In re Owens
| Decision Date | 05 January 1987 |
| Docket Number | Bankruptcy No. 85-00882K. |
| Citation | 67 BR 418 |
| Parties | In re Howard E. OWENS Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
David Sambolin, Philadelphia, Pa., for debtor.
Roger M. Olsen, Asst. Atty. Gen., Edward C. Snyder, Chief, Civil Trial Section, Central Region, Karen Elias, Tax Div., U.S. Dept. of Justice, Washington, D.C., Virginia Powel, Asst. U.S. Atty., Philadelphia, Pa., for U.S.
James J. O'Connell, Philadelphia, Pa., Chapter 13 Standing Trustee.
In this case, we must examine two (2) issues. The first, relating to our local Motion practices, addresses the circumstances under which we will allow a party, in particular the Internal Revenue Service ("IRS"), to move for reconsideration of an Order of this Court disallowing its "Amended Claim" after a Certification that the matter was not contested. The second concerns the "merits" of the controversy: whether we will allow the IRS to file the aforesaid "Amended Claim," for what we believe is a post-petition tax claim, several months after the bar date. Somewhat reluctantly, we will grant the IRS' Motion to Reconsider this Court's earlier Order, especially as the Order may be read as disallowing all claims of the IRS in their entirety. However, ruling on the merits of the Debtor's Objection, we will order that all but $487.45 of the "Amended Claim" must be disallowed due to the IRS' untimely filing of same.
This case was filed under Chapter 13 of the Bankruptcy Code on March 11, 1985. Listed by the Debtor among his priority claims was an obligation of $4,944.64 to the IRS for "delinquent taxes." The Plan divulges no indication of how the Debtor intended to provide for payment of this obligation.
On March 19, 1985, the Trustee dispatched Notice that the meeting required by 11 U.S.C. § 341(a) was scheduled on April 15, 1985, to all interested parties, among which was the IRS. Included in the Notice was warning that the bar date for filing claims was July 15, 1985.
On June 3, 1985, the IRS filed a Proof of Claim for a priority debt in the amount of $487.45 arising from an alleged federal income tax delinquency for the 1983 tax year. According to the Debtor, the IRS also forwarded a "Notice of Deficiency" to the Debtor in reference to his 1981 federal income taxes on June 6, 1985.1 At that time, however, it must be noted that the Debtor had not yet filed his 1981 federal income tax return, and he did not do so until August 1, 1985.
Meanwhile, on May 28, 1985, the Trustee filed a Motion to Dismiss the Bankruptcy case, apparently due to a "feasibility" problem arising from the failure of the Debtor's Plan to provide for payment of all filed secured claims. This Motion was continued several times while the Debtor has proceeded to institute two (2) separate adversarial proceedings, at Adversary No. 85-0994K against the first mortgagee on his residence, Germantown Savings Bank, and at No. 86-0191K against a second mortgagee, Beneficial Consumer Discount Company to reduce these claims. He also filed a Motion to Avoid a Judgment Lien of Episcopal Hospital. The Judgment Lien was avoided by Order of this Court of January 2, 1986. The matter with Beneficial Consumer Discount Company was resolved by a Stipulation reducing the amount of this claim. The Court recently entered an Order setting down the matter involving Germantown Savings Bank, for disposition on December 17, 1986.
On January 24, 1986, the IRS added another serious problem to those already confronting the Debtor by filing the Proof of Claim in issue, in the amount of $8,277.51, arising from alleged federal income tax delinquencies in both the 1981 and 1983 tax years. The difference from the earlier IRS proof of claim is attributable to priority claims of $4,108.45 for taxes due, $1,038.23 for interest, and a $1,657.38 increment in an unsecured claim for penalties allegedly arising from the Debtor\'s 1981 federal income tax return.
On May 21, 1986, the Debtor filed a "Motion . . . Objecting to Allowance of Internal Revenue Service Claim # 9," in which he contended that the Proof of Claim filed by the IRS was violative of the automatic stay2 and was filed "without first making a motion for cause shown to extend the time for filing of a claim by the United States." Although an Order Requiring Answer per Local Rule 9014.1(b)(2) and Local Bankruptcy Form 9014.1A was executed by Chief Judge Emil F. Goldhaber on May 27, 1986, a second Order Requiring Answer was, for some unknown reason, resubmitted to Judge Thomas M. Twardowski, who signed same on June 26, 1986. The Order states, in pertinent part, as follows:
it is ORDERED that all interested persons are required to serve upon movant\'s attorney, whose answer is set forth below and file with the Clerk, an Answer to the Motion . . . within 20 days after service of this Order, exclusive of the date of service. If no answer is filed, an order may be entered granting the relief demanded in the motion.
