In re Metro Transp. Co.
| Decision Date | 08 August 1990 |
| Docket Number | Bankruptcy No. 86-03618S. |
| Citation | 117 BR 143 |
| Parties | In re METRO TRANSPORTATION COMPANY t/a Yellow Cab Company, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Joseph R. Baranko, Jr., Mylotte, David & Fitzpatrick, Hazleton, Pa., for Fund.
Pauline Morgan, Clark Ladner Fortenbaugh & Young, Philadelphia, Pa., for Committee.
Kevin W. Walsh, Adelman, Lavine, Gold & Levin, Philadelphia, Pa., for debtor.
Before the court is a Motion of the Pennsylvania State Workmen's Insurance Fund ("the Fund"), a creditor in this Chapter 11 bankruptcy case, seeking a determination that its claim of $91,460.00 ("the Claim") has priority status under 11 U.S.C. § 507(a)(7)(E). We reject the Fund's request on two alternative grounds: (1) The Fund is not entitled to change the classification of its claim after the bar date, when no new factors have arisen since the bar date justifying such a change; and (2) The Fund's claim is not properly classifiable as an "excise tax," pursuant to § 507(a)(7)(E), in any event, given the Fund's status as a non-compulsory insurer under applicable Pennsylvania state law. Therefore, we conclude that the Fund is confined to an unsecured claim in the amount of $91,460.00.
On July 29, 1986, the Debtor, METRO TRANSPORTATION COMPANY, t/a YELLOW CAB COMPANY, ("the Debtor"), the principal purveyor of taxicab services in the City of Philadelphia, filed a voluntary petition for relief under Chapter 11 of the Code. The facts of the main bankruptcy case have been discussed at length in numerous Opinions by this court published in this case at 64 B.R. 968 (Bankr.E.D.Pa.1986); 78 B.R. 416 (Bankr. E.D.Pa.1987), aff'd in part & remanded in part, 107 B.R. 50 (E.D.Pa.1989); 82 B.R. 351 (Bankr.E.D.Pa.1988); 87 B.R. 338 (Bankr.E.D.Pa.1988); and 113 B.R. 874 (Bankr.E.D.Pa.1990). As little of this history bears any significant relationship to the instant contested matter, same will not be repeated here and the reader interested in this history is referred to those Opinions.
The instant matter arose upon a "Motion for Determination of Priority Status" filed by the Fund on February 19, 1990. This Motion was opposed by both the Debtor and the Official Unsecured Creditors' Committee ("the Committee") appointed in the Debtor's case.
A brief trial on the Motion was conducted on April 25, 1990. The only witnesses were employees of the Fund. They described the Fund as an entity created pursuant to Section 221 of the Pennsylvania Workmen's Compensation Act, 77 P.S. § 1, et seq. ("the Act"). Employers covered by the Act which choose to insure through the Fund pay their premiums into the Fund "for the purpose of insuring such employers against liability under article three of the Act, and of assuring the payment of the compensation therein provided." 77 P.S. § 221. The Fund issues policies of insurance to participating employers or subscribers. 77 P.S. §§ 81, 224. However, it is important to note that, under the Act, employers have two options for procuring requisite workmen's compensation insurance in addition to doing so through the Fund: (1) they may self-insure; and (2) they may purchase workmen's compensation insurance from a private company.
The Fund's witnesses indicated the reason why the amount of the Fund's Claim kept changing: because premiums due to the Fund must be recalculated on the basis of subsequent claims, retrospective adjustments were constantly necessary. Further detailed findings on the computation of the Fund's claim are not necessary, because neither the Debtor nor the Committee are opposing the amount of the Fund's claim at this juncture, but merely its classification.
Immediately subsequent to the hearing, we ordered the parties to submit Briefs in support of their respective positions on or before May 25, 1990 (the Fund), and June 11, 1990 (the Debtor and the Committee). The matter was then listed for a settlement conference before the Honorable Judith H. Wizmur of the District of New Jersey on May 25, 1990. At that time, the parties reported that they were close to a settlement, because the classification of the Fund's claim resulted in relatively little change in the distribution to it, and the parties hoped to also resolve the Debtor's possible future use of the Fund's services at the same time.
