In Re Metro Transportation Co.
OPINION
A. INTRODUCTION
Before the court is a Motion of the Pennsylvania State Workmen’s Insurance Fund (“the Fund”), a creditor in this Chapter 11 bankruptcy case, seeking a determination that its claim of $91,460.00 (“the Claim”) has priority status under 11 U.S.C. § 507(a)(7)(E). We reject the Fund’s request on two alternative grounds: (1) The Fund is not entitled to change the classification of its claim after the bar date, when no new factors have arisen since the bar date justifying such a change; and (2) The Fund’s claim is not properly classifiable as an “excise tax,” pursuant to § 507(a)(7)(E), in any event, given the Fund’s status as a non-compulsory insurer under applicable Pennsylvania state law. Therefore, we conclude that the Fund is confined to an unsecured claim in the amount of $91,-460.00.
B. FACTUAL AND PROCEDURAL BACKGROUND
On July 29, 1986, the Debtor, METRO TRANSPORTATION COMPANY, t/a YELLOW CAB COMPANY, (“the Debt- or”), the principal purveyor of taxicab services in the City of Philadelphia, filed a voluntary petition for relief under Chapter 11 of the Code. The facts of the main bankruptcy case have been discussed at length in numerous Opinions by this court published in this case at
The instant matter arose upon a “Motion for Determination of Priority Status” filed by the Fund on February 19, 1990. This Motion was opposed by both the Debtor and the Official Unsecured Creditors’ Committee (“the Committee”) appointed in the Debtor’s case.
A brief trial on the Motion was conducted on April 25, 1990. The only witnesses were employees of the Fund. They described the Fund as an entity created pursuant to Section 221 of the Pennsylvania Workmen’s Compensation Act, 77 P.S. § 1, et seq. (“the Act”). Employers covered by the Act which choose to insure through the Fund pay their premiums into the Fund “for the purpose of insuring such employers against liability under article three of the [Act], and of assuring the payment of the compensation therein provided.” 77 P.S. § 221. The Fund issues policies of insurance to participating employers or subscribers. 77 P.S. §§ 81, 224. However, it is important to note that, under the Act, employers have two options for procuring requisite workmen’s compensation insurance in addition to doing so through the Fund: (1) they may self-insure; and (2) they may purchase workmen’s compensation insurance from a private company.
The Fund’s witnesses indicated the reason why the amount of the Fund’s Claim kept changing: because premiums due to the Fund must be recalculated on the basis of subsequent claims, retrospective adjustments were constantly necessary. Further detailed findings on the computation of the Fund’s claim are not necessary, because neither the Debtor nor the Committee are opposing the amount of the Fund’s claim at this juncture, but merely its classification.
Immediately subsequent to the hearing, we ordered the parties to submit Briefs in support of their respective positions on or before May 25, 1990 (the Fund), and June 11, 1990 (the Debtor and the Committee). The matter was then listed for a settlement conference before the Honorable Judith H. Wizmur of the District of New Jersey on May 25, 1990. At that time, the parties reported that they were close to a settlement, because the classification of the Fund’s claim resulted in relatively little change in the distribution to it, and the parties hoped to also resolve the Debtor’s possible future use of the Fund’s services at the same time.
Unfortunately, despite our granting the Debtor and the Committee two extensions of time, ultimately until July 18, 1990, to remit their submissions due to the penden-cy of the possible settlement, and the diligence of Judge Wizmur in following up the original conference to attempt to close a settlement, these efforts failed, requiring us to resolve this matter by written Opinion.
The Fund asserts, in its Motion and accompanying Brief, that the Claim is for delinquent premiums for workers’ compensation insurance as to Policy No. 271581-2, issued to the Debtor for coverage during the period of January 1, 1982, through December 31, 1983.
