United States Bankruptcy Appellate Panel FOR THE EIGHTH CIRCUIT

_______________ No. 97-6010

_______________ In re: * * R. EUGENE JANSSEN and EUNICE * JANSSEN, *

Debtors. * * Appeal from the United R. EUGENE JANSSEN and EUNICE * States Bankruptcy Court JANSSEN, * for the Northern District * of Iowa Plaintiff-Appellees, * * v. * * UNITED STATES OF AMERICA, * * Defendant-Appellant. *

_______________ Submitted: September 18, 1997 Filed: October 24, 1997

_______________ Before KOGER, Chief Judge, HILL, and DREHER, Bankruptcy Judges.

_______________ WILLIAM A. HILL, Bankruptcy Judge:
The Internal Revenue Service (“IRS”), through the Unite d States, appeals from a judgmen t in favor of the debtors, R. Eugene Ja nssen and Eunice Janssen (“Janssens”). The bankruptcy cour t permitted avoidance of an IRS tax lien pursuant to Section 545(2) of the Bankruptcy Code. The court further held that the IRS lien did not reach property held in the name of REJ Farm Enterprises , Inc. (“REJ”), a corporation wh olly owned by the Janssens. For the
reasons set forth below we reverse, in part, and affirm, in par t the rulings of the bankruptcy court.2 I The Janssens formed REJ as an Iowa corporation on December 2 7, 1983. A t that time, they personally held warranty deeds to nin e pa rcels of real property located in Woodbury County, Iowa , consisting of both farmland and their homestead. On January 2, 1984, the Janssens transferred by quitclaim de ed their entire interest in the nine parcels of real property, as well as all interest in their farm machinery and livestock, to REJ, in exchange for stock in the corporation. Although they retained no residual interest in any of th e transferred property, the Janssens cont inued to live on the homestead. Also on January 2, th e Ja nssens, as directors of REJ, called its first organizationa l meeting, in the course of which R. Eugene Janssen was electe d president and treasurer, Eunic e Janssen was elected secretary, and the Janssen ’s son, Darloe Janssen, was elected vice-president. On December 27, 1985, the Jans sens amended their timely filed federa l income tax returns for the tax years of 1980 and 1981 t o show previously unreported income. On February 10, 1986, the IRS assessed the Janssens’ tax lia bility for the tax years of 1980 and 1981 at $275,359.22 and $140,1 57.98, respectively. On February 9, 1987, the IRS filed a Notice of Federal Tax Lien Under Interna l Revenue Law with the Register of Deeds for Woodbury County against the J anssens in the amount of $245,725.38. The IRS renewed th e notice on February 16, 1992. In 1992, the IRS filed a complaint in the United State s Distri ct Court for the Northern District of Iowa against th e Janssens, their son Darloe, and REJ, in order to establish t hat REJ

was eff ectively the alter ego of the Janssens, as well as t o foreclose the federal tax liens on property formerly owned by the Janssens but which was subsequ ently titled in REJ. On October 28, 1993, the Janssens filed a pet ition for relief under Chapter 11 of the United States Bankruptcy Code. At the time of their filing,3

the Ja nssens’ only non-exempt assets consisted of money and RE J stock. On Novembe r 15, 1993, the IRS filed a Proof of Claim fo r Internal Revenue Taxes in the amount of $592,371.50, for the unpaid federal income tax, statutory penalties, and accrued interest owed by t he Janssens as of the petition date. On April 14, 1995, th e Jansse ns commenced this adversary proceeding against the IRS, i n which they disputed both the a mount and validity of the IRS’ proof of cla im, and additionally sought, inter alia, to determine th e validityof, and to avoid, the lien claimed by the IRS on thei r money and REJ stock. The IRS answer to the Janssens’ complain t raised an “affirmative defense ,” to wit, that REJ is the alter ego of the debtors, and further sought a determination that the IR S claim was both valid and wholly secured by the federal tax lie n which attached to all property and rights to property held by the debtors in their own name and in the name of REJ, as their alleged alter ego. The IRS did not, h owever, take any steps to make REJ a party. Both the Janssens and the IRS moved for summary judgment. T he Janssens sought a judgment in their favor avoiding the IRS lien on their REJ stock and their mone y under both the Bankruptcy Code, 11 U.S.C. § 545(2), and the Internal Revenue Code, 26 U.S.C. § 632 3(b)(1). They asserted that Section 545(2) of the Bankruptc y Code permits a trustee, and ac cordingly a debtor in possession, to

