In re Spinks

• Decision Date: 21 August 2018
• Docket Number: Number 17-41579-EJC
• Citation: 591 B.R. 113
• Parties: IN RE: William B. SPINKS, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Georgia

591 B.R. 113

IN RE: William B. SPINKS, Debtor.

Number 17-41579-EJC

United States Bankruptcy Court, S.D. Georgia, Savannah Division.

Signed August 21, 2018

Judson C. Hill, Gastin & Hill, Savannah, GA, for Debtor.

O. Byron Meredith, III, Savannah, GA, for Trustee.

OPINION ON OBJECTION OF ORLANDO A. MONTOYA TO CONFIRMATION OF PLAN

Edward J. Coleman, III, Chief Judge

Before the Court is the objection (dckt. 36) filed by pro se creditor Orlando A. Montoya ("Montoya") to confirmation of the Chapter 13 plain (dckt. 4) filed by William B. Spinks (the "Debtor"). This is the Debtor's second Chapter 13 case. In the Debtor's first case, filed on April 2, 2015, Montoya claimed priority treatment for unpaid wages pursuant to 11 U.S.C. § 507(a)(4), which requires such wages to have been earned within 180 days prior to the bankruptcy filing or to the debtor's cessation of operations. Before the Debtor completed payments under the plan, his 2015 case was dismissed on October 10, 2017. Ten days later, on October 20, 2017, the Debtor filed a second Chapter 13 case, in which Montoya was unable to claim priority treatment for the remaining unpaid wages because they were not earned within the 180-day "lookback" period. Montoya contends that this lookback period should be equitably tolled for the pendency of the Debtor's first bankruptcy case to allow his claim as a priority wage claim. For the reasons set forth below, the Court will overrule Montoya's objection.

I. JURISDICTION

This Court has subject-matter jurisdiction pursuant to 28 U.S.C. § 1334(a), 28 U.S.C. § 157(a), and the Standing Order of Reference signed by then Chief Judge Anthony A. Alaimo on July 13, 1984. This is a "core proceeding" within the meaning of 28 U.S.C. § 157(b)(1).

II. FINDINGS OF FACT

The facts in this case are not in dispute. From March 18, 2014, to January 8, 2015, Montoya worked for the Debtor as a tour guide.¹ When Montoya's employment ended, the Debtor owed him a total of $1,125.00 in unpaid wages for the months of October, November, and December of 2014.² Montoya sued the Debtor in magistrate court, but his collection efforts were interrupted when, on April 2, 2015, the Debtor filed a Chapter 13 petition (2015 dckt. 1), commencing Case No. 15-40495-MJK (the "first case"). On May 7, 2015, Montoya filed a proof of claim in the amount of $1,125.00, consisting of $1,072.50 for which he claimed priority treatment pursuant to 11 U.S.C. § 507(a)(4) and $52.50 in nonpriority wages.³ (2015 Claim 7-1).

The Court entered an order confirming the Debtor's Chapter 13 plan on January 8, 2016. (2015 Dckt. 62). On October 10, 2017, the first case was dismissed (2015 dckt. 90) because the Debtor defaulted⁴ under the terms of a consent order (2015 dckt. 87) entered on July 31, 2017.⁵ According to the Chapter 13 Standing Trustee's Final Report and Account (2015 dckt. 92), Montoya received a total of $199.36 in the Debtor's first case. Before Montoya could resume his state court remedies to collect the remaining $925.64, the Debtor filed a second Chapter 13 petition (dckt. 1) on October 20, 2017, commencing Case No. 17-41579-EJC (the "second case").⁶ That same day, the Debtor filed a Chapter 13 plan, pursuant to which all § 507 claims would be paid in full over the life of the plan. (Dckt. 4). The plan, however, does not treat Montoya's claim as a priority claim. As amended, the Debtor's plan proposes to pay general unsecured creditors with allowed claims a minimum total of $19,219.00, resulting in a dividend of approximately 75%. (Dckt. 45).

On December 1, 2017, Montoya filed a proof of claim in the second case in the amount of $925.64. (Claim 2-1). Attached to the proof of claim, which was filed on an outdated form, were a series of emails between Montoya and the Debtor, a document entitled "Disbursement History by Claim ID" listing the disbursements to Montoya in the first case, and a letter from Montoya to the Court. (Claim 2-1, pp. 3-11). Pursuant to a deficiency notice entered that same day, Montoya was directed to file an amended proof of claim on a current form. (Dckt. 25). On December 13, 2017, Montoya filed an amended proof of claim on Official Form 410. (Claim 2-2). Question 12 on this form asks whether all or part of the claim is entitled to priority under 11 U.S.C. § 507(a). Montoya, however, did not check the box for priority treatment because his unpaid wages were not earned within 180 days before the second case, and he did not want to make a false statement on the form under penalty of perjury.⁷

