Joye v. Franchise Tax Board

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In the Matter of: SHELLI RENEE 

JOYE; TERESA M. JOYE,

Debtors,

SHELLI RENEE JOYE; TERESA M.

JOYE, aka Michael Joye, Maria No. 07-15676

Teresa Joye & Maria Mendoza, D.C. Nos.

Plaintiffs-Appellants,  CV-06-02415-SC

01-30495-DM

v.

FRANCHISE TAX BOARD, STATE OF OPINION

CALIFORNIA; SELVI STANISLAUS

Executive Officer of State of

California Franchise Tax Board,

Defendants-Appellees.



Appeal from the United States District Court

for the Northern District of California

Samuel Conti, District Judge, Presiding

Argued and Submitted

October 24, 2008—San Francisco, California

Filed August 21, 2009

Before: J. Clifford Wallace, Sidney R. Thomas and

Susan P. Graber, Circuit Judges.

Opinion by Judge Wallace

Dissent by Judge Graber

11505

IN THE MATTER OF JOYE 11509

COUNSEL

Robert N. Kolb, Antioch, California, for the plaintiffs-

appellants.

Edmund G. Brown, Jr., Attorney General for the State of Cali-

fornia, Randall P. Borcherding, Supervising Deputy Attorney

General, and Kristian D. Whitten, Deputy Attorney General,

San Francisco, California, for the defendants-appellees.

OPINION

WALLACE, Senior Circuit Judge:

Shelli Renee Joye and Teresa M. Joye (the Joyes) filed an

adversary complaint in bankruptcy court against the State of

California Franchise Tax Board and its Executive Director,

Selvi Stanislaus (collectively, the Board), for declaratory and

injunctive relief. The Joyes seek an order declaring that their

state tax obligations from the year 2000 were discharged at

the conclusion of their Chapter 13 bankruptcy proceeding in

2004. They also seek an injunction enjoining the Board from

collecting these outstanding tax liabilities. The Board moved

for summary judgment, and the bankruptcy court denied the

motion. The district court reversed the bankruptcy court, and

entered summary judgment in the Board’s favor. The Joyes

now appeal from the district court’s summary judgment. We

have jurisdiction over this timely appeal pursuant to 28 U.S.C.

§ 158(c)(2). We reverse and remand.

11510 IN THE MATTER OF JOYE

I.

The Joyes filed their Chapter 13 bankruptcy petition on

March 7, 2001. The bankruptcy petition scheduled the Board

as a priority creditor in the estimated amount of $10,000 for

outstanding state income taxes for the year 2000. Pursuant to

11 U.S.C. § 342, official notice of the Joyes’ bankruptcy case

was then sent to all creditors scheduled in the petition. The

notice indicated that the meeting of creditors would take place

on April 19, 2001, and that the claims bar date for govern-

mental claims was set for September 3, 2001. The Board does

not appear to have attended the meeting of creditors, or other-

wise filed objections to the Joyes’ bankruptcy plan. The bank-

ruptcy court confirmed the Joyes’ bankruptcy plan on May

18, 2001. The Board did not file a proof of claim in the Joyes’

case, and the claims bar date for governmental claims elapsed

as scheduled.

On October 15, 2001, the Joyes filed their year 2000 state

income tax return. Although this return was originally due on

April 15, 2001, California law grants taxpayers an automatic

six-month extension of the deadline for filing personal income

tax returns. The Joyes’ year 2000 state tax return was there-

fore timely filed. The return showed the Joyes owing taxes

and penalties totaling $28,178.00. No payment accompanied

the return.

The Joyes successfully completed their bankruptcy plan on

February 7, 2004. On March 4, 2004, the bankruptcy court

discharged the Joyes from bankruptcy pursuant to 11 U.S.C.

§ 1328(a). The discharge order stated that “the debtor is dis-

charged from all debts provided for by the plan or disallowed

under 11 U.S.C. § 502,” subject to a few exceptions not rele-

vant here. The order also stated that “[a]ll creditors are pro-

hibited from attempting to collect any debt that has been

discharged in this case.”

Subsequently, the Board attempted to collect the outstand-

ing taxes reported in the Joyes’ year 2000 state tax return. On

IN THE MATTER OF JOYE 11511

March 22, 2005, the Joyes commenced an adversary proceed-

ing in bankruptcy court, alleging that the Board’s collection

efforts violated the discharge order. The Board filed a motion

for summary judgment, arguing that the outstanding taxes sur-

vived discharge pursuant to 11 U.S.C. § 1305. In the alterna-

tive, the Board argued that barring its collection of these

outstanding taxes would violate the constitutional guarantee

of fundamental fairness to governmental entities.

The bankruptcy court denied the Board’s motion, conclud-

ing that the outstanding taxes were properly discharged. With

respect to the Board’s primary argument, the bankruptcy court

observed that section 1305 was inapplicable to the parties’

dispute because that section “has nothing to do with dis-

charge. It has to do with whether a creditor, such as the

Board, may file a claim, and if so, how that claim is treated.

But that’s not our case . . . . [The Board] didn’t file a claim

and it got notice of the proceeding, and the discharge is a final

order.” The bankruptcy court also rejected the Board’s alter-

native argument regarding the constitutional doctrine of fun-

damental fairness. The bankruptcy court held that the Board

received both adequate notice of the Joyes’ bankruptcy case

and a meaningful opportunity to file a proof of claim for the

outstanding taxes.