avo id any statutory lien that is not enforceable at th e commencement of a case against a bona fide purchaser. They further

ass erted that Internal Revenue Code Section 6323(b)(1) void s statutory tax liens asserted against purchasers of securities and that t hey, as debtors in possession, met the requirements o f “pur chaser,” as defined in Internal Revenue Code Sectio n 6323(h)(6). The IRS responded that the Janssens did not qua lify as purchasers within the meaning of Section 6323(h)(6) even though4

they may have qualified as bon a fide purchasers within the meaning of Section 545(2). Alternatively, the IRS asserted that REJ wa s the alter ego of the Janssens and, accordingly, the assets of REJ were assets of the estate, not of the Janssens. On August 21, 1996, the bankruptcy court issued its Partia l SummaryAdjudication, in which it made two rulings which are no w before us on this appeal. First, as to the matter of the al ter ego status of REJ, the court, rely ing in part on Zenith Radio Corp. v. Hazeltine Research, Inc. , 395 U.S. 100, 110-11, 89 S. Ct. 1562 , 1569-70 (1969), held that “[a]s a matter of law, the alter eg o claim is not a defense to the claims raised by the Janssens. It is a direct claim against the corporation. Moreover, the IRS cannot obtain an enforceable judgment against REJ in this adversar y proceeding because REJ is not a party.” On this basis, and as to this m atter, the court granted the Janssens’ motion for partia l summary judgment and struck as insufficient the alter ego defense of the IRS. Second, as to the issue of lien avoidance, the court found t he Janssens’ money and their shares of REJ stock to be securitie s within the meaning of 26 U.S.C. § 6323(a), and found the pur chasers of these securities to be protected from the enforcement of ta x liens against them under 26 U.S.C. § 6323(b)(1)(A). The cour t found the Janssens, as Chapter 11 debtors in possession, to b e invested with the avoidance powers of a trustee, pursuant to 1 1 U.S.C. § 1107(a), including the power to avoid statutory lien s pursuant to 11 U.S.C. § 545(2). Relatedly, the court determine d that a federal tax lien is a statutory lien which is subject t o avoidance under Section 545(2). The court then weighed the Janssens’ contention that the tax lien which attached to the sto ck in REJ and the money is avoidable because it would not be enforc eable against hypothetical bona fide purchasers, against the argument by the IRS that the lien is not5

avo idable because the bankruptcy trustee’s status as a bona fid e purchaser under 11 U.S.C. § 545(2) is not equivalent to status as

a “purchaser” under 26 U.S.C. § 6323. In doing so, the cour t considered case law which dire ctly addresses this issue: Askanase

v. Unite d States (In re Guyana Dev. Corp.) , 189 B.R. 393 (Bankr

. S.D. Tex. 1995), which found that “the trustee as a bona fid e purchaser under 11 U.S.C. § 545 meets the requirements of a purchaser under [26 U.S.C. §] 6323,” id. at 397, and United States v. Hunter (In re Walter) , 45 F.3d 1023 (6th Cir. 1995), whic h found that t he status of “hypothetical bona fide purchaser” under th e BankruptcyCode did not rise to that of “purchaser” under th e Internal Revenue Code, id. at 1030. The court was persuaded by the reasoning of Guyan a Development , and made the following conclusions in accordanc e therewith:

The tru stee acquires the highest status as a bona fide pu rchaser that there may be under the law. In r e Rench , slip op. at 14. I see no reason to trea t trus tees as having given nominal or inadequat e consideration in their capacity as bo na fide purchasers solely because minimal consideration is sufficient, in som e circumstances, to meet a definition of ‘value. ’ The co urt is also persuaded by the Janssen’s argumen t that the good faith element of bona fide purchase r status implies adequate consideration. . . . I co nclude that a trustee’s status as a bona fid e purchaser, and thereby the Janssen’s status as debtorsin-possession with all powers of a trustee, i s sufficient to avoid the lien on the REJ stock.
On January 16, 1997, after having resolved remaining issues, th e bankruptcy court entered a fin al judgment overruling the Janssens’ objection to the IRS’ claim, and ordering that the IRS’ lienon the Janssens ’ money and REJ stock be avoided pursuant to 11 U.S.C. § 545(2).Rule 8013 of the Federal Rules of Bankruptcy Procedure 1 reads as follows:

On an appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy judge’s judgment, order, or decree or remand with instructions for further proceedings. Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.

