In re Vlavianos
| Decision Date | 25 November 1986 |
| Docket Number | Bankruptcy No. 683-00416-C,Adv. No. 686-0054. |
| Citation | 71 BR 789 |
| Parties | In re Margarita P. VLAVIANOS, Debtor. UNITED STATES of America INTERNAL REVENUE SERVICE, Plaintiff, v. Margarita P. VLAVIANOS and Helen P. Parrish, Trustee, Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Virginia |
Jennie L. Montgomery, U.S. Atty., Roanoke, Va., Gerard J. Mene, Trial Atty., U.S. Dept. of Justice, Washington, D.C., for plaintiff.
Leroy R. Hamlett, Jr., Charlottesville, Va., for debtor/defendant.
Helen P. Parrish, Charlottesville, Va., Trustee.
Before the court is the complaint of the United States, on behalf of the Internal Revenue Service ("IRS"), requesting principally that the court declare nondischargeable under 11 U.S.C. § 1328(a) a portion of the IRS's tax claim, as reflected in its amended proof of claim, that was not paid under the confirmed Chapter 13 plan of the debtor, Margarita P. Vlavianos (the "debtor"). The portion of the tax claim that the IRS seeks to have declared nondischargeable was not paid because the amended proof of claim asserting that amount was not filed by the IRS until after all payments under the debtor's plan had been completed. Also before the court is the debtor's objection to the IRS's amended proof of claim.
The facts precipitating this controversy are, for purposes of the resolution of this case, largely undisputed. In 1979, about four years before the debtor filed her Chapter 13 petition, the Criminal Investigation Division of the IRS conducted an audit examination of the debtor and her husband to determine whether they had understated their income on their 1975 and 1976 federal income tax returns. The investigation revealed that the debtor had inherited a substantial sum of cash, located in a safe deposit box, from her mother, Smaro Papadopulos, who died in 1970. The debtor was the personal representative and sole legatee of her mother's estate. In August 1979, after determining that the debtor and her husband had properly reported their income for the years in question and after ensuring that the debtor would file an estate tax return for her mother's estate, the IRS closed its criminal investigation.
The precise amount of cash inherited by the debtor is unclear. According to the IRS agent who conducted the criminal investigation, the debtor had indicated to him that the safe deposit box had held $150,000, contained in 15 envelopes holding $10,000 each. Tr. of September 8, 1986 ("Tr.") at 15, 21. According to the debtor on the other hand, the cash totaled only $97,853. Tr. of 62, 65. However, on January 7, 1980 the debtor, as personal representative of her mother's estate, filed a federal estate tax return, indicating that the gross estate was $150,000 and that a tentative tax of $17,255 was owed. Government Exhibit 11. Subsequently, on November 3, 1982, the debtor filed a second federal estate tax return, this time stating that there was a gross estate of only $90,000 and that the tax due was $2,874.00. Government Exhibit 8.
On May 13, 1983, after much correspondence between the IRS and the debtor and her attorney concerning the estate tax liability, the IRS issued a "Past Due Final Notice", informing the debtor as personal representative of the estate that the tax liability totaled $5,973.57 and demanding payment of that amount within 10 days from the date of the notice. Exactly 10 days later, on May 23, 1983, the debtor filed an individual petition under Chapter 13 of the Bankruptcy Code. In the schedules accompanying the petition, the debtor listed the IRS as a creditor holding a claim in the amount of $5,973.57 and characterized the claim as an "Estate tax for Estate of Smaro Papadopulos". The mailing address of the IRS was also provided. Thus, the debtor was treating the IRS as a creditor by reason of her personal liability, arising pursuant to 26 U.S.C. § 6324(a)(2) (1982) of the Internal Revenue Code, for the failure of her mother's estate to pay the estate tax when due.
In a letter dated May 26, 1983, three days after the filing date of the debtor's petition, the IRS advised the debtor that the gross estate should be $150,000, rather than $90,000, and proposed a deficiency in estate tax against the estate of the debtor's mother of $14,381, which represented the tax due on the $60,000 difference. The IRS, however, did not file a proof of claim in the debtor's bankruptcy proceeding for any of the estate tax deficiency before the deadline for filing proofs of claim fixed by the court in the § 341 notice sent to creditors.
On February 13, 1984, the debtor filed a proof of claim on behalf of the IRS as permitted by the Bankruptcy Rules, asserting a priority claim in the amount of $5,973.57, the sum demanded by the IRS in the "Past Due Final Notice" sent to the debtor immediately before the filing of her petition and set forth in her bankruptcy schedules as the claim of the IRS.
