110 T.C. No. 20
UNITED STATES TAX COURT
JUDITH K. GUERRA, A.K.A. JUDITH HARVEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4225-97. Filed April 8, 1998.
On June 25, 1992, P filed a bankruptcy petition
under chapter 13 of the Bankruptcy Code. On Dec. 16,
1996, R issued a notice of deficiency to P for the
taxable year 1993. On Jan. 21, 1997, the bankruptcy
court issued an order dismissing P's case pursuant to
11 U.S.C. sec. 1307 (1994). On Jan. 31, 1997, P filed
a motion for reconsideration with the bankruptcy court.
On Feb. 12, 1997, the bankruptcy court issued an order
granting P's motion for reconsideration and reinstating
petitioner's case. On Mar. 3, 1997, petitioner filed a
petition for redetermination with the Court. R filed a
motion to dismiss for lack of jurisdiction on the
ground that the petition was filed in violation of the
automatic stay imposed under 11 U.S.C. sec. 362(a)(8)
(1994).
Held: The bankruptcy court's order dated Jan. 21,
1997, dismissing P's bankruptcy case pursuant to 11
U.S.C. sec. 1307 (1994), served to terminate the
automatic stay imposed under 11 U.S.C. sec.
362(a)(8)(1994). See 11 U.S.C. sec. 362(c)(2)(C)
(1994). Held, further: The bankruptcy court's order
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dated Feb. 12, 1997, although vacating the bankruptcy
court's order dated Jan. 21, 1997, is silent respecting
the status of the automatic stay, and, thus, the
automatic stay was not reinstated. See Allison v.
Commissioner, 97 T.C. 544 (1991). Held, further: The
petition filed herein was not filed in violation of the
automatic stay, and P properly invoked this Court's
jurisdiction. Sec. 6213(f), I.R.C.
Judith K. Guerra, pro se.
Robert A. Varra and Peter K. Reilly, for respondent.
OPINION
DAWSON, Judge: This case was assigned to Chief Special
Trial Judge Peter J. Panuthos pursuant to the provisions of
section 7443A(b)(3) and Rule 182.1 The Court agrees with and
adopts the opinion of the Special Trial Judge, which is set forth
below.
OPINION OF THE SPECIAL TRIAL JUDGE
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on respondent's Motion to Dismiss for Lack of
Jurisdiction. The question to be decided is whether the petition
for redetermination was filed with the Court in violation of the
so-called automatic stay imposed pursuant to 11 U.S.C. sec.
362(a)(8) (1994).
Background
On June 25, 1992, petitioner and Carlos Manuel Guerra,
1
All section references are to the Internal Revenue Code
in effect for the year in issue, unless otherwise indicated. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
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petitioner's husband, filed a voluntary petition for relief under
chapter 13 of the Bankruptcy Code with the U.S. Bankruptcy Court
for the District of Colorado.
On December 16, 1996, respondent mailed a notice of
deficiency to petitioner determining a deficiency in her Federal
income tax for 1993 in the amount of $7,813, as well as additions
to tax in the amounts of $1,819 and $302.30 pursuant to sections
6651(a) and 6654, respectively.
On January 21, 1997, the bankruptcy court entered an order
granting the bankruptcy trustee's motion to dismiss petitioner's
case.2 The bankruptcy court's order states in pertinent part:
THIS MATTER having come before the Court upon the
Motion to Dismiss the Chapter 13 case filed by the
Standing Chapter 13 Trustee, it is:
ORDERED that the within case be and is hereby
dismissed pursuant to the provisions of 11 USC Section
1307.
FURTHER ORDERED that, in accordance with 11 USC
Section 349(b)(1) and (2), any transfer avoided under
Section 522, 544, 545, 547, 548, 549 or 724(a) of Title
11 or preserved under Section 510(c)(2), 522(i)(2) or
551 of Title 11 is reinstated; any lien voided under
Section 506(d) of Title 11 is reinstated; and any
order, judgment, or transfer ordered under Section
522(i)(1), 542, 550, or 553 of Title 11 is vacated.
FURTHER ORDERED that funds in the hand of the
Standing Chapter 13 Trustee in said case, if any, which
are lawfully payable to the creditors will be
distributed by said Trustee within ninety (90) days
from the date of this Order.
2
It appears that the bankruptcy trustee filed the motion
to dismiss on the ground that petitioner had failed to make a
payment due under the chapter 13 plan.
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The order does not impose any stay of proceedings and does not
mention the status of the automatic stay imposed under 11 U.S.C.
sec. 362(a)(8) (1994).