F ED . R. B ANKR . P. 8013.
6 II Two issues have been presented for our consideration on this appeal: first, whether the ba nkruptcy court erred in equating the status of “bona fide purchaser” under the Bankruptcy Code, wit h that of a “purchaser” under the Internal Revenue Code, thereb y allowing t he debtors to avoid the federal tax lien of the IR S pursuant to 11 U.S.C. § 545(2) and 26 U.S.C. § 6323(b)(1)(A); and second, whether the bankruptcy court erred in holding that i t could not consider the alter ego sta tus of REJ without REJ’s presence as a party in this adversary proceeding.

III On a ppeal, the bankruptcy court’s findings of fact ar e reviewed for clear error and i ts legal determinations are reviewed de novo. O’Neal v. Southwest Missouri Bank of Carthage (In r e Broadview Lumber Co.) , 118 F.3d 1246, 1250 (8th Cir. 1997); Natkin & Co. v. Myers (In re Rine & R ine Auctioneers, Inc.) , 74 F.3d 848, 851 (8th Cir. 1996); see also F ED . R. B ANKR . P. 8013. 1 The facts as determined by the bankruptcy court in this matt er
are not in dispute. We turn to the legal issues which have bee n presented to us.The term “security” is defined under Internal Revenue 2 Code Section 6323(h)(4) as meaning,

any bond, debenture, note, or certificate or other evidence of indebtedness, issued by a corporation or a government or political subdivision thereof, with interest coupons or in registered form, share of stock, voting trust certificate, or any certificate of interest or participation in, certificate of deposit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to
7 IV Bankruptcy Code Section 545(2) grants the bankruptcy trustee the power to “avoid the fixing of a statutory lien on property of the debtor to the extent that such lien . . . is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser that purchases such property at the time o f the commencement of the case, whether or not such a purchase r exists . . . .” 11 U.S.C. § 5 45(2). Bankruptcy Code Section 1107 del ineates the “rights, powers, and duties” of a debtor i n possession, and provides in relevant part that “a debtor i n possession shall have all of the rights . . . and powers, an d shall performall the functions and duties . . . of a trustee . . . . ” 11 U.S.C. § 1107(a). These sections, in tandem, allocate th e bankruptcy trustee’s avoidance powers as a hypothetical bona fide purchaser, to a debtor in possession. Internal Revenue Code Section 6323(b)(1)(A) provides that , “[e]ven though notice of a lien imposed by section 6321 has bee n filed, such lien shall not be valid . . . with respect to a security . . . as against a purchaser of such security who at the time of purchase did not have actual notice or knowledge of th e existence of such lien . . . .” 26 U.S.C. § 6323(b)(1)(A). Thus,

a “purchaser” is empowered under Internal Revenue Code Sectio n 6323(b)(1)(A) to avoid the fixing of a Section 6321 lien o n securities. 2or purchase, any of the foregoing; negotiable instrument; or money. 26 U.S.C. § 6323(h)(4).

Section 6321 provides: 3 If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. 26 U.S.C. § 6321.

Section 6322 provides: 4 Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time. 26 U.S.C. § 6322.

Section 6323(a) provides that, “The lien imposed by 5 section 6321 shall not be valid as against any purchaser, holder of security interests, mechanic’s lienor, or judgment lien 8 The IRS possesses a statutory tax lien on money and REJ stock whic h the Janssens owned at the time of the filing of thei r bankru ptcypetition, pursuant to Internal Revenue Code Sectio n 6321. The money

and stock, which are the subjects of the Section 3 6321 lien, constitute securiti es within the definition of Internal Revenue Code Section 6323(h)(4). The Section 6321 lien arose onFebruary 10, 1986, pursuant to Int ernal Revenue Code Section 6322, upon the IRS’s assessment o f 4 the Janssens’ tax liability for their deficient 1980 and 1981 tax retu rns. Pursuant to Internal Revenue Code Section 6323 , subsections (a) and (f)(1)(A)(i), the lien bec ame valid as against 5creditor until notice thereof which meets the requirements of

subsection (f) has been filed by the Secretary.” 26 U.S.C. § 6323(a). Subsection (f)(1)(A)(i), in turn, provides as to real property that, “The notice referred to in subsection (a) shall be filed [i]n the case of real property, in one office within the State (or the county, or other governmental subdivision), as designated by the laws of such State, in which the property subject to the lien is situated. . . .” 26 U.S.C. § 6323(f)(1)(A)(i).