The district court on appeal agreed that the outstanding

taxes were “technically discharged” through the Chapter 13

proceeding because the Board did not file a proof of claim.

However, the district court concluded that the Board was

nonetheless entitled to summary judgment because barring

collection of the outstanding taxes would constitute a denial

of fundamental fairness to the Board. The court held that the

Board did not receive adequate notice of its right to payment

on the outstanding taxes because “California’s income tax

system . . . relies on taxpayers to assess how much they owe

and inform the [Board] of that amount by filing a tax return,”

and the Joyes did not file their state tax return until after the

claims bar date for governmental claims. The court further

11512 IN THE MATTER OF JOYE

held that scheduling the Board as a creditor in the bankruptcy

petition for an estimated amount was insufficient to provide

the Board with constitutionally adequate notice.

Therefore, the district court reversed the bankruptcy court’s

decision, and granted the Board’s motion for summary judg-

ment. Rather than remanding the case to the bankruptcy court

for further proceedings, the district court entered judgment in

favor of the Board. This appeal followed.

II.

We review a district court’s decision on a bankruptcy court

appeal de novo. Dawson v. Wash. Mut. Bank, F.A. (In re

Dawson), 390 F.3d 1139, 1145 (9th Cir. 2004). In doing so,

we review the bankruptcy court’s decision independently, and

give no deference to the district court’s determinations. Id.

The bankruptcy court’s factual findings are reviewed for clear

error, and its conclusions of law are reviewed de novo. Id.

Summary judgment is appropriate where the evidence demon-

strates that there are no genuine issues of material fact for trial

and the moving party is entitled to judgment as a matter of

law. Barboza v. New Form, Inc. (In re Barboza), 545 F.3d

702, 707 (9th Cir. 2008). A genuine issue of material fact

exists if, viewing all the evidence in the light most favorable

to the nonmoving party, a reasonable fact-finder could decide

in that party’s favor. Id.

The Joyes argue that the district court erred in entering

summary judgment in favor of the Board based on the consti-

tutional doctrine of fundamental fairness. The Board defends

the district court’s constitutional determination, but argues in

the alternative that summary judgment should be affirmed on

statutory grounds. Downs v. Hoyt, 232 F.3d 1031, 1036 (9th

Cir. 2000) (“We may affirm on any ground supported by the

record, even if it differs from the district court’s rationale”).

Because we must “avoid reaching constitutional questions in

advance of the necessity of deciding them,” we first address

IN THE MATTER OF JOYE 11513

the parties’ statutory arguments. Lyng v. Nw. Indian Cemetery

Protective Ass’n, 485 U.S. 439, 445 (1988).

A.

Both the bankruptcy court and the district court concluded

that the Joyes’ outstanding tax liabilities for the year 2000

were discharged at the conclusion of their bankruptcy case

pursuant to 11 U.S.C. § 1328(a). In so ruling, the two courts

rejected the Board’s argument that these outstanding taxes

survived the bankruptcy court’s discharge order under 11

U.S.C. § 1305. Indeed, both courts held that section 1305 was

irrelevant to the determination of whether these outstanding

taxes were subject to discharge. The Board disputes this con-

clusion, renewing its argument that section 1305 allows cer-

tain “post-petition” claims to survive a debtor’s Chapter 13

discharge so long as the claimholder elects not to file a proof

of claim. For their part, the Joyes appear to concede that if the

outstanding taxes give rise to a post-petition claim under sec-

tion 1305, the taxes would survive discharge.

We have not addressed whether section 1305 operates to

protect certain claims from a bankruptcy discharge. However,

we need not decide this open question of Ninth Circuit law

because even if section 1305 can be read to shield certain

claims from discharge, its protection extends only to “post-

petition” claims, and we conclude that the Joyes’ outstanding

taxes cannot give rise to such a claim under section 1305. We

therefore agree with the ultimate conclusions of both courts

that these taxes were discharged in the Joyes’ bankruptcy

case.

1.

[1] Section 1305 is entitled “Filing and allowance of post-

petition claims.” Subsection (a) provides that “[a] proof of

claim may be filed by any entity that holds a claim against a

debtor . . . (1) for taxes that become payable to a governmen-

11514 IN THE MATTER OF JOYE

tal unit while the case is pending.” 11 U.S.C. § 1305(a)(1).

The parties do not dispute that the Joyes’ bankruptcy case was

pending from March 7, 2001 to March 4, 2004. Therefore,

whether the Joyes’ outstanding taxes give rise to a post-

petition claim pursuant to section 1305(a)(1) depends on

when these taxes became “payable” for the purpose of that

section.

[2] We have yet to construe the term “payable” as used in

section 1305(a)(1). See In re Savaria, 317 B.R. 395, 401

(B.A.P. 9th Cir. 2004) (recognizing, without resolving, the

split in authority on the meaning of the word). However, the

Court of Appeals for the Fifth Circuit and the Bankruptcy

Appellate Panel for the Tenth Circuit have each addressed this

issue with differing results. In United States v. Ripley (In re

Ripley), 926 F.2d 440 (5th Cir. 1991), the court held that

“taxes that have ‘become payable’ are those that must be paid

now.” Id. at 444. In coming to this conclusion, the court stated

that the word “payable” in “customary usage” means “not

only ‘[c]apable of being paid’ but also ‘justly due’ and

‘legally enforceable.’ ” Id. at 444, quoting Black’s Law Dic-

tionary 1128 (6th ed. 1990). The court then held that “[t]he

latter of these is the only reasonable meaning to be affixed to

the word as it is used in section 1305.” Id. The court appears

to have based its conclusion on the fact that this construction

comports with the law of commercial paper: “When a nego-

tiable instrument is ‘payable’ to bearer or to order, the sum

therein must be paid to the bearer or to the order of the person

therein specified.” Id., citing U.C.C. §§ 3-110, 3-111. The

court acknowledged, however, that the meaning of the word

was not disputed by the parties. Id. at 444 n.14.

