In re Jones
| Citation | 164 BR 543 |
| Decision Date | 04 January 1994 |
| Docket Number | Bankruptcy No. 388-37332 RCM-13. |
| Parties | In re Clifford N. JONES, Debtor. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas |
Gregg D. Stevens, Atty., Tax Div., Dept. of Justice, Dallas, TX.
Gregory Gutman, Dallas, TX.
On November 22, 1993 came on to be heard the motion of debtor to hold the United States of America (the Internal Revenue Service) ("IRS") in contempt. Pursuant to Bankr.R. 7052, the following are the Court's findings of fact and conclusions of law in connection with such motion. The Court has jurisdiction of this contested matter under 28 U.S.C. § 1334(b) and the General Order of Reference in this District. Also see, U.S. v. Nordic Village, Inc., ___ U.S. ___, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) ("Nordic Village"). This is a core proceeding under 28 U.S.C. including § 157(b)(2)(A), (B), (I), and (O).
This motion is brought against the IRS under the provisions of Bankr.R. 9020.
The movant filed his Chapter 13 petition in this Court on December 2, 1988.
The IRS was listed as a creditor on the debtor's schedules. This claim was listed as contingent and disputed. In addition, the claim was described as a potential claim against Nexus Group, Inc. (the debtor's failed business) and debtor's personal liability with respect to same was denied.
A § 341 hearing was conducted on February 23, 1989.
Debtor's plan was confirmed by this Court on April 24, 1989. Such plan included a provision for the IRS claim. The IRS claim was considered a priority claim in the amount of $10, which was to be paid in full under the plan. The IRS never timely moved to revoke the confirmation under 11 U.S.C. § 1330. Bankr.R. 9024.
The movant completed his Chapter 13 plan that was confirmed by this Court. An order was entered on July 8, 1993, discharging the movant from all debts provided for by the plan. The IRS never moved to set aside this order.
On or about August 16, 1993, the IRS had issued a written notice to the movant captioned "Notice of Intent to Levy" allegedly related to what is described in the notice as a "civ pen". The notice specified that the alleged civil penalty indebtedness was for the "tax period 06-30-88". Apparently, this was a reference to the second quarter of 1988. Stipulated Fact ("SF") ¶ 5. (See p. 8 of IRS answer). A true and correct copy of that Notice of Intent to Levy was attached to the motion as Exhibit A. IRS Exhibit 4 was its proof of claim filed February 28, 1991, showing priority taxes due of $9,095 for the December 31, 1986 tax period, and 100% penalty of $22,767.85 for the June 30, 1988 tax period. This penalty tax had to do with Nexus Group, Inc. Apparently, the IRS disputes only the discharge of the $22,767.85 penalty tax, and not the $9,095 tax.
On or about August 27, 1993 debtor responded to the IRS' notice of intent to levy. That letter, to the Austin office of the IRS where the notice originated, informed the IRS of the Chapter 13 of the debtor, and the debtor's assertion that the debt had been discharged in accordance with this Court's order. The letter also instructed the IRS to refrain from any further attempts to collect its alleged indebtedness, unless they are in accordance with the Bankruptcy Code and Rules. A true and correct copy of the correspondence, as well as copies of the certified mail documentation reflecting receipt, were attached to the motion as exhibit B.
On or about September 21, 1993, the IRS issued a Notice of Levy and delivered such notice to the Dallas Office of Bank One, Texas N.A. In accordance with this notice, Bank One froze the funds contained in debtor's account, number XXXXXXXXXX. The account contained $268.43 at the time it was frozen. A true and correct copy of the Notice of Levy, together with a letter from the bank to the debtor, was attached to the motion as exhibit C. Before the Debtor's contempt motion was filed, the IRS released its levy on the bank account.
Debtor has moved to hold the United States of America in contempt for violation of § 524(a)(2) because of the IRS collection and levy actions in August of 1993.
The initial inquiry is whether the IRS claim has been discharged. The debtor received a discharge upon the completion of his plan on July 8, 1993. The IRS contends that its claim for the 100% penalty was not included in the discharge on two grounds.
First, the IRS maintains that the debt arose post-petition and is therefore not dischargeable. The 100% penalty was assessed after the petition date, however it was based on a prepetition tax claim. These taxes are prepetition even though the IRS did not assess them until after the petition date. The accrual date of the tax liability and not the date of the IRS audit determines the character of the taxes. See In re Ryan, 78 B.R. 175, 177 (Bankr.E.D.Tenn.1987); In re Workman, 108 B.R. 826 (Bankr.M.D.Ga. 1989); cf. In re Miller, 118 B.R. 76 (E.D.Tenn.1989). The 100% penalty assessed by the IRS is a prepetition claim. In re Ripley, 926 F.2d 440 (5th Cir.1991), was cited by the IRS for the proposition that the penalty tax is a 11 U.S.C. 1305(a) post-petition tax. The tax in the instant case is distinguishable because, as the Ripley court pointed out: "In Miller, the government sought recovery of a truly quarterly tax rather than of annual taxes, as in this case." Id. at 446. (Emphasis added). The penalty taxes the IRS seeks in this case are likewise on a truly quarterly tax, and therefore, do not fall within § 1305(a).
