In re Tri-Manufacturing and Sales Co.
Decision Date | 26 January 1988 |
Docket Number | Bankruptcy No. 1-85-00400. |
Citation | 82 BR 58 |
Parties | In re TRI-MANUFACTURING AND SALES CO., Debtor. STATE OF OHIO, BUREAU OF WORKERS' COMPENSATION, Claimant, v. TRI-MANUFACTURING AND SALES CO., Objector. |
Court | U.S. Bankruptcy Court — Southern District of Ohio |
Paul A. Nemann, Cincinnati, Ohio, for debtor/objector.
Randal C. Berning, Columbus, Ohio, for claimant.
DECISION and ORDER ON OBJECTION TO CLAIM
Claimant, State of Ohio, Bureau of Workers' Compensation, filed three proofs of claim in the present Chapter 11 case. The claims are for pre-petition unpaid workers' compensation premiums. The parties have settled all issues, including agreeing on an amount of $14,064.10 for Claim No. 97, except for a single issue which is here presented. That issue is whether claimant is entitled to have Claim No. 97 treated as a priority claim pursuant to § 507(a)(7)(E). That priority extends to excise taxes. The question is whether the claim in question is entitled to treatment as an excise tax, or simply as an unsecured claim without priority.
The Bankruptcy Act of 1898 provided at § 64(a)(4) a priority for "taxes which became legally due and owing by the bankrupt to the United States or to any State or any subdivision thereof which are not released by a discharge in bankruptcy ...". In In re Pan American Paper Mills, Inc., 618 F.2d 159 (1st Cir.1980), the court held that unpaid premiums assessed under the workers' compensation law of Puerto Rico were entitled to priority under § 64(a)(4). The court found such premiums to be taxes by reasoning that the word "taxes" within the meaning of § 64(a)(4) (at p. 162) "extends to those pecuniary obligations laid upon individuals or their property, regardless of their consent, for the purpose of defraying the expenses of government or of undertakings authorized by it." This conclusion was derived from City of New York v. Feiring, 313 U.S. 283, 285, 61 S.Ct. 1028, 1029, 85 L.Ed. 1333 (1941). The court found (at p. 162) that workers' compensation premiums were "pecuniary obligations imposed by the government for the purpose of defraying the expenses of an undertaking which it authorized", and were therefore to be treated as taxes.
In In re Mansfield Tire and Rubber Co., 660 F.2d 1108 (6th Cir.1981), a case decided under the Bankruptcy Code which primarily dealt with the application of the automatic stay provision, 11 U.S.C. § 362, the Sixth Circuit made the somewhat ambiguous observation that claims for unpaid premiums against the bankrupt employers are entitled to priority under § 64(a)(4) of the Bankruptcy Act of 1898, relying upon In re Pan American Paper Mills, Inc., supra. The reason that the observation is ambiguous is that the court in Mansfield appeared to be discussing the state of the law under the Bankruptcy Code, and it is reasonable to believe that the court in Mansfield was accepting for Bankruptcy Code purposes the holding of Pan American Paper Mills. At the same time, one cannot be certain that the court in Mansfield meant so to hold definitively because that was not the primary thrust of the case.
The question is troublesome because the priority statute under the Bankruptcy Code, § 507, differs from that under the Bankruptcy Act of 1898, § 64. The Bankruptcy Code speaks about priority of taxes at § 507(a)(7) as follows:
To continue reading
Request your trial