[3] In Dixon v. IRS (In re Dixon), 218 B.R. 150 (B.A.P.

10th Cir. 1998), the Bankruptcy Appellate Panel for the Tenth

Circuit construed the term differently. The panel construed

Ripley as addressing “payable” in the context of “the last per-

missible time to pay [one’s taxes] before the [given taxing

authority] can commence forcible collection activities.” Id. at

IN THE MATTER OF JOYE 11515

152. The panel observed, however, that “[t]he Bankruptcy

Code . . . generally attempts to deal with debtors’ payment

obligations at an earlier time.” Id. Reading the word “pay-

able” in conjunction with the Bankruptcy Code’s definitions

for “claims” and “debts,” respectively, the panel reasoned that

the word is best construed to refer “to a time before the last

permissible day for paying taxes.” Id. This construction is

confirmed, the panel held, by the legislative history of the

Bankruptcy Code, which contains the statement, “Section

1305(a) provides for the filing of a proof of claim for taxes

and other obligations incurred after the filing of the chapter

13 case.” Id. at 153, quoting S. Rep. No. 95-989, at 140

(1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5926 (empha-

sis added in Dixon).

[4] The reasoning of the Tenth Circuit Bankruptcy Appel-

late Panel is persuasive. As the court in Ripley acknowledged,

the word “payable” is susceptible to more than one interpreta-

tion. Ripley, 926 F.2d at 444 (stating that “payable” can mean

either “capable of being paid” or “justly due” and “legally

enforceable”). The panel in Dixon therefore correctly

reviewed the statutory scheme of the Bankruptcy Code to dis-

cern Congress’ intent. United States v. Daas, 198 F.3d 1167,

1174 (9th Cir. 1999) (“To determine the plain meaning of a

particular statutory provision, and thus congressional intent,

the court looks to the entire statutory scheme”).

[5] In that regard, the panel in Dixon rightly stated that

Chapter 13 of the Code is generally concerned with satisfying

or discharging “claims” against a given debtor. Dixon, 218

B.R. at 152, citing 11 U.S.C. §§ 1322, 1325 & 1328. A

“claim” is broadly defined as the “right to payment, whether

or not such right is reduced to judgment, liquidated, unliqui-

dated, fixed, contingent, matured, unmatured, disputed, undis-

puted, legal, equitable, secured, or unsecured.” 11 U.S.C.

§ 101(5)(A). This broad definition supports Dixon’s conclu-

sion that the term “payable,” which is used to define a certain

11516 IN THE MATTER OF JOYE

class of claims, refers to a time before the creditor’s right to

payment matures into a legally enforceable prerogative.

Further examination of the statutory scheme confirms this

interpretation. Like section 1305(a)(1), section 502(i) of the

Code also addresses tax claims held by governmental entities.

This section provides that “[a] claim [for certain tax liabilities

owed to governmental units] that does not arise until after the

commencement of the case . . . shall be determined, and shall

be allowed . . . the same as if such claims had arisen before

the date of the filing of the petition.” 11 U.S.C. § 502(i). Rec-

onciling section 502(i) with section 1305(a)(1), Collier on

Bankruptcy concludes that the “taxes covered by [section

502(i)] are those which are incurred prepetition that do not

come due until after the petition is filed. If a tax is incurred

postpetition, it can be treated . . . only as a postpetition claim

under section 1305.” 8 Collier on Bankruptcy ¶ 1300.71[10]

(Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev.)

(emphasis added); see also In re Flores, 270 B.R. 203, 208

(Bankr. S.D. Tex. 2001) (holding that a post-petition claim

under section 1305 “is a liability that arises postpetition and

relates only to postpetition activity”) (emphasis added); 4

Keith M. Lundin, Chapter 13 Bankruptcy § 302.1, at 302-1

(3d ed. 2000 & 2004 Supp.) (“Section 1305 deals only with

debts that arise after the petition”) (emphasis added). There-

fore, only taxes incurred post-petition may be treated as post-

petition claims under section 1305(a).1

1

The dissent faults us for “equat[ing]” section 1305 with section 502(i)

because the former refers to “taxes that become payable,” whereas the lat-

ter refers to a “claim” that “arise[s].” However, the phrase “taxes that

become payable” in section 1305 defines one type of post-petition

“claim,” so the two provisions are more alike than the dissent asserts. 28

U.S.C. § 1305(a). Furthermore, our reliance on “scholarly interpretations,”

which harmonize these two provisions, is but a straightforward application

of the well-established canon of statutory interpretation in pari materia,

that similar provisions in the same statute should be interpreted in a simi-

lar manner unless legislative history or purpose suggests material differ-

ences. Erlenbaugh v. United States, 409 U.S. 239, 244 (1972).

