In re Calisoff, Bankruptcy No. 87 B 01192.
| Decision Date | 20 December 1988 |
| Docket Number | Bankruptcy No. 87 B 01192. |
| Citation | 94 BR 1002 |
| Parties | In re Charles I. CALISOFF, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Victoria Crosley, for IRS.
Melvyn H. Berks, Des Plaines, Ill., and William E. Lane, Wilmette, Ill., for creditors.
Joseph D'Amico, for trustee.
Arthur Gold, Chicago, Ill., for debtor.
In this case under Chapter 7 of the Bankruptcy Code, the last date for filing proofs of claim pursuant to Bankruptcy Rule 3002(c) was June 24, 1987.1 The Internal Revenue Service timely filed a proof of claim for 1984 and 1985 individual income taxes, but then filed a supplemental proof of claim for 1986 taxes after the bar date. The trustee and creditors of the Debtor object to the supplemental claim on the sole ground that it is untimely. The IRS contends that the supplemental claim is a permissible amendment to its timely claim. The Court will overrule the objections and allow the supplemental claim to stand as an amendment to the original IRS proof of claim.
FACTS:
The IRS' original proof of claim is for $3,935.62 in penalties and $4,603.75 in interest for 1984 income taxes, and 1985 income taxes in the principal amount of $5,060.00, $657.50 in penalties and $442.19 in interest.
The Debtor filed his individual income tax return for the 1986 tax year on October 13, 1987, after the June 24, 1987 deadline for filing proofs of claim under Bankruptcy Rule 3002(c), but before the extended due date for that return under tax law. On February 8, 1988, the IRS filed its "supplement" to its first claim. This supplemental claim was for 1986 individual income taxes "to be assessed" at $12,521.00.
Sherry Calisoff and Melvin Berks, creditors of the Debtor, first objected to the IRS' supplemental claim on June 9, 1988 pursuant to Section 502(a) of the Code and Bankruptcy Rule 3007 on the ground that there was no documentation to support the validity of the claim. On August 4, 1988, the same creditors filed an amended objection to the supplemental claim on the ground that it is a wholly new claim that should be disallowed as untimely. The creditors' objection to the supplemental claim has been adopted by the Chapter 7 Trustee.
DISCUSSION:
Proofs of claims filed after the bar date are not allowed. In re Ebeling, 123 F.2d 520 (7th Cir.1941); In re Rothert, 61 F.2d 1 (7th Cir.1932). However, "the decision to allow an amendment to a timely filed claim is within the generally sound discretion of the Court." In re Candy Braz, 1988 Bankr. LEXIS 1740, 15. Amendments to timely filed claims are liberally allowed to modify information or correct omissions in the original claim. See, In re Hanscom Retail Foods, 96 B.R. 33 (Bankr.E.D.Pa. 1988); In re International Horizons, 751 F.2d 1213, 1216 (11th Cir.1985). Amendments to proofs of claim are also permitted if "the original claim provided notice to the Court of the existence, nature and amount of the claim and that it was the creditors' intent to hold the estate liable." International Horizons, 751 F.2d at 1217.
Courts that have decided issues similar to those presented in the case at bar have pursued various courses. See, Candy Braz, 1988 Bankr. LEXIS 1740, 16. Some courts have applied principles developed under Federal Rule of Civil Procedure 15 to determine whether the untimely claim arose out of the same transaction or occurrence as the timely claim. See, In re AM International, Inc., 67 B.R. 79 (N.D.Ill.1986).2 A second line of cases initiated by In re Miss Glamour Co., 80-2 U.S.T.C. ¶ 9737 (S.D.N.Y.1980) 1980 WL 1668, supports the use of a "balancing of equities" test.3 A third line of cases attempted to integrate the transaction or occurrence test and the Miss Glamour Coat test. See, In re The Overly-Hautz Co., 57 B.R. 932 (Bankr.N.D.Oh.1986).
In this Court's view a more straightforward analysis would allow an untimely claim as an amendment to a timely claim if the policy goals served by barring late claims would not be defeated by allowing the alleged amendment. Upon closer analysis, most of the authorities seem to follow this approach and focus on four general issues: 1) whether allowance of the proposed amendment would delay or complicate the administration of the case; 2) whether the claimant was diligent; 3) whether the parties would be prejudiced if the amendment were allowed; and 4) whether the subject matter of the proposed amendment is sufficiently similar to the original claim so that the parties were put on notice that the claimant intended to hold the estate liable for the type of liabilities described in the proposed amendment.
