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In re Nicolaus

United States District Court, N.D. Iowa, Central Division

January 3, 2019

IN RE ANTHONY J. NICOLAUS, Debtor.
v.
UNITED STATES OF AMERICA o/b/o INTERNAL REVENUE SERVICE, Appellee. ANTHONY J. NICOLAUS, Appellant,

          ORDER

          Linda R. Reade, Judge

         TABLE OF CONTENTS

         I. INTRODUCTION ............................................................................... 2

         II. STANDARD OF REVIEW .................................................................... 2

         III. FACTUAL AND PROCEDURAL BACKGROUND ...................................... 2

         A. Bankruptcy Court Proceedings ....................................................... 2

         B. Bankruptcy Court Ruling ............................................................. 4

         C. The Appeal ............................................................................... 4

         IV. ANALYSIS ........................................................................................ 5

         A. Parties’ Arguments ..................................................................... 5

         B. Applicable Law .......................................................................... 7

         C. Application ............................................................................. 12

         V. CONCLUSION ................................................................................. 17

         I. INTRODUCTION

         This is an appeal from the United States Bankruptcy Court for the Northern District of Iowa (“Bankruptcy Court”). See In re Nicolaus, Bankr. No. 15-01757. The Bankruptcy Court entered a Ruling (Bankruptcy docket no. 135) granting Creditor-Appellee United States of America’s (“the government”), on behalf of the Internal Revenue Service (“IRS”), “Motion to Set Aside or Vacate the [Bankruptcy Court’s February 8, 2018 Ruling] Sustaining Debtor[-Appellant Anthony J. Nicolaus’s] Objection to IRS Proof of Claim No. 2” (“Motion to Vacate”) (Bankruptcy docket no. 113). Debtor appeals.

         II. STANDARD OF REVIEW

         A district court has jurisdiction to hear appeals from final judgments, orders and decrees of bankruptcy judges. 28 U.S.C. § 158(a). On appeal from a bankruptcy court, the district court acts as an appellate court and reviews the bankruptcy court’s factual findings for clear error and its conclusions of law de novo. In re Cedar Shore Resort, Inc., 235 F.3d 375, 379 (8th Cir. 2000).

         III. FACTUAL AND PROCEDURAL BACKGROUND A. Bankruptcy Court Proceedings

         On December 30, 2015, Debtor filed a petition for relief under Chapter 7 of the United States Bankruptcy Code (Bankruptcy docket no. 1). On February 11, 2016, the IRS filed Proof of Claim No. 2. See Appellant’s Appendix (“Appendix”) (docket no. 5-1) at 5-9. The proof of claim listed a total of $92,877.89 in secured and unsecured claims associated with civil penalties for failure to pay withholdings taxes. Id. at 8. On January 26, 2017, Debtor filed “Objection to IRS Proof of Claim No. 2 (Bankruptcy docket no. 91). On January 27, Debtor filed “Notice of Objection to Proof of Claim No. 2 and Deadline for Response” (Bankruptcy docket no. 93). Debtor mailed the notice to the following addresses:

(1) Internal Revenue Service P.O. Box 7346 Philadelphia, PA 19101-7346
(2) Internal Revenue Service Attn: Mary Jo Rachford 425 Second Street Southeast, Suite 500 Cedar Rapids, IA 52401

See Appendix at 69. On February 22, 2017, Debtor filed a second “Notice of Objection to Proof of Claim No. 2 and Deadline for Response” (Bankruptcy docket no. 96) because the first notice did not include a copy of the objection to the IRS’s proof of claim. Id.

         Debtor mailed the second notice, including a copy of the objection, to the same two addresses as the first notice. Id. at 70. The IRS did not respond to Debtor’s objection by the deadline provided in the second notice.

         On March 17, 2017, the Bankruptcy Court entered an “Order Sustaining Debtor’s Objection to IRS Proof of Claim No. 2" (Bankruptcy docket no. 97). On December 21, 2017, the government filed the Motion to Vacate. On January 12, 2018, Debtor filed a Response (Bankruptcy docket no. 118) to the Motion to ...


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