IN THE MATTER OF JOYE 11517

Moreover, as stated in Dixon, the legislative history of the

Bankruptcy Code indicates that section 1305(a) was meant to

address taxes “incurred after the filing of the chapter 13

case.” Dixon, 218 B.R. at 153, quoting S. Rep. No. 95-989,

at 140 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5926

(emphasis added in Dixon). Although resort to legislative his-

tory is generally discouraged in statutory construction and

certainly unnecessary where the meaning of a statute is plain,

we have the option of turning to it for insight into congressio-

nal intent where, as here, the statutory language is ambiguous.

Daas, 198 F.3d at 1174 (“If the statute is ambiguous — and

only then — courts may look to its legislative history for evi-

dence of congressional intent”).

[6] Reviewing the statutory scheme of the Bankruptcy

Code and the relevant legislative history, we conclude that

Congress meant section 1305(a)(1) to refer to taxes that were

incurred by the debtor during the pendency of the debtor’s

bankruptcy case. We would frustrate this congressional intent

were we to construe the word “payable” to refer to only those

taxes that have become “legally enforceable” or “justly due.”

Ripley, 926 F.2d at 444. Rather, as the court in Ripley stated,

payable can also describe amounts that are simply “capable of

being paid.” Id.; see also Black’s Law Dictionary (8th ed.

2004) (“An amount may be payable without being due. Debts

are commonly payable long before they fall due”). This con-

struction of “payable” better comports with Congress’ intent

to cover a debtor’s tax liability at a time prior to the point

when that liability becomes legally actionable.2 Therefore,

2

The dissent argues that the narrower definition of “payable” more

accurately reflects congressional intent because it would enable tax collec-

tion in this case, whereas the broader definition we adopt prevents collec-

tion. However, as discussed above, the relevant statutory scheme and

legislative history of section 1305 evince a specific congressional intent to

allow post-petition claims for those tax obligations that were incurred

while a bankruptcy petition is pending. To take the dissent’s approach

would be to ignore this legislative directive in favor of a general congres-

sional preference for tax collection, unmoored from the particular provi-

sion at issue.

11518 IN THE MATTER OF JOYE

because “[t]he purpose of statutory construction is to discern

the intent of Congress,” Daas, 198 F.3d at 1174, we hold that

taxes become “payable” for purposes of section 1305(a)(1)

when they are capable of being paid.3

[7] Applying this construction here, we hold that the Joyes’

outstanding state taxes for the year 2000 cannot give rise to

a post-petition claim pursuant to section 1305(a)(1). Under

California law, personal taxes are calculated based on the

given taxpayer’s income earned “for each taxable year.” Cal.

Rev. & Tax. Code § 17041(a)(1). A “taxable year” is in turn

defined as a calendar year. Cal. Rev. & Tax. Code § 17010.

Thus, the Joyes could have technically determined and paid

their year 2000 taxes on the day after the close of the corre-

sponding calendar year. Although the Joyes were not required

to pay these taxes until April 15, 2001 (or at the latest October

15, 2001), their tax liability to the state for the year 2000 was

nonetheless capable of being paid, and thus payable, as of

January 1, 2001.

[8] Because this date fell prior to the date the Joyes filed

their bankruptcy petition on March 7, 2001, these taxes can-

not give rise to a post-petition claim under section 1305(a)(1).

Therefore, even if section 1305 shields post-petition claims

from discharge (which we do not decide), it would not operate

to protect the Board’s claim to the Joyes’ outstanding taxes

from discharge. These taxes were thus properly discharged at

the conclusion of Joyes’ bankruptcy case.4

3

We acknowledge that our decision creates a circuit split with the Fifth

Circuit. Respectfully, however, we are not bound by its decision. To the

extent that the dissent argues that we are also not bound by the Tenth Cir-

cuit Bankruptcy Appellate Panel’s decision in Dixon, we agree. Nonethe-

less, we conclude that the bankruptcy panel’s analysis is persuasive, and

adopt its interpretation as our own for the reasons discussed in this opin-

ion.

4

The dissent argues that our holding “assumes that a taxpayer can do

nothing to alter her tax obligations between January 1 and April 15.” But

IN THE MATTER OF JOYE 11519

2.

The Board presents an array of internally inconsistent, and

ultimately unsuccessful, arguments against adopting the

broader definition of “become payable” suggested in Dixon.

First, the Board appears to argue that the Ninth Circuit has

adopted the “same analysis [as Ripley] to determine when

taxes become payable.” On this point, the Board mentions

that it believes that Ripley interprets “payable” under the

Internal Revenue Code. Yet, later in the Board’s brief, the

Board attempts to distinguish Dixon on the same grounds,

arguing that, “[i]n this case, the issue is not when taxes

‘become payable’ under the Internal Revenue Code, but when

they ‘become payable’ under the California [Revenue and Tax

Code].”

To the extent that the Board argues that cases interpreting

“payable” under the Internal Revenue Code are not particu-

larly instructive, we agree. As aptly stated in Dixon, “words

used in the Bankruptcy Code do not necessarily mean the

same thing they might mean in the Internal Revenue Code.”

