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Foss, Walter E. v. U.S.
- Case NameIN THE MATTER OF BLISS COLLEGE, BANKRUPT; WALTER E. FOSS, TRUSTEE, Plaintiff v. UNITED STATES OF AMERICA THROUGH INTERNAL REVENUE SERVICE, Defendant.
- CourtUnited States District Court for the District of Maine
- DocketBankruptcy No. BK-72-520
- JudgeJOHNSON
- Parallel Citation77-1 U.S. Tax Cas. (CCH) P9379
- LanguageEnglish
- Tax Analysts Electronic Citation1977 UST 3-78
Foss, Walter E. v. U.S.
Gunnar Myrbeck, 844 Stevens Ave., Portland, Maine, Walter Foss, 415 Congress Ave., Portland, Maine, for plaintiff. John Burke, Internal Revenue Service, P. O. Box 1020, Augusta, Maine 04330, for defendant.
MEMORANDUM OF DECISION
The Trustee has objected to a claim of the Internal Revenue Service for unpaid federal taxes including withholding and F. I. C. A. taxes. The basis of the Trustee's objection is, first, that $4,833.46 has been paid and, second, that if not paid then the obligation is that of Casco bank and Trust Company and not an obligation of the Bankrupt.
The facts upon which the Trustee bases his objection are these: On April 28, 1972 Bliss College was indebted to the Internal Revenue Service in the amount of $4,833.46 for unpaid withholding and F. I. C. A. taxes for the first quarter of 1972. On either Friday, April 28, 1972, or on Monday, April 2nd, a Bliss College check for $4,833.46 was deposited with the Casco Bank & Trust Company to be forwarded to I. R. S. At the time of its deposit Bliss did not have sufficient funds on deposit in its checking account with Casco to cover its check.
Sometime after May 2nd Casco drew its own check for $4,833.46 and forwarded it to the Federal Reserve Bank of Boston. After its check had arrived at the Federal Reserve Bank, but before it had been deposited or forwarded to I. R. S., Casco Bank, presumably by telephone, requested that its check be returned. The Federal Reserve Bank returned the check to Casco. Casco, sometime between May 2nd and May 11th, dishonored Bliss College's check and returned it to Bliss for insufficient funds. The check has never been honored. Bliss College filed its voluntary Petition in Bankruptcy on August 31, 1972.
The Proof of Claim of I. R. S. includes the withholding and F. I. C. A. taxes referred to above.
The issues presented are:
(1) Did Bliss College's deposit of its $4,833.46 check
constitute payment of its tax liability?
(2) Did the actions of Casco Bank in drawing its own check
and forwarding it to the Boston Federal Reserve Bank release the
Bankrupt from liability for the tax?
The Court concludes that the deposit of Bliss's check, which was subsequently dishonored, did not constitute payment of Bliss's tax liability. Further, the Court concludes that Casco Banks' action did not release Bliss from liability for the tax.
Discussion
Title 26 U. S. C. Section 6311 provides:
"(a) Authority to receive.-It shall be lawful for
the Secretary or his delegate to receive for internal revenue
taxes, ... checks or money orders, to the extent and under the
conditions provided in regulations prescribed by the Secretary
or his delegate.
(b) Check or money order unpaid.
(1) Ultimate liability.--If a check or money order
so received is not duly paid, the person by whom such check or
money order has been tendered shall remain liable for the
payment of the tax ... and for all legal penalties and
additions, to the same extent as if such check or money order
had not been tendered.
(2) Liability of Banks and others.--If any
certified, treasurer's or cashier's check ... so received is not
duly paid, the United States shall, in addition to its right to
exact payment from the party originally indebted therefor, have
a lien for the amount of such check upon all the assets of the
bank or trust...."
The language of 26 U. S. C. Section 6311(b) seems to the Court to be clear and unambiguous. The person tendering a check or money order which is not duly paid shall remain liable for the payment of the tax.
The question of whether or not Casco may have created a liability in itself in the event I. R. S. chose to pursue the issue under 26 U. S. C. Section 6311(b)(2) is not before the Court and I express no opinion on the question. For an interesting discussion of 26 U. S. C. Section 6311, see U. S. v. Second National Bank of North Miami, 502 F.2d 535 (1974).
The Trustee attempts to invoke U. C. C. Section 4-302 [11 M. R. S. A. Section 4-302] claiming that because Casco Bank may have held Bliss' check beyond its midnight deadline (U. C. C. Section 4-104(h)) it somehow substituted itself for Bliss for liability for the tax and insulated Bliss for liability. This theory is without merit. Cases cited by the Trustee allowed recovery by the payee of the check and not by the drawer or the drawer's Trustee in Bankruptcy.
The Trustee's objection will be denied and the claim of I. R. S. will be allowed.
An appropriate Order will be entered today.
- Case NameIN THE MATTER OF BLISS COLLEGE, BANKRUPT; WALTER E. FOSS, TRUSTEE, Plaintiff v. UNITED STATES OF AMERICA THROUGH INTERNAL REVENUE SERVICE, Defendant.
- CourtUnited States District Court for the District of Maine
- DocketBankruptcy No. BK-72-520
- JudgeJOHNSON
- Parallel Citation77-1 U.S. Tax Cas. (CCH) P9379
- LanguageEnglish
- Tax Analysts Electronic Citation1977 UST 3-78
