## Facts

- A bank holding company and its subsidiaries, including an insured depository institution, filed consolidated federal income tax returns under a written tax-sharing agreement (TSA).
- The subsidiary bank incurred substantial losses that generated an approximately $170 million tax refund.
- Under consolidated return rules, the IRS paid the refund to the parent holding company as the common parent.
- The bank failed and was placed into FDIC receivership; the parent and nonbank affiliates later filed Chapter 11 cases.
- The FDIC, as receiver, claimed the refund beneficially belonged to the bank and was held by the parent as agent or trustee, so it should be excluded from the bankruptcy estate.
- The debtors contended the TSA created only a debtor-creditor arrangement, making the refund estate property and leaving the bank with, at most, an unsecured claim.

## Issues

1. Whether the TSA, construed under applicable state contract law, created a debtor-creditor relationship or an agency/trust-type relationship as to tax refunds.
2. Whether the TSA was unambiguous, permitting summary judgment on refund ownership without extrinsic evidence.
3. Whether federal common law governing bank receiverships or consolidated refunds displaced or supplemented state-law contract interpretation in determining ownership.

## Decision

- The court granted summary judgment for the Chapter 11 debtors.
- It held the TSA unambiguously created a debtor-creditor relationship between the parent and group members regarding tax allocations and refunds.
- It ruled the tax refund paid to the parent was property of the parent’s bankruptcy estate under 11 U.S.C. § 541.
- It concluded the FDIC, standing in the bank’s shoes, held only an unsecured claim for any amount allegedly owed under the TSA’s allocation mechanics.
- It declined to apply a federal common-law rule awarding the refund to the loss-generating bank, treating ownership as controlled by the TSA and state contract law.

## Legal Principles

- In bankruptcy, assets are included in the estate under 11 U.S.C. § 541 unless a claimant establishes a non-estate equitable interest (such as a valid trust or agency interest) recognized under applicable law.
- Tax-refund ownership within a consolidated filing group generally turns on the parties’ tax-sharing agreement as interpreted under state contract principles.
- Contract language emphasizing “payments,” “reimbursements,” and intercompany obligations, without express fiduciary, agency, segregation, or “in trust” terms, supports characterization as a debtor-creditor relationship rather than a trust or agency.
- Courts are reluctant to impose implied or constructive trusts in bankruptcy absent a clear basis, because such remedies remove assets from the estate to the detriment of other creditors.
- Federal consolidated return mechanics determine who receives a refund from the IRS, but do not alone determine beneficial ownership among group members; that allocation is typically contractual.

## Conclusion

The district court treated the TSA as an unambiguous debtor-creditor arrangement and held the consolidated tax refund paid to the parent was property of the parent’s Chapter 11 estate, rejecting the FDIC’s attempt to exclude the refund based on implied trust, agency, or federal common-law theories.


Fed. Deposit Ins. Corp. v. AmFin Fin. Corp., No. 1:10-CV-1292, 2011 WL 2200387 (N.D. Ohio June 6, 2011)