Dixon, 218 B.R. at 152. And as described earlier, there are

ample clues provided by the plain language, statutory scheme,

and legislative history of section 1305 for us to divine con-

gressional intent without recourse to interpretations of a

wholly different statute. See, e.g., Sherman v. United States

Parole Comm’n, 502 F.3d 869, 874-78 (9th Cir. 2007)

(declining to adopt the interpretation of a certain statute pro-

vided in a prior case, in construing a similar phrase used in

a different statute, because the prior case “dealt with an

we assume nothing of the sort. There may be a case where, as the dissent

describes, “[a] taxpayer . . . contribute[s] to an Individual Retirement

Account (“IRA”) between January 1 and April 15, 2009, and deduct[s]

that contribution from her 2008 income when she files her 2008 tax

return.” That case, however, is not before us. There is no evidence, or even

allegation, that the Joyes engaged in transactions, which significantly

altered their year 2000 tax liability after the close of the tax year.

11520 IN THE MATTER OF JOYE

entirely separate statutory scheme”); accord United States ex

rel. Chicago, New York & Boston Refrigerator Co. v. Inter-

state Commerce Comm’n, 265 U.S. 292, 295 (1924)

(“[B]ecause words used in one statute have a particular mean-

ing they do not necessarily denote an identical meaning when

used in another and different statute”).

For similar reasons, we also reject the Board’s argument

that “payable” under section 1305(a)(1) should be construed

by reference to the California Revenue and Tax Code. On this

issue, the Board confuses the substantive determination to be

made under section 1305(a)(1) with the task of construing the

statutory provision in the first instance. True, under Raleigh

v. Ill. Dep’t of Revenue, 530 U.S. 15, 20 (2000), “the ‘basic

federal rule’ in bankruptcy is that state law governs the sub-

stance of claims.” Id., quoting Butner v. United States, 440

U.S. 48, 57 (1979). However, before we can determine

whether the Joyes’ outstanding taxes became payable under

California law during the pendency of their bankruptcy case,

we must first decide what the Bankruptcy Code means by the

term “payable” in section 1305(a)(1). For that initial determi-

nation, we rely on the traditional canons of statutory interpre-

tation, not the substantive tax law of California.

The Board also suggests that this circuit in Pan American

Van Lines v. United States, 607 F.2d 1299 (9th Cir. 1979) has

already determined that “payable” refers to the tax return

deadline. We do not agree. In that case, the court determined

“whether taxpayer’s liability for the restricted interest was

‘legally due and owing[‘] within three years preceding bank-

ruptcy” under Section 17(a) of the Bankruptcy Act. Id. at

1301. Thus, Pan American interpreted a completely different

statutory provision than the one at issue here, and in no way

speaks to the interpretation of the term payable under section

1305(a)(1). To the extent that the Ninth Circuit Bankruptcy

Appellate Panel in Savaria held that Pan American Van Lines

stands for the proposition that taxes “become payable when

IN THE MATTER OF JOYE 11521

the final tax return for the tax year is required to be filed,” we

disagree with the panel. Savaria, 317 B.R. at 401.

The other cases relied on by the Board are also unhelpful.

In Schatz v. Franchise Tax Board, 81 Cal. Rptr. 2d 719 (Cal.

Ct. App. 1999), a case also relied upon by the dissent, the

court held that a state income tax deficiency is “assessed” for

the purposes of federal bankruptcy laws “when the assessment

contained in a notice of proposed deficiency assessment

becomes final.” Id. at 720. Schatz did not, however, address

when taxes become “payable” under California law for pur-

poses of section 1305(a)(1). The tax return deadline may be

the “date when the State formally act[s] to finally fix the tax

deficiencies for those years,” but that does not preclude the

conclusion that the taxes owed are capable of being paid at a

point before the State’s formal action. Id. at 724.

The same reasoning distinguishes Franchise Tax Board v.

Bracey (In re Bracey), 77 F.3d 294 (9th Cir. 1996). Like

Schatz, this case dealt with the issue of when a tax deficiency

is “assessed” under California law for purposes of rendering

the assessment nondischargeable in federal bankruptcy pro-

ceedings. Id. at 295. The moment when a tax deficiency

assessment becomes final is plainly different than when

income taxes become payable for purposes of section

1305(a)(1).

For these reasons, we disagree with the Board’s argument

that the Joyes’ outstanding taxes “became payable” on the

date their state tax return was due. As described above, those

taxes “became payable” at the close of the year 2000 taxable

year. Because the date the taxes became payable fell before

the date the Joyes filed their bankruptcy petition, the taxes

were properly discharged in their bankruptcy case.

B.

[9] Having concluded that the Board is not entitled to sum-

mary judgment on statutory grounds, we are now required to

11522 IN THE MATTER OF JOYE

address the parties’ constitutional arguments. We must decide

whether barring the Board from collecting the Joyes’ out-

standing taxes would constitute a denial of fundamental fair-

ness in state proceedings guaranteed by the Constitution. In

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306,

314 (1950), the Supreme Court held that “[a]n elementary and

fundamental requirement of due process in any proceeding

which is to be accorded finality is notice reasonably calcu-

lated, under all the circumstances, to apprise interested parties

of the pendency of the action and afford them an opportunity

to present their objections.” In City of New York v. New York,

New Haven & Hartford R.R. Co., 344 U.S. 293, 296-97

(1953), the Court extended this constitutional guarantee to

governmental entities.