9 purchasers, holders of security interests, mechanic’s lienors and judgment lien creditors upon the IRS’ filing of its Notice o f Federal Tax Lien Under Internal Revenue Law with the Register o f Deeds for Woodbury County, Iowa, on February 9, 1987. The Janssens, as debtors in po ssession, possess the status of “hypothetical bona fide purchasers” under Bankruptcy Code Section 545(2). They contend that this status is sufficiently equiva lent to that of a “purchaser” under Internal Revenue Code Sectio n 6323( h)(6), so as to enable them to avoid the IRS’ Section 632 1 lien und er 26 U.S.C. § 6323(b)(1) and 11 U.S.C. § 545(2). Th e nature of their avoidance power in this respect, if indeed an y exists, turns entirely upon the scope and meaning of these tw o terms. “B ankruptcy is a creature of statute [and] [a]pplications t o the bankruptcy code must, therefore, be consistent with lon g establishedcanons of statutory construction.” Windsor on the Rive r Assocs., Ltd. v. Balcor Real Estate Fin., Inc. (In re Windsor on th e River Assocs., Ltd.) , 7 F.3d 127, 130 (8th Cir. 1993). Th e Bankruptcy Code is silent as to the meani ng of bona fide purchaser. “Unless otherwise defined, words will be interpreted as taking thei r ordinary, c ontemporary, common meaning.” Perrin v. United States , 444 U.S. 37, 42, S. Ct. 311, 314, 62 L.Ed.2d 199 (1979); accor d United S tates v. Brummels , 15 F.3d 769, 773 (8th Cir. 1994) ; Groseclose v. Bowen , 809 F.2d 502, 505 (8th Cir. 1987). TheSee Askanase v. United States (In re Guyana Dev. 6 Corp.) , 189 B.R. 393, 397 (Bankr. S.D. Tex. 1995) (“This court . . . finds that the trustee as a bona fide purchaser under 11 U.S.C. § 545 meets the requirements of a purchaser under section 6323.”); In re Janssen , Bankr. No. 93-51776XS, 1996 WL 604226, at *8 (Bankr. N.D. Iowa Aug. 21, 1996) (“I conclude that a trustee’s status as a bona fide purchaser, and thereby the Janssens’ status as debtors-in-possession with all the powers of 10 ordinary meaning of bona fide purchaser is generally understood to be “‘[o] ne who has purchased property for value without notice o f any defects in the title of the seller.’” United States v. Hunter (In re Walt er) , 45 F.3d 1023, 1030 (6th Cir. 1995) (quoting B LACK’S L AWD ICTIONARY1 77 (6th ed. 1990)); accord Internal Revenue Service