Second, the IRS maintains that it was improperly scheduled and not properly dealt with in the plan, and therefore its claim was not discharged. The debtor placed the IRS in his schedules as an unliquidated and contingent claim. Its claim was then treated under the plan as being a $10 priority claim, which under the plan was to be paid in full. The IRS did not object to the confirmation of the plan.
A governmental debt may be scheduled as a disputed or estimated amount. In re Ryan, supra at 175, 177-178. The amounts and classes of claims will be determined from the proofs of claims that are filed. Id. The debtor did provide for a priority tax claim and a percentage payout on unsecured claims in his plan. In re Gregory, 705 F.2d 1118 (9th Cir.1983). (Plan which stated that it provided for zero payment to the unsecured creditors "provided for" such creditors). Also see, In re Border, 116 B.R. 588 (Bankr. S.D.Ohio 1990), and In re Pack, 105 B.R. 703 (Bankr.M.D.Fla.1989).
The IRS did not file a timely proof of claim. A proof of claim must be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the code. Bankr.Rule 3002(c). The debtors § 341 meeting was held on February 23, 1989. The IRS received bold-faced notice from the Court that: "CLAIMS WHICH ARE NOT FILED BY 05/24/89 WILL NOT BE ALLOWED EXCEPT AS OTHERWISE PROVIDED BY LAW." The IRS did not file its proof of claim until February 28, 1991, or one year and nine months after the bar date for filing proofs of claims.
Failure to file a timely proof of claim has generally been held to disallow the claim. See Jones v. Arross, 9 F.3d 79 (10th Cir. 1993); In re Chavis, 160 B.R. 804 (Bankr. S.Dak.1993); In re Tomlan, 102 B.R. 790, 791-92 (E.D.Wash.1989) aff'd, adopted, 907 F.2d 114 (9th Cir.1990); In re Messics, 159 B.R. 803 (Bankr.N.D.Ohio 1993); In re Osborne, 159 B.R. 570, 578 (Bankr.C.D.Cal. 1993); In re Turner, 157 B.R. 904 (Bankr. N.D.Ala.1993); In re Zimmerman, 156 B.R. 192 (Bankr.W.D.Mich.1993) (en banc); In re Johnson, 156 B.R. 557 (Bankr.N.D.Ill.1993); In re Bailey, 151 B.R. 28 (Bankr.N.D.N.Y. 1993). Some courts have held that an untimely filing merely effects the treatment of the claim and does not cause disallowance of the claim. See In re Babbin, 156 B.R. 838 (Bankr.D.Colo.1993); In re Judkins, 151 B.R. 553 (Bankr.D.Colo.1993); In re Hausladen, 146 B.R. 557 (Bankr.D.Minn.1992) (en banc).
The Hausladen Court held that failure to file a timely proof of claim only effects the treatment of the claim and does not result in the disallowance of that claim. This conclusion was based upon the interplay between 11 U.S.C. § 502 and Bankruptcy Rule 3002(c). The Court concluded that the absence of a § 502 provision disallowing untimely claims took precedence over any time bar that is present in Rule 3002. In re Hausladen, 146 B.R. 557 (Bankr.D.Minn. 1992) (en banc).
This Court respectfully declines to follow the Hausladen opinion, and finds the reasoning set forth in In re Zimmerman, 156 B.R. 192 (Bankr.W.D.Mich.1993) (en banc) to be more compelling. The Zimmerman Court found that there was not any conflict between § 502 and Rule 3002(c), and Rule 3002(c) acts as a time bar for filing proofs of claims. The IRS could have filed a motion to extend the period to file its proof of claim under Bankr.Rule 3002(c)(1), but it failed to do so. As a result, the IRS' claim is disallowed due to the untimely filing of its proof of claim.
The debt was provided for in the plan (In re Ryan, supra), but the IRS did not receive payment due to its failure to properly file a proof of claim. As a result the debtor did complete his plan and properly received a discharge of the IRS debt on July 8, 1993. See, e.g., In re Workman, supra; In re Ryan, supra. See also, In re Border, 116 B.R. 588 (Bankr.S.D.Ohio 1990) ().
The IRS attempt to collect on this discharged debt in August of 1993 resulted in this contempt motion. Section 524(a)(2) creates a permanent injunction against creditors attempting to collect on discharged debts. See, In re Jet Florida Systems, Inc., 883 F.2d 970, 972 (11th Cir.1989); In re Norris Grain Co., 138 B.R. 1004, 1007 (Bankr. M.D.Fla.1992), aff'd, In re Norris Grain Co., 1993 U.S. Dist. Lexis 12,064 (M.D.Fla.1993) (unpublished opinion). In In re...
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