In re Candy Braz, Inc.

Decision Date09 September 1988
Docket NumberBankruptcy No. 85 B 00724.
Citation98 BR 375
PartiesIn re CANDY BRAZ, INC., Debtor.
CourtU.S. Bankruptcy Court — Northern District of Illinois

William D. Kelly, Chicago, Ill., for debtor.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 incorporated by Federal Rule of Bankruptcy Procedure 7056 filed by Bernard Chaitman (the "Trustee") as trustee for the estate of Candy Braz, Inc. ("Candy Braz") on an objection to the allowance of a claim filed by the Illinois Department of Revenue (the "Department") on behalf of the State of Illinois and on a cross motion for summary judgment filed by the Department. For the reasons set forth herein, the Court having considered all the pleadings and exhibits filed does hereby deny the Trustee's motion for summary judgment and overrules the objection to the allowance of the Department's claim. The Court does hereby grant the Department's cross motion for summary judgment and allows the amended claim in the amount of $151,492.20 as a priority claim.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain these motions pursuant to 28 U.S.C. § 1334 and General Orders of the United States District Court for the Northern District of Illinois. These motions constitute core proceedings under 28 U.S.C. § 157(b)(2)(A), (B), (O).

II. STANDARD FOR SUMMARY JUDGMENT

The Trustee has moved for summary judgment with regard to the Department's claim. The Department has responded with a cross motion for summary judgment. Both parties have submitted memoranda in support of their respective motions and have agreed that the matter is ripe for determination on the motions for summary judgment.

In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings in the Bankruptcy Court by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Hossman v. Spradlin, 812 F.2d 1019, 1020 (7th Cir.1987).

The primary purpose for granting a summary judgment motion is to avoid unnecessary trials when no genuine issue of material fact is in dispute. Farries v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987). The burden is on the moving party to show that no genuine issue of material fact is in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 2514, 91 L.Ed.2d 202 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 585-586, 106 S.Ct. 1348, 1355-1356, 89 L.Ed.2d 538 (1986). Moreover, all reasonable inferences to be drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Marine Bank, Nat. Ass'n v. Meat Counter, Inc., 826 F.2d 1577, 1579 (7th Cir.1987); DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 811 F.2d 326, 329 (7th Cir.1987); Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir.1986), cert. denied, 479 U.S. 1092, 107 S.Ct. 1304, 94 L.Ed.2d 160 (1987). Furthermore, the existence of a material factual dispute is sufficient only if the disputed fact is determinative of the outcome under the applicable law. Egger v. Phillips, 710 F.2d 292, 296 (7th Cir.1983) (en banc), cert. denied, 464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983). On cross motions for summary judgment, the Court must rule on each party's motion individually, denying both motions if a genuine issue of material fact exists. ITT Indus. Credit Co. v. D.S. America, Inc, 674 F.Supp. 1330, 1331 (N.D. Ill.1987); Wausau Ins. Co. v. Valspar Corp., 594 F.Supp. 269, 270 (N.D.Ill.1984).

Rule 12(e) of the General Rules of the United States District Court for the Northern District of Illinois adopted by General Order of the Bankruptcy Court dated May 6, 1986, requires that the party moving for summary judgment file a detailed statement of material facts as to which they contend there is no genuine issue. Rule 12(f) requires that the party opposing the motion file a statement of material facts as to which there is a genuine issue. If the nonmoving party's Rule 12(f) statement fails to deny the facts set forth in the movant's statement, those facts will be "deemed admitted." In support of the motions, each party has filed a detailed Rule 12(e) statement. Neither party has filed a Rule 12(f) statement. Thus, the facts stated in the respective Rule 12(e) statements are deemed admitted for purposes of that motion. The material facts do not appear to be disputed. Therefore, the Court will rule on each motion.

III. FACTS AND BACKGROUND

On January 17, 1985, Candy Braz filed a Chapter 11 petition for relief under the Bankruptcy Code (the "Code"). Subsequently, on January 18, 1985, Bernard Chaitman was appointed Trustee. The case has proceeded as a liquidation of Candy Braz's assets.

