Court Opinion

ID: 4217013
Source: CourtListenerOpinion
Date Created: 2017-11-01 20:01:40.888807+00
Date Added: 2024-06-11T07:47:44.552745
License: Public Domain

NOT FOR PUBLICATION                     FILED
                        UNITED STATES COURT OF APPEALS                    NOV 1 2017
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In the Matter of: BRENT THEODORE                  No.   15-35802
CHERNE; SHERYL LYNN CHERNE,
                                                  D.C. No. 1:14-cv-00356-EJL
                   Debtors,

------------------------------                    MEMORANDUM*

BRENT THEODORE CHERNE; SHERYL
LYNN CHERNE,

                   Plaintiffs-Appellants,

  v.

UNITED STATES OF AMERICA,
INTERNAL REVENUE SERVICE,

                   Defendant-Appellee.

                       Appeal from the United States District Court
                                 for the District of Idaho
                        Edward J. Lodge, District Judge, Presiding

                          Argued and Submitted October 4, 2017
                                   Portland, Oregon

Before: PAEZ and BEA, Circuit Judges, and LAMBERTH,** District Judge.

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
              The Honorable Royce C. Lamberth, United States District Judge for
the District of Columbia, sitting by designation.
      Brent T. Cherne and Sheryl L. Cherne appeal the district court’s judgment

affirming the bankruptcy court’s decision on summary judgment. The bankruptcy

court, overruling the Chernes’ objection to a proof of claim filed on behalf of the

Internal Revenue Service (IRS) against the Chernes’ bankruptcy estate under 26

U.S.C. § 6672, granted summary judgment to the IRS and denied the Chernes’

motion for summary judgment. We have jurisdiction under 28 U.S.C. § 158(d).

We review de novo both the district court’s judgment and the underlying

bankruptcy court’s ruling on summary judgment, In re Raintree Healthcare Corp.,

431 F.3d 685, 687 (9th Cir. 2005), and we affirm.

      Section 6672 provides that a person with “status, duty, and authority” to

remit a company’s collected trust-fund taxes to the IRS can be held personally

liable for taxes due that he willfully fails to remit. See Davis v. United States, 961
F.2d 867, 873 (9th Cir. 1992). As a board member of Florence Hospital, the

management company’s chief financial officer, and a significant shareholder in the

hospital’s ownership group and its management company, Mr. Cherne possessed

“the authority required to exercise significant control over” the hospital’s financial

affairs. Purcell v. United States, 1 F.3d 932, 937 (9th Cir. 1993). Mr. Cherne

participated in discussions concerning which of the hospital’s bills to pay

(including, at one point, recommending that other expenses be prioritized over

payroll taxes), and he had signature authority on the hospital’s accounts. We hold

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that Mr. Cherne’s failure to remit taxes due to the IRS thus constituted “a

voluntary, conscious and intentional act to prefer other creditors over the United

States.” Davis, 961 F.2d at 871 (quoting Klotz v. United States, 602 F.2d 920, 923

(9th Cir. 1979)). Further, we conclude that the encumbered funds exception to

section 6672 does not apply. Florence Hospital was under no legal obligation “to

use the funds for a purpose other than satisfying the preexisting employment tax

liability,” as restrictions on assets imposed by a creditor do not qualify as legal

obligations for purposes of this exception. Nakano v. United States, 742 F.3d
1208, 1212 (9th Cir. 2014).

      We also deny the Chernes’ motion to supplement the record in a separate

Order.

      AFFIRMED.

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