In re Monclova Care Center, Inc.
| Citation | 254 BR 167 |
| Decision Date | 25 May 2000 |
| Docket Number | No. 93-32226.,93-32226. |
| Parties | In re MONCLOVA CARE CENTER, INC., Debtor. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
COPYRIGHT MATERIAL OMITTED
Bruce S. Schoenberger, Toledo, OH, for Swan Pointe Care Center Inc.
Derek Rippy, Cleveland, OH, for U.S. Trustee.
Henry Riordan, Dept. of Justice, Tax Division, Washington, D.C., for U.S.A.
Mary Ann Whipple, Toledo, OH, for John N. Graham.
This cause comes before the Court upon the Amended Motion for Summary Judgment and Memorandum in Support submitted by the Internal Revenue Service in opposition to the Trustee's Motion to Confirm Distribution of the Debtor's assets. In support of its Motion to Confirm Distribution, the Trustee submitted a Memorandum in Support, and a Memorandum in Opposition to the Internal Revenue Service's Amended Motion for Summary Judgment. This Court has now had the opportunity to review the arguments of counsel, the exhibits, as well as the entire record in the case. Based upon that review, and for the following reasons, the Court finds that the Amended Motion for Summary Judgment submitted by the Internal Revenue Service should be Granted in part and Denied in part.
The facts relevant in this case had their genesis in July of 1993 when the Debtor, Monclova Care Center, Inc. (hereinafter Debtor), commenced the above captioned case under Chapter 11 of the United States Bankruptcy Code. In the bankruptcy schedules originally filed with its petition, the Debtor listed two secured creditors, one of which was the Internal Revenue Service (hereinafter IRS). (Later the Debtor amended its bankruptcy schedules so as to reflect that the IRS was the only secured creditor.) In response to the Debtor's bankruptcy petition, the IRS filed a proof of claim, which was later amended, reflecting an obligation owed by the Debtor in the amount of Two Hundred Fifty-two Thousand Six Hundred Eight and 00/100 dollars ($252,608.00). Of this amount, the IRS classified Two Hundred Thirty-eight Thousand Seven Hundred Sixty-five and 71/100 dollars ($238,765.71) as a prepetition secured claim, and Thirteen Thousand Eight Hundred Forty-two and 29/100 dollars ($13,842.29) as a prepetition unsecured priority claim. Included within the amounts listed in its proof of claim were all the prepetition penalties which had accrued on the Debtor's tax obligation with the IRS. The IRS, however, in its proof of claim, did not request the allowance of any postpetition interest that would become due on its claim.
Approximately one year after the Debtor's Bankruptcy Case was commenced, John Graham was appointed as the Debtor's Chapter 11 Trustee pursuant to 11 U.S.C. § 1104(a). While Trustee, Mr. Graham (hereinafter referred to as the Trustee) proposed a liquidating plan of reorganization for the Debtor. In this proposed Plan of Reorganization, the claim submitted by the IRS, against which the Trustee did not object, was classified according to its secured and unsecured components, and provided that each component would be left "unimpaired" under the Plan. In addition, according to the terms of the Debtor's Plan, all the claims against the Debtor's estate would be satisfied through the purchase of the Debtor's assets by a company named Facility Providers, Inc., with the agreed upon purchase price of the Debtor's assets essentially equaling the aggregate amount of all the claims that would be allowed against the Debtor's estate. On April 4, 1996, the Debtor's Liquidating Plan of Reorganization was confirmed by the Court without objection by the IRS.
Not long after confirming the Debtor's Plan of Reorganization, the Trustee, as disbursing agent, commenced making distributions on the claims allowed in Debtor's Plan. However, at this time, certain issues concerning the amount owed on the claim submitted by the IRS were raised. Specifically, the IRS asserted that it was statutorily entitled to postpetition and postconfirmation interest on its claim, and that such interest was continuing to accrue. As a consequence of this assertion, the Trustee, while attempting to resolve this matter, delayed payment to the IRS in contemplation of a resolution. However, with no imminent resolution forthcoming, the Trustee eventually disbursed to the IRS a total of One Hundred Ninety-seven Thousand Six Hundred Twenty-eight and 97/100 dollars ($197,628.97) on its claim, the amount of which excluded any prepetition penalties and postpetition interest which had accumulated on the proof of claim submitted by the IRS. The check sent to the IRS was then cashed.