Accompanying the Motion was the Notice of Hearing to Consider Motion form per Local Rule 9014.1(b)(3)(i) and Local Bankruptcy Form 9014.1B, which stated that a hearing was scheduled on the Motion on August 13, 1986.
The Debtor's Counsel certified that he served the Motion Objecting to the IRS Claim, the above Order Requiring Answer, the Notice of Hearing to Consider Motion, and the other papers required by Local Rule 9014.1(b) to the IRS and the local United States Attorney's Office on July 14, 1986.3 After waiting twenty-four (24) days and not having received a response, the Debtor's Counsel, in accordance with the pertinent Local Rule 9014.1(i), certified the matter as uncontested. On August 8, 1986, Chief Judge Emil F. Goldhaber signed an Order disallowing the IRS claim of $8,277.51 in its entirety. Copies of this Order were sent to both the local IRS Office and the local United States Attorney's Office.
As it developed, a document entitled as an "Opposition" to the Debtor's Motion was allegedly sent by the IRS on August 5, 1986, and arrived and was filed in the Clerk's Office on August 11, 1986. There is no indication that anyone appeared at the scheduled hearing on August 13, 1986.
On August 18, 1986, the IRS filed a Motion for Reconsideration, contending, as its sole ground, that the Opposition to the Debtor's Motion "was served on August 5, 1986, and that the claim was disallowed prior to the hearing scheduled for August 13, 1986, in the above-captioned case," presumably thereby suggesting that Judge Goldhaber erred by prematurely entering the August 8, 1986, Order.
According to the Debtor's Counsel, he received no notice that the IRS had filed any pleadings opposing his Motion until August 28, 1986, when he received a copy of the IRS' Motion for Reconsideration. The "Opposition" to the Motion was not sent to the Debtor's Counsel until early September, due to the fact that the IRS admittedly misaddressed the envelope in which this document was sent to opposing Counsel.
Given this history, it was nothing short of miraculous that Counsel for the Debtor and the IRS both appeared before us on September 18, 1986, the date of the scheduled hearing on the Motion for Reconsideration. After hearing argument, the Court requested the IRS and the Debtor to submit Briefs on both the issue of whether the Court should reconsider the Order of August 8, 1986, and the merits of the issue of whether the IRS' claim should be dismissed as untimely, such filings to be made on October 8, 1986, and October 28, 1986, respectively.
The Court, admittedly with reluctance due to the series of negligent acts by the IRS in litigation of this matter, has decided to grant the IRS' Motion to Reconsider Judge Goldhaber's Order of August 8, 1986. We must note that we totally reject the apparent argument of the IRS that its response to the Motion was timely simply because it was made prior to the August 13, 1986, hearing date. The papers generated by defense counsel and the Court per Local Rule 9014.1 should make it eminently clear to any learned individual, let alone an attorney, that an answer must be filed with the Court and served upon opposing counsel within twenty (20) days of service, or relief may be granted.4 We do not agree that a mailing of an answer to the Court on August 5, 1986, which mysteriously arrives six (6) days later, or sending a misaddressed missive to the Debtor's Counsel which arrives almost a month later, constitutes either service or filing on or before August 6, 1986, which, by our calculation, was the last date for doing so in timely fashion, even applying Bankruptcy Rule 9006(f) in such fashion as to give the IRS an extra three (3) days beyond the twenty (20) days cited on the Order Requiring Answer.
Further, we note that the IRS did not appear at the scheduled hearing on August 13, 1986. In order not to permit our local Motion practice to be a trap for the unwary, the Court is inclined to entertain a response by any party who appears at a pre-scheduled hearing to defend a Motion, even if no written response has been filed. If an accurate certification that no response has been made is filed prior to the hearing date, and an Order has already been entered, and a party and/or counsel appear at the scheduled hearing, we would normally request counsel for a represented party to file a Motion for Reconsideration per Bankruptcy Rule 9023 and Federal Rule of Civil Procedure (F.R.Civ.P.) 59(e), and allow an unrepresented party to orally move for Reconsideration. However, the IRS is a frequent litigant in our Court, and we do not consider it "unwary." We also note that the IRS is usually capably represented in our Court by Assistant United States Attorney Virginia Powel, who is extremely aware of, and vigilant in complying with, our Local Rules; and whose office is located only a few steps from our Clerk's Office and our Courtroom on the same floor of the ...
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