v. Diper na , 195 B.R. 358, 361 (E.D.N.C.1996); United States v

. Battley

(In re Berg) , 188 B.R. 615, 619 (B.A.P. 9th Cir. 1995); cf

. Carrens v. Carrens (In re Carrens) , 198 B.R. 999, 1006 (Bankr

. M.D .Fla. 1996) (“It is generally established that a bona fid e purchaser for purposes of 11 U.S.C. § 545(2) is a purchaser wh o takes for value without notice or knowled ge of any adverse claim to the property.”). The In ternal Revenue Code defines the term “purchaser” fo r pur poses of Section 6323(b)(1)(A), under Internal Revenue Cod e Section 6323(h)(6), as “a person who, for adequate and ful l considerationin money or money’s worth, acquires an interest (othe r than a lienor security interest) in property which is valid under local law against subsequent purchasers w ithout actual notice.” 26 U.S.C. § 6323(h)(6). A survey of recent case law addressing the interplay betwee n the bona fide purchaser status contemplated under the Bankruptc y Cod e and the purchaser status defined under the Internal Revenu e Cod e, for purposes of lien avoidance under Internal Revenue Cod e Section 6323 and Bankruptcy Code Section 545(2), reveals a variance of opini on. Two courts, including the bankruptcy court in thi s matter, equate the two terms so as to provide for lien avoidance. 6a trustee, is sufficient to avoid the lien on the REJ stock.”).
See Battley v. United States (In re Berg) , No. 95- 7 36205, 1997 WL 461564, at *2 (9th Cir. Aug. 14, 1997) (“The Trustee [as bona fide purchaser] does not qualify for the exception provided by § 6323(b)(1).”), aff’g 188 B.R. 615 (B.A.P. 9th Cir. 1995); United States v. Hunter (In re Walter) , 45 F.3d 1023, 1030 (6th Cir. 1995) (“Because a bona fide purchaser is not necessarily a purchaser for purposes of Internal Revenue Code § 6323(b)(2), it follows that a trustee standing in the shoes of a hypothetical bona fide purchaser does not fall within the protection of this statute.”); Internal Revenue Service v. Diperna , 195 B.R. 358 (E.D.N.C. 1996) ( “Although the trustee steps into the shoes of a bona fide purchaser, this is all he or she does; the court will not assume that the trustee has characteristics beyond that which a hypothetical bona fide purchaser would have.”); United States v. Weissing , No. 93-1507- CIV-T-17A, 1995 WL 579928, at *5 (M.D. Fla. July 20, 1995) (“This Court . . . distinguishes between a purchaser . . . and a trustee standing in the shoes of a bona fide purchaser. . . . trustees may not use the exceptions created under 26 U.S.C. § 6323 to escape federal tax liens.”); Straight v. First Interstate Bank of Commerce (In re Straight) , 200 B.R. 923, 929-30 (Bankr. D. Wyo. 1996) ( “A trustee standing in the shoes of a bona fide purchaser is not the purchaser without knowledge that § 6323 is intended to protect.”) aff’d ,, 207 B.R. 217 (B.A.P. 10th Cir. 1997); Cleary v. United States (In re Cleary) , 210 B.R. 741, 744-45 (Bankr. N.D. Ill. 1997) (“[A] trustee standing in the shoes of a hypothetical bona fide purchaser who has been deemed to have ‘purchased’ the debtor’s estate for ‘value’ will not find protection under § 6323 where a purchaser must have paid ‘adequate and full consideration.’”); Mitchell v. United States (In re Mitchell) , No. 95-31553-B-11, 1997 WL 265716, at *3 (Bankr. E.D. Cal. Jan.17, 1997) (“[T]he status of a trustee as a ‘bona fide purchaser’ for purposes of 11 U.S.C. § 545(2) may not be used in connection with 26 U.S.C. § 6323(b) lien voidance rights.”); In re Linn , No. 96-34634-BKC-SHF, 1997 WL 547844, at *2 (Bankr. S.D. Fla. Aug. 26, 1997) (“This Court . . . interprets Congress’ definition of ‘purchaser’ in Section 6323 as a different entity than a bona fide purchaser as contemplated in Section 545 of the Bankruptcy Code. Because the Trustee does not have the characteristics of a ‘purchaser’, she cannot avoid the IRS lien on the Debtor’s property.”); Carrens v. United States
11 The vast majority of courts, however, including the only two circui t courts to have ruled on this issue, do not equate the meaning of th e terms, but rather, differentiate strongly between them. Our own 7(In re Carrens) , 198 B.R. 999, 1006 (Bankr. M..D. Fla. 1996)

(“[T]he Bankruptcy Code does not grant hypothetical possession or other hypothetical characteristics to a bona fide purchaser. Since a purchaser must have these characteristics to satisfy the specific requirements of 26 U.S.C. § 6323(b), the Trustee may not avoid the lien under 11 U.S.C. § 545(2).”).
12 analysi s of this issue leads us to conclude that the reasoning o f these latter courts is correct. Sp ecifically, on a purely definitional basis, we find i t untenabl e to equate the meaning of the term “bona fide purchaser ” under the Bankruptcy Code with that of “purchaser” under th e Internal Revenue Code, for the two are not one and the same. As th e Cour t of Appeals for the Sixth Circuit noted in United States v

. Hunter (In re Walter) , 45 F.3d 1023 (6th Cir. 1995):

‘[V]alue’ is a much lower standard than ‘adequate and full consideration in m oney or money’s worth.’ Bec ause a bona fide purchaser is not necessarily a purchaser for purposes of Internal Revenue Code § 6323(b)(2), it follows that a trustee standing in the shoes o f a hypothetical bona fide purchaser does no t fall within the protection of this statute.

