Court Opinion

ID: 9480732
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:56:48.527064+00
Date Added: 2024-06-11T17:47:52.362493
License: Public Domain

MAGILL, Circuit Judge,
dissenting.
In holding that the IRS did not violate the automatic stay of 11 U.S.C. § 362, the majority disregards “the fundamental canon that statutory interpretation begins with the language of the statute itself.” Pennsylvania Dep’t of Pub. Welfare v. Davenport, — U.S. -, 110 S.Ct. 2126, 2130, 109 L.Ed.2d 588 (1990). Section 362(a) provides that a bankruptcy petition “operates as a stay, applicable to all entities, of ... (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”5 The meaning of this language is plain: if the funds on which the IRS levied are property of the estate, then the IRS violated the automatic stay. Thus, as both the bankruptcy and district courts recognized, the critical issue in this case is whether funds held by a Chapter 13 trustee for distribution to creditors under a confirmed plan constitute property of the estate. The majority declines to even consider this issue, reasoning that the precise terms Congress used in § 362(a) are irrelevant because, in its view, the IRS levy does not interfere with the general purposes of the stay. It is not surprising that the majority cites no authority to support this radical departure from the recognized rules of statutory construction.6 In a recent decision interpreting a different Bankruptcy Code section, the Supreme Court emphasized that “where, as here, the statute’s language is plain, ‘the sole function of the courts is to enforce it according to its terms.’ ” United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917)).
Because the majority refuses to enforce § 362(a) according to its terms, I must respectfully dissent. I would hold that the IRS violated the automatic stay because the funds on which it levied are property of the estate.7 I would further hold that the Anti-Injunction Act, 26 U.S.C. § 7421(a), does not bar the trustee’s action to enforce the stay.8
*201I. Property of the Estate
In Resendez v. Lindquist, 691 F.2d 397, 398-99 (8th Cir.1982), we held that undistributed funds in the possession of a Chapter 13 trustee after confirmation of the plan are property of the Chapter 13 estate. The trustee in Resendez was therefore required under 11 U.S.C. § 542(a) to turn over such funds to the Chapter 7 trustee when the debtors converted their case to Chapter 7. Id. at 398; see also Bankruptcy Rule 1019(5) (1987).9 In addition, because the debtors had voluntarily paid the funds to the Chapter 13 trustee, we affirmed the denial of their claim for exemption of the funds from the Chapter 7 estate. Resendez, 691 F.2d at 399. The only other circuit to address the issue has also concluded that undistributed funds held by a Chapter 13 trustee postconfirmation are property of the estate. See In re Nash, 765 F.2d 1410, 1412, 1414 (9th Cir.1985).
Our determination that the undistributed postconfirmation funds in Resendez were property of the Chapter 13 estate was in no way dependent upon the debtors’ decision to convert their ease. There is certainly nothing in the Bankruptcy Code which makes that determination in an ongoing Chapter 13 case contingent upon whether the debtor will or will not later choose to convert the case. Thus, because there is no principled basis on which to distinguish the holding in Resendez, this panel is bound to conclude that the funds on which the IRS levied are property of the estate.10
Even if Resendez did not constitute binding authority in this case, I would still conclude that the funds at issue are property of the estate. 11 U.S.C. § 1306(a) provides that property of the Chapter 13 estate includes not only all of the debtor’s property as of the time of petition, but also all property and earnings the debtor subsequently acquires prior to the time the case is closed, dismissed, or converted to another chapter. Section 1306(b) further provides that the debtor shall remain in possession of all property of the estate except as provided in a confirmed plan or confirmation order. On the other hand, 11 U.S.C. § 1327(b) states that the confirmation of a plan vests all of the property of the estate in the debtor except as otherwise *202provided in the plan or confirmation order. The apparent tension between § 1327(b) and § 1306(a)’s definition of the estate has led to a split in the bankruptcy courts on the question of whether the Chapter 13 estate continues to exist after confirmation of the plan. Some bankruptcy court decisions have held that unless the plan provides otherwise, confirmation vests all property of the Chapter 13 estate in the debtor, terminating the estate at that point. See, e.g., In re Dickey, 64 B.R. 3, 4 (Bankr.E.D. Va.1985); In re Mason, 45 B.R. 498, 500-01 (Bankr.D.Or.1984), aff'd, 51 B.R. 548 (D.Or.1985). Others have held that property necessary for the execution of the plan’s provisions remains property of the Chapter 13 estate and does not vest in the debtor. See, e.g., In re Root, 61 B.R. 984, 985 (Bankr.D.Colo.1986); In re Adams, 12 B.R. 540, 541-42 (Bankr.D.Utah 1981); see also 2 L. King, supra note 6, 111327.01 at 1327-5 (§ 1327(b) preserves “to the debtor ownership, as well as possession, of all property, whether acquired before or during the chapter 13 case, except as otherwise required to effectuate the confirmed plan”) (footnotes omitted).11 I find the latter line of cases more persuasive.
