MATTER OF BEST REFRIGERATED EXPRESS, INC.

• Decision Date: 31 January 1996
• Docket Number: Bankruptcy No. BK89-80169.
• Parties: In the Matter of BEST REFRIGERATED EXPRESS, INC., Debtor.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Nebraska

192 B.R. 503 (1996)

In the Matter of BEST REFRIGERATED EXPRESS, INC., Debtor.

Bankruptcy No. BK89-80169.

United States Bankruptcy Court, D. Nebraska.

January 31, 1996.

Robert Yates, Omaha, NE, for trustee.

Denise Dengler, Des Moines, IA, for Iowa Dept. of Rev.

James Woodruff, Omaha, NE, for Nebraska Dept. of Rev.

John Leed, pro se.

Paul Potadle, Lincoln, NE, for Neb. Motor Vehicles.

MEMORANDUM

TIMOTHY J. MAHONEY, Chief Judge.

Hearing was held on Trustee's Motion to Disallow Tax Claims; Objection by Department of Motor Vehicles, State of Nebraska; Objection by John Leed; Resistance by State of Nebraska, Department of Revenue; Opposition by Iowa Department of Revenue and Finance. Appearances: Robert Yates, Attorney for trustee; Denise Dengler, Attorney for Iowa Department of Revenue; James Woodruff, Attorney for Nebraska Department of Revenue; John Leed, pro se; Paul Potadle, Attorney for Nebraska Motor Vehicles. This memorandum contains findings of fact and conclusions of law required by Fed. Bankr.R. 7052 and Fed.R.Civ.P. 52. This is a core proceeding as defined by 28 U.S.C. § 157(b)(2)(B).

Background

The debtor, Best Refrigerated Express, Inc., an interstate trucking company, filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code on February 7, 1989. In December of 1989, the debtor began to wind-down its operations, and ceased operations in February of 1990. A Chapter 11 trustee (trustee) was appointed in February, 1990, to liquidate the debtor. A Chapter 11 liquidating plan was confirmed on June 1, 1995. The confirmed plan will pay in full allowed administrative expenses, including allowed administrative expense claims for taxes, while general unsecured creditors will only receive a small dividend.

On July 5, 1995, the trustee moved to disallow certain administrative expense claims filed by the Nebraska Department of Revenue (Nebraska) and the Iowa Department of Finance and Revenue (Iowa) hereinafter, Nebraska and Iowa shall be referred to collectively as the "tax authorities". The trustee is challenging Nebraska's claims numbered 147 and 156, which relate to withholding taxes and fuel taxes, and Iowa's claims numbered 154 and 155, which relate to sales taxes and fuel taxes. All four disputed claims arose post petition.

The parties do not dispute the amount of principal due on the original post-petition priority tax claims, with one exception. Nebraska filed an amended proof of claim to original claim number 156 for post-petition fuel taxes. Nebraska filed a motion to amend the proof of claim on October 30, 1995, which was after June 1, 1995, the bar date for filing a proof of claim for administrative priority expense claims.

A breakdown of each of the proof of claims at issue in this dispute is as follows:

                Claim No.         Principal         Penalty        Interest*      Date Filed
                147 (NE)          1468.16           293.63         59.13               08/14/90
                154 (IA)          2211.61           331.74        139.30               09/4/90
                155 (IA)          4000.00           300.00        189.00               09/4/90
                156 (NE)          2688.00           268.80        123.65               10/1/90
                Amended 156      5,368.79           536.88      3,905.23              10/13/95
                

Issues

(1) Should amended claim number 156 be disallowed because the amendment was filed five years after the original claim was filed and after the claims bar date for filing administrative claims expired?

(2) Should the court equitably subordinate the accrued post-petition penalty amounts to the benefit of general unsecured creditors pursuant to 11 U.S.C. § 510(c)(1)?

(3) Are the interest portions of the post-petition tax claims entitled to priority status under 11 U.S.C. § 503(b)(1)(B) or should such amounts be treated as general unsecured claims?

Decision

(1) Nebraska's amended proof of claim number 156 is allowed.

(2) The penalties accrued on the post-petition tax liabilities of the tax authorities shall be subordinated under 11 U.S.C. § 510(c)(1) to the general unsecured claims.

(3) The interest accrued on post-petition tax liabilities of the tax authorities is allowed as an administrative expense priority claim under 11 U.S.C. § 503(b)(1).