Much of the discussion in the decisions is about the fourth factor — the similarity of subject matter. It is clear that an attempt to add a claim for a tax different than the tax specified in the original claim will not be allowed. See, In re International Horizons, Inc., 751 F.2d 1213 (11th Cir.1985) (); In re Simms, 40 B.R. 186, 190 (Bankr.N.D.Ga.1984) ().4 The difficulty has arisen in cases like this one, where the taxing authority seeks to add a claim for the same type of tax but for a different time period. Although there is a difference among the cases as to the application of the fourth consideration — with some courts treating attempts to add claims for other tax years as proper while other courts reject such attempts as "new claims" — the different outcomes are often explained by the first three factors (hindrance of case administration, diligence of the claimant and prejudice to the parties).
Three cases illustrate this analysis. In In re AM International, Inc., 67 B.R. 79 (N.D.Ill.1986), the district court affirmed the bankruptcy court's denial of a claim by the Commonwealth of Pennsylvania for 1980 and 1981 sales and use taxes filed after the bar date set for filing claims. The Commonwealth had previously filed a timely claim for 1982 sales and use taxes. The first claim was for sales taxes the debtor had collected from its customers but failed to remit to the Commonwealth, but the second claim was for sales taxes the debtor failed to collect from its customers. The court held that "merely because the taxes involved are of the same general type does not, in and of itself, support a claim that the second claim is an amendment to the first claim." 67 B.R. at 82.
The court relied upon factors in addition to the differences between the claims. The court found that the Commonwealth had no valid excuse for its failure to file its second proof of claim on a timely basis. Instead, the Commonwealth relied on the debtor's participation in an audit and its notice of tax assessment as a substitute for filing a timely proof of claim. In addition, the debtor in AM International was attempting to reorganize under Chapter 11. The bar date had been set by Order of the Court. Although the district court's opinion does not say why the bankruptcy court entered the bar Order, such orders are often entered to facilitate the administration of Chapter 11 cases. They enable the debtor and creditors to know with some certainty the amounts and priorities of the claim with which they must deal in the negotiation and proposal of a plan. Allowance of the late claim by the Commonwealth might have delayed the reorganization process and prejudiced the parties who relied on the timely filed claims in negotiating, proposing and voting on a plan of reorganization. The court did say that the equities favor creditors who had no notice of the second claim and relied on its absence. 67 B.R. at 82.
In U.S. v. Owens, 84 B.R. 361 (E.D.Pa. 1988), the IRS filed a timely claim for 1983 income taxes. Two months after the bar date had passed and three years after the original due date, the debtor filed his 1981 income tax return. Six months after the bar date had passed, the IRS filed a late proof of claim for 1981 and additional 1983 income taxes. The court upheld the 1983 portion of the second proof of claim and disallowed the 1981 portion. 84 B.R. at 363.
The disallowed portion of the IRS' second claim in Owens was for 1981 income taxes that were originally due pre-petition. Although the debtor's 1981 tax return was not filed until after the bar date for filing claims had passed, the IRS had sent a notice of deficiency for 1981 taxes to the debtor prior to the bar date. The IRS therefore had a basis for either filing a claim for 1981 taxes or requesting an extension of time under Bankruptcy Rule 3002(c)(1), since it knew of the 1981 delinquency in time to do either. The IRS did neither, and that lack of diligence was an important reason for the decision in Owens.
Finally, In re Hanscom Retail Foods, Inc., 96 B.R. 33 (Bankr.E.D.Pa.1988), allowed an untimely filed proof of claim for FICA and withholding taxes as an amendment to a timely filed claim for the same type of taxes in a different tax period. There, the court stated;
An attempt by the IRS to add additional quarters or even additional years is usually not considered a new claim. Citations omitted. Since the purpose of a proof of claim is for the creditor to put the estate on notice of its demand against the estate and its intention to hold the estate liable citation omitted, this purpose is met so long as the nature of the claim is clearly and timely announced.
Other parties suffered no prejudice because there had been no plan confirmation or distribution to the creditors. The IRS was not responsible for the delay because the debtor had filed its tax returns late. In conclusion, the court stated;
Where the amendment concerns post-petition taxes (or taxes for which returns were first due post-petition) compare In re Owens (pre-petition taxes with a pre-petition notice of...
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