Besides § 1306(a), several other Bankruptcy Code sections indicate that the Chapter 13 estate remains in existence after confirmation of the debtor’s plan. 11 U.S.C. § 704(9), made applicable to Chapter 13 by 11 U.S.C. § 1302(b)(1), requires the trustee to make a final report and file a final account of “the administration of the estate.” 11 U.S.C. § 347(a) provides that ninety days after the final distribution in a case under Chapter 13, the trustee must stop payment on any check remaining unpaid and remit “any remaining property of the estate” to the court for disposal pursuant to Chapter 129 of Title 28. In addition, 11 U.S.C. § 345 authorizes the Chapter 13 trustee to deposit or invest “money of the estate,” subject to specified restrictions that protect plan creditors from loss. If undistributed postconfirmation funds were not property of the estate, then the Chapter 13 trustee would not be bound by these restrictions when depositing or investing such funds pending distribution to creditors. Finally, 11 U.S.C. § 349(b)(3) states that unless the court orders otherwise for cause, dismissal of a Chapter 13 case “re-vests the property of the estate in the entity in which such property was vested immediately before the commencement of the case.” Based on this provision, the Ninth Circuit has held that a Chapter 13 trustee must return undistributed postcon-firmation funds to the debtor when the case is dismissed. See Nash, 765 F.2d at 1414.
Section 362(a)’s automatic stay of acts against property of the estate continues until such property is no longer property of the estate, § 362(c)(1), and bars any attempt to proceed against property of the estate regardless of whether the claim arose pre- or postpetition. The stay of acts against the debtor or property of the debt- or continues until the case is closed or dismissed, or a discharge is granted or denied. § 362(c)(2). However, it does not prohibit acts to enforce claims that arose postpetition. § 362(a). Thus, if the Chapter 13 estate ceases to exist upon confirmation and all property of the estate becomes property of the debtor, then the automatic stay would not protect property essential to successful completion of a confirmed plan from postpetition claims. Nor would it prevent postconfirmation actions against that property by the IRS or other entities to enforce claims against plan creditors. Such a result is contrary to debtor rehabilitation, a major policy goal of Chapter 13. See In re Schewe, 94 B.R. 938, 945 (Bankr.W.D.Mich.1989). As one bankruptcy court has put it, “a debtor who is making his best financial effort to pay all of his creditors equally under a Chapter 13 Plan should not have his scarce resources and ‘property of the estate’ invaded and the Plan doomed to failure because of a claim from an upstart post-petition creditor.” In re Clarke, 71 B.R. 747, 750 (Bankr.E.D.Pa.1987). Al*203though there are situations in which it may be difficult to identify precisely the property that is essential for execution of the plan, see In re Petruccelli, 113 B.R. 5, 16 (Bankr.S.D.Cal.1990), it is clear that such property necessarily includes funds submitted by the debtor to the trustee for distribution to creditors under the plan. See 11 U.S.C. § 1322(a)(1) (a Chapter 13 plan must “provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan”); In re McCray, 62 B.R. 11, 12 (Bankr.D.Colo.1986) (after confirmation, “plan payments” remain property of the estate because they are “needed for execution of the plan”).
Given that undistributed funds held by a Chapter 13 trustee postconfirmation are property of the estate, the plain language of § 362(a) requires a finding that the IRS violated the automatic stay. Our sole function is to enforce this language, unless we are presented with one of the “ ‘rare eases [in which] the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters.’ ” Ron Pair Enterprises, 109 S.Ct. at 1031 (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982)). Thus, contrary to the majority’s view, the trustee need not show that the IRS levy interferes with the general purposes of the stay to prevail in this case. Rather, in order to justify its refusal to enforce the plain language of § 362(a), the majority must point to “clear evidence that reading the language literally would thwart the obvious purposes” of the automatic stay. Mansell v. Mansell, 490 U.S. 581, 109 S.Ct. 2023, 2030, 104 L.Ed.2d 675 (1989).