On February 9, 2018, Montoya filed the instant objection to confirmation (dckt. 36) on the basis that the Debtor's Chapter 13 plan "reduces [Montoya's] wage claim to a non-priority status for no reason other than the Debtor's failure to comply with this court's order in the 2015 bankruptcy and Debtor's subsequent filing of another bankruptcy in 2017." Id. at p. 2. Montoya requests that the Court equitably toll the 180-day lookback period of § 507(a)(4) to accord priority status to $873.14 of his wage claim. Id. At a continued confirmation hearing on March 27, 2018, the Court heard testimony and argument from Montoya. Laura Grifka, counsel for the Chapter 13 Trustee, stated that the Chapter 13 Trustee does not believe Montoya's claim is entitled to priority status. The Debtor's counsel represented that the Debtor would not object to Montoya's claim as a priority.

At the conclusion of the hearing, the Court took the matter under advisement.

On May 2, 2018, a consent order on confirmation, which contained the following provision, was entered:

The Objection Of Orlando A. Montoya to Confirmation of Plan, pro se creditor, as to the treatment of his timely filed claim, Court's Claim No. 2, is taken under advisement by the Judge for ruling. Said claim shall be treated and paid through the Chapter 13 Plan pursuant to the findings set forth in the Order of the Court. If necessary, the Plan payment shall increase to pay the claim per the Order.

(Dckt. 48, p. 1). On May 31, 2018, the Court entered an order confirming the Debtor's plan. (Dckt. 51).

III. CONCLUSIONS OF LAW

The sole issue before the Court is whether to equitably toll the 180-day lookback period of 11 U.S.C. § 507(a)(4). Section 507(a) of the Bankruptcy Code"sets forth 10 categories of claims that are entitled to be paid ahead of a debtor's general body of unsecured creditors." In re Norwalk Furniture Corp., 418 B.R. 631, 634 (Bankr. N.D. Ohio 2009). "These categories of priority claims reflect the Congressional determination that, while equality of distribution is a major goal of the Bankruptcy Code, certain categories of claims deserve to be paid over other claims." Id. Here, Montoya claims priority status, in the form of his objection to confirmation, pursuant to the fourth category of priority claims as set forth in § 507(a)(4), which provides in pertinent part:

(a) The following expenses and claims have priority in the following order:

...

(4) Fourth, allowed unsecured claims, but only to the extent of $12,850 for each individual or corporation, as the case may be, earned within 180 days before the date of the filing of the petition or the date of the cessation of the debtor's business, whichever occurs first, for-

(A) wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual ....

11 U.S.C. § 507(a)(4)(A). "Pursuant to section 507(a)(4), an employee generally ‘earns’ wages at the time that the services are performed or the entitlement to the benefits vests, regardless of when the payment is made." In re Golden Gate Cmty. Health , 577 B.R. 567, 570 (Bankr. N.D. Cal. 2017) (citing In re Idearc Inc. , 442 B.R. 513 (Bankr. N.D. Tex. 2010) ).

If Montoya's unpaid wages are entitled to priority status, then his claim must be paid in full over the life of the Debtor's Chapter 13 plan. See 11 U.S.C. § 1322(a)(2) ("[t]he plan ... shall provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title ..."). The problem for Montoya is that his unpaid wages were not earned within 180 days before October 20, 2017, the date the Debtor filed the petition in the second case.⁸ Thus, under the plain language of § 507(a)(4), Montoya's claim is not entitled to priority status.

As Montoya points out, however, the automatic stay provisions of 11 U.S.C. § 362(a) prohibited him from pursuing any collection efforts against the Debtor between the filing of the Debtor's petition in the first case on April 2, 2015, and the dismissal of that case on October 10, 2017.

Accordingly, Montoya requests that the Court equitably toll the 180-day lookback period for the pendency of the Debtor's first bankruptcy case. "The doctrine of equitable tolling applies to periods of limitation in appropriate circumstances. It permits a court to suspend the measuring period for a party to take action during the time the party was unable to act."⁹ Tidewater Fin. Co. v. Williams (In re Williams) , 333 B.R. 68 (Bankr. D. Md. 2005). In other words, Montoya contends that the period from April 2, 2015, through October 10, 2017, should not count against the 180-day lookback period. If the Court equitably tolls this period, then a portion of Montoya's wages, which were earned within 180 days before the first case, would still be entitled to priority status in the second case.

This appears to be a matter of first impression, as Montoya does not cite, and the Court has not found, any cases in which a bankruptcy court addressed the issue of equitable tolling in the context of the 180-day lookback period of a § 507(a)(4) wage claim.¹⁰ Numerous courts, however, have addressed equitable tolling in connection with priority tax claims under § 507(a)(8), and these cases may assist the Court in resolving the present issue. Thus, the Court will briefly survey the history of equitable tolling of priority tax claims.

Section 507(a)(8) provides in pertinent part:

(a) The following

...