attorney Michael E. Douglas Attorney at Law
  Personal Injury Attorney
  St. Paul Workers Compensation Lawyer work comp attorney
 > About Me
   :: My Commitment
   :: Our Community
 > Legal Practice Areas
  twin cities comsumer lawPersonal Injury
   :: Traffic Accidents
   :: Medical Malpractice
   :: Social Security Disability
   :: Premises Liability
   :: Wrongful Death
   :: Dog Bite
   :: Back/Spinal/Neck Injuries
   :: Whiplash
   :: Defective Medical Devices
   :: Defective Drugs
  Minnesota Personal InjuryWorkers Compensation
  St. Paul personal injuryConsumer Law
   :: Debt Collection
   :: Repossessions
   :: Foreclosures
   :: Loan, Credit, Banking
   :: Arbitration Agreements
   :: Deception and Fraud
   :: Auto Fraud / Lemon Law
   :: Warranties
   :: Predatory Lending
 > Contact Us
   :: Contact Us

Law Offices of Michael E. Douglas
P.O. Box 251551
Woodbury, Minnesota 55125-6551

 Saint Paul Lawyer


Internal Revenue Service v. Ealy: APPELLATE PROCEDURE | CREDIT - no right of setoff without mutual obligations; appeal moot

United States Bankruptcy Appellate Panel
No. 08-6031
In re: *
Mark Anthony Ealy, Sr., *
Debtor. *
Internal Revenue Service, * Appeal from the United States
* Bankruptcy Court for the
Creditor - Appellant, * Eastern District of Arkansas
v. **
Mark Anthony Ealy, Sr., *
Debtor - Appellee. *
Submitted: October 29, 2008
Filed: November 5, 2008
Before KRESSEL, Chief Judge, SCHERMER and MCDONALD, Bankruptcy
SCHERMER, Bankruptcy Judge
1The Honorable Richard D. Taylor, United States Bankruptcy Judge for the
Eastern and Western Districts of Arkansas.
The Internal Revenue Service (Creditor) appeals the bankruptcy courts1
order denying relief from the automatic stay of 11 U.S.C. 362 to offset a postpetition
tax refund and a post-petition stimulus payment owed to Debtor Mark
Anthony Ealy, Sr. (Debtor) against a post-petition tax liability of the Debtor to the
Creditor. We must dismiss the appeal as moot.
The Debtor filed a petition for relief under Chapter 13 of the Bankruptcy
Code on January 6, 2005. The Court confirmed the Debtors Chapter 13 plan which
provided for payment of the Creditors priority claim in full in periodic payments and
provided for payment of a pro-rata dividend on account of the Creditors unsecured
The Debtor failed to pay his post-petition federal income tax for 2005 and 2006.
On June 6, 2007, the Creditor filed a proof of claim which included a priority claim
for post-petition income tax liabilities of ,375 for 2005 and ,499 for 2006. In
2008, the Debtor filed his income tax return for 2007 reflecting an overpayment of
taxes in the amount of 6.
On May 21, 2008, the Creditor filed a motion for relief from the automatic stay
to permit offset of the Debtors tax overpayment of 6 against his 2005 postpetition
tax liability. At the hearing on the motion, the Creditor asked that relief from
the automatic stay also be granted to allow offset of the Debtors economic stimulus
payment of 0 pursuant to the Economic Stimulus Act of 2008 against his 2005
post-petition tax liability. The court denied the Creditors motion, concluding that the
Creditor was adequately protected by the Debtors confirmed plan which provided for
2 The parties stipulated at oral argument that the Creditor had paid the tax
refund to the Debtor. After oral argument, counsel for the Debtor submitted a
letter to this court advising that the Creditor has also paid the stimulus payment to
the Debtor.
periodic payments in full of the post-petition tax liability. The Creditor appealed and
sought a stay of the order pending appeal from the bankruptcy court. The bankruptcy
court denied the Creditors request for a stay pending appeal. The Creditor has since
paid the tax refund and the stimulus payment to the Debtor.2
A federal court may only exercise jurisdiction over cases and controversies
and lacks authority over moot issues. U.S. CONST., art. III, 2, cl. 1; Mills v.
Green, 159 U.S. 651, 653 (1895); Church of Scientology of California v. U.S.,
506 U.S. 9, 12 (1992). A case is moot when the issues presented are no longer live
or no longer present an actual ongoing controversy. Strong v. Bank of America (In
re Strong), 312 B.R. 378, 380 (B.A.P. 8th Cir. 2004); Williams v. Citifinancial
Mortgage Co. (In re Williams), 256 B.R. 885, 895 (B.A.P. 8th Cir. 2001). A case is
no longer live if the reviewing court is incapable of rendering effective relief or
restoring the parties to their original positions. In re Strong, 312 B.R. at 380; In re
Williams, 256 B.R. at 895. When circumstances change while an appeal is pending
that make it impossible for the court to grant effective relief to a prevailing party,
the appeal must be dismissed as moot. Mills v. Green, 159 U.S. at 653; Church of
Scientology, 506 U.S. at 12; In re Williams, 256 B.R. at 895.
In the present case, the Creditor was seeking relief from the automatic stay
to offset funds in its possession the tax refund and the economic stimulus
payment against the Debtors post-petition tax liability. Once the Creditor
released the funds, it no longer had an obligation to the Debtor. Absent mutual
obligations, no right of setoff exists. Citizens Bank of Maryland v. Strumpf,
516 U.S. 16, 18 (1995). Therefore, even if this Court were to reverse the
bankruptcy court, the Creditor no longer possesses a right of setoff. See Van
Iperen v. Prod. Credit Assn of Worthington (In re Van Iperen), 819 F.2d 189, 191
(8th Cir. 1987)(Once collateral is taken and converted into cash, no court is able to
formulate adequate relief. . .). It is impossible for this Court to grant the Creditor
effective relief. Accordingly, the appeal is dismissed as moot.


  What day were you injured?

  / /

  What caused your injuries?
Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall

  How have your injuries affected

  your life?


  What kinds of medical care
  professionals have you seen?


  What has your treatment cost?


  Is Insurance Involved?
My insurance may cover

Someone else's insurance
        may cover this.

I already filed a claim.
I rejected a settlement

I accepted a settlement

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report



          By visiting this page or clicking the
  "submit" button above, you agree
  that you have read and accept this   "disclaimer".
Copyright © Michael E. Douglas, Attorney at Law, Saint Paul MN. All Rights Reserved.
Minnesota Law Firm representing Personal Injury, Car / Auto Accident, Workers Compensation, Medical Malpractice, Social Security Disability claims.
Dedicated to Injured Workers, Victims of Negligence, Car Accidents, Victims of Fraud, and those in need of legal assistance.