Chavis, In re, 94-3083

• Citation: 47 F.3d 818
• Decision Date: 23 February 1995
• Docket Number: No. 94-3083,94-3083
• Parties: -1168, 63 USLW 2534, 32 Collier Bankr.Cas.2d 1806, 26 Bankr.Ct.Dec. 985, Bankr. L. Rep. P 76,379 In re John R. CHAVIS and Betty E. Chavis, Debtors. UNITED STATES of America, INTERNAL REVENUE SERVICE, Plaintiff-Appellant, v. John R. CHAVIS and Betty E. Chavis, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 818

47 F.3d 818

75 A.F.T.R.2d 95-1168, 63 USLW 2534,

32 Collier Bankr.Cas.2d 1806, 26 Bankr.Ct.Dec. 985,

Bankr. L. Rep. P 76,379

In re John R. CHAVIS and Betty E. Chavis, Debtors UNITED STATES of America, INTERNAL REVENUE SERVICE Plaintiff-Appellant, v. John R. CHAVIS and Betty E. Chavis, Defendants-Appellees.

No. 94-3083.

United States Court of Appeals Sixth Circuit.

Argued Jan. 23, 1995.

Decided Feb. 23, 1995.

Gary D. Gray, Randolph L. Hutter (argued), Gary R. Allen, Acting Chief (briefed), U.S. Dept. of Justice, Appellate Section, Tax Div., Washington, DC, for plaintiff-appellant.

Pamela Nan Maggied (argued and briefed), Columbus, OH, for defendants-appellees.

Before: JONES, CONTIE, and MILBURN, Circuit Judges.

CONTIE, Circuit Judge.

Chapter 13 debtors objected to an untimely proof of claim filed by the Internal Revenue Service ("IRS"). The bankruptcy and district courts disallowed the IRS's untimely claim. We affirm.

I.

Defendants-appellees John R. and Betty E. Chavis (the "debtors") filed a voluntary petition under Chapter 13 of the Bankruptcy Code on May 23, 1991. Plaintiff-appellant IRS received notice of the filing.

The meeting of creditors was held on June 26, 1991. On August 16, 1991, the IRS filed its initial proof of claim listing unsecured priority income taxes due from the debtors for the 1989 and 1990 tax years totaling $7,662.63. The debtors do not contest the validity of this initial claim.

On August 19, 1991, the bankruptcy court confirmed the debtors' plan. ¹ The bankruptcy court's order confirming the plan set September 24, 1991, as the last day for creditors to file timely proofs of claim. ² The IRS received notice of the September 24 deadline.

On August 7, 1992, the IRS filed an "amendment" to its original proof of claim. The "amendment" included the previously filed amounts for 1989 and 1990, and listed income tax liabilities for the debtors' 1988 and 1991 tax years. ³ The IRS sought priority unsecured status for the debtors' 1988 tax year liability ($2,940) and the 1991 tax year liability ($1,498). The debtors objected to the 1988 tax year liability because the IRS filed its claim eleven months after the September 24, 1991 deadline had passed. ⁴ In response, the IRS asserted that untimely claims are not barred by the Bankruptcy Code.

The bankruptcy court sustained the debtors' objection and disallowed the IRS's 1988 tax liability claim. Specifically, the bankruptcy court found that Bankruptcy Rule 3002(c) "establishes a bar date for filing certain proofs of claim in chapter 7 and chapter 13 cases," Bankruptcy Court's Opinion and Order on Objection to Claim, 160 B.R. 804, 806, and noted that the IRS's "amended" claim was untimely because it was filed after September 24, 1991:

Balancing all factors, the Court finds that the 1992 Claim filed by the IRS is not an amendment of the 1991 Claim, but rather is the assertion of a new distinct claim.

....

The IRS argues that under a reading of the applicable Bankruptcy Code sections and accompanying rules, untimely filing of a claim is not grounds for disallowance. The IRS relies on [In re Hausladen, 146 B.R. 557 (1992)], an en banc decision from the bankruptcy court in Minnesota which essentially concludes that Congress did not intend to include tardiness as a grounds for disallowance of claims.

The court in Hausladen reasoned that 11 U.S.C. Sec. 502 provides the only grounds for disallowance of claims. Because untimeliness is not among the enumerated grounds, a claim should not be disallowed on that basis. The court further reasoned that the time deadlines established in Fed.R.Bankr.P. 3002(c) merely affect the treatment of a tardily filed claim and not its allowability. Hausladen holds that a Chapter 13 plan may treat late-filed claims differently from timely filed ones, but that a late-filed claim should not be disallowed merely because it was filed outside the time established in Fed.R.Bankr.P. 3002(c). Several other courts have followed the reasoning in Hausladen and have reached similar conclusions.

Directly contrary to the result reached in Hausladen is a decision rendered en banc by a Michigan bankruptcy court[,] In re Zimmerman. ...

[T]o analyze the allowability of a claim, a court should engage in a two-step process: First, the Court should determine whether the claim is properly filed under 11 U.S.C. Sec. 501 and Fed.R.Bankr.P. 3002(c) and, second, whether there is a substantive ground for disallowance under 11 U.S.C. Sec. 502(b)....

