Appeal from the United States District Court for the District of New Jersey. (D.C. Civil Action No. 91-02591).
Present: Becker, Hutchinson and Weis, Circuit Judges.
HUTCHINSON, Circuit Judge.
Appellant the United States of America, through its Internal Revenue Service ("IRS"), appeals an adverse ruling of the United States District Court for the District of New Jersey which held that a broadcasting license granted by the Federal Communications Commission ("FCC") is not "property" subject to a lien under section 6321 of the Internal Revenue Code, 26 U.S.C.A. § 6321 (West 1989). The IRS contends that the proceeds from the sale of the license in a Chapter 7 bankruptcy proceeding are subject to its lien. The bankruptcy trustee, on the other hand, contends that a longstanding FCC prohibition against treating the licenses as property, coupled with legal authority denying private creditors any interest in broadcasting licenses, compels a contrary Conclusion. Because we believe the policy behind the FCC's refusal to recognize liens obtained by private creditors against a broadcasting license is not applicable to the IRS's assertion of a secured claim in bankruptcy against the proceeds of a bankruptcy sale, we hold that a section 6321 lien does attach to the proceeds of a Chapter 7 sale. We note particularly that the FCC does not object to the sale of the FCC license issued to the debtor under the supervision of the bankruptcy court but has instead approved it. We will therefore reverse the order of the district court denying the IRS a lien against the proceeds of the bankruptcy sale attributable to sale of the license itself.
The bankruptcy court had jurisdiction over this adversary proceeding pursuant to 28 U.S.C.A. § 157(b)(2)(K) (West Supp. 1993). The district court had jurisdiction over the appeal from the bankruptcy court pursuant to 28 U.S.C.A. § 158(a) (West Supp. 1993). We have appellate jurisdiction over the government's appeal from the order of the district court pursuant to 28 U.S.C.A. § 158(d) (West Supp. 1993).
On May 15, 1986, Atlantic Business and Community Development Corporation ("Atlantic") filed a petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. On July 14, 1987, the United States filed a timely proof of claim on behalf of the IRS for unpaid employment taxes, plus statutory additions in the total amount of $322,008.77. The proof of claim the IRS filed identified $267,429.39 as a secured claim because of federal tax liens that were perfected before the bankruptcy petition was filed.
The United States Trustee appointed Thomas J. Subranni ("Trustee") to administer the estate while the case proceeded through Chapter 11. Subsequently, the Trustee moved to convert the case into a Chapter 7 liquidation. The bankruptcy court granted that motion and the Trustee continued to administer the estate after conversion.
Under order of the bankruptcy court, the Trustee sold the assets of Atlantic's bankrupt estate. The United States asserted a secured claim against the resulting fund by virtue of the tax lien it had previously asserted against the debtor. To resolve the government's claim, the Trustee filed an adversary proceeding to establish the extent and validity of the government's liens and, in particular, to determine whether the liens attached to a broadcast license the FCC had issued to Atlantic. The parties cross-moved for summary judgment. The bankruptcy court held that the lien did not attach to the broadcast license and entered judgment for the Trustee. The government appealed and the district court affirmed on July 31, 1992. The government filed its timely notice of appeal on September 29, 1992.
Atlantic, a New Jersey corporation, owned an AM radio station in Atlantic City, New Jersey using the call letters WUSS. Atlantic operated WUSS pursuant to a broadcast license it had obtained from the FCC prior to filing its bankruptcy petition.
In 1986 Atlantic sought protection under Chapter 11 of the Bankruptcy Code. Following a failed reorganization attempt, on motion of the Trustee the case was converted to a Chapter 7 proceeding. Subsequently, the bankruptcy court authorized the Trustee to sell all the assets of WUSS-AM.
Before the sale, the Trustee retained an appraiser who inventoried, itemized, and valued the station assets. The appraiser determined the station had assets worth $254,283, including the value of the license which the appraiser set at $250,000. The sale proceeded with the government and the Trustee agreeing that all liens would be transferred to the fund acquired from the sale, retaining whatever priority they had in the property to be sold, with the further understanding that the validity and priority of those liens would be subsequently litigated. On December 14, 1988, the Trustee entered into an agreement of sale for the station and all its assets. The agreement transferred the station and ...