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Chapter 7 Trustee for a Bankruptcy Estate Seeks Tax Refund from FDIC

by RMDLG Staff / April 13, 2021

Simon Rodriguez, a Chapter 7 trustee for bankruptcy estate of bank holding company filed legal action against Federal Deposit Insurance Corporation (FDIC) in its capacity as receiver for subsidiary bank. The trustee requested a declaratory judgment of $4,081,335 tax refund as result of consolidated tax returns filed by the holding company.   As property of the bankruptcy estate, the trustee requested turnover of the tax refund and objected to FDIC’s proof of claim. The U.S. Bankruptcy Court for the District Colorado entered summary judgment in the trustee’s favor. This was followed by an appeal by FDIC. The U.S. District Court for the District of Colorado reversed and remanded judgment, and appeal was taken. On remand from the Court of Appeals, Circuit judge held that ambiguous tax allocation agreement between a bankrupt holding company and subsidiary bank had to be decided in favor of the bank. Agreement created an agency relationship and the tax refund belonged to the bank and its receiver, FDIC. The U.S. Supreme Court vacated and remanded judgment.


United Western Bancorp, Inc. (UWBI) and its Bank claimed ownership of a federal tax refund. UWBI is a thrift holding company that filed for bankruptcy overseen by trustee Simon Rodriguez. The Bank is a subsidiary of UWBI. In 2008, UWBI, United Western Bank, and UWBI’s other affiliate subsidiaries entered into a Tax Allocation Agreement. Under the Agreement, UWBI filed consolidated tax returns in 2008, 2009, and 2010 on behalf of itself and its subsidiaries. The 2008 returns had a positive net income while both 2009 and 2010 reported losses. UWBI sought a “loss-carryback” from the IRS to offset the 2009 and 2010 consolidated against the 2008 gains.

In 2011, UWBI filed for bankruptcy after the Bank was placed into receivership. The IRS issued UWBI a tax refund of $4,081,334 after it filed for bankruptcy. The bankruptcy trustee, Mr. Rodriguez, and the FDIC both claimed ownership of the refund. Mr. Rodriguez filed a legal proceeding against FDIC to resolve the dispute over the tax refund. The bankruptcy court entered summary judgment in his favor, stating the tax refund was owned by UWBI and was part of the bankruptcy estate. FDIC appealed to the district court, which reversed the bankruptcy court’s decision. Mr. Rodriguez appealed to the U.S. Court of Appeals of the Tenth Circuit. The bankruptcy court entered summary judgment in favor of the trustee. It held the tax refund was owned by UWBI and was part of the bankruptcy estate. FDIC appealed to the district court, which reversed the decision of the bankruptcy court.

Mr. Rodriguez appealed to the U.S. Court of Appeals. It agreed with the district court that the tax refund belonged to the Bank. It noted the Tenth Circuit adopted the Bob Richards rule that held in the absence of a tax allocation agreement that “a tax refund due from a joint return generally belongs to the company responsible for the losses that form the basis of the refund.” Using this rule, it concluded the Allocation Agreement created an agency relationship between UWBI and the Bank. It found the Agreement’s intended treatment of tax refunds did not differ from the Bob Richards rule. It held the tax refund belonged to the Bank and the FDIC, as receiver for the Bank, was entitled to summary judgment.

Mr. Rodriguez filed a petition for writ of certiorari. The Supreme Court granted review to determine whether the ownership dispute over the tax refund should be resolved according to federal common law. The Supreme Court found that, “in the absence of congressional authorization, common lawmaking must be necessary to protect uniquely federal interests.” The court concluded the federal government has no unique interest in this case. It held the Bob Richards rule was mistaken and the case was remanded for further consideration.


Mr. Rodriguez argued the Agreement did not give the Bank control over UWBI sufficient to establish agency under Colorado law. He asserted it granted UWBI powers irreconcilable with the fiduciary duties of a common-law agent, including the right to commingle tax refunds with its other assets.” The U.S. Court of Appeals arguments “unavailing.” It stated the nature of the relationship UWBI and the Bank Agreement were ambiguous. It found Section H.4 of the Agreement unambiguous and required the court to “construe any ambiguities in favor of the Bank and FDIC. The Court of Appeals concluded the Agreement must be read as creating an agency relationship between UWBI and the Bank. Because an agency relationship was created between the two, the court held the tax refund belonged to the Bank and FDIC. It affirmed the judgment of the district court and remanded the case to the bankruptcy court for further proceedings.

If you find yourself dealing with bankruptcy and in need of legal help, contact RMDLG. We have the experience and resources to help you protect your assets.

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