The majority identifies absolutely no evidence that one of the obvious purposes of § 362(a) is to make it easier for entities to enforce claims against plan creditors by permitting them to proceed against property of the estate without first obtaining relief from the stay. There is, on the other hand, evidence in the Code that postconfir-mation application of § 362(a) to such actions against estate funds held by the trustee would protect the interests of both the debtor and other creditors. At any time after confirmation, a Chapter 13 debt- or has an absolute right to have the case dismissed, 11 U.S.C. § 1307(b), to convert the case to Chapter 7, § 1307(a), or to request modification of the plan, 11 U.S.C. § 1329(a). Thus, any one of these actions could be taken during a period in which the trustee is holding estate funds postconfir-mation pending their later distribution to creditors in accordance with the plan. If the case is dismissed during this period, the trustee must return the estate funds to the debtor. Nash, 765 F.2d at 1414. If the case is instead converted to Chapter 7, the funds become part of the Chapter 7 estate, Resendez, 691 F.2d at 398-99, which may very well result in a different distribution of those funds among creditors. A different apportionment of the funds may also result from modification of the plan to reduce the level of payments to a particular class of creditors, § 1329(a)(1), or from modification to alter the amount of the distribution to a creditor who has received a payment outside of the plan, § 1329(a)(3). Moreover, if the IRS is correct in contending that the circumstances of this particular case strongly favor enforcement of the levy, then there is no reason why it could not simply have requested and obtained relief from the stay under the provisions of § 362(d)-(g).
In sum, because there is no clear evidence that literal application of the plain and precise language of § 362(a) would thwart the obvious purposes of that section, I would hold that the IRS violated the automatic stay.
II. Anti-Injunction Act
Section 362(a) states that the automatic stay applies to all “entities.” The definition of the term “entity” includes a “governmental unit,” which in turn is defined as including a “department, agency, or instrumentality of the United States.” 11 U.S.C. § 101(14), (26). Some of the exceptions to the stay listed in § 362(b) apply only to governmental units. Of particular note is *204§ 362(b)(9), which excepts “the issuance to the debtor by a governmental unit of a notice of tax deficiency.”
These statutory provisions leave no doubt that “[t]he IRS is subject to the automatic stay when engaged in tax collection activities.” In re Loughnane, 28 B.R. 940, 941 (Bankr.D.Colo.1983). There are numerous decisions finding that the IRS violated the stay. See, e.g., United States v. Reynolds, 764 F.2d 1004 (4th Cir.1985); United States v. Norton, 717 F.2d 767 (3d Cir.1983); In re Lile, 103 B.R. 830 (Bankr.S.D.Tex.1989); In re Carlsen, 63 B.R. 706 (Bankr.C.D.Cal.1986). Indeed, in some cases the IRS has conceded that it violated the stay. See In re Academy Answering Serv., Inc., 100 B.R. 327, 329 (N.D.Ohio 1989); In re Santa Rosa Truck Stop, Inc., 74 B.R. 641, 642 (Bankr.N.D.Fla.1987); see also In re Aurora Cord & Cable Co., Inc., 2 B.R. 342, 344 (Bankr.N.D.Ill.1980) (noting that IRS “does not contest that it is subject to the automatic stay”). By contrast, there is apparently not a single reported case in which the IRS argued or the court held that the Anti-Injunction Act barred an action to enforce the automatic stay. In their decisions holding that the Bankruptcy Code contains no general exception to the Anti-Injunction Act, both the Fourth and Seventh Circuits intimated that the Act does not apply to a suit against the IRS to prevent or remedy a violation of the Code’s automatic stay. In re Heritage Village Church & Missionary Fellowship, 851 F.2d 104, 105 (4th Cir.1988) (per curiam); In re LaSalle Rolling Mills, Inc., 832 F.2d 390, 394 (7th Cir.1987). Other decisions holding to the same effect have expressly indicated that the protection afforded by the automatic stay is not limited by the Act. In re Heritage Village Church & Missionary Fellowship, 87 B.R. 401, 403-03 (D.S.C.), aff'd, 851 F.2d 104 (4th Cir.1988); Cambridge Machined Prods. Corp. v. United States, 58 B.R. 22, 25 (Bankr.D.Mass.1985); In re Idaho Agriquipment, Inc., 54 B.R. 114, 115 (Bankr.D.Idaho 1985); In re Franklin Press, Inc., 46 B.R. 523, 525 (Bankr.S.D.Fla.1985); In re O.H. Lewis Co., Inc., 40 B.R. 531, 533-34 (Bankr.D.N.H.1984).
Thus, the statutory language and case law make it abundantly clear that the Code’s automatic stay provisions supersede the Act. In enacting § 362, Congress obviously intended that the courts would have jurisdiction to enforce the stay against the IRS. To conclude otherwise would effectively render the stay’s express applicability to the IRS meaningless. Accordingly, I would hold that the trustee’s action to enforce the automatic stay is not barred by the Anti-Injunction Act.
For the reasons set forth above, I would reverse the district court’s judgment.

