                  United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 02-3139
                                 ___________

In re: Odom Antennas, Inc.           *
                                     *
                   Debtor.           *
_____________________                *
                                     *
Lori Holloway; James Holloway,       *
                                     *
                   Appellants,       *
                                     * Appeal from the United States
      v.                             * District Court for the
                                     * Eastern District of Arkansas.
Internal Revenue Service;            *
Candy Stevens; The Law Offices of *
Brad Hendricks; M. Randy Rice,       *
Trustee for the Bankruptcy Estate of *
Odom Antennas, Inc.,                 *
                                     *
                   Appellees.        *
                                  ___________

                        Submitted: April 18, 2003

                             Filed: August 25, 2003
                                  ___________

Before LOKEN, Chief Judge, HANSEN and RILEY, Circuit Judges.
                             ___________

RILEY, Circuit Judge.
      Lori Holloway and James Holloway (collectively Holloways) appeal the district
court’s1 affirmance of an adverse bankruptcy court2 decision. We affirm.

I.     BACKGROUND
       The trustee for the bankruptcy estate of Odom Antennas, Inc. (Odom) brought
an adversary proceeding in the Bankruptcy Court for the Eastern District of Arkansas
to determine the priority of liens in proceeds remaining from an authorized sale of
Odom’s real estate. The trustee listed the Holloways, the Internal Revenue Service
(IRS), and Candy Stevens (Stevens), among others, as persons having a possible
interest in the sale proceeds. The Holloways answered and asserted cross-claims
against the IRS and Stevens, claiming the bankruptcy court should disallow or
subordinate both the IRS’s lien for pre-petition, non-compensatory tax penalties
(IRS’s lien) and Stevens’s judgment lien for punitive damages (Stevens’s lien).

       Upon joint stipulated facts, the bankruptcy court (1) denied the Holloways’
motion for partial summary judgment, (2) found the IRS and Stevens held superior
liens, and (3) ordered the trustee to disburse the proceeds to Stevens and the IRS for
their secured claims. The bankruptcy court determined the Holloways could not use
11 U.S.C. § 502(d) (2000) to disallow the IRS’s lien and Stevens’s lien because no
judicial order to turn over property existed. The bankruptcy court also determined the
Holloways could not proceed under 11 U.S.C. § 724(a), because section 724(a) only
allows the trustee, not other interested parties, to avoid liens securing pre-petition,
non-compensatory tax penalties and punitive damages. Further, the bankruptcy court
concluded the Holloways could not equitably subordinate the IRS’s lien and
Stevens’s lien under 11 U.S.C. § 510(c), because the record did not indicate any


      1
       The Honorable James M. Moody, United States District Judge for the Eastern
District of Arkansas.
      2
       The Honorable Robert F. Fussel, United States Bankruptcy Judge for the
Eastern and Western Districts of Arkansas.
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misconduct by the IRS or by Stevens. The Holloways appealed the bankruptcy
court’s decision to the district court. The district court affirmed.

      The Holloways appeal, contending (1) the Holloways can object and disallow
the IRS’s lien and Stevens’s lien under 11 U.S.C. § 502(d); (2) section 510(c)
subordinates the IRS’s and Stevens’s liens to the Holloways’ claim; (3) the payment
of Stevens’s lien and the IRS’s lien violated the Holloways’ Fifth, Eighth, and
Fourteenth Amendment rights, and (4) the bankruptcy court improperly dismissed the
Holloways’ cross-claims. We affirm.

II.    DISCUSSION
       A.    Sections 502(d), 724(a) and 726(a)(4)
       Both the IRS and Stevens hold perfected liens. Neither has received property
from a transaction that is voidable under the sections identified in section 502(d), that
is, sections 522(f), 522(h), 544, 545, 547, 548, 549, and 724(a). See 11 U.S.C.
§ 502(d). The Holloways argue they may proceed under section 502(d) to avoid the
liens, because the trustee did not attempt to avoid the tax penalty or the punitive
damages judgment under section 724(a).

