In re Norris Grain Co.

Decision Date03 December 1987
Docket Number85-231-BK-J-GP and 85-232-BK-J-GP,Adv. No. 86-314.,No. 85-218-BK-J-GP,85-218-BK-J-GP
PartiesIn re NORRIS GRAIN COMPANY, Detroit HC, Inc., and Olympia Stadium Corporation, Debtors. NORRIS GRAIN COMPANY, Detroit HC, Inc., and Olympia Stadium Corporation, Plaintiffs, v. UNITED STATES of America, Defendant.
CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida

COPYRIGHT MATERIAL OMITTED

James H. Post, Jacksonville, Fla., for plaintiffs.

Richard F. Mitchell, Washington, D.C., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

GEORGE L. PROCTOR, Bankruptcy Judge.

On September 25, 1986, the debtors filed a complaint against the Internal Revenue Service of the United States of America (the "IRS") to determine the debtors' federal tax liability and for adjudication of objections to defendant's proofs of claims. On April 9, 1987, the IRS filed a motion for an enlargement of time in which to file a claim for 1985 income taxes. Pursuant to an order of this Court, the IRS motion was consolidated with this adversary proceeding for purposes of discovery and trial. A trial was held on October 7, 1987, and the Court having considered the evidence and the arguments, finds as follows:

Findings of Fact

1. On November 5, 1984, the debtors filed a consolidated income tax return for the year ending February, 1984, showing a total tax due of $391,533, which was paid by the debtors.

2. On March 25, 1985, Norris Grain Company ("NGC") filed a petition for reorganization under Chapter 11 of Title 11 of the United States Code.

3. On March 27, 1985, Detroit HC, Inc. ("Detroit HC") and Olympia Stadium Corporation ("Olympia") filed petitions for reorganization under Chapter 11.

4. On March 28, 1985, the debtors sent a notice of their Chapter 11 filings to the attention of the Special Procedures Unit of the IRS in Jacksonville, Florida. The Special Procedures Unit is a department of the IRS responsible for filing proofs of claim on behalf of the IRS in these Chapter 11 cases.

5. On April 3, 1985, this Court established July 23, 1985, as the bar date for filing claims against NGC and July 25, 1985, as the bar date for filing claims against Detroit HC and Olympia.

6. In April, 1985, the IRS received notice of the bar dates.

7. On May 1, 1985, the debtors filed an application for an extension of time until November 15, 1985, for filing their consolidated income tax return for the year ending February 1985. In the application, the debtors listed the tentative amount of tax due as zero. In reliance upon the application, the IRS did not file a claim prior to the bar date with respect to the debtors' 1985 income taxes.

8. On May 14, 1985, the debtors, after having their 1984 income tax return reviewed by their tax attorneys, filed an amended 1984 income tax return with the IRS Service Center in Atlanta, Georgia. The amended 1984 return indicated an unpaid tax liability in the amount of $1,690,026. The debtors also forwarded a copy of the amended 1984 return to the Special Procedures Unit in Jacksonville, Florida.

9. On May 31, 1985, the IRS filed Claim No. 2 in the case of NGC, Case No. 85-218-BK-J-GP, in the amount of $365.75 for interest which arose upon the debtors' failure to timely pay the 1984 income taxes reported in its original 1984 return. The IRS did not conduct any further examinations prior to the bar date regarding the need to file additional proofs of claim in the NGC case.

10. On July 12, 1985, the IRS filed Claim No. 8A in the estimated amount of $1,155.63 in the case of Olympia, Case No. 85-232-BK-J-GP. This claim was later withdrawn by the IRS.

11. On July 29, 1985, the IRS filed Claim No. 2 in the estimated amount of $165,732.49 in the case of Detroit HC, Case No. 85-231-BK-J-GP. The same claim was also docketed as Claim No. 14 in the case of NGC, Case No. 85-218BK-J-GP. The IRS stated at trial that both of these claims had been withdrawn.

12. On November 14, 1985, the debtors filed their consolidated income tax return for the year ending February, 1985, showing a total tax due of $573,038.

13. On November 26, 1985, the IRS, relying upon the debtors' 1985 income tax return, filed Claim No. 18 in the case of NGC, Case No. 85-218-BK-J-GP, asserting a claim in the amount of $573,038 for 1985 income taxes.

14. On December 19, 1985, six months after the bar date, the IRS, relying upon the debtors' 1984 amended income tax return, filed Claim No. 20 in the case of NGC, Case No. 85-218-BK-J-GP, asserting a claim in the amount of $1,690,026 for unpaid 1984 income taxes. This claim, which was based upon the debtors' 1984 amended income tax return filed over seven months earlier, was the first in which the IRS asserted a claim for 1984 income taxes.

15. On January 15, 1986, the debtors filed a second amended 1984 income tax return which reduced its tax liability to $1,673,458. The debtors mailed a copy of the second amended 1984 return to the Special Procedures Unit in Jacksonville, Florida.

