Lucas v. Limbach

Per Curiam. For the following reasons, we affirm the judgment of the court of appeals as to Wolf. Appellant argues that the court of appeals erred when it relied upon decisions which construed the later enacted Bankruptcy Code of 1978, rather than the Bankruptcy Act of 1898. Further, appellant argues that trust fund taxes such as the sales tax are not dischargeable in bankruptcy. As to the first contention, while technically correct, it does not cause us to reverse the decision of the court since the terms and the concepts used in both the Bankruptcy Act and the Bankruptcy Code are similar. Our review of bankruptcy decisions does not indicate any basic distinctions in the concepts involved,1 nor does appellant refer us to any cases which note any such distinctions. The court of appeals reviewed recent decisions which discussed the Bankruptcy Code only as a prelude to its finding that the new contract entered into by the debtor and the appellant extinguished the claim of the appellant against the appellee. Concerning the second contention, we agree with the appellant that trust fund taxes are not dischargeable in bankruptcy. However, as the court of appeals found, this claim was not dis-chargeable in bankruptcy, but the state, under the terms of the plan of arrangement, waived the payment of the remaining indebtedness in exchange for the promise by the debtor to pay $3,000 per month from the proceeds of its operation. The debt was not discharged; it was compromised and settled by the debtor’s agreement to make these monthly payments. The court cited In re Ernst (D. Minn. 1985), 45 Bankr. 700, 702, for its holding that the confirmation of a plan effectively discharges the prior, underlying indebtedness and creates a new indebtedness: “The effect of confirmation is to discharge the entire confirmation debt, replacing it with a new indebtedness as provided in the confirmed plan. The plan is essentially a new and binding contract, sanctioned by the Court, between a debtor and his preconfirmation creditors.” [73] In the later case of In re Herron (D. La. 1986), 60 Bankr. 82, 84, that court stated: “Once a plan is confirmed, the preconfirmation debt is ‘replaced’ with a new indebtedness as provided in the confirmed plan. The new indebtedness is, in essence, a new and binding contract between the debtor and the creditors.” As the court of appeals noted, appellant could have preserved her ability to assess Wolf for his derivative liability by reserving such right in the plan of arrangement. She did not do so and specifically waived the immediate payment of the balance due on the liability. The court found that the effect of this was a new agreement, the consideration for which was a new promise to pay, i.e., a chose in action, which is recognized as a valuable property right. Cincinnati v. Hafer (1892), 49 Ohio St. 60, 30 N.E. 197; Loveman v. Hamilton (1981), 66 Ohio St. 2d 183, 20 O.O. 3d 194, 420 N.E. 2d 1007. We agree. While under the Bankruptcy Act the bankruptcy of a corporation did not release its officers from liability under the laws of a state (former Section 22[b], Title 11, U.S. Code or Section 4[b] of the Bankruptcy Act of 1898, as amended), the agreement of the appellant to waive the underlying debt and contract for a new debt did release appellee here. Accordingly, the judgment of the court of appeals is affirmed. Judgment affirmed. Moyer, C.J., Sweeney, Locher, Holmes, Douglas, Wright and H. Brown. JJ., concur. Footnotes [1] See, for instance, In re Astroglass Boat Co., Inc. (E.D. Tenn. 1983), 32 Bankr. 538, and In re Blanton-Smith Corp. (E.D. Tenn. 1984), 44 Bankr. 73, which are cases decided under the Bankruptcy Code of 1978 but refer to cases decided under the Bankruptcy Act of 1898 for authority.