Opinion of the Court
administrative expense. Since the Sixth Circuit's rationale was inappropriately categorical in nature, this Court need not decide whether a bankruptcy court must always find creditor misconduct before a claim may be equitably subordinated. Pp. 538-543. 48 F. 3d 210, reversed and remanded.
Souter, J., delivered the opinion for a unanimous Court.
Kent L. Jones argued the cause for the United States. With him on the briefs were Solicitor General Days, Assistant Attorney General Argrett, Deputy Solicitor General Wallace, Gary D. Gray, and Edward T. Perelmuter.
Raymond J. Pikna, Jr., argued the cause for respondent. With him on the brief were Thomas R. Noland and Gregory P. Garner.
Justice Souter delivered the opinion of the Court. The issue in this case is the scope of a bankruptcy court's power of equitable subordination under 11 U. S. C. § 510(c). Here, in the absence of any finding of inequitable conduct on the part of the Government, the Bankruptcy Court subordinated the Government's claim for a postpetition, noncompensatory tax penalty, which would normally receive first priority in bankruptcy as an "administrative expense," §§ 503(b)(1)(C), 507(a)(1). We hold that the bankruptcy court may not equitably subordinate claims on a categorical basis in derogation of Congress's scheme of priorities.
In April 1986, First Truck Lines, Inc., voluntarily filed for relief under Chapter 11 of the Bankruptcy Code, and in the subsequent operation of its business as a debtor-in-possession incurred, but failed to discharge, tax liabilities to the Internal Revenue Service (IRS). First Truck moved to convert the case to a Chapter 7 liquidation in June 1988, and in August 1988 the Bankruptcy Court granted that motion and appointed respondent Thomas R. Noland as trustee. The liquidation of the estate's assets raised insufficient funds to pay all of the creditors.Page: Index Previous 1 2 3 4 5 6 7 8 9 Next
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