On January 31, 1997, petitioner and her husband filed a
motion to reconsider with the bankruptcy court regarding the
dismissal of their case. On February 12, 1997, the bankruptcy
court issued an order granting petitioner's motion to reconsider
as follows:
THIS MATTER comes before the Court on Debtor's
Motion to Reconsider Order Dismissing Chapter 13 Case
entered January 21, 1997. The Court, having reviewed
the file and being advised in the premises, hereby
ORDERS as follows:
1. The Motion to Reconsider is GRANTED;
2. The Order entered January 21, 1997, dismissing
this case is VACATED;
3. This case is hereby REINSTATED.
4. Debtor will be current with the Trustee within
ten days from the date of this order.
The order does not mention the status of the automatic stay
imposed under 11 U.S.C. sec. 362(a)(8) (1994).
On March 3, 1997, petitioner filed a petition for
redetermination with the Court.3 In response, respondent filed a
Motion to Dismiss for Lack of Jurisdiction asserting that the
petition was filed in violation of the automatic stay imposed
under 11 U.S.C. sec. 362(a)(8) (1994).
3
At the time the petition was filed, petitioner resided
at Denver, Colorado.
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Discussion
The Tax Court is a court of limited jurisdiction, and we may
exercise our jurisdiction only to the extent authorized by
Congress. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). Our
jurisdiction to redetermine a deficiency depends upon the
issuance of a valid notice of deficiency and a timely filed
petition. Rule 13(a),(c); Monge v. Commissioner, 93 T.C. 22, 27
(1989); Normac, Inc. & Normac International v. Commissioner, 90
T.C. 142, 147 (1988).
Section 6212(a) expressly authorizes the Commissioner, after
determining a deficiency, to send a notice of deficiency to the
taxpayer by certified or registered mail. The taxpayer, in turn,
generally has 90 days from the date the notice of deficiency is
mailed to file a petition in this Court for a redetermination of
the deficiency. Sec. 6213(a).
An exception to the normal 90-day filing period arises where
the taxpayer has filed a petition for relief under the Bankruptcy
Code. In particular, 11 U.S.C. sec. 362(a)(8) (1994) provides in
pertinent part:
(a) Except as provided in subsection (b) of this
section, a petition filed under section 301, 302, or
303 of this title, * * * operates as a stay, applicable
to all entities, of--
* * * * * * *
(8) the commencement or continuation of a
proceeding before the United States Tax Court
concerning the debtor.
In short, the filing of a bankruptcy petition invokes the
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automatic stay which precludes the commencement or continuation
of proceedings in this Court. Kieu v. Commissioner, 105 T.C.
387, 391 (1995); Allison v. Commissioner, 97 T.C. 544, 545
(1991).
Although respondent is free to issue a notice of deficiency
to a taxpayer that has filed a bankruptcy petition, see 11 U.S.C.
sec. 362(b)(9) (1994),4 the normal 90-day period for filing a
timely petition with this Court is suspended for the period
during which the taxpayer is prohibited by reason of the
automatic stay from filing a petition in this Court and for 60
days thereafter, sec. 6213(f); Olson v. Commissioner, 86 T.C.
1314, 1318-1319 (1986), and cases cited therein.
The period that the automatic stay remains in effect is
prescribed in 11 U.S.C. sec. 362(c) (1994) as follows:
(c) Except as provided in subsections (d), (e),
and (f) of this section--
(1) the stay of an act against property of the
estate under subsection (a) of this section
continues until such property is no longer
property of the estate; and
4
11 U.S.C. sec. 362(b)(9) (1994) provides in pertinent
part:
(b) The filing of a petition under section 301,
302, or 303 of this title, * * * does not operate as a
stay--
(9) under subsection (a),--
* * * * * * *
(B) of the issuance to the debtor
by a governmental unit of a notice
of tax deficiency;
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(2) the stay of any other act under subsection
(a) of this section continues until the earliest
of--
(A) the time the case is closed;
(B) the time the case is dismissed; or
(C) if the case is a case under chapter
7 of this title concerning an individual or a
case under chapter 9, 11, 12, or 13 of this
title, the time a discharge is granted or
denied.
In sum, unless relief from the automatic stay is granted by order
of the bankruptcy court, see 11 U.S.C. sec. 362(d) (1994), the
automatic stay generally remains in effect until the earliest of
the closing of the case, dismissal of the case, or the grant or
denial of a discharge, 11 U.S.C. sec. 362(c)(2) (1994); see
Allison v. Commissioner, supra at 545; Smith v. Commissioner, 96
T.C. 10, 14 (1991); Neilson v. Commissioner, 94 T.C. 1, 8 (1990).
In the instant case, respondent issued a notice of
deficiency to petitioner on December 16, 1996, during the
pendency of petitioner's bankruptcy case. See 11 U.S.C. sec.
362(b)(9) (1994). There is no dispute that petitioner was
precluded by the automatic stay imposed under 11 U.S.C. sec.
