Opinion
CASE NO. 01-14849-13
June 18, 2002
ORDER ON TRUSTEE'S TO MOTION FOR INSTRUCTION
The standing Chapter 13 trustee has filed Motion For Instruction in regard to a United States Internal Revenue Service levy served on him after this case was dismissed.
FACTS
Debtor filed this case on September 24, 2001. The United States Internal Revenue Service filed a proof of claim showing a secured claim of $227,961.05. On March 7, 2002, the Court entered its Order on Dismissal of Chapter 13 Case. On March 28, 2002, the Court denied Debtor's motion to alter or amend. The Standing Chapter 13 Trustee states that he is holding $13,271.25. The Chapter 13 Trustee was served with a 26 U.S.C. § 6331 Notice of Levy after this case was dismissed.
LAW
"The Internal Revenue Service is empowered to levy on the property of a tax delinquent in the hands of a third party by 26 U.S.C. § 6331. . . . Upon receipt of a notice of levy, such third parties are required to surrender that property to the I.R.S." United States v. Ruff, 99 F.3d 1559, 1563 (1996). Ruff held that a Chapter 7 Trustee who had failed to honor a levy, instead paying the funds to an administrative claimant, was personally liable to the Government for the property not surrendered. Ruff, 99 F.3d at 1567. Ruff went on to hold a contrary case from this District, In re Ceafco, No. 28,700, 1977 WL 1273 (S.D. Ala. Sept. 21, 1977), to have been wrongly decided.
Ruff has been applied to require a Chapter 13 Trustee to honor a Title 26 Notice of Levy. In re Mishler, 223 B.R. 17, 19-20 (Bankr. M.D. Fla. 1998). This requirement applies notwithstanding language in 11 U.S.C. § 1326(a) calling for return of funds to the debtor.Mishler, 223 BR. at 20; In re Schlapper, 195 B.R. 805, 806 (Bankr. M.D. Fla. 1996). This Court has followed the logic of Schlapper in a case affirmed by the District Court and Court of Appeals. In re Kiper, Case No. 98-14655-WSS-13 (April 26, 2000) at 5, aff'd, In re Kiper, Case No. 00-670-BJL (September 26, 2000), aff'd, Kiper v. McAleer, No. 00-15595 (July 5, 2001).
The Court of Appeals decision in Ruff, 99 F.3d 1559, and the decisions of the District Court and Court of Appeals in Kiper, are binding precedent. United States v. Chila, 871 F.2d 1015, 1018 (11th Cir. 1989),cert. denied, 493 U.S. 498. The Trustee is instructed to follow the command of 26 U.S.C. § 6331 and hand over all funds remaining after his administrative expenses to the counsel for the United States.