Circuit Judge, dissenting:
I respectfully dissent.
Shelli Renee and Teresa M. Joye concede that, if their outstanding taxes for 2000 gave rise to a post-petition claim, the taxes would survive their discharge in bankruptcy. Under 11 U.S.C. § 1305(a)(1), the government may file a proof of claim "for taxes that become payable to a governmental unit while the сase is pending." The question, then, is whether the taxes in this case "bec[a]me payable" *1082 while the Joyes' bankruptcy case was pending.
As the majority acknowledges, the term "payable" in this statute is ambiguous. See maj. op. at 1074-76. "Payable" could mean "calculable" or "fixed," or it could mean "must be paid now" or "legally enforceable." I would read it, as did the Fifth Circuit, to mean "must be paid now" or "legally enforceable." United States v. Ripley (In re Ripley),
First, the fundamental purpose of this particular subsection is to permit governmental units to collect taxes as part of a bankruptcy plan. The Bankruptcy Code is concerned primarily with pre-petition debts, as a bankruptcy plan attempts to release the debtor "from pre-petition debts so that she can be given a `fresh start.'" Boeing N. Am., Inc. v. Ybarra (In re Ybarra),
Our task in construing a statute is to discern congressional intent. See Dole v. United Steelworkers of Am.,
The majority opinion is also flawed because it equates § 1305(a)(1) with § 502(i), maj. op. at 1076, even though those sections employ substantially different formulations. Section 1305(a)(1) pertains to "taxes that become payable," while § 502(i) refers to a "claim" that "arise[s]." A "claim" is not the same as "taxes," and a claim for taxes may "arise" before it "become[s] payable." When interpreting statutes, we presume that Congress meant to convey different concepts when it used different words. See, e.g., SEC v. McCarthy,
Second, because of the importance of national uniformity in administering the Bankruptcy Code, we should interpret § 1305(a), if possible, the same way as our sister circuits have interpreted it. As noted, the Fifth Circuit reads the statute as I do.
The majority relies heavily on a Bankruptcy Appellate Panel ("BAP") case from the Tenth Circuit, Dixon v. IRS (In re Dixon),
Third, the majority's view assumes that a taxpayer can do nothing to аlter her tax obligations between January 1 and April 15. That assumption is not accurate. A taxpayer may, for example, contribute to an Individual Retirement Account ("IRA") between January 1 and April 15, 2009, and deduct that contribution from her 2008 income when she files her 2008 tax return, as long as she specifies that the contribution is to be attributed to 2008. See 26 U.S.C. § 219(a), (f)(3) (noting that deductible contributions can be made up to the date the tax return is due); State of California Franchise Tax Board Publication 1005, Pension and Annuity Guidelines 4 ("The California Treatment of IRAs is generally the same as the federal treatment."). So her tax liability cannot be truly "fixed" or "calculable" until April 15, because she can alter her income (for tax purposes) until that date each year.
Fourth, as the majority recognizes, we turn to state law to determine whether the Joyes' taxes becamе payable under California law during the pendency of their bankruptcy case. Maj. op. at ___; see Raleigh v. Ill. Dep't of Revenue,
For these reasons, I would hold that, under 11 U.S.C. § 1305(a)(1), the Joyes' 2000 taxes were post-petition. Accordingly, I would affirm the decision of the district court.
NOTES
[1] The dissent faults us for "equat[ing]" section 1305 with section 502(i) because the former refers to "taxes that become pаyable," whereas the latter refers to a "claim" that "arise[s]." However, the phrase "taxes that become payable" in section 1305 defines one type of post-petition "claim," so the two provisions are more alike than the dissent asserts. 28 U.S.C. § 1305(a). Furthermore, our reliance on "scholarly interpretations," which harmonize these two provisions, is but a straightforward application of the well-established canon of statutory interpretation in pari materia, that similar provisions in the same statute should be interpreted in a similar manner unless legislative history or purpose suggests material differences. Erlenbaugh v. United States,
Notes
[2] The dissent argues that the narrower definition of "payable" more accurately reflects congressional intent because it would enable tax collection in this case, whereas the broader definition we adopt prevents collection. However, as discussed above, the relevant statutory scheme and legislative history of section 1305 evince a specific congressional intent to allow post-petition claims for those tax obligations that were incurred while a bankruptcy petition is pending. To take the dissent's approach would be to ignore this legislative directive in favor of a general congressional preference for tax collection, unmoored from the particular provision at issue.
[3] We acknowledge that our decision creates a circuit split with the Fifth Circuit. Respectfully, however, we are not bound by its decision. To the extent that the dissent argues that we are also not bound by the Tenth Circuit Bankruptcy Appellate Panel's decision in Dixon, we agree. Nonetheless, we conclude that the bankruptcy panel's analysis is persuasive, and adopt its interpretation as our own for the reasons discussed in this opinion.
[4] The dissent argues that our holding "assumes that a taxpayer can do nothing to alter her tax obligations between January 1 and April 15." But we assume nothing of the sort. There may be a case where, as the dissent describes, "[a] taxpayer ... contribute[s] to an Individual Retirement Account (`IRA') between January 1 and April 15, 2009, and deduct[s] that contribution from her 2008 income when she files her 2008 tax return." That case, however, is not before us. There is no evidence, or even allegation, that the Joyes engaged in transactions, which significantly altered their year 2000 tax liability after the close of the tax year.
[1] Moreover, in Dixon, the agency conceded that the claim was prepetition.