362(a)(8) (1994) from filing a petition with this Court at the
time the notice of deficiency was issued.
The issue to be decided is whether the automatic stay
remained in effect in this case following the dismissal and
subsequent reinstatement of petitioner's bankruptcy case. If the
automatic stay remained in effect, then the petition filed in
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this case on March 3, 1997, must be dismissed. On the other
hand, if the automatic stay was terminated, it follows that the
petition was timely filed pursuant to section 6213(f)(1).
Respondent contends that the automatic stay remained in
effect at all times in this case, notwithstanding the dismissal
of petitioner's bankruptcy case on January 21, 1997. First,
respondent maintains that, by virtue of Bankruptcy rule 9023,5
petitioner's motion to reconsider, filed with the bankruptcy
court within 10 days of the issuance of the dismissal order, is
treated as a motion under rule 59 of the Federal Rules of Civil
Procedure. Respondent contends that, under the latter rule, the
bankruptcy court's dismissal order did not become final.6
5
Bankruptcy rule 9023 states: "Rule 59 F.R.Civ.P.
applies in cases under the Code, except as provided in Rule
3008." 11 U.S.C. App. at 969 (1994).
6
Fed. R. Civ. P. 59 states in pertinent part:
(a) Grounds. A new trial may be granted to all or
any of the parties and on all or part of the issues
* * *(2) in an action tried without a jury, for any of
the reasons for which rehearings have heretofore been
granted in suits in equity in the courts of the United
States. On a motion for a new trial in an action tried
without a jury, the court may open the judgment if one
has been entered, take additional testimony, amend
findings of fact and conclusions of law or make new
findings and conclusions, and direct the entry of a new
judgment.
(b) Time for Motion. A motion for a new trial
shall be served not later than 10 days after the entry
of the judgment.
* * * * * *
(continued...)
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Respondent reasons that, because the dismissal order never became
final, and consistent with the bankruptcy court's subsequent
decision to reinstate petitioner's bankruptcy case, the automatic
stay remained in effect at all times. In the alternative,
respondent contends that the bankruptcy court's February 12, 1997
order reinstating petitioner's case caused the automatic stay to
be reinstated on that date.
Contrary to respondent's position, we conclude that the
bankruptcy court's January 21, 1997, order of dismissal
terminated the automatic stay. Under the circumstances, we are
not satisfied that petitioner's motion for reconsideration
precluded the bankruptcy court's order of dismissal from becoming
final insofar as that order served to terminate the automatic
stay. Respondent cites no direct authority for the proposition
that the filing of petitioner's motion for reconsideration with
the bankruptcy court caused the automatic stay to remain in
effect. On the other hand, at least one appellate court has held
that the automatic stay terminated immediately upon the dismissal
of the debtor's bankruptcy case for failure to properly
prosecute, notwithstanding that the debtor undertook to file a
motion for reconsideration with the bankruptcy court within 10
days of the order of dismissal. See In re De Jesus Saez, 721
6
(...continued)
(e) Motion to Alter or Amend Judgment. A motion
to alter or amend the judgment shall be served not
later than 10 days after entry of the judgment.
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F.2d 848 (1st Cir. 1983)(applying Bankruptcy rule 762--the
predecessor to Bankruptcy rule 7062);7 see also In re Franklin
Mortgage & Investment Co., 144 Bankr. 194, 194-195 (Bankr. D.C.
1992); In re Barnes, 119 Bankr. 552, 555 (S.D. Ohio 1989); In re
Weston, 101 Bankr. 202, 204-206 (Bankr. E.D. Cal. 1989), affd.
without published opinion 123 Bankr. 466 (B.A.P. 9th Cir. 1991),
affd. without published opinion 967 F.2d 596 (9th Cir. 1992); In
re Bluford, 40 Bankr. 640, 644 (Bankr. W.D. Mo. 1984).
Respondent has failed to reconcile respondent's
interpretation of Bankruptcy rule 9023 with the interpretation of
7
Bankruptcy rule 7062 states in pertinent part: "Rule 62 FR
Civ P applies in adversary proceedings. An order granting relief
from an automatic stay provided by section 362 * * * shall be
[one of the] additional exceptions to Rule 62(a)." Fed. R. Civ.
P. 62 provides (with exceptions) that a judgment generally shall
not be enforced until 10 days after its entry.
3 Norton, Bankruptcy Law and Practice, sec. 78.06 (1992)
discusses the effect of Bankruptcy rule 7062 as follows:
By the terms of [Bankruptcy] Code section 362(c),
the automatic stay terminates at the time a bankruptcy
case is dismissed. A request for dismissal of a
bankruptcy case, filed by a party other than the
debtor, will generally be in the form of a motion and
will constitute a contested matter under Bankruptcy
rule 9014. As provided in that Rule, Bankruptcy rule
7062 applies in contested matters, and thus if an order
of dismissal is "an order granting relief from an
automatic stay" as described in Bankruptcy rule 7062,
then it can be argued that an order for dismissal is
not subject to the 10-day stay of proceedings described
in Rule 62(a) of the Federal Rules of Civil Procedure.