The Fund contended that it has filed four related proofs of claim on the following respective dates, in the following respective amounts and classifications: (1) December 10, 1987, an unsecured claim in the amount of $40,459.00; (2) January 19, 1989, an unsecured claim in the amount of $65,-152.00; (3) November 22, 1989, and unsecured claim in the amount of $91,460.00; 1 and (4) January 16, 1990, a priority claim in the amount of $91,460.00 which is the Claim in issue (“the January Claim”).
The bar date for filing proofs of claim in the Debtor’s bankruptcy case was set by this court as March 1, 1989. The Fund’s third and fourth proofs of claim were thus
The Fund identifies three questions which are before the court. We will discuss them in the following order:
1. Whether the Motion is a contested matter properly filed pursuant to Bankruptcy Rule (“B.Rule”) 9014.
2. Whether the proofs of claim filed by the Fund on November 22, 1989, and January 16, 1990, after the bar date, constitute appropriate amendments to the Fund’s earlier timely-filed proofs of claim.
3. Whether the Fund’s claim is entitled to priority status pursuant to 11 U.S.C. § 507(a)(7)(E).
We answer the first question in the affirmative and the second and third largely in the negative.
C. DISCUSSION
1. Although, technically, the Fund’s Motion should have been maintained as an Adversary Proceeding pursuant to B.Rules 3007 and 7001(2), rather than pursuant to B.Rule 9014, we will overlook same.
The Fund’s Motion requests the determination of the priority of its claim. B.Rules 3007 and 7001(2) require that a request for determination of priority of a claim be brought as an adversary proceeding. The Fund urges that its Motion was properly brought pursuant to BiRule 9014. B.Rule 9014, however, applies to contested matters “not otherwise governed by these rules.” Since matters to determine priority of claims are governed elsewhere in the B.Rules, i.e., in B.Rules 3007 and 7001(2), B.Rule 9014 is inapplicable.
The Fund also refers in its Brief to B.Rule 3013 which states, in pertinent part,
the court may, on motion after hearing on notice as the court may direct, determine classes of creditors ... pursuant to § 1122 ... of the Code.
This B.Rule is potentially applicable, as the Fund wishes to be included in a class of § 507(a)(7) priority claims. B.Rules 3007 and 7001(2), however, are clearly the rules which most specifically address this Motion, and therefore their terms should be followed.
Although we cannot generally excuse even technical violations of the B.Rules, we will excuse the instant, technically improper filing of the instant matter because of the presence of the following circumstances: the lack of prejudice to the Debtor and the Committee; their participation without objection to the use of the B.Rule 9014 process by the Fund at the April 25, 1990, hearing; all of the parties’ participation in negotiations to settle this dispute; the Debtor’s and the Creditors’ Committee’s failure to discuss this issue in their jointly submitted Brief; and their acquiescence to this court’s deciding the Motion after failed settlement negotiations.
Compare In re Jablonski,
2. Although we will allow the Fund’s claim in the amount demanded in its January claim, we will not allow the Fund to amend the classification of the claim to priority status in the January claim.
The Fund contends that its Claim against the Debtor is a priority claim in the amount of $91,460.00. The Debtor and the Committee argue that the Fund’s Claim should be allowed as a general unsecured claim in the amount of $91,460.00. Obviously, given these positions of the parties, the Debt- or and the Committee have conceded that either the November 22, 1989, Claim or the January Claim amends the Fund’s previous, timely-filed proofs of claim as to amount, leaving, as the only matter before us for decision, whether the January Claim properly amends the classification of the Fund’s Claim.
[s]ometimes the rationale given for permitting claims to be amended is that bankruptcy courts are courts of equity. In re Anderson-Walker Industries, Inc., 798 F.2d [1285] at 1287 (9th Cir.1986). Other times, the amendment of a claim has been likened to an amendment of a pleading. See Fidelity and Deposit Co. v. Fitzgerald,272 F.2d 121 , 129 n. 8, 130 n. 13 (10th Cir.1959), cert. denied,362 U.S. 919 ,80 S.Ct. 669 ,4 L.Ed.2d 738 (1960); 3 Collier [on Bankruptcy,] ¶ 57.11, at 194-195 [14th ed. 1977]; 2 Remington [on Bankruptcy,] §§ 746-752 [(5th ed. 1956)]. Not only have amendments been liberally permitted, the amendments may occur after the bar date and relate back to the initial filing which was timely. Matter of Pizza of Hawaii, Inc.,761 F.2d 1374 (9th Cir.1985), Fidelity and Deposit Co. v. Fitzgerald.