16. On July 16, 1986, the debtors' Second Amended Consolidated Plan of Reorganization (the "Plan") was confirmed. The Plan provided for the full payment of all allowed claims. The debtors have paid all allowed claims in full except those creditors, such as retirees, who were to be paid over an extended period of time.

17. On August 15, 1986, the debtors filed objections to the proofs of claim filed by the IRS.

18. On September 25, 1986, the debtors filed a complaint to determine their federal tax liability and their objections to the IRS claims on the grounds that the claims were untimely.

19. On April 19, 1987, the IRS filed a motion for an enlargement of time in which to file a claim for 1985 income taxes.

Conclusions of Law

1. The bar date for filing proofs of claim in Chapter 11 cases is a mechanism intended by Congress to provide the debtor and its creditors with "finality." See e.g., In re Chicago Rock Island and Pacific RR Co., 788 F.2d 1280 (7th Cir.1986); and Hoos & Co. v. Dynamics Corp. of America, 570 F.2d 433, 439 (2d Cir.1978). For this reason, courts look upon the bar date as being:

in the nature of a statute of limitations which must be strictly observed.

In re Kay Homes Inc., 57 B.R. 967, 971 (Bkrtcy.S.D.Tex.1986).

The congressional goal of finality precludes the Bankruptcy Courts from "finding exceptions to these rules in the supposed interest of equity." Hoos & Co., 570 F.2d at 439; See also, In re Piqott, 684 F.2d 239, 243 (3rd Cir.1982); In re Evanston Motor Co., Inc., 26 B.R. 998, 1005 (N.D.Ill.1983), aff'd, 735 F.2d 1029 (7th Cir. 1984). Thus, although aware that a bar date, like other limitation periods, would inevitably cause hardship on those who failed to act timely, Congress decided that the goal of finality is of greater benefit to the public than any benefit derived from allowing individual exceptions to the bar date. Hoos & Co., 570 F.2d at 439; In re Stern, 70 B.R. 472, 476 (Bkrtcy.E.D.Pa. 1987).

2. Nevertheless, amendment to a claim is often allowed where the purpose is to cure a defect in the claim as originally filed, to describe the claim with greater particularity or to plead a new theory of recovery on the facts set forth in the original claim. See, Szatkowski v. Meade Toole & Die Co., 164 F.2d 228, 230 (6th Cir.1947); In re G.L. Miller & Co., 45 F.2d 115 (2d Cir.1930). However, the courts must still subject such amendments to a careful inspection. Says the Eleventh Circuit:

Courts must subject post bar date amendments to careful scrutiny to assure that there is no attempt to file a new claim under the guise of amendment.

In re International Horizons, 751 F.2d 1213 (11th Cir.1985).

3. Under the traditional analysis, the factor most often considered is whether the "amended" claim arose out of the same transaction or occurrence set forth in the original timely filed claim. See, In re AM International, Inc., 67 B.R. 79,82 (N.D.Ill. 1986); In re Hunt, 59 B.R. 718 (Bkrtcy.D. Me.1986); In re Sapienza, 27 B.R. 526 (Bkrtcy.W.D.N.Y.1983); and In re Overly Hautz Co., 57 B.R. 932, 936 (Bkrtcy.N.D. Ohio 1986). Other courts have expanded this notion and have allowed amendments to tax claims where the tax claims were of the "same genre" as the original claims or where the original and amended claims were both "within the matrix of an indebtedness due the federal government in their revenue collection function." See, Menick v. Hoffman, 205 F.2d 365 (9th Cir.1953); In re Emerald Green Corp., 2 B.C.D. 938 (Bkrtcy.E.D.N.Y.1976); In re Midwest Teleproductions Co., Inc., 69 B.R. 675 (Bkrtcy.N.D.Ohio 1987).

4. Applying the traditional test to the case at bar, it is quite clear that the amended claim for $1,690,026 in income taxes is substantially different than the $365.75 claim for interest based upon the debtors' late payment of $391,533 of 1984 income taxes. One claim is for accrued interest while the other asserts a claim for unpaid corporate income taxes. Indeed, it is also worth noting that a taxpayer's liability for interest on late payment of income taxes and a taxpayer's liability for unpaid taxes arise out of separate statutory provisions of the Internal Revenue Code.1 Upon this premise, the Court finds that the amended claim does not arise out of the same transaction as the original claim and is in fact an assertion of a new claim.

5. The government has argued that this Court ought to apply the more liberal standard espoused in cases such as In re Miss Glamour Coat Co., 80-2 USTC ¶ 9737 (S.D.N.Y.1980), where the court suggested that a "balancing of the equities test" ought to be applied to allow a post-bar date amendment. Under that test, the factors which the Court would look to are:

(1) whether the debtor and creditors relied upon the IRS\'s earlier proofs of claim or whether they had reason to know that subsequent proofs of claim would follow;
(2) whether the other creditors would receive a windfall to which they are not entitled on the merits by
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