Alliance Operating Corp., Matter of

• Decision Date: 15 August 1995
• Docket Number: No. 94-30520,94-30520
• Citation: 60 F.3d 1174
• Parties: Bankr. L. Rep. P 76,600 In The Matter of ALLIANCE OPERATING CORPORATION, Debtor. HIGHLANDS INSURANCE COMPANY, INC., Appellant, v. ALLIANCE OPERATING CORPORATION, Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1174

60 F.3d 1174

Bankr. L. Rep. P 76,600

In The Matter of ALLIANCE OPERATING CORPORATION, Debtor.

HIGHLANDS INSURANCE COMPANY, INC., Appellant, v. ALLIANCE OPERATING CORPORATION, Appellee.

No. 94-30520

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Aug. 15, 1995.

David L. Neeb, Metairie, LA, for appellant.

Stewart F. Peck, Claude F. Bosworth, Lugenbuhl, Burke, Wheaton, Peck & Rankin, New Orleans, LA, for appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JONES, BARKSDALE and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

Plaintiff-Appellant Highlands Insurance Company ("Highlands") appeals the district court's affirmance of a bankruptcy court's decision to disallow Highlands's amendment to its proof of claim. Finding no reversible error, we affirm.

FACTS AND PROCEDURAL HISTORY

On December 19, 1989, the Defendant-Appellee Alliance Operating Corporation 10. This claim is a general unsecured claim, except to the extent that the security interest, if any, described in paragraph 9 is sufficient to satisfy the claim. [If priority is claimed, state the amount and basis thereof.]

                ("Alliance") filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code ("Code").  Highlands, the workmen's compensation insurer for Alliance, filed a proof of claim on May 9, 1990 in the amount of $157,008 for "workmen's compensation insurance premiums."   Highlands utilized Official Bankruptcy Form No. 19 as its proof of claim, and this form requested the following information
                

Highlands did not respond to this request.

On October 17, 1990, the Bankruptcy Court set the deadline for filing proof of claims as December 3, 1990. On April 6, 1992, Highlands executed a creditor ballot for accepting or rejecting Alliance's plan of reorganization and stated on its ballot accepting the plan that it was the holder of an unsecured claim of $157,008. On June 25, 1992, the Bankruptcy Court signed the order confirming Alliance's plan of reorganization. On August 18, 1992, the Bankruptcy Court issued an order extending the bar date for filing administrative expenses claims to September 9, 1992.

On April 21, 1993, Highlands filed an application for recognition and payment of its priority claim for workmen's compensation premiums ("amendment to proof of claim"). On September 3, 1993, Highlands filed an addendum to its proof of claim, setting forth an administrative expense claim of $28,678 for post-petition insurance coverage afforded Alliance, a priority claim of $97,505, and a general unsecured claim of $71,595. On May 10, 1994, the Bankruptcy Court denied Highlands's application. On September 6, 1994, the United States District Court affirmed the decision.

LAW AND ARGUMENT

Highlands contends that the district court erred in disallowing the amendment to the proof of claim after concluding that the amendment was a new claim and not an amendment to the original timely filed claim. Amendments to proofs of claim are freely allowed where the purpose is "to cure a defect in the claim as originally filed, to describe the claim with greater particularity or to plead a new theory of recovery on the facts set forth in the original claim." In re Kolstad, 928 F.2d 171, 175 (5th Cir.) (citation omitted), cert. denied, 502 U.S. 958, 112 S.Ct. 419, 116 L.Ed.2d 439 (1991).

Highlands first argues that the Bankruptcy Court and the District Court in the instant case contravened the liberal rules of the Fifth Circuit in allowing amendments to timely filed claims. Pointing to the general principle enunciated in Pepper v. Litton, 308 U.S. 295, 305, 60 S.Ct. 238, 244, 84 L.Ed. 281 (1939) ("[Bankruptcy courts] have been invoked to the end that fraud will not prevail, that substance will not give way to form, that technical considerations will not prevent substantial justice from being done."), Highlands cites In re Commonwealth Corporation, 617 F.2d 415 (5th Cir.1980), In re Crown Cabinets, Inc., 488 F.2d 91 (5th Cir.1973), and In re Kolstad, 928 F.2d at 171, as cases demonstrating the liberality of the Fifth Circuit on this issue.

Bar dates, however, are not to be vitiated by amendments, and the courts must ensure that the amendments do not introduce wholly new grounds of liability. In re Kolstad, 928 F.2d at 175. Amendments to proofs of claim that change the nature of the claim from an unsecured status to a priority status set forth a new claim. In re Walls & All, Inc., 127 B.R. 115, 118 (Bankr.W.D.Pa.1991); In re Metro Transportation Co., 117 B.R. 143, 148 (Bankr.E.D.Pa.1990). The court in In re Metro Transportation Co. reasoned:

[T]he nature of a priority claim is much different from that of a general unsecured claim. Reclassifying the claim as a priority claim impacts the Debtor's Plan and the distributions to be paid to the other creditors under the Plan. This situation is therefore different from those in which amendments have been permitted to increase the amount of a claim when post-bar date events have resulted in a larger, but otherwise unchanged debt.

The Fund does not suggest that any post-bar-date event occurred which necessitated the reclassification of the Claim, as opposed to the amount of the Claim. If the Claim deserved priority, it deserved it at the time that the Fund filed its first proof of claim. The Fund should not therefore be permitted, at this late date, to assert what is essentially a new claim seeking priority treatment.

A priority claim is a claim completely different from that asserted by the Fund in its timely proofs of claim. The Fund's desire to reclassify its Claim is therefore an attempt to assert an untimely new claim.

In re Metro Transportation Co., 117 B.R. at 148.

The cases that Highlands cites, on the other hand, do not involve instances in which the amendment attempts to change the nature of the claim from an unsecured status to a priority status; hence, a new claim was not attempted. In re Kolstad, 928 F.2d at 173 (amendment increasing amount of claim); In re Commonwealth Corporation, 617 F.2d at 422 (amendment alleging additional facts and new cause of action); In re Crown Cabinets, Inc., 488 F.2d at 92 (amendment correcting original claim's lack of sufficient documentary proof of the nature of the claim as one entitled to priority).

Highlands attacks the reasoning of In re Metro Transportation Co. and argues that the purpose of the bar dates is to fix the creditors who are allowed to participate in the claims adjudication process, which inevitably produces changes in the distribution of the assets as claims are properly assessed and determined. Highlands then argues that increasing the amount of the claim after the bar date, which was allowed by In re Kolstad, 928 F.2d at 173, changed the distribution of the assets within the particular class of the amending claimant. However, the change in distribution within a class is not ordinarily as significant as that contemplated in this case. While increasing the amount of the claim changes the distribution of assets within the particular class, enhancing the priority of a claim...