225 Mich. App. 575

ELSHEICK v DEPARTMENT OF TREASURY

Docket Nos. 194642, 194644.

Submitted April 8, 1997, at Detroit.

Decided October 3, 1997, at 9:00 A.M.

*576Raymond & Prokop, PC. (by Thomas J. Kenny and Danielle Barrón Mayoras), for the petitioner.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and E. David Brockman and Suann D. Cochran, Assistant Attorneys General, for the respondent.

Before: Sawyer, P.J., and Murphy and Cavanagh, JJ.

Sawyer, P.J.

Both parties appeal from a judgment of the Michigan Tax Tribunal in this dispute over a corporate officer’s liability for a tax assessment. We affirm in part and reverse in part.

Petitioner was president of Northwest Petroleum Corporation. On October 26, 1992, Northwest filed for Chapter 11 bankruptcy. Beginning on October 28, 1992, respondent assessed Northwest for unpaid gasoline taxes during August and September of 1992, including penalties and interest. Northwest did not appeal the assessments. On December 10, 1993, respondent issued final corporate officer liability assessments against petitioner for the unpaid taxes, including penalties and interest. Petitioner appealed these assessments.

*577While the appeals of those assessments were pending, respondent sought to collect on the $125,000 tax surety bond posted by Northwest. The insurer paid on the bond, and respondent applied the proceeds against other assessments against Northwest that were not the subject of appeal and for which petitioner was not derivatively liable.

Ultimately, the Tax Tribunal ruled in favor of respondent on the assessments and prepetition interest and pre- and postpetition penalty issues. However, it disallowed any postpetition interest and ordered that any bond proceeds received by respondent be deducted from the assessments.

Turning first to the issues raised by petitioner, petitioner argues that the Tax Tribunal lacks the authority to hold a corporate officer derivatively liable for interest and penalties assessed on a corporation’s debt pursuant to the motor fuel tax act. We disagree. The motor fuel tax act provides in MCL 207.201; MSA 7.320(1) that motor fuel taxes shall be administered pursuant to the provisions of the revenue act contained in MCL 205.1; MSA 7.657(1) to MCL 205.30; MSA 7.657(30). Not only does MCL 205.24(2); MSA 7.657(24)(2) contain penalty and interest provisions, MCL 205.27a(5); MSA 7.657(27a)(5) provides for corporate officer liability. Accordingly, petitioner could be held derivatively liable for interest and penalties on the motor fuel taxes.

Next, petitioner argues that the Tax Tribunal erred in concluding that a corporate officer is responsible for penalties that accrued after the corporation filed for bankruptcy. We disagree. Petitioner relies on our opinion in Stackpoole v Dep’t of Treasury, 194 Mich App 112; 486 NW2d 322 (1992), which reliance is mis*578placed. Petitioner focuses on the observation in Stackpoole that the general rule is that interest on prepetition claims ceases to accrue upon the filing for bankruptcy. Petitioner, however, overlooks the fact that Stackpoole acknowledged exceptions to that rule and remanded the matter to the Tax Tribunal to determine whether there was an accrual during the bankruptcy stay period and, if so, whether the corporate officer was derivatively liable for the additional interests and penalties. Id. at 119.

In fact, this does represent an exception to the general rule. Postpetition penalties can be imposed in connection with nondischargeable tax debts. See In re Hanna, 872 F2d 829 (CA 8, 1989). Because the tax debt was nondischargeable, postpetition penalties may be assessed and, therefore, petitioner remains derivatively liable for those penalties.

The next issue raised by petitioner is similar to the first of respondent’s issues that we consider, namely, whether the Tax Tribunal erred in ruling that interest did not accrue after the filing of the bankruptcy petition. As with the penalty issue, interest continues to accrue after a bankruptcy filing on a debt not dis-chargeable in bankruptcy. See Bruning v United States, 376 US 358; 84 S Ct 906; 11 L Ed 2d 772 (1964) (postpetition interest collectable on a nondischargeable tax debt).

Respondent next argues that the Tax Tribunal erred in ordering the reapplication of the proceeds of the tax bond to the assessments at issue here. We agree. We need not address the merits of the question whether the tribunal has the power to order the reapplication of the bond proceeds because that issue was not properly before the tribunal in this case. While *579petitioner did initially raise the issue in his petition, the issue was subsequently abandoned. Specifically, following the prehearing conference, an order was entered listing the issues to be litigated and this issue was not one of them. Accordingly, no evidence or argument was taken on the issue. Thus, the issue should not have been addressed by the tribunal.1

Affirmed in part and reversed in part. Respondent may tax costs.

Elsheick v. Department of Treasury
225 Mich. App. 575

Case Details

Name
Elsheick v. Department of Treasury
Decision Date
Oct 3, 1997
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225 Mich. App. 575

Jurisdiction
Michigan

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