Given that an order of dismissal has the effect of
terminating the automatic stay, it is arguable that a
dismissal order falls within the terms of Bankruptcy
rule 7062 and constitutes immediate relief from the
stay. [Fn. ref. omitted.]
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Bankruptcy rule 7062 set forth in the authorities cited above.
Based upon the record presented, we hold that the bankruptcy
court's January 21, 1997, order of dismissal terminated the
automatic stay.
We likewise reject respondent's alternative argument that
the automatic stay was reinstated at the same time that the
bankruptcy court granted petitioner's motion for reconsideration
and reinstated petitioner's case. As previously discussed, the
automatic stay is imposed upon the filing of a bankruptcy
petition and generally is terminated when the bankruptcy case is
closed or dismissed or a discharge is granted or denied.
The Court has previously considered whether the automatic
stay was reinstated in circumstances analogous to those presented
in the instant case. In Kieu v. Commissioner, 105 T.C. 387
(1995), the Court held that the automatic stay terminated when
the bankruptcy court entered an order granting summary judgment
that the debtors/taxpayers were not entitled to a discharge of
their debts. The Court further held that the automatic stay was
not reinstated when the bankruptcy court vacated its earlier
order. Similarly, in Allison v. Commissioner, 97 T.C. 544
(1991), the Court held that the automatic stay terminated when
the bankruptcy court granted the debtor/taxpayer a discharge of
indebtedness and that the automatic stay was not reinstated when
the bankruptcy court subsequently reopened the case. See Moody
v. Commissioner, 95 T.C. 655 (1990) (automatic stay terminated
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upon bankruptcy court's confirmation of a chapter 11 plan and
automatic stay was not reinstated despite the bankruptcy court's
decision to retain jurisdiction over the case).
Respondent argues that the above-referenced cases, and
particularly Kieu v. Commissioner, supra, can be factually
distinguished from the present case insofar as petitioner's
bankruptcy case was reinstated before petitioner filed her
petition for redetermination with the Court. Respondent relies
on In re Diviney, 211 Bankr. 951 (Bankr. N.D. Okla. 1997), for
the proposition that the bankruptcy court's reinstatement of
petitioners' bankruptcy case caused the automatic stay to be
reinstated.
Although we agree that In re Diviney, supra, stands for the
proposition cited by respondent, we are not persuaded that we are
obliged to find that the automatic stay was reinstated in this
case. To the contrary, we adhere to Allison v. Commissioner,
supra at 546-547, and specifically Kieu v. Commissioner, supra at
395, in which we held:
While an argument might be made that the
bankruptcy court's intent to reinstate the automatic
stay in the present case may be inferred from the fact
that the bankruptcy court vacated its order [granting
the creditors' motion for summary judgment], we decline
to decide the issue presented in this case on such an
assumption. We are mindful that the automatic stay
respecting the commencement or continuation of
proceedings in this Court was adopted in part to avert
duplicative and inconsistent litigation over tax
issues. Halpern v. Commissioner, 96 T.C. 895, 902
(1991). Given the consequences, however, that follow
from a determination respecting the status of the
automatic stay, the soundest approach is to adhere to
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the reasoning in Allison v. Commissioner, supra.
Simply stated, where a bankruptcy court has taken
action that serves to terminate the automatic stay
under 11 U.S.C. sec. 362(c)(2), the automatic stay
remains terminated absent an express indication from
the bankruptcy court to the contrary. Certainly, if a
bankruptcy court intends to exercise its jurisdiction
to resolve the issues surrounding petitioners' tax
liability, that court has the means to bring about a
stay of the proceedings in this Court. See Allison v.
Commissioner, supra at 547 (referring to 11 U.S.C. sec.
105 (1994), which permits the bankruptcy court to issue
any order necessary to carry out title 11).
In accordance with the foregoing, we hold that the automatic
stay was terminated as of January 21, 1997, the date that the
bankruptcy court issued its order dismissing petitioner's case.
Further, we hold that the automatic stay was not revived when the
bankruptcy court reinstated petitioner's case on February 12,
1997. Because the automatic stay was not in effect on the date
that petitioner filed her petition for redetermination with the
Court, we conclude that petitioner properly invoked the Court's
jurisdiction, and we will deny respondent's Motion to Dismiss for
Lack of Jurisdiction.
To reflect the foregoing,
An order denying respondent's
Motion to Dismiss for Lack of
Jurisdiction will be issued.