Federal Deposit Ins. Corp v. Siegel (In re Indymac Bancorp, Inc.)

Summarized by Kevin Baum , Windels Marx Lane & Mittendorf, LLP
11 years 10 months ago

Citation:

FDIC v. Siegel (In re IndyMac Bancorp, Inc.), No. 12-56218 (9th Cir. Apr. 21, 2014)

Tag(s):

Ruling:

The Ninth Circuit affirmed the district and bankruptcy courts' decision determining that over $55 million in tax refunds were property of IndyMac's Bancorp, Inc.’s (the “Debtor”) estate. In so holding, the Ninth Circuit concluded that the tax refunds were property of the Debtor’s estate because under California law, the tax sharing agreement (the “TSA”) between the Debtor and IndyMac Bank F.S.B. (the “Bank”) did not (1) establish a principal-agent relationship or (2) create a trust relationship.

Procedural context:

Appeal from the United States District Court for the Central District of California’s decision affirming the bankruptcy court’s decision determining that the tax refunds were property of the Debtor’s estate under section 541(a)(1) of the Bankruptcy Code.

Facts:

Sections 2 and 3 of the TSA adjusted the parties’ ultimate tax liability. Section 2 of the TSA provided the mechanism by which the Bank would pay the Debtor its share of the taxes. Further, Section 2 of the TSA provided that the Debtor was obligated to return any excess at the end of the year to the Bank. Section 3 of the TSA described the process by which the Debtor would allocate the tax refunds, if any, attributable to any of the Bank’s current losses used to compute tax liability for the group. The TSA did not prohibit the Debtor from using taxes paid or tax refunds as its own or commingling funds paid to it by the Bank or received from the taxing authorities. Finally, even though Section 5 of the TSA provided that the Debtor was appointed as the Bank’s “agent and attorney-in-fact,” such appointment did not give the Bank any control over the Debtor. After the Debtor received a $55 million tax refund, the FDIC, as receiver for the Bank, argued that such tax refund was not property of the Debtor’s estate because some or all the funds were attributable to the Bank’s losses.

Judge(s):

Fernandez, N.R. Smith, and Murguia, Circuit Judges

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