In Re Jones
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This сase is before the Court upon Debt- or’s Objection to Claim 23 filed by Peggy P. Jones. Following a hearing on December 16, 1997, the Court enters the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. Robert Carl Jones, Sr. (Debtor), and Peggy P. Jones (Claimant) were husband and wife until a Final Judgment Dissolving Marriage was entered on July 22, 1992. (Debtor Ex. 5.)
2. Debtor’s and Claimant’s assets were divided in accordance with a Stipulation and Agreement entered into between the parties on July 17,1992. (Debtor Ex. 1.)
3. On April 15, 1992,’ Debtor and Claimant filed a joint 1040 Income Tax Return for the year 1991. The total income tax required to be paid was $40,403.99. Of that total, $13,824.95 was paid through withholding, and $26,579.05 was remitted with the return.
4. Of the amount paid through withholding, $11,596.40 was attributable to amounts withheld from Debtor’s wages. (Debtor Ex. 4.) The remaining .$2,228.55 was withheld from Claimant’s wages. (Id.) At the time taxes for the year 1991 were paid, Debtor and Claimant were separated and did not have a joint bank account.
5. On September 28, 1995, Debtor filed a 1045 Application for Tentative Refund, seek
6. The application was prepared by Michael Carter, a certified public accountant employed by Carter, Merolle & Company, P.A. The application was predicated on a carryback of loss generated by R.C. Jones Furniture Company, of which the debtor is the sole shareholder.
7. Carter testified that upon examining the financial records of the corporation he discovered that its books were overstated and its assets overvalued. He therefore advised Debtor to carry the loss back, which would generate a refund of all taxes paid in 1991.
8. The Internal Revenue Service granted the debtor’s Application for Tentativе Refund and issued a check in the amount of $40,-403.99.
9. The refund check, dated December 29, 1995, was payable to the order of “Robert C. and Peggy P. Jones” and was mailed to Debtor at his residence address.
10. Upon his receipt of the cheek, the debtor wrote his bank account number on the back of the check along with the words “Deposit Only”. The debtor then deposited the cheek into his personal checking account at Barnett Bank on January 4,1996.
11. Debtor filed a petition under Chapter 11 of the Bankruptcy Code on May 28, 1996. June 11, 1997, was еstablished as the bar date for claims by the Court.
12. On August 26, 1996, Claimant timely filed Claim 23 as a priority claim under 11 U.S.C. § 507(a)(8). Claim 23 is in the amount of $20,202, which is equal to one-half of the tax refund for the year 1991.
13. Debtor’s Plan of Reorganization was confirmed by Order of this Court on July 17, 1997. On August 1, 1997, Debtor filed an objection to Claim 23, which was heard by the Court on December 16,1997.
14. The debtor objects to Claim 23 on the grounds that the claim was improperly filed as a priority claim, and was also filed for an incorrect amount. At the hearing on the Objection, Claimant conceded that her claim is not еntitled to priority status as set forth in 11 UlS.C. § 507(a)(8).
CONCLUSIONS OF LAW
Debtor’s first contention regarding Claim 23 is that amendment of the claim from priority to unsecured status should not be permitted because Claimant has not filed a motion to amend claim or a motion for leave to file a late claim. Although Claimant has not filed a formal motion to amend claim, the Court considers Claimant’s admission during the hearing on Debtor’s Objection that Claim 23 is not entitled to priority status, as well as Claimant’s proposed Order and Finding of Facts requesting that the Court allow Claim 23 as an unsecured сlaim as a de facto motion to amend.
Debtor’s next objection to Claimant’s request to amend Claim 23 is based on the assertion that it would be inequitable to allow the filing of a claim after confirmation of the debtor’s plan of reorganization. Debtor relies оn case law holding that an amendment which alters the status of a claim from unsecured to secured equates to filing a new claim, which is impermissible post-confirmation.
See United States v. Int’l Horizons, Inc. (In re Int’l Horizons, Inc.),
Finally, Debtor objects to the amount of Claim 23 and requests that the claim be disallowed in its entirety. At the very most, argues the debtor, Claimant is entitled to $2,228.55, the amount of the refund that corresponds to the amount of the taxes actually paid in by Claimant in 1991.
A. Claimant’s Proposed Amended Claim is a New Claim
The Eleventh Circuit has mandated that courts carefully scrutinize post bar date аmendments to claim in order to prevent the filing of new claims disguised as amendments.
