In re: Scott S. Austin; Anna M. Austin, formerly known as Anna DeFalco Debtors
Scott S. Austin; Anna M. Austin Debtors - Appellees United States of America, on behalf of the Internal Revenue Service Creditor - Appellant
Submitted: February 23, 2018
from United States Bankruptcy Court for the Eastern District
of Missouri - St. Louis
SALADINO, Chief Judge, SHODEEN and SANBERG, Bankruptcy
SANBERG, Bankruptcy Judge.
Appellant, United States of America, appeals the July 24,
2017, order of the Bankruptcy Court sustaining the
Debtors' objection to a proof of claim filed by the
Internal Revenue Service. We have jurisdiction over this
appeal from the final order of the Bankruptcy Court.
See 28 U.S.C. § 158(b).
reasons stated below, we reverse.
question of whether substantial evidence was presented in
support of the objection as a matter of law sufficient to
rebut the Internal Revenue Service's ("IRS")
proof of claim is reviewed de novo. Fed.R.Bankr.P.
8013; Halverson v. Estate of Cameron (In re
Mathiason), 16 F.3d 234, 235 (8th Cir. 1994);
Dove-Nation v. eCast Settlement Corp. (In re
Dove-Nation), 318 B.R. 147, 150 (B.A.P. 8th Cir. 2004).
We review the Bankruptcy Court's findings of fact for
clear error and its conclusions of law de novo. Brown v.
I.R.S. (In re Brown), 82 F.3d 801, 805 (8th Cir. 1996),
abrogated on other grounds by Raleigh v. Ill. Dep't
of Revenue, 503 U.S. 15, 120 S.Ct. 1951 (2000);
Keating v. C.I.R., 544 F.3d 900 (8th Cir. 2008),
Blodgett v. C.I.R., 394 F.3d 1030, 1035 (8th Cir.
2005)(finding in the context of proving tax loss, which is
entitled to a presumption of correctness, that "we
review de novo the legal question of whether a taxpayer
produced sufficient evidence to shift the burden of
Debtors, Scott S. and Anna M. Austin ("Austins" or
"Appellees"), filed a voluntary petition under
Chapter 13 of the Bankruptcy Code with the Bankruptcy Court
for the Eastern District of Missouri on December 8, 2014. In
their schedules, the Austins listed two pending worker's
compensation claims as contingent and unliquidated exempt
property. These claims were valued at $0.00 or an
"unknown value." The Austins listed the IRS as a
secured creditor. The IRS filed proof of claim no. 5-1,
asserting in part a secured claim as a result of a tax lien.
January 9, 2015, the Austins filed an objection to claim no.
5-1 ("January Objection"). They objected to the
amount of the IRS's priority claim and the amount of the
claim listed as secured. They argued that no value should be
attributable to their worker's compensation claims in
determining the secured portion of the IRS's claim. They
also argued, in the alternative, that since there were
neither settlement offers nor a basis to determine the value
of the worker's compensation claims, the present value of
the worker's compensation claims should be $0.
13, 2015, the Bankruptcy Court held a hearing on the January
Objection. No evidence was presented at this hearing and the
matter was taken under submission.
September 18, 2015, the Bankruptcy Court overruled the
Austins' January Objection and held that the Austins had
failed to meet their burden to produce substantial evidence
to rebut the IRS's claim. The Bankruptcy Court disagreed
with the Austins' assertion that their worker's
compensation claims had no value. In re Austin, 538
B.R. 543 (Bankr. E.D. Mo. 2015)("Austin 1").
Rather, the Bankruptcy Court held that because the claims
were being pursued at the time the petition was filed, they
must have had some value. Id. at 546.
Therefore, the Bankruptcy Court overruled the Austin's
objection. Id. at 546-547.
meantime, on July 28, 2015 (while Austin 1 was under
submission), the Austins negotiated a settlement of the
worker's compensation claims for $21, 448.80. After