While most courts have adopted this liberal approach toward allowing the amendment to timely filed proofs of claim, purported amendments will not be permitted if they actually constitute “new claims.”
See In re International Horizons, Inc.,
We ourselves addressed the topic of amendments to proofs of claim in
In re Owens,
the courts have been completely consistent in holding that, while amendments to more clearly set forth previously timely-filed claims are freely permitted after the bar date, amendments “are not to be used to assert an entirely new claim,” In re International Horizons, Inc.,751 F.2d 1213 , 1215 (11th Cir.1985), nor can they relate back to the date of earlier proofs of claim when the earlier proofs “did not give fair notice of the conduct, transaction or occurrence that forms the basis of the claim asserted in the amendment.” In re Westgate-California Corp.,621 F.2d 983 , 984 (9th Cir.1980). Hence, “amendments after the bar date are to be scrutinized very closely to ensure that the amendment is in fact genuine and not an entirely new claim.” [In re] W.T. Grant, supra, 53 B.R. [417,] at 422 [ (Bankr.S.D.N.Y.1985)]. See also, e.g., In re Black & Geddes, Inc.,58 B.R. 547 , 553 (S.D.N.Y.1983); In re Computer Devices, Inc.,51 B.R. 471 , 477-78 (Bankr.D.Mass.1985); and In re W.T. Grant Co.,37 B.R. 593 , 594 (Bankr.S.D.N.Y.1984).
The Eleventh Circuit, in
International Horizons, supra,
[i]n a bankruptcy case, amendment to a claim is freely allowed where the purpose is to cure a defect in the claim as originally filed, describe the claim with greater particularity or to plead a new theory of recovery on the facts set forth in the .original claim. See Szatkowski v. Meade Tool & Die Co.,164 F.2d 228 , 230 (6th Cir.1947); In re G.L. Miller & Co.,45 F.2d 115 (2d Cir.1930). Still, the court must subject post-bar date amendments to careful scrutiny to assure that there was no attempt to file a new claim under the guise of amendment. In the Matter of Commonwealth Corp.,617 F.2d 415 , 420 (5th Cir.1980).
Caselaw has generally held that a post-bar date proof of claim seeking to merely increase the amount of a timely-filed claim is not the assertion of a new claim, but an allowable amendment to a prior claim.
See In re Candy Braz, Inc.,
However, where a claimant attempts to change the nature of a proof of claim, such as when a taxing authority attempts to increase its proof of claim by adding different types of taxes or different tax years than that stated in the original proof of claim, such amendments have generally been disallowed.
See Candy Braz, supra,
In its post-trial Brief, the Fund relies upon general language in the caselaw stating that an amendment to a proof of claim is to be allowed where the original claim provided notice of the existence, nature, and amount of the claim.
Owens II, supra,
The Fund argues that because the January Claim and its timely proofs of claim all identify the debt as being for “delinquent premiums for Worker’s Compensation Policy No. 271581-2,” and naming the claimant as the Fund, the January Claim should be allowed as an amendment because it does not state a new claim but merely states the original claim with greater particularity. Post-bar-date amendments have generally been allowed to describe a claim with greater particularity.
See, e.g., In re White Motor Corporation,
However, the nature of a priority claim is much different from that of a general unsecured claim. Reclassifying the claim as a priority claim impacts the Debtor’s Plan and the distributions to be paid to the other creditors under the Plan. This situation is, therefore different from those in which amendments have been permitted to increase the amount of a claim when post-bar date events have resulted in a larger, but otherwise unchanged debt.
