UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
MADISON RECYCLING ASSOCIATES CASE NO. 00-50199
OPINION AND ORDER
This matter came before the court upon the Motion for Emergency Hearing filed herein by the debtor on February 3, 2000. That motion seeks to hold the United States Internal Revenue Service (IRS) in contempt for violation of the automatic stay. The IRS filed its Response herein on February 3, and a hearing was held on that date. The problem involves a proceeding in the United States Tax Court and its determination to proceed with a trial to determine the liability of the partners in the debtor partnership for certain taxes. The proceeding in the United States Tax Court is styled Madison Recycling Associates, David A. Beldon, et al vs. Commissioner of Internal Revenue, Docket No. 10601-88.
The debtor contends that, since the style of that case includes the name of the debtor, it is a proceeding against the debtor and is stayed by the provisions of 11 U.S.C. §362(a)(8). The IRS contends that the proceeding is merely a proceeding to determine the tax liability of the partners of the debtor partnership since the debtor, as a partnership, has no tax liability. The United States also contends that the stay simply does not apply in this situation.
A review of the file in this matter does not suggest the presence of any assets which will be liquidated to result in funds in this estate to pay any claims.
The IRS cites 1983 Western Reserve Oil and Gas Company, Ltd., Richard G. Shaffer, Receiver Pendente Lite, et al v. Commissioner, 95 T.C. 51 (1990), affd 1993 U.S. App. LEXIS 12686 (9th Cir. 1993), and Durham Farms, et al v. United States Tax Court, (In re W.J. Hoyt Sons Management Co., Ltd.), 1999 Bankr. LEXIS 1514 (Bankr. D.OR. 1999) as authority for the proposition that it may proceed in the tax court in this matter. In the latter cited case, Bankruptcy Judge Perris expressed concern as to whether a determination of the partners liability for taxes would, in effect, be a determination of their claims against the partnership. She was not satisfied in that case that that result would follow. In the present case, this court also is not satisfied that that result will follow and, additionally, where there appear to be no assets in the proceeding, the amount of those claims as against the estate is not of consequence since no distributions can be made. The court adopts the reasoning of Judge Perris in the Hoyt matter and, as she observed in Hoyt, to apply the automatic stay to the tax court proceeding only because the debtor is named in the proceeding is to allow form to prevail over substance.
It is therefore ORDERED that the Motion of the debtor herein to shorten the ten day notice requirement for hearing be, and the same hereby is, SUSTAINED; and it is further
ORDERED that the Motion of the debtor herein for an order holding the Internal Revenue Service in contempt for failure to abide by the automatic stay be, and the same hereby is, OVERRULED.
Dated this day of February, 2000.
BY THE COURT
Brian Gilfedder, Esq.
David Middleton, Esq.
James D. Lyon, Esq.