The court in Zimmerman also recognized important policy considerations in reaching its decision. Claims bar dates are a necessary and integral part of a Chapter 13 case. Such dates provide the debtor and creditors with finality.

This Court agrees with, and adopts, the reasoning and conclusions reached by the court in Zimmerman. Fed.R.Bankr.P. 3002(c) establishes a bar date for filing certain proofs of claim in chapter 7 and chapter 13 cases. That deadline would be rendered meaningless if untimeliness were not a grounds for disallowance. Fed.R.Bankr.P. 3002(a) makes clear that filing a proof of claim in the manner required by the rule is a necessary precondition to allowance.... This Court sees no reason to challenge the congressionally-granted rulemaking power with regard to matters such as time, which Fed.R.Bankr.P. 3002(c) provides. Such a holding would undermine many years of precedent and common sense.

This conclusion is further supported by the recent United States Supreme Court decision in Pioneer Investment. In Pioneer, the Court detailed the circumstances when an untimely claim may, nevertheless, be allowed due to "excusable neglect" of the claimant or his attorney. The analysis utilized by the Court presupposes that a finding of "excusable neglect" is necessary to allow an otherwise untimely claim. Said differently, if tardiness is not a procedural ground for disallowance, there would have been no need for the Court's analysis in Pioneer Investment.

The IRS does not allege any cognizable neglect which would permit the untimeliness of its 1992 Claim to be excused. Accordingly, the Court finds that the claim filed by the IRS for 1988 income taxes was untimely filed and the Debtors' objection on that ground is SUSTAINED.

Bankruptcy Court's Opinion and Order on Objection to Claim at 5-9 (citations omitted).

The IRS appealed. On November 17, 1993, the district court affirmed the bankruptcy court:

The Internal Revenue Service (IRS) appeals the bankruptcy court's opinion and order of July 28, 1993, in which the bankruptcy court sustained the debtors' objection to the IRS's claim filed in 1992 to the extent of debtors' 1988 tax liability. The bankruptcy court found that the IRS's 1992 claim was not an amendment of its 1991 claim, and that there was no cause to excuse the untimeliness of the 1992 claim.

For the reasons stated in the bankruptcy court's well-reasoned opinion and order of July 28, 1993, the judgment of the bankruptcy court is AFFIRMED.

District Court's November 17, 1993 Order.

The IRS timely appealed. ⁵

II. Standard of Review

" '[I]n appeals from the decision of a district court on appeal from the bankruptcy court, the court of appeals independently reviews the bankruptcy court's decision, applying the clearly erroneous standard to findings of fact and de novo review to conclusions of law.' " In re Century Boat Co., 986 F.2d 154, 156 (6th Cir.1993) (citations omitted) (brackets in original).

The 1988 Income Tax Liability

The bankruptcy court invoked Federal Rule of Bankruptcy Procedure 3002 to disallow the IRS's 1992 claim because the IRS filed its proof of claim after the "bar date" had passed. Pursuant to Rule 3002, an unsecured creditor must file a proof of claim or interest within 90 days after the first date set for the meeting of creditors in a Chapter 13 debt adjustment action. Thereafter, the Bankruptcy Code establishes which claims receive priority distribution. The IRS's claim for unpaid federal taxes is generally entitled to priority pursuant to 11 U.S.C. Sec. 507(a)(7).

On appeal, the IRS argues that:

[T]he bankruptcy and district courts erred in aligning themselves with those courts that have given controlling weight to Rule 3002. Rule 3002 is invalid to the extent it directs that late-filed claims will be disallowed, because it contradicts the language and structure of the Bankruptcy Code itself. In enacting the current Bankruptcy Code, Congress did away with the practice under the former Bankruptcy Act of disallowing claims on the ground of untimely filing and substituted a scheme under which timeliness is a basis for classification, but not disallowance.

Appellant's Brief at 11.

The filing and allowance of claims is governed by provisions of Chapter 5 of the Bankruptcy Code applicable to all actions filed under Chapters 7, 11, 12 and 13. 11 U.S.C. Sec. 103(a). Specifically, section 502(a) of the Code provides: "A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest ... objects."

Though 11 U.S.C. Sec. 502(b) does not expressly disallow untimely claims, the disallowance of untimely claims is the product of the Federal Rules of Bankruptcy Procedure, not the Bankruptcy Code. Specifically, Rule 3002 implements 11 U.S.C. Sec. 501 and provides that a proof of claim "shall be filed" within 90 days after the first date set for the meeting of creditors "to be allowed" in a Chapter 13 debt adjustment action.

The United States asserts that Rule 3002 simply separates claims into two groups: timely filed claims and tardily filed claims. The debtors maintain that the IRS's untimely claim is "barred" by Rule 3002. Unfortunately, there is tremendous disparity among the courts that have addressed this issue. The decisions that support a strict bar date include: United States v. Clark, 166 B.R. 446 (D. Utah 1993); In re Jones, 164 B.R. 543 (Bankr.N.D.Tex.1994); Matter of Andrew, 162 B.R. 46...