Rodriguez v. FDIC (In re United Western Bancorp, Inc.)

Case Type:
Case Status:
Reversed and Remanded
17-1281 (10th Circuit, Jun 19,2018) Published
An ambiguous tax allocation agreement between a debtor and its subsidiary that filed consolidated tax returns gave the debtor only mere legal title to a refund based on the subsidiary's prior taxable income and subsequent net operating losses. The debtor was acting only as the agent for the subsidiary with respect to the filing of the income tax returns, and had no equitable interest in the resulting refund. Thus, the bankruptcy estate had no rights in or to the income tax refund.
Procedural context:
The bankruptcy court granted a Chapter 7 trustee for a bank holding company summary judgment on a declaratory judgment action. The bankruptcy court held that a tax refund based solely on a subsidiary-bank's net operating loss carryback was property of the bankruptcy estate because the holding company had "at least bare legal title" to the refund. The bankruptcy court also held that the refund created a debtor-creditor relationship between the bank holding company and the subsidiary bank. The FDIC, which was acting as the receiver for the bank, appealed the bankruptcy court's judgment. The district court reversed the bankruptcy court, and the Chapter 7 trustee appealed.
A bank holding company, United Western Bancorp, Inc. (UWBI), became a Chapter 11 debtor following the appointment of the FDIC as the receiver for United Western Bank (Bank), a federally chartered savings and loan subsidiary of UWBI. Before bankruptcy and the receivership, UWBI and the Bank were party to a "Tax Allocation Agreement" that provided, in part, that "each first-tier subsidiary be treated as a separate taxpayer with UWBI merely being an intermediary between an Affiliate and the Internal Revenue Service...." The Agreement also provided that the Bank appointed UWBI as its "agent... for the purpose of filing such consolidated Federal income tax returns for the UWBI group...." UWBI filed federal income tax returns for the consolidated group, and the tax liabilities and benefits were computed on a separate-entity basis for each party to the Agreement. In 2010, the Bank suffered more than $35MM in net operating losses (NOL). The FDIC subsequently appointed as the receiver for the Bank. In 2011, UWBI filed a tax return seeking a refund for taxes paid in respect of the Bank's 2008 profits by use of the Bank's NOL. The refund was paid to UWBI after UWBI became a debtor in bankruptcy and after UWBI's case was converted to a Chapter 7 liquidation.

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