On May 14, 1985, Candy Braz filed its schedule of liabilities which indicated that $177,000.00 was owed to the State of Illinois for unspecified taxes. The amount was not listed as disputed, contingent or unliquidated. The schedule of liabilities filed was signed by "R. Harasymiw att'y", an attorney on behalf of Candy Braz. On June 27, 1985, the Trustee filed motions requesting that a bar date be set for filing proofs of claim or interest and seeking a order compelling Candy Braz to comply with Section 521(1) of the Code. In addition, the Trustee moved for an order regarding the filing of fully completed schedules as the originals were apparently incomplete.

Accordingly, pursuant to an Order of this Court dated June 27, 1985, a bar date for filing proofs of claim was fixed at August 22, 1985.1 In addition, the June 27, 1985 Order designated Sean Saleh ("Saleh") to act on behalf of Candy Braz pursuant to Bankruptcy Rule 9001(5). Moreover, pursuant to sections 105(a) and 521(1), Candy Braz, by Saleh, was ordered to immediately file fully completed Schedules, Statement of Affairs, and Statement of Executory Contracts. Saleh, however, did not file properly executed schedules. The Department did not receive notice of the Order designating Saleh to act on behalf of Candy Braz and compelling him to sign schedules.

The Trustee published and the Clerk of the Bankruptcy Court sent notice of the bar date to all creditors including the Department. Thereafter, on September 9, 1985, the Department filed a claim for unpaid cigarette stamp taxes for the period June 1984 through January 1985 in the amount of $3,510.60. Such taxes were assessed against Candy Braz pursuant to Ill. Rev.Stat. ch. 120, para. 453.1 (1984) et. seq. On May 4, 1987, the Trustee filed an objection to the allowance of the claim of the Department. In the objection, the Trustee asserts that the claim was untimely and that the schedules were unsigned but listed the Department's claim in the amount of $177,000.00.

Subsequently, on May 8, 1987, the Department filed an amended claim for the same period in the amount of $151,492.20. The increase in the amount was based on NSF checks tendered by Candy Braz in payment of cigarette tax stamps. The Trustee also contends that the amended claim is in essence a new claim and is time barred.

On May 26, 1987, the Department filed an answer to the Trustee's objection to the claim. In its answer to the Trustee's objection, the Department contends that pursuant to the section 341 notice of the first meeting of creditors, the automatic stay and section 1111(a), it was not required to file a proof of claim. The section 341 notice stated in part, "Any creditor holding a listed claim which is not listed as disputed, contingent or unliquidated as to amount, may, but need not, file a proof of claim in this case." The Department further states that it was entitled to rely on the filed schedules under Bankruptcy Rule 3003(b)(1) which admitted a greater tax liability owed the State of Illinois than the amount claimed due in the Department's amended claim.

IV. DISCUSSION

The Trustee first asserts that the schedules filed were null and void due to the fact that they were signed by "R. Harasymiw, att'y", an attorney for Candy Braz who was not a corporate officer, director, shareholder or person in control of the debtor for purposes of Bankruptcy Rule 9001(5). The Trustee concludes that the Department's claim was therefore never properly scheduled and its claim filed after the bar date is untimely. The Court, however, is unwilling to make such a determination. The fact that the schedules were not signed by an officer, director or shareholder of Candy Braz does not obviate the fact that they were filed and listed a substantial amount of taxes owed the State of Illinois. Sections 501, 521(1), and 1111(a), Bankruptcy Rule 3003(b)(1) and the bar date notice sent to the creditors on June 27, 1985, did not require the Department to file a proof of claim. The Trustee's mere assertion that the filed schedules were null and void does not obviate these facts, nor does Bankruptcy Rule 9001(5) mandate the result argued by the Trustee.

Only certain claimants are required to file proofs of claim or interest in a chapter 11 reorganization case. Section 1111(a) provides that "a proof of claim or interest is deemed filed under section 501 of this title for any claim or interest that appears in the schedules filed under section 521(1) or 1106(a)(2) of this title, except a claim or interest that is scheduled as...

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