Id. at 1030 (footnotes omitted). Moreover, equating the terms b ecomes even less palatable when considered in light of the substantial policy implications i nherent to the Internal Revenue Code, generally, and thus, to the coda l provisions at issue on this appeal. As the Ninth Circuit st ated in Battley v. United States (In re Berg) , 121 F.3d 535 (9th Cir

. 1997):
‘[T]axes are th e lifeblood of government.’ Bull

v. Un ited States , 295 U.S. 247, 259, 55 S. Ct. 695 , 699, 79 L.Ed. 1421 (1935). A court will not lightl y ass ume that Congress intended to subordinate th e ef ficacyof the federal tax laws to othe r consi derations. Here § 6321 is general an d peremptory. The exceptions permitted under § 6323 areThe Eighth Circuit addressed a related issue in its 8 decision in Drewes v. Carter (In re Woods Farmers Coop. Elevator Co.) , 946 F.2d 1411 (8th Cir. 1991). In Woods Farmers , the court addressed the question of whether the status of a trustee as a hypothetical bona fide purchaser under Bankruptcy Code Section 13 careful lycrafted and narrowly limited. There is n o reference whatsoever to a particular exception for a trustee in bankruptcy. Givin g §§ 6321 and 6323 the dominant positio n the ydeserve, we hold that the powers conferred b y Bankrup tcyCode § 545(2) on the Trustee as a hypothetical [b ona fide purchaser] are not sufficient to satisfy the conditions of [Internal Revenue Code ] § 63 23. As the Sixth Circuit has held, a good fait h purchaser is not necessarily a purchaser ‘for adequate and full consideration.’ In re Walter , 45 F.3d a t 1030. The Trus tee does not qualify for the exception provided by §6323(b)(1).”

Id. at 537. Each of these considerations, in isolation, leads us to conclud e that the debtors must not prevail upon this issue. However, our determination is additionally supported b y reasons quite apart from the definitional and policy conside rations which factor into our independent analysis of this issue. Th e United States Bankruptcy Appellate Panel of the Ninth Circui t presaged our instant concerns in United States v. Battley (In re Berg) , 188 B.R. 615 (B.A.P. 9th Cir. 1995), when it stated that,

Unl ike the bankruptcy judge, we find th e interpretation of Internal Revenue Code sectio n 6323(b) by the Sixth Circuit to be both reaso nable and authoritative. Consistent application of federal law is an important goal, and a lower federal cou rt should onl ydeviate under compelling circumstances from th e interpretation placed on a federal statute by the only Circuit to have spoken [thereon]. . . .

Id. at 620. This issue is one of first impression for us, and one upo n which the Court of Appeals for the Eighth Circuit has not ye t spoken. Absent precedential directive from the Eighth Circuit,

8545(2), and as further defined under North Dakota law, was

coterminous with that of a buyer in the ordinary course of business, as defined under North Dakota law, for the purposes of statutory lien avoidance under N.D. C ENT . C ODE § 60-02-25.1 (1985), which provided that:

The lien created under this section shall be preferred to any lien or security interest in favor of any creditor of the warehouseman regardless of the time when the creditor’s lien or security interest attached to the grain. The lien created by this section is discharged as to grain sold by the warehouseman to a buyer in the ordinary course of business.
Id. Noting that the status of a buyer in the ordinary course of business required “something more than [that required of] a bona fide purchaser,” the court disallowed the trustee, as a hypothetical bona fide purchaser, to avoid the statutory liens there in question under Bankruptcy Code Section 545(2). 946 F.2d at 1414. 14 and very mindful of the purpose and placement of the Bankruptc y Appellate Panels within the fr amework of the United States Courts, we are not therefore indiffere nt to the only decisions rendered on this issue by other Circuit Courts of Appeals. Indeed, in l ight of their unity of approach in addressing this matter, we afford them significant precedential weight. Therefore, after careful consideration of the claims between the parties in the instant mat ter, the law upon which they rely to supp ort their respective arguments, and the case law concernin g this relatively novel issue, we will follow the well-reasone d decision s of the only other circuit courts to have ruled on thi s iss ue. We conclude, in accordance with the decisions rendered b y the Courts of Appeals for the Sixth and Ninth Circuits , respectively, in Walter and Ba ttley , as discussed herein, that the Jans sens’ status as hypothetical bona fide purchasers under th e Bankruptcy Code does not rise to the level of that of a purchaser, as defined under Internal Revenue Code Section 6323(h)(6), s o as toWe note that, by reason of our prior holding concerning 9 the validity of the IRS lien, this issue has less significance. As the IRS lien on the REJ stock cannot be superseded, the IRS will be able to recover REJ assets by enforcing its lien.