On April 26, 1999, the Trustee filed a Motion to Confirm Distribution to the IRS. In response thereto, the IRS filed an Objection stating that, in addition to the money it has already received, it was also entitled to an additional Two Hundred Three Thousand Four Hundred Seventy-three and 14/100 dollars ($203,473.14) on the secured and priority portions of its claim on account of accruing interest. On this issue the IRS then filed a Motion for Summary Judgment in accordance with Bankruptcy Rule 7056.
Determinations concerning the administration of the debtor's bankruptcy estate, and the allowance or disallowance of claims against the estate are core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(A) & (B). Thus, this case is a core proceeding.
The primary and ultimate goal in any Chapter 11 case is for the debtor to formulate, and then have confirmed by the court, a viable plan of reorganization; a goal which was accomplished in this case on April 4, 1996, when this Court confirmed the Debtor's Liquidating Plan of Reorganization. See, e.g., In re Great American Pyramid Joint Venture, 144 B.R. 780, 788 (Bankr.W.D.Tenn.1992). A fundamental principle with regards to a confirmed Chapter 11 plan, which is really nothing more than a new contract between the parties, is that all the prior obligations and rights of the parties subject to the plan are extinguished and replaced by the terms of the Plan. In re Sugarhouse Realty, Inc., 192 B.R. 355, 362 (E.D.Pa.1996). Thus, once a Chapter 11 plan is confirmed, issues that could have been raised prior to confirmation cannot be revisited, and any dispute(s) between the Parties must be resolved by reference to the plan itself. Still v. Rossville Bank (In re Chattanooga Wholesale Antiques), 930 F.2d 458, 463 (6th Cir.1991) (). This principle is codified in § 1141(a) of the Bankruptcy Code which provides, in part, that, "the provisions of a confirmed plan bind the debtor ... and any creditor ... whether or not the claim or interest of such creditor ... is impaired under the plan and whether or not such creditor ... has accepted the plan."
In conformance with the Debtor's Chapter 11 Plan of Reorganization, the Trustee has requested that this Court confirm the One Hundred Ninety-seven Thousand Six Hundred Twenty-eight and 97/100 dollars ($197,628.97) in estate assets distributed to the IRS on the grounds that this distribution was in conformance with the Liquidating Plan of Reorganization formulated by the Trustee on behalf of the Debtor. The IRS, however, has objected thereto, and asserts, through its Amended Motion for Summary Judgment, that it is entitled to the following forms of relief with respect to the Trustee's distribution of estate assets on its claim.
First, with regards to the secured portion of its claim, the IRS seeks the prepetition penalties which had accrued on the Debtor's tax obligation, and which were listed in the IRS's amended proof of claim. Second, the IRS requests that the Trustee be required to pay to it all the postpetition interest that has accrued on the secured portion of its tax claim. Third, the Trustee also asks that the Trustee be required to pay to it any and all of the postconfirmation interest that has accrued on both the secured and unsecured portions its claim. With regards to the latter two requests, the IRS seeks such relief even though it did not request it through its amended proof of claim. Finally, the IRS seeks from the Trustee any other form(s) of relief which the Court would deem just and proper, including, but not limited to, an award of attorney fees.
In support of these requests, the IRS has set forth what are essentially three (3) different legal arguments. First, with regards to prepetition penalties, the IRS asserts that as such penalties are allowable as a part of a proof of claim, the failure of the Trustee to timely object to the claim submitted by the IRS now bars litigation of this matter. Second, in support of receiving postpetition interest on its secured claim, the IRS contends it is an oversecured creditor, and thus entitled to postpetition interest pursuant § 506(b) of the Bankruptcy Code. Finally, the IRS argues that it is entitled to both postpetition and postconfirmation interest on the basis that the Debtor's Plan of Reorganization provided that both the secured and unsecured portions of its claim would be left unimpaired. The Court will now address each of these legal arguments in order. However, based upon the binding nature of a confirmed Chapter 11 Plan, this Court's analysis, with respect to the legal arguments raised by the IRS, will, where appropriate, be strictly confined to addressing the relevant provisions contained in the Debtor's Chapter 11 Plan of Reorganization. In addition, as the IRS has sought relief by way of a Motion for Summary Judgment, the relief requested will only be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with 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...
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