Unfortunately, despite our granting the Debtor and the Committee two extensions of time, ultimately until July 18, 1990, to remit their submissions due to the pendency of the possible settlement, and the diligence of Judge Wizmur in following up the original conference to attempt to close a settlement, these efforts failed, requiring us to resolve this matter by written Opinion.
The Fund asserts, in its Motion and accompanying Brief, that the Claim is for delinquent premiums for workers' compensation insurance as to Policy No. 271581-2, issued to the Debtor for coverage during the period of January 1, 1982, through December 31, 1983.
The Fund contended that it has filed four related proofs of claim on the following respective dates, in the following respective amounts and classifications: (1) December 10, 1987, an unsecured claim in the amount of $40,459.00; (2) January 19, 1989, an unsecured claim in the amount of $65,152.00; (3) November 22, 1989, and unsecured claim in the amount of $91,460.00;1 and (4) January 16, 1990, a priority claim in the amount of $91,460.00 which is the Claim in issue ("the January Claim").
The bar date for filing proofs of claim in the Debtor's bankruptcy case was set by this court as March 1, 1989. The Fund's third and fourth proofs of claim were thus filed (but see page 145 n. 1, supra, regarding the third claim) after the bar date.
The Fund identifies three questions which are before the court. We will discuss them in the following order:
1. Whether the Motion is a contested matter properly filed pursuant to Bankruptcy Rule ("B.Rule") 9014.
2. Whether the proofs of claim filed by the Fund on November 22, 1989, and January 16, 1990, after the bar date, constitute appropriate amendments to the Fund's earlier timely-filed proofs of claim.
3. Whether the Fund's claim is entitled to priority status pursuant to 11 U.S.C. § 507(a)(7)(E).
We answer the first question in the affirmative and the second and third largely in the negative.
1. Although, technically, the Fund's Motion should have been maintained as an Adversary Proceeding pursuant to B.Rules 3007 and 7001(2), rather than pursuant to B.Rule 9014, we will overlook same.
The Fund's Motion requests the determination of the priority of its claim. B.Rules 3007 and 7001(2) require that a request for determination of priority of a claim be brought as an adversary proceeding. The Fund urges that its Motion was properly brought pursuant to B.Rule 9014. B.Rule 9014, however, applies to contested matters "not otherwise governed by these rules." Since matters to determine priority of claims are governed elsewhere in the B.Rules, i.e., in B.Rules 3007 and 7001(2), B.Rule 9014 is inapplicable.
This B.Rule is potentially applicable, as the Fund wishes to be included in a class of § 507(a)(7) priority claims. B.Rules 3007 and 7001(2), however, are clearly the rules which most specifically address this Motion, and therefore their terms should be followed.
Although we cannot generally excuse even technical violations of the B.Rules, we will excuse the instant, technically improper filing of the instant matter because of the presence of the following circumstances: the lack of prejudice to the Debtor and the Committee; their participation without objection to the use of the B.Rule 9014 process by the Fund at the April 25, 1990, hearing; all of the parties' participation in negotiations to settle this dispute; the Debtor's and the Creditors' Committee's failure to discuss this issue in their jointly submitted Brief; and their acquiescence to this court's deciding the Motion after failed settlement negotiations. Compare In re Jablonski, 70 B.R. 381, 385 (Bankr.E.D.Pa.1987), aff'd, 88 B.R. 652 (E.D.Pa.1988). Further, the Debtor's Third Modified Plan of Reorganization ("the Plan") was finally confirmed on October 25, 1989, and the need to resolve all remaining issues as soon as possible so that the Plan may be implemented causes us to overlook the Fund's technical error and to address the substance of its pleadings.
2. Although we will allow the Fund's claim in the amount demanded in its January claim, we will not allow the Fund to amend the classification of the claim to priority status in the January claim.
The Fund contends that its Claim against the Debtor is a priority claim in the amount of $91,460.00. The Debtor and the Committee argue that the Fund's Claim should be allowed as a general unsecured claim in the amount of $91,460.00. Obviously, given these positions of the parties, the Debtor and the Committee have conceded that either the November 22, 1989, Claim or the January Claim amends the Fund's previous, timely-filed proofs of claim as to amount, leaving, as the only matter before us for decision, whether the January Claim properly amends the classification of the Fund's Claim.
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