[10] We assessed the constitutional adequacy of the official

notice provided in bankruptcy proceedings in Matter of Greg-

ory, 705 F.2d 1118 (9th Cir. 1983). There, a creditor argued

that its claim in bankruptcy should not be discharged because

it had received inadequate notice of the debtor’s bankruptcy

plan. Id. at 1120. It was undisputed, however, that the creditor

had received official notice of the bankruptcy case and the

scheduled meeting of creditors. Id. We rejected the creditor’s

constitutional challenge, holding that “[w]hen the holder of a

large, unsecured claim [in bankruptcy] . . . receives any notice

from the bankruptcy court that its debtor has initiated bank-

ruptcy proceedings, it is under constructive or inquiry notice

that its claim may be affected, and it ignores the proceedings

to which the notice refers at its peril.” Id. at 1123. We added

that “[i]f [the creditor] had made any inquiry following

receipt of the notice, it would have discovered that it needed

to act to protect its interest.” Id.; see also Espinosa v. United

Student Aid Funds, Inc., 545 F.3d 1113, 1122 (9th Cir.),

amended by 553 F.3d 1193 (2008) (holding that Gregory is

“entirely consistent with Mullane and the more than a half

century of due process caselaw that follows it”).

[11] Gregory controls here. The Joyes filed their bank-

ruptcy petition on March 7, 2001. The petition scheduled the

IN THE MATTER OF JOYE 11523

Board as a priority creditor in the estimated amount of

$10,000. The bankruptcy court then sent the Board official

notice of the petition. The notice indicated that the meeting of

creditors would be held on April 19, 2001, and that the claims

bar date for governmental claims was September 3, 2001. The

parties do not dispute that this notice complied with the

requirements of the Bankruptcy Code. Moreover, the Board

does not contend that it did not receive this official notice.

Therefore, like the creditor in Gregory, the Board received

constitutionally adequate notice of its right to payment — in

the form of the official notice mandated by the Bankruptcy

Code — and it ignored the Joyes’ bankruptcy proceeding “at

its peril.” Gregory, 705 F.2d at 1123.

The Board argues that even though it received this official

notice, it could not determine the Joyes’ actual tax liability

until after October 15, 2001 because California’s income tax

system relies on taxpayers to assess how much they owe and

inform the Board of that amount through a tax return. But this

does not change the fact that the Board received actual notice

of the Joyes’ bankruptcy petition, which had scheduled the

Board as a priority creditor for an estimated $10,000.

Although this estimate was below the actual amount owed,

the estimate certainly put the Board on notice that it may be

entitled to some amount of payment from the Joyes’ Chapter

13 estate. Cf. In re Coastal Alaska Lines, Inc., 920 F.2d 1428,

1431 (9th Cir. 1990) (holding that an unscheduled creditor

had constitutionally adequate notice of the bankruptcy pro-

ceedings because it had sufficient information to evaluate

whether to participate in the case and protect its interests); In

re Kragness, 82 B.R. 553, 555 (Bankr. D. Or. 1988) (holding

that “the operative fact is whether or not the creditor has

notice of the debtor’s bankruptcy proceeding in time to file a

timely proof of claim”).

[12] Moreover, as the Joyes correctly point out, if the

Board had doubts about the tax estimate, it could have either

requested an extension of time in which to file a claim, or

11524 IN THE MATTER OF JOYE

filed an estimated claim in any amount, and then sought an

amendment of that claim prior to the distribution. See, e.g.,

Lompa v. Price (In re Price), 871 F.2d 97, 99 (9th Cir. 1989)

(holding that a creditor who had received actual notice of a

bankruptcy proceeding through his counsel did not suffer a

due process violation because he had notice “in time to file a

complaint, or at least to file a timely motion for an extension

of time”). Yet the Board does not explain why it did not

inquire further into the Joyes’ bankruptcy proceeding. Instead,

the Board argues that the Joyes should not be allowed to

“game” the system by setting the claims bar date before the

date on which they are required to file their tax returns. How-

ever, there is no evidence of bad faith on the Joyes’ part; it

is undisputed that the Joyes were legally entitled to file their

tax returns on October 15.

Our decision in Manufacturers Hanover v. Dewalt (In re

Dewalt), 961 F.2d 848 (9th Cir. 1992) does not alter our con-

clusion. In that case, we ruled that a creditor did not receive

adequate notice because the debtor negligently listed an incor-

rect address for the debtor in her bankruptcy plan. Id. at 849.

The creditor therefore “did not receive any notice from the

court regarding” the claim schedules in bankruptcy. Id. The

case before us is wholly distinguishable. As described above,

no one disputes that the Board received actual notice of the

Joyes’ bankruptcy case. Moreover, there is no evidence that

the Joyes acted negligently in filing their tax returns after the

claims bar date.

Similarly, Ellett v. Stanislaus, 506 F.3d 774 (9th Cir. 2007)

is of no help to the Board. In that case, we held that a taxing

authority did not receive adequate notice of the debtor’s

Chapter 13 bankruptcy because the debtor provided an incor-

rect social security number in his bankruptcy filings. Id. at

781. Although we observed that the burden of providing ade-

quate notice is generally on the debtor, our decision in that

case turned on the fact that the debtor provided “incorrect

identifying information” to the tax authority. Id. We held that

IN THE MATTER OF JOYE 11525

“due to [the debtor’s] negligence in listing an erroneous

[social security number] on his bankruptcy petition and sec-

tion 341(a) notice, proper notice was not provided to the [tax-

ing authority].” Id. (emphasis added). In this case, it is

undisputed that the Joyes provided their correct social security

numbers in their bankruptcy filings. The Board nevertheless

argues that it did not have the Joyes’ social security numbers

in its own records prior to the tax return deadline. But Ellett

does not stand for the proposition that the bankruptcy court’s

official notice is constitutionally inadequate simply because

the creditor’s records are incomplete through no fault of the

debtor.