The Chapter 13 trustee issued a supplemental report on filed claims on February 27, 1984, stating that the proof of claim of the IRS had been filed. The trustee's report contained the mailing address of the IRS; the same identification number used on the two federal estate tax returns filed by the debtor, followed by the words, "Estate of Smaro Papadoupulos sic"; and the statement that the claim was "for prepetition estate tax due in 1970. . . ." A copy of this report was mailed to the IRS on February 27, 1984.
No creditor objected to the confirmation of the debtor's plan, which the court confirmed in an order dated July 23, 1983. The debtor's plan proposed to make all priority payments required under 11 U.S.C. § 507, and to pay secured creditors and certain unsecured creditors outside of the plan. The plan contemplated a 100 percent payout on all claims. In the order confirming the debtor's plan, the court recited, among other things, that the debtor's plan had been found to comply with the requirements of 11 U.S.C. § 1322, had been filed in good faith as required under 11 U.S.C. § 1325(a)(3), and had been found to comply with the provisions of Chapter 13.
Eventually, the debtor completed all payments under her plan, enabling the Chapter 13 trustee to pay out all claims in full, including the IRS claim of $5,973.57. On June 20, 1986 the debtor filed an application for her Chapter 13 discharge, stating that she had completed all payments under her Chapter 13 plan.
On July 23, 1983, over a month after all payments under the debtor's plan had been completed and nearly 29 months after the original IRS proof of claim had been filed, the IRS filed an amended proof of claim, increasing its priority claim against the debtor to $34,985.73 for the estate taxes, accrued interest and penalty it asserted were owed by the debtor as of the filing date of her petition. The debtor objected to the IRS's amended claim on August 7, 1986, and on August 20, 1986 the IRS filed its complaint against the debtor, resulting in this proceeding.
The IRS essentially makes three alternative requests for relief: (1) that the court declare the unpaid portion of its claim, as reflected in its amended proof of claim, nondischargeable under 11 U.S.C. § 1328(a); (2) that the court deny the debtor her Chapter 13 discharge or, alternatively, dismiss her Chapter 13 petition because, the IRS contends, the debtor filed her petition in bad faith and is seeking a discharge in bad faith; or (3) that the court otherwise "fashion appropriate equitable relief" in this case. The court addresses each request in turn.
The IRS first seeks a determination that the unpaid balance of its claim against the debtor is nondischargeable. Section 1328(a) of the Code outlines the scope of a discharge is Chapter 13 cases. In pertinent part that statute provides that:
11 U.S.C. § 1328(a). Tax claims do not fall under either of the two classes of nondischargeable claims. In re Richards, 50 B.R. 339, 341 (E.D.Tenn.1985); In re Goodwin, 58 B.R. 75, 76-77 (Bankr.D.Me.1986).
The language of § 1328(a) unambiguously establishes that, in order for a claim to be discharged, the claim must either be "provided by the plan" or "disallowed under § 502" of the Code. For a plan to "provide for" a claim within the meaning of § 1328(a), the plan must "make a provision for" the claim; that is, "deal with it or refer to it." Matter of Gregory, 705 F.2d 1118, 1122 (9th Cir.1983).
An examination of the debtor's Chapter 13 plan in the present case satisfies the court that the plan "provided for" the payment of the IRS's claim within the meaning of § 1328(a). The debtor's plan expressly stated that, from the debtor's payments into the plan, "the trustee shall make distributions as follows: (a) the priority payments required by 11 U.S.C. § 507 . . . ." Indeed, for the debtor's Chapter 13 plan to have been confirmed by the court, her plan had to provide for the payment of the priority claims of § 507 in full in deferred cash payments, unless the holder of a particular claim agreed otherwise. 11 U.S.C. §§ 1322(a)(2), 1325(a)(1). The debtor's plan therefore must be read as providing for full payment of all claims entitled to priority. Since in the present case the claim of the IRS was originally filed as a priority claim and no party in interest objected,1 the IRS's claim was entitled to treatment as a priority claim under § 507. See 11 U.S.C. § 502(a) (...
To continue reading
Request your trial
- In re Sudler
-
In re Moss, Bankruptcy No. LAX 85-54461-AA.
...705 F.2d 1118, 1122 n. 5 (9th Cir.1983) (plan amendment made after all payments were completed was unauthorized); In re Vlavianos, 71 BR 789, 793 (W.D.Va.1986) (debtor cannot amend plan after all payments have been made). See also GAF Corp. v. Milstein, 453 F.2d, 709 (2d Cir.1971) (quoting ......