The Eighth Circuit examined the alter ego doctrine in 10 the context of bankruptcy in Constellation Dev. Corp. v. Dowden (In re B.J. McAdams, Inc.) , 66 F.3d 931(8th Cir. 1995), cert. denied , --- U.S. ----, 116 S. Ct. 2546, 135 L.Ed.2d 1067 (1996). The Eighth Circuit’s discussion on this matter provides background context to the claims of the parties before us :

‘[A] bankruptcy court has full power to inquire into the validity of any claim asserted against the estate and to disallow it if it is ascertained to be without lawful existence. Pepper v. Litton , 308 U.S. 295, 305, 60 S. Ct. 238, 244, 84 L.Ed. 281 (1939). . . . Under the alter ego doctrine, the legal fiction of the separate corporate entity may be rejected in 15 permit them to avoid the statutory tax lien of the IRS under 1 1 U.S.C. § 545(2) and 26 U.S.C. § 6323(b)(1)(A).

V The IRS next urges us to overturn the bankruptcy court’ s ruling below which dismissed t he “affirmative defense” of the IRS,
thereb ypreventing the IRS lien from reaching the assets th e Janssens had transferred to RE J. The bankruptcy court’s reasoning

was twofold. First, the court held that as a matter of law, th e alter ego claim was not an affirmative defense, but rather a direct claim against the corporation. Second, the court reasoned t hat the
IRS could not obtain a judgment against REJ in this adversar y proceeding because REJ was not made a party to the adversar y proceeding. On both counts, the bankruptcy court was correct. 9 First, the claim that REJ is the alter ego of the Janssens 10the case of a corporation that (1) is controlled by another to the extent that it has independent existence in form only, and (2) is used as a subterfuge to defeat public convenience, to justify wrong, or to perpetrate a fraud. Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Management, Inc. , 519 F.2d 634, 638 (8th Cir. 1975). ‘The essence of the [alter ego] test is whether, under all the circumstances, the transaction carries the earmarks of an arm’s length bargain. If it does not, equity will set it aside.’ Pepper , 308 U.S. at 307, 60 S. Ct. at 245.
Id. at 936-37.

The IRS cites In re Velis , 133 B.R. 497 (D.N.J. 1991) 11 and United States v. Charnock (In re Charnock) , 97 B.R. 619 (M.D. Fla. 1989) for the proposition that Section 541 renders property of a corporation wholly owned by a debtor property of the debtor and does not require a separate adjudication on an alter ego claim. Neither case stands for this proposition. Indeed, both support the notion that a separate action which includes the corporation is a necessary prerequisite to piercing the corporate veil. 16 so as to allow creditors of th e Janssens to reach corporate assets
to satisfy their claims was not an affirmative defense. A n affirm ative defense is a “matter asserted by a defendant which , assuming the complaint to be true, constitutes a defense to it. ”
B LACK’S L AWD ICTIONARY60 (6th ed. 1990). In this case, the Jans sens’ complaint objected to the amount and validity of the IRS’s clai m and sought to avoid any tax lien the IRS might have against th e
Janssens ’ stock and the money. Regardless of whether REJ is th e alter ego of the Janssens, we fail to see how such a determination

wou ld constitute a defense to either of the Janssens’ claims

. Accordingly, the IRS’ alter ego claim was properly character ized by the bankruptcy court as being a separate claim against REJ. 1117