        Contrary to the Holloways’ position, the purpose of section 502(d) is to ensure
compliance with judicial orders. See In re Davis, 889 F.2d 658, 661 (5th Cir. 1989).
The language of section 502(d) expressly provides that the entity’s claim is not
disallowed if the entity or transferee “paid the amount, or turned over any such
property, for which such entity or transferee is liable.” 11 U.S.C. § 502(d). This
language indicates section 502(d) should be used to disallow a claim after the entity
is first adjudged liable; otherwise, the court could not determine if the exception
applies. Davis, 889 F.2d at 661-62 (observing “[t]he legislative history and policy
behind section 502(d) illustrate[] that the section is intended to have the coercive
effect of insuring compliance with judicial orders” and section 502(d) “is designed
to be triggered after a creditor has been afforded a reasonable time in which to turn

                                           -3-
over amounts adjudicated to belong to the bankruptcy estate”). The Holloways do not
possess judicial orders requiring the turnover of voidable transfers, and section 502(d)
does not provide affirmative relief. In re Parker N. Am. Corp., 24 F.3d 1145, 1155
(9th Cir. 1994) (noting “[s]ection 502(d) operates to disallow claims of transferees
who do not surrender their avoidable transfers. It does not compel the surrender, nor
permit affirmative relief of any kind.”).

       The Holloways still assert any party in interest can disallow a claim pursuant
to section 502(d). However, “section 502(d) makes clear that its provisions are
exclusive as to the kinds of situations it describes.” 4 Lawrence P. King, et al.,
Collier on Bankruptcy ¶ 502.05[3] (15th ed. rev. 2003). Collier further explains
section 502(d) applies when the trustee successfully pursues an action “under section
724(a) to ‘avoid a lien that secures a claim of a kind specified in section 726(a)(4).’”
Id. ¶ 502.05[1]. Section 724(a) states “[t]he trustee may avoid a lien that secures a
claim of a kind specified in section 726(a)(4) of this title.” 11 U.S.C. § 724(a).
Section 726(a)(4) subordinates any allowed claim, “whether secured or unsecured,
for any . . . penalty . . . or punitive damages, arising before the earlier of the order for
relief or the appointment of a trustee, to the extent that such . . . penalty . . . or
damages are not compensation for actual pecuniary loss suffered by the holder of
such claim,” to certain other claims. Id. § 726(a)(4). Taken together, sections 724(a)
and 726(a)(4) allow the trustee, not a third party, to avoid a lien to the extent the lien
secures the claim for a penalty or for punitive damages.3




       3
        We intimate no opinion whether a creditor may pursue a derivative action on
behalf of the bankruptcy estate when the trustee declines to pursue such action. See
Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d
548, 552-53, 580 (3d Cir. 2003) (allowing the Official Committee of Unsecured
Creditors to pursue, on behalf of the bankruptcy estate, a fraudulent transfer claim
after the debtor in possession declined to pursue the claim).
                                            -4-
       In Hartford Underwriters Ins. Co. v. Union Planters Bank, 530 U.S. 1, 6 (2000),
the Supreme Court held that only a trustee was entitled to use section 506(c). Section
506(c) uses the language: “[t]he trustee may recover . . . .” 11 U.S.C. § 506(c). The
court reasoned (1) a statute designating a particular party empowered to act is “the
least appropriate in which to presume nonexclusivity;” (2) the trustee has “a unique
role in bankruptcy proceedings” making it more plausible “Congress would provide
a power to [the trustee] and not to others”; and (3) had Congress intended the
provision to be broader, it could simply have done so. Hartford Underwriters, 530
U.S. at 6-7. The Hartford Underwriters reasoning, by analogy, makes eminent sense
for interpreting sections 502(d) and 724(a).

       We further recognize that allowing the Holloways to use section 502(d) to
disallow the IRS’s and Stevens’s liens would permit the Holloways to accomplish
indirectly what they could not accomplish directly through section 724(a). Section
502(d) does not provide the Holloways with a convenient substitute for section
724(a).

       B.    Section 510(c)
       Section 510(c) allows equitable subordination. The Supreme Court has already
rejected the notion that a bankruptcy court can subordinate a tax penalty merely
because the claim is a tax penalty. See United States v. Reorganized CF&I
Fabricators of Utah, Inc., 518 U.S. 213, 228-29 (1996); United States v. Noland, 517
U.S. 535, 540-43 (1996). Further, the Holloways do not allege or argue the IRS or
Stevens has engaged in inequitable conduct. The Holloways also do not explain how
any equities favor subordination for their benefit. Section 510(c) equitable
subordination is not appropriate in this case.




                                         -5-
       C.     Other Claims
       The Holloways argue the payment of punitive damages and tax penalties
violates their Fifth, Eighth, and Fourteenth Amendment rights. Other than conclusory
statements, the Holloways do not demonstrate how their rights are affected. The
Holloways also claim the bankruptcy court erred by failing to grant them leave to file
cross-claims sua sponte. The Holloways again make only conclusory arguments
without any legal or factual bases. See Fed. R. App. P. 28(a). We find no error
relating to any of these contentions. See 8th Cir. R. 47B.

III.   CONCLUSION
       For the foregoing reasons, we affirm.

       A true copy.

             Attest:

                  CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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