Discussion

A. Allowance of Amended Proof of Claim of Nebraska

1. Legal Authority

The trustee has challenged the proposed amendment to claim number 156 as untimely and because the claim is being amended nearly five years after the original claim was filed. Generally, the rule in the Eighth Circuit is that creditors may file amendments to proofs of claims after the expiration of the claims bar date. In re Donovan Wire & Iron Co., 822 F.2d 38 (8th Cir.1987); In re K & L, Inc., Neb.Bkr. 92:174, 175 (Bankr.D.Neb.1992) ("An amendment to a proof of claim will relate back and be effective as of the date of the original proof of claim."); In re Carr, 134 B.R. 370 (Bankr.D.Neb.1991) ("The amended proof of claim constitutes prima facie evidence of the claim under Bankruptcy Rule 3001(f)."). In Donovan, the Eighth Circuit opined that the rule concerning amending a proof of claim is a liberal one: "The courts should be liberal in awarding amendments . . . at any stage in the proceedings as justice may require." 822 F.2d at 39 (quoting In re Faulkner, 161 F. 900, 903 (8th Cir.1908) (quotation omitted)); accord United States v. Berger (In re Tanaka Bros. Farms, Inc.), 36 F.3d 996, 998 (10th Cir.1994); Holstein v. Brill, 987 F.2d 1268, 1270 (7th Cir.1993); Roberts Farms Inc. v. Bultman (In re Roberts Farms Inc.), 980 F.2d 1248, 1251 (9th Cir.1992); United States v. Kolstad, 928 F.2d 171, 175 (5th Cir.), reh'g denied, 936 F.2d 571, cert. denied, Kolstad v. Internal Revenue Serv., 502 U.S. 958, 112 S.Ct. 419, 116 L.Ed.2d 439 (1991); In re Stavriotis, 977 F.2d 1202, 1204 (7th Cir.1992).

In Chapter 11 cases, the Supreme Court has already determined that "excusable neglect" under Bankruptcy Rule 9006(b) governs motions to enlarge time periods after the expiration of a bar date in a Chapter 11 case. See Pioneer Inv. Servs. v. Brunswick Assoc. Ltd. Partnership, 507 U.S. 380, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993); FED. R.BANKR.P. 9006(b). Bankruptcy Rule 9006(b)(1) states that the bankruptcy court, for cause shown, may enlarge a period of time when a motion is made after the expiration of a bar date if the failure to act was due to "excusable neglect." In Pioneer, the Supreme Court held that neglect can pertain to situations of inadvertence, mistake and carelessness, as well as circumstances beyond the control of the creditor, and held that the factors to consider to determine whether the neglect is excusable are the following:

1. The danger of prejudice to the debtor;

2. The length of the delay and its potential impact on judicial proceedings;

3. The reason for the delay, including whether it was within the reasonable control of the movant;

4. Whether the movant acted in good faith.

Pioneer, 507 U.S. at 394-95, 113 S.Ct. at 1498.

Bankruptcy Rule 9006(b) may not, however, necessarily apply to an amendment to a proof of claim. Many courts follow Bankruptcy Rule 7015 when a motion to amend a proof of claim is made. See Stavriotis, 977 F.2d at 1206 n. 4; Roberts Farms, 980 F.2d at 1251; FED.R.BANKR.P. 7015. Bankruptcy Rule 7015 incorporates Federal Rule 15(a), which states that an amended claim relates back to the date of the original pleading if the substance of the amendment concerns the same transaction, conduct or occurrence in the original pleading. FED. R.CIV.P. 15(a). Bankruptcy Rule 7015, which applies to adversary proceedings, may be applied to contested matters at the bankruptcy court's discretion through Bankruptcy Rule 9014. FED.R.BANKR.P. 9014 ("The court may at any stage in a particular matter direct that one or more of the other rules in Part VII shall apply.").

In this case, Bankruptcy Rule 7015 shall be applied to this contested matter, the objection to filing an amended claim. In addition to determining if the proposed amendment to claim number 156 addresses the original claim, the Pioneer factors shall be considered to determine whether the circumstances of this case merit permitting an amendment to a proof of claim. The test for excusable neglect set forth under Pioneer embodies both the liberal approach that circuit courts have encouraged bankruptcy courts to follow and the most universal factors that have been considered by other courts when evaluating whether to permit an amendment to a proof of claim. Even though Pioneer deals with Rule 9006, the Pioneer test is appropriate because the hurdles to overcome in obtaining allowance of an amendment to a timely proof of claim after a claims bar date should not be higher than the hurdles determined by the Supreme Court for obtaining allowance of an untimely original proof of claim.

2. Discussion and Decision

The trustee takes the position that because Nebraska did not specifically indicate that its original proof of claim was "estimated," Nebraska should be denied an opportunity to amend the proof of claim because interested parties did not have notice that original claim number 156 was subject to change. See also Tanaka Bros., 36 F.3d at 1000 (noting that designating an original claim as an estimate puts other interested parties on notice that a proof of claim is subject to change). Since the trustee failed to file the tax returns relating to the liability underlying claim number 156, the trustee had to be aware that Nebraska did not have the actual data to compute an exact tax liability and did, therefore, know that Nebraska estimated its claim.

However, the issue of notice of estimation of the claim is not relevant in this case. Nebraska is amending the claim because of an error in the original computation of the amount of the fuel tax. The fuel taxes were due quarterly under the multi-state "International Fuel Tax Agreement" (IFTA). That compact did not become effective in Nebraska until...