United States v. Int’l Horizons, Inc. (In re Int’l Horizons, Inc.),
It cannot be disputed that Claimant’s proposed amended claim arose from the identical occurrence as her original claim: the 1991 tax refund. The controversy involves the Eleventh Circuit’s prohibition of amendments which are, in effect, new claims. In
In re Nat'l Merchandise Co., Inc.,
Although Claimant, is not seeking to effect the identical change in status as was the claimant in
National Merchandise,
nonetheless she does seek to change the status of her claim from that of priority to unsecured. The Court finds that such an amendment would amount to the filing of a new claim, which is prohibited by the res judicata effect of the debtor’s plan of reorganization.
See Id.; In the Matter of Alliance Operating, Corp.,
B. Equitable. Considerations
-An amendment to claim might also be . аllowed based on an equitable balancing-test, which involves a consideration of the following:
(1) whether the debtor and creditors relied upon the earlier proof of claim or had reason to know that a subsequent proof of claim would be filed;
(2) whether other creditors would receive a. windfall if the court refused to allow amendment;
(3) whether claimant intentionally or negligently delayed in filing the amendment;
(4) the justification for the failure to file for an extension to the bar date;
(5) whether other equitable considerations exist which compel amendment.
United States v. Int'l Horizons, Inc.,
Regarding the first factor, although there was no notice of a subsequent claim or amendment, no evidence has beеn presented establishing the debtor or creditors’ reliance on Claimant’s original proof of claim. The debtor and creditors in this case would be hard pressed to demonstrate any prejudice resulting from the allowance of the amendment given that Claimant seeks to amend her claim-from priority to unsecured. Prejudice would only be present had a party acted to their detriment in reliance on the priority status of the claim. Id. The court is unaware of any such reliance by any - party. The debtor and creditors werе on notice of a $20,000 priority claim, and they will not be prejudiced if this claim is allowed as an unsecured ’claim.
The third and fourth factors address whether the creditor was at fault in failing to timely file the amended claim.
Norris Grain Co. v. United States (In re Norris Grain Co.),
The final element of the equitable balancing test requires the Court to consider any equitable considerations which compel amendment. One equitable consideration is the inequity which would result should the amendment not be allowed. Although the claimant did delay in requesting an amendment, the debtor was well aware of the nature and amount of the claim, which have not changed. Finding an absence of any prejudice or bad faith, the Court concludes that the equities in this case weigh in favor of allowing the amendment. The Cоurt allows the amendment of Claim 23 to reflect an unsecured claim in the amount of $20,202.
II. Amount of Claim 28
Claimant seeks to recover half of the tax refund, or $20,202, on the basis that the refund was equally owned by the debtor and the claimant. Therefore, according to the claimant, the debtоr converted the claimant’s share of the refund. The debtor, on the other hand, contends Claimant is not entitled to any of the refund. Debtor’s fallback argument is that if Claimant is entitled to a portion of the refund, that portion is $2,228.55, which is the amount Claimant contributed to the 1991 taxes.
Flоrida’s Uniform Commercial Code provides that the law relating to the conversion of personal property is applicable to instruments as well. Fia.Stat.Ann. § 673.4201(1) (West 1998). Conversion is defined as “the unauthorized exercise of ownership over goods belonging to anothеr to the exclusion of the owner’s rights.”
Wolfson v. Equine Capital Corp. (In re Wolfson),
The filing of a joint tax return does not affect the underlying property interests of the parties.
U.S. v. Elam,
Because Claimant contributed at least $2,228.55 to the 1991 taxes, as evidenced by
Although the claimant asserts title to one-half of the refund check, she has failed to produce any evidence showing the amount of her contribution to the 1991 taxes In an objection to claim, thе burden of producing evidence rebutting the prima facie validity of the claim rests with the party making the objection.
In re Haack,
The claimant has failed to meet her burden of proving the validity of a claim in the amount of $20,202, as she has neglected to prove the amount she contributed to the taxes. The only evidence before the Court, given the lack of Claimant’s testimony on the issue, demonstrates that Claimаnt contributed $2,228.55, the amount withheld from her 1991 wages. Thus, the Court holds that Claimant’s interest in the refund check equals $2,228.55, and allows Claim 23 as an unsecured claim in that amount.
III. Conclusion
Finding a formal motion to amend to be unnecessary, the Court permits the amendment of Claim 23 to reflect an unsecurеd claim in the amount of $20,202. The Court further finds that the debtor converted Claimant’s interest in the tax refund, and that the value of Claimant’s converted interest was $2,228.55. The Court therefore sustains Debtor’s objection to the amount of Claim 23 and allows an unsecured claim for $2,228.55. A separate Order consistent with these Findings of Fact and Conclusions of Law will be entered by the Court.