[13] Finally, we address the district court’s observation that

recent amendments to the Bankruptcy Code evidence Con-

gress’ concern that situations like this case “could result in the

denial of fundamental fairness to taxing authorities.” These

amendments were enacted in 2005, and were therefore inap-

plicable at the time the Joyes filed their bankruptcy petition.

In Gardenhire v. IRS (In re Gardenhire), 209 F.3d 1145, 1148

(9th Cir. 2000), we held that “[c]lose adherence to the text of

the relevant statutory provisions and rules is especially appro-

priate in a highly statutory area such as bankruptcy.” We heed

that advice here. As described above, the official notice pro-

vided to the Board complied with all the requirements of the

Bankruptcy Code as enacted at the time. The Board has not

provided adequate reason to disregard the clear import of the

statutory scheme on the otherwise equitable grounds of funda-

mental fairness.

III.

In conclusion, we hold that the Joyes’ outstanding taxes for

the year 2000 were properly discharged pursuant to 11 U.S.C.

§ 1328(a). Those taxes do not give rise to a post-petition

claim under 11 U.S.C. § 1305(a)(1); therefore, the Board can-

not rely on that provision to save its claim to these taxes from

discharge. We also hold that the Board received constitution-

11526 IN THE MATTER OF JOYE

ally adequate notice of its right to payment on these outstand-

ing taxes. Thus, barring the Board from collecting these taxes

would not constitute a denial of fundamental fairness.

We acknowledge that the Board has the unenviable task of

maintaining complete and accurate records for the millions of

taxpayers in the State of California. But we are not at liberty

to rework the Bankruptcy Code in order to lighten its burden.

The Joyes did all that was required of them to provide the

Board with notice of their tax liabilities. Accordingly, we

reverse the summary judgment of the district court, and

remand this case for proceedings consistent with this opinion.

REVERSED and REMANDED.

GRABER, Circuit Judge, dissenting:

I respectfully dissent.

Shelli Renee and Teresa M. Joye concede that, if their out-

standing taxes for 2000 gave rise to a post-petition claim, the

taxes would survive their discharge in bankruptcy. Under 11

U.S.C. § 1305(a)(1), the government may file a proof of claim

“for taxes that become payable to a governmental unit while

the case is pending.” The question, then, is whether the taxes

in this case “bec[a]me payable” while the Joyes’ bankruptcy

case was pending.

As the majority acknowledges, the term “payable” in this

statute is ambiguous. See maj. op. at 11513-16. “Payable”

could mean “calculable” or “fixed,” or it could mean “must

be paid now” or “legally enforceable.” I would read it, as did

the Fifth Circuit, to mean “must be paid now” or “legally

enforceable.” United States v. Ripley (In re Ripley), 926 F.2d

440, 444 (5th Cir. 1991). As the Ripley court explained,

Black’s Law Dictionary states that a sum of money normally

IN THE MATTER OF JOYE 11527

is said to be “payable” when a person is obliged to discharge

the debt at once. Id. So read, the statute entitles the Franchise

Tax Board to collect taxes from the Joyes for the year 2000

because the taxes became payable (“must be paid now” or “le-

gally enforceable”) on April 15, 2001; the Joyes had filed

their bankruptcy case on March 7, 2001, and their bankruptcy

case remained pending on April 15, 2001. I come to this inter-

pretation for four main reasons.

First, the fundamental purpose of this particular subsection

is to permit governmental units to collect taxes as part of a

bankruptcy plan. The Bankruptcy Code is concerned primar-

ily with pre-petition debts, as a bankruptcy plan attempts to

release the debtor “from pre-petition debts so that she can be

given a ‘fresh start.’ ” Boeing N. Am., Inc. v. Ybarra (In re

Ybarra), 424 F.3d 1018, 1026 (9th Cir. 2005). Claims that

arise after the filing of the bankruptcy petition, or post-

petition claims, generally are not part of the bankruptcy case

(though they may be collected outside the bankruptcy pro-

ceedings). 8 Collier on Bankruptcy ¶ 1305.01 (Alan N. Resn-

ick & Henry J. Sommer eds., 15th ed. rev.). But Congress has

crafted a few statutory exceptions to that rule, one of which

is relevant here. In enacting 11 U.S.C. § 1305, titled “Filing

and allowance of postpetition claims,” Congress allowed a

governmental unit to which taxes “become payable” while a

bankruptcy case is pending to file an otherwise impermissible

post-petition claim with the bankruptcy court, id.

§ 1305(a)(1).

Our task in construing a statute is to discern congressional

intent. See Dole v. United Steelworkers of Am., 494 U.S. 26,

35 (1990). To do so, we “look to the provisions of the whole

law, and to its object and policy.” Id. (internal quotation

marks omitted). That Congress chose to allow governmental

units to participate in bankruptcy proceedings as creditors—

even as to claims that ordinarily would have to be collected

separately—manifestly evinces a strong intent to allow for

collection of taxes as part of the bankruptcy plan. If one plau-

11528 IN THE MATTER OF JOYE

sible reading cuts off tax liability, while another does not, we

should adopt the reading that comports with Congress’ overall

intent.

The majority opinion is also flawed because it equates

§ 1305(a)(1) with § 502(i), maj. op. at 11516, even though

those sections employ substantially different formulations.

