  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
Frost v. Subramanian (In re Subramanian), No. 06-3294, 2007 WL 2310026 (3d Cir. Aug. 14, 2007) (Debtor not entitled to Rule 60 relief from default judgment barring discharge when untimely filed answer through new counsel did not assert any meritorious defense to five counts of a 199 paragraph complaint. Excusable neglect under Rule 60(b)(1) requires proof of meritorious defense with respect to each cause of action. Exceptional circumstances under Rule 60(b)(6) were not demonstrated by debtors as any negligence of their original counsel was properly considered under the excusable neglect standard. Actions by counsel can constitute "exceptional circumstances" justifying relief under Rule 60(b)(6) if the actions by counsel are "inexcusable 'gross negligence'". Debtor failed to prove that the conduct of prior counsel was "so gross that it is inexcusable.").
II. LITIGATION OF DISCHARGEABILITY COMPLAINTS: 11 U.S.C. S 523
A. 11 U.S.C. S 523(a)(1):
"for a tax or a customs duty . . . ."
1. Fraudulent return or willful attempt to evade
United States v. Jacobs (In re Jacobs), 490 F.3d 913 (11th Cir. 2007) (Weaving among Griffith v. United States (In re Griffith), 206 F.3d 1389 (11th Cir. 2000), United States v. Fretz ( In re Fretz), 244 F.3d 1323 (11th Cir. 2001), and Haas v. I.R.S. (In re Haas), 48 F.2d 1153 (11th Cir. 1995), although mere nonpayment of taxes does not constitute willful attempt to evade or defeat taxes under S 523(a)(1)(C), nondischargeability was established by evidence that: 1) debtor purchased an expensive home and titled it in his wife's name to avoid tax liens; 2) debtor characterized income from his law firm as officer compensation to avoid withholding taxes; 3) debtor used law firm to purchase cars for himself and his wife; and 4) debtor made large discretionary expenditures such as donations to charity when debtor knew tax liability was accumulating. "Section 523(a)(1)(C) 'contains a conduct requirement (that the debtor 'attempted in any manner to evade or defeat [a] tax'), and a mental state requirement (that the attempt was done 'willfully').' 'The government satisfies the conduct requirement when it proves the debtor engaged in affirmative acts to avoid payment or collection of the taxes,' either through commission or culpable omission. The mental state requirement-willfulness-is satisfied where the government shows that the debtor's attempt to avoid tax liability was 'done voluntarily, consciously or knowingly, and intentionally.' That standard is met where '(1) the debtor had a duty under the law, (2) the debtor knew he had that duty, and (3) the debtor voluntarily and intentionally violated that duty.'" While a debtor's failure to pay taxes, without more, does not invoke S 523(a)(1)(C), "'the conduct requirement is satisfied . . . where a debtor engaged in affirmative acts to avoid payment or collection of taxes[.]'" "Affirmative acts" may include transfers of property whether or not any interest is retained. "'[I]nadvertent mistakes' are insufficient to trigger S 523(a)(1)(C)'s exception to dischargeability, . . . the necessary trigger is knowledge and deliberateness[.]" Debtor's failure to pay tax liabilities or make estimated payments while making large undocumented loans to family owned business strongly indicate willfulness. That debtor regretted his failure to pay taxes doesn't defeat willfulness. That debtor paid some portion of