. The stay also applies to "any act to create, perfect, or enforce any lien against property of the estate.” § 362(a)(4).

. In each of the cases cited by the majority involving an alleged violation of the Bankruptcy Code’s automatic stay, the court first looked to the pertinent language of § 362 in order to decide the issue. Indeed, the treatise cited by the majority states that “the precise wording of the stay and its exceptions should be emphasized." 2 L. King, Collier on Bankruptcy, ¶ 362.04, at 362-34 (15th ed. 1990). It notes further that "[t]he stay of section 362 is extremely broad in scope and, aside from the limited exceptions of subsection (b), should apply to almost any type of formal or informal action against the debtor or the property of the estate.” Id. at 362-32.

. The IRS argues that even if the funds are property of the estate, the levy constituted an action by a governmental unit to enforce its regulatory power and therefore falls under the exception to the automatic stay set forth in § 362(b)(4). The IRS fails to recognize that the § 362(b)(4) exception is expressly limited to those acts otherwise stayed by § 362(a)(1) and thus does not apply to the acts proscribed by § 362(a)(3), (a)(4). See SEC v. First Fin. Group, 645 F.2d 429, 437 (5th Cir. Unit A May 1981); In re Ryan, 15 B.R. 514, 519 (Bankr.D.Md.1981).

. However, even if the IRS's violation of the stay was willful, we have no jurisdiction to grant the trustee’s request for costs and attorney’s fees under 11 U.S.C. § 362(h) because the federal government has not waived its sovereign immunity as to such relief. The only provision *201that could constitute a waiver in this case is 11 U.S.C. § 106(c). Based on the Supreme Court’s decision in Hoffman v. Connecticut Dep't of Income Maintenance, — U.S. -, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989), we have held that § 106(c) does not waive the federal government’s sovereign immunity with respect to monetary awards. Small Business Admin. v. Rinehart, 887 F.2d 165, 169-70 (8th Cir.1989). Contrary to the trustee’s argument, the IRS may raise the issue of sovereign immunity for the first time on appeal. Dewitt Bank & Trust Co. v. United States, 878 F.2d 246, 246 (8th Cir.1989), cert. denied, — U.S. -, 110 S.Ct. 1318, 108 L.Ed.2d 493 (1990); United States v. Johnson, 853 F.2d 619, 622 n. 7 (8th Cir.1988).

. Some bankruptcy courts have concluded that 11 U.S.C. § 1326(a)(2), added to the Bankruptcy Code in 1984, now provides that undistributed funds held by a Chapter 13 trustee postconfir-mation must be distributed to creditors in accordance with the plan upon conversion of the case. See In re Milledge, 94 B.R. 218, 219-20 (Bankr.M.D.Ga.1988); In re Waugh, 82 B.R. 394, 400 (Bankr.W.D.Pa.1988); In re Lennon, 65 B.R. 130, 137-39 (Bankr.N.D.Ga.1986). On its face, § 1326(a)(2) appears to apply only to funds that the trustee received prior to confirmation. More importantly, it is questionable whether this subsection mandates that the trustee continue distributing payments to creditors even after the debtor has converted the case. In any event, even if § 1326(a)(2) partially supersedes Resendez by requiring that undistributed post-confirmation funds be turned over directly to plan creditors, it certainly has no effect on Re-sendez 's holding that such funds are property of the estate.

. In re Lindberg, 735 F.2d 1087 (8th Cir.), cert. denied, 469 U.S. 1073, 105 S.Ct. 566, 83 L.Ed.2d 507 (1984), does not permit us to reach a contrary conclusion. Lindberg simply held that in a case converted from Chapter 13 to Chapter 7, the date of conversion controls exemption eligibility. Id. at 1088. Although the Lindberg panel suggested in dictum that confirmation terminates the Chapter 13 estate unless the plan provides otherwise, id. at 1089, it did not even discuss Resendez, let alone purport to overrule its holding that undistributed funds in the possession of a Chapter 13 trustee postconfirmation are property of the Chapter 13 estate. This holding can, of course, only be overruled by the court en banc. See, e.g., Brown v. First Nat'l Bank, 844 F.2d 580, 582 (8th Cir.), cert. dismissed, 487 U.S. 1260, 109 S.Ct. 20, 101 L.Ed.2d 971 (1988). Furthermore, we have stressed that "[t]he doctrine of stare decisis, weighty in any context, is especially so in matters of statutory construction.” Cottrell v. Commissioner, 628 F.2d 1127, 1131 (8th Cir.1980) (en banc).

. In re Aneiro, 72 B.R. 424, 429-30 (Bankr.S.D.Cal.1987), reached a similar result by holding that property which revests in the debtor at confirmation remains property of the estate, with the debtor’s ownership rights limited at least to the extent that the property is committed to successful completion of the plan.