The opinion of the court was delivered by: Reagan, District Judge
A. Procedural and Jurisdictional Overview
On March 24, 2009, United States Bankruptcy Judge William V. Altenberger issued an Opinion and Judgment from which Chapter 7 Debtor Andrea H. Meyers appeals to this District Court. Subject matter jurisdiction lies under 28 U.S.C. § 158(a)("district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders, and decrees ... of bankruptcy judges entered in cases" referred to them under 28 U.S.C. § 157.)
This appeal was timely filed, and the parties have thoroughly briefed the questions presented herein. Although Meyers delineates nine sub-issues (e.g., whether the Bankruptcy Court erred in finding that income tax withholdings from post-petition earnings are property of the bankruptcy estate, whether the Bankruptcy Court erred in finding that the Trustee met her burden of establishing an entitlement to a portion of Meyers' tax refunds, etc.), the crux of the appeal is whether Judge Altenberger erred in applying the "pro-rata by days" allocation method to Meyers' refunds. As summarized by Appellee Grandy ("the Trustee"), the question before this Court is: "Whether the Bankruptcy Court erred in applying the 'pro-rata-by-days' ... method to allocate a tax refund between pre-petition and post-petition periods to determine the value of the bankruptcy estate's portion of the Debtor's 2007 income tax refunds" (Doc. 9, p. 4).
In the Chapter 7 proceeding, the Trustee claimed a portion of Meyers' federal and state income tax refunds that accrued duringthe year the bankruptcy petition was filed (2007) but did not become payable to Meyers until after the tax year closed (December 31, 2007). The parties disagreed as to how much of the tax refunds should be considered part of the bankruptcy estate. Siding with the Trustee, the Bankruptcy Court found the bankruptcy estate entitled to $973.60 of the refunds ($815.01 federal $158.59 state). Meyers contends that only $349.91 should have been included (Doc. 7, p. 2).*fn1
With this overview, the Court turns to the standard governing its review.
B. Applicable Standards of Review
Federal Rule of Bankruptcy Procedure 8013 provides that, on appeal, the District Court "may affirm, modify, or reverse a bankruptcy judge's ... order ... or remand with instructions for further proceedings." Rule 8013 further provides:
Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.
Case law of this Circuit similarly instructs that a bankruptcy judge's "[f]actual findings are reviewed for clear error; [and] legal conclusions are reviewed de novo." In re Doctors Hosp. of Hyde Park, Inc., 474 F.3d 421, 426 (7th Cir. 2007). Accord In re Crosswhite, 148 F.3d 879, 881 (7th Cir. 1998); Meyer v. Rigdon, 36 F.3d 1375, 1378(7th Cir. 1994)(district court reviews bankruptcy judge's fact findings for clear error and legal conclusions de novo).
This appeal challenges the allocation method a bankruptcy judge used to determine how much of a debtor's tax refunds should be included in the bankruptcy estate. This is a legal issue subject to de novo review. There are fact issues -- and mixed questions of law and fact -- subsumed in and overlapping this legal question, as Debtor Meyers points out in her brief (see Doc. 7, pp. 5-6). But this Court's task is to decide de novo whether the Bankruptcy Judge erred in granting the Trustee's motion for (and overruling Meyers' objection to) the turnover relating to Meyers' tax refunds and whether the Bankruptcy Judge erred in calculating the portion of those refunds that constituted property of the bankruptcy estate.
On September 25, 2007, Andrea Meyers filed for Chapter 7 bankruptcy protection. Months later, Meyers filed her 2007 federal and state income tax returns. The federal return reported gross taxable income of $44,136, federal withholding of $5,983, tax due of $2,661 (after all credits), and an overpayment of $3,322 (for which Meyers requested a refund). The Missouri return reported state tax due of $1,511, state withholding of $1,727, and an overpayment of $216 (for which Meyers requested a refund).
In August 2008, the Trustee appointed to administer Meyers' estate filed a Motion for Turnover of the bankruptcy estate's share of the tax refunds, under 11 U.S.C. § 542. Meyers filed an objection to turnover on September 8, 2008, contesting the amount of the refunds sought to be included as property of the estate. Specifically, Meyers asserted that $1973.91*fn2 in pre-petition federal withholding was at issue and no part of the post-petition withholdings was part of the estate. Judge Altenberger heard oral argument on the Trustee's motion for turnover September 15, 2008. On March 24, 2009, Judge Altenberger overruled Meyers' objection, granted the ...