Second, the bankruptcy court correctly held that no suc h separate claim could be made against, or be binding upon, REJ i n its absence as a party to this action. For this, we begin with an examination of Zenith Radio Co rp. v. Hazeltine Research, Inc. , 395
U.S. 100, 89 S. Ct. 1562, 23 L.Ed.2d 129 (1969), which th e bankruptcycourt cited in support of its ruling that it lacke d jurisdiction over REJ. In this decision, the Supreme Cour t addressed circumstances in which Zenith Radio Corporatio n (“Zenith”) had won, in part, a judgment for treble damages in the

amoun t of $35,000,000.00 against its former patent licenso r
Haz eltine Research, Inc., (HRI), as well as against HRI’s wholl y owned subsidiary Hazeltine Corporation (Hazeltine), despite th e fact that “Hazeltine was not named as a party, was never ser ved and did not formally appear at the trial.” Id ., 395 U.S. at 110 , 89 S. Ct. at 1570. Addressing this failure to name Hazeltine as a party
and to serve it with process, the Court made the followin g determinations:

The Co urt of Appeals was quite right in vacating th e jud gments against Hazeltine. It is elementary tha t one is not bound by a judgment in personam resultin g fro mlitigation in which he is not designated as a party or to which he has not been made a party b y ser vice of process. The consistent constitutiona l rule has been t hat a court has no power to adjudicate a p ersonal claim or obligation unless it ha s jurisdiction over the person of the defendant.

Id. , 395 U.S. at 110, 89 S. Ct. at 1569; cf. Class Plaintiffs v. City of Seattle , 955 F.2d 1268, 1277 (9th Cir.) (citing Insurance18

Corp. of Ireland v. Campagnie des Bauxites de Guinee , 456 U. S. 694, 702, 102 S. Ct. 2099, 2104, 72 L.Ed.2d 492 (1982), and Hansb erry v.
Lee , 311 U.S. 32, 41, 61 S. Ct. 115, 117, 85 L.Ed.2d 22 (1940) ) (“This general rule of constitutional fair play represents a

res triction on judicial power that flows from the due proces s guarantees of the fifth and fo urteenth amendments.”), cert. denied
sub nom. Hoffer v. City of Seattle , 506 U.S. 953, 113 S. Ct. 408, 121 L.Ed.2d 333 (1992), Id. at 1277. Pertinent to this appeal,
the Z enith Court went on to address the impact of the potentia l
alter ego status of the unnamed and unserved party upon th e jurisdictional question before it, as follows:

Per haps Zenith could have proved and the tria l cou rt could have found that HRI and Hazeltine wer e alt er egos; but absent jurisdiction over Hazeltine , that determinat ion would bind only HRI. If the alter ego is sue had been litigated, and if the trial cour t had decided that HRI and Hazeltine were one and th e same entity and that jurisdiction over HRI gave th e court jurisdiction over Hazeltine, perhaps Ha zeltine’s app earance before judgment with full opportunity t o con test jurisdiction would warrant entry of judgmen t against it. But that is not what occurred here.

Id. , 395 U.S. at 110, 89 S. Ct. at 1569-70. Under the facts at hand, REJ has not been named a party, has not been served with process, and has not made an appearance before the bankruptcy court or this P anel. Under Zenith and its progeny,

even had the bankruptcy court found REJ to be the Janssens alte r ego, that finding alone, absen t the court’s jurisdiction over REJ, would be binding only upon the Janssens, and not upon REJ. Id. ;19

Panther Pumps & Equip . Co. v. Hydrocraft, Inc. , 566 F.2d 8, 23 (7th Cir. 1977), cert. denied sub n om. Beck v. Morrison Pump Co., Inc. , 435 U.S. 1013, 98 S. Ct. 1887, 56 L.Ed.2d 395 (1978). Thus, w e conclude t hat the IRS may not, as it claims, reach the asset s titled in REJ in order to satisfy the individual tax liabili ties of the Janssens, for the simple r eason that REJ has not been named as a party in these proceedings.

VI ACCORDINGLY, the judgment in favor of the Janssens, permitti ng themto avoid the IRS lien on their money and REJ stock, i s REVERSED. In all other respects the judgement is AFFIRMED.

A true copy.

Attest:

CLERK, U.S. BANKRUPTCY APPELLATE PANEL FOR TH E EIGHTH CIRCUIT