Section 1305(a)(1) pertains to “taxes that become payable,”

while § 502(i) refers to a “claim” that “arise[s].” A “claim” is

not the same as “taxes,” and a claim for taxes may “arise”

before it “become[s] payable.” When interpreting statutes, we

presume that Congress meant to convey different concepts

when it used different words. See, e.g., SEC v. McCarthy, 322

F.3d 650, 656 (9th Cir. 2003) (“It is a well-established canon

of statutory interpretation that the use of different words or

terms within a statute demonstrates that Congress intended to

convey a different meaning for those words.”). The majority

therefore errs in concluding, because of the text and scholarly

interpretations of § 502(i), that only taxes incurred post-

petition may be treated as post-petition claims under

§ 1305(a). See maj. op. at 11516.

Second, because of the importance of national uniformity

in administering the Bankruptcy Code, we should interpret

§ 1305(a), if possible, the same way as our sister circuits have

interpreted it. As noted, the Fifth Circuit reads the statute as

I do.

The majority relies heavily on a Bankruptcy Appellate

Panel (“BAP”) case from the Tenth Circuit, Dixon v. IRS (In

re Dixon), 218 B.R. 150 (B.A.P. 10th Cir. 1998). Maj. op. at

11514-16. But there has been no circuit split until today. Only

the Fifth Circuit has ruled on what “payable” means in

§ 1305(a)(1). A BAP opinion is equivalent only to an opinion

from a federal district court in another circuit. The Tenth Cir-

cuit’s BAP (like our own Ninth Circuit BAP) consists of a

group of non-Article III judges appointed by a federal circuit

court to hear appeals from the bankruptcy courts. In circuits

IN THE MATTER OF JOYE 11529

that do not have BAPs, bankruptcy court decisions are

appealed to federal district courts. See 28 U.S.C. § 158(a). We

should not, therefore, give the Tenth Circuit’s BAP decision

any more weight than that of a district court from another cir-

cuit. Cf. Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764,

772 n.10 (9th Cir. 2008) (“BAP opinions are not binding on

this court . . . .”); Bank of Maui v. Estate Analysis, Inc., 904

F.2d 470, 472 (9th Cir. 1990) (declining to rule on the author-

itative effect of a BAP decision, but noting that “BAP deci-

sions cannot bind the district [and circuit] courts themselves.

As article III courts, the district [and circuit] courts must

always be free to decline to follow BAP decisions and to for-

mulate their own rules within their jurisdiction.”). To the

extent that the question is one of federal law, if it is reason-

able to do so we should harmonize our holding with that of

the Fifth Circuit, which is the only other federal court of

appeals to have decided the question before us.1

Third, the majority’s view assumes that a taxpayer can do

nothing to alter her tax obligations between January 1 and

April 15. That assumption is not accurate. A taxpayer may,

for example, contribute to an Individual Retirement Account

(“IRA”) between January 1 and April 15, 2009, and deduct

that contribution from her 2008 income when she files her

2008 tax return, as long as she specifies that the contribution

is to be attributed to 2008. See 26 U.S.C. § 219(a), (f)(3) (not-

ing that deductible contributions can be made up to the date

the tax return is due); State of California Franchise Tax Board

Publication 1005, Pension and Annuity Guidelines 4 (“The

California Treatment of IRAs is generally the same as the fed-

eral treatment.”). So her tax liability cannot be truly “fixed”

or “calculable” until April 15, because she can alter her

income (for tax purposes) until that date each year.

1

Moreover, in Dixon, the agency conceded that the claim was pre-

petition. 218 B.R. at 151. That concession was key to the court’s holding

that the taxes became payable at the close of the tax year. There is no such

concession here.

11530 IN THE MATTER OF JOYE

Fourth, as the majority recognizes, we turn to state law to

determine whether the Joyes’ taxes became payable under

California law during the pendency of their bankruptcy case.

Maj. op. at 11520; see Raleigh v. Ill. Dep’t of Revenue, 530

U.S. 15, 20 (2000) (“The ‘basic federal rule’ in bankruptcy is

that state law governs the substance of claims . . . .” (citation

omitted)). California’s Revenue and Taxation Code governs

the Joyes’ obligations to the Franchise Tax Board. Section

19001 of the California code provides that taxes “shall be paid

at the time and place fixed for filing the return (determined

without regard to any extension of time for filing the return).”

Under that text, “the time . . . fixed for filing the return” in

the absence of an extension of time for filing the return is

April 15. Even if the tax is capable of calculation on January

1, the Franchise Tax Board would have no authority under

state law to initiate a collection action before April 15. At

least one California appellate case supports this interpretation

as well. In Schatz v. Franchise Tax Board, 81 Cal. Rptr. 2d

719, 724 (Ct. App. 1999), the California Court of Appeal con-

cluded that the date on which the Franchise Tax Board

accepts a return is the “date when the State formally act[s] to

finally fix the tax.” Thus, to the extent that the question here

pertains to the substance of the tax claim and thus to Califor-

nia law, the Franchise Tax Board’s proposed interpretation is

more persuasive. The Joyes filed for bankruptcy on March 7,

2001; the taxes became payable on April 15, 2001, during the

pendency of the bankruptcy proceeding.

For these reasons, I would hold that, under 11 U.S.C.

§ 1305(a)(1), the Joyes’ 2000 taxes were post-petition.

Accordingly, I would affirm the decision of the district court.