The Fund does not suggest that any post-bar-date event occurred which necessitated the reclassification of the Claim, as opposed to the amount of the Claim. If the Claim deserved priority, it deserved it at the time that the Fund filed its first proof of claim. The Fund should not therefore be permitted, at this late date, to assert what is essentially a new claim seeking priority treatment.
A priority claim is a claim completely different from that asserted by the Fund in its timely proofs of claim. The Fund’s desire to reclassify its Claim is therefore an attempt to assert an untimely new claim. We must follow
Pigott
and strictly con
Over the last decade, many of the courts deciding whether to allow a post-bar-date amendment to a timely proof of claim have not limited their analysis to whether the amendment states a new claim, but have relied upon five equitable factors originally set forth by the court in
In re Miss Glamour Coat,
The Tax Court, in Miss Glamour Coat, ruling upon the propriety of a post-bar date amendment filed by the IRS, considered the following five equitable factors:
(1) Whether the bankrupt and creditors relied upon the IRS’ earlier proofs of claim or 'whether they had reason to know that subsequent proofs of claim would follow pending the completion of the audit ...
(2) Whether the other creditors would receive a windfall to which they are not entitled on the merits by the court not allowing this amendment to the IRS proof of claim ...
(3) Whether the IRS intentionally or negligently delayed in filing the proof of claim stating the amount of ... taxes due ...
(4) The justification, if any, for the failure of the IRS to file for a time extension for the submission of further proofs of claim ...
(5) Whether or not there are any other considerations which should be taken into account in assuring a just and equitable result ...
Owens I, supra,
We emphasize, as we did in Owens I, id. at 423, that the deadlines for filing proofs .of claim must be strictly construed. The Fund, here, does not deny that the January Claim was tardily filed. We must determine whether, after a balancing of the equities, the January Claim properly amends the Fund’s Claim to reclassify it as a priority claim. We conclude that it does not.
We begin our analysis by reviewing the five factors set forth in
Miss Glamour Coat.
Factors 1, 3, 4, and 5 do not lie in the Fund’s favor. The Debtor and creditors relied upon the Fund’s earlier proofs of claim in the process of negotiating and voting on the Plan and had no reason to know that a subsequent proof of claim
The Fund’s failure to file a timely proof of claim requesting priority treatment was due to its own negligence. The Fund was not misled by any action or inaction of another party.
Compare Garner, supra,
The application of this factor to the instant facts is in contrast to that in
Sitzberger, supra,
Finally, consideration of the “absolute nature of the policy barring late filings expressed in
Pigott,” Owens I,
The equities of the second factor set forth in Glamour Coat, i.e., whether the other creditors would receive a windfall to which they are not entitled if the amendment is not allowed, do not fall squarely on either side. The other creditors of the Debtor will receive what they were promised under the Debtor’s Plan if the amendment is denied. The Fund had the opportunity to review the Debtor’s Plan prior to confirmation and, therefore, should have known its place in the distribution scheme. Since the Fund failed to argue its right, if any, to priority treatment at that time, it cannot now be said that the other creditors would receive a windfall to which they are not entitled.
The court in
In re Major Mud & Chemical Co.,
[a]s a result of disallowing the amended claim, creditors will benefit from a more than $1,000,000 decrease in priority tax claims against the debtor. Given the [IRS’s] dilatory actions, however, creditors will not receive a windfall to which they are not entitled.
To allow the Claim to be reclassified as a priority debt at this juncture would prejudice the other creditors, who would accordingly receive less than they reasonably contemplated under the Plan. In light of the Fund’s own negligence in delaying to make a priority claim, such a result would be unjust. The equities of the situation thus tip in favor of the Debtor and the Committee and against the Fund.
In
Garner, supra,
the court denied a request by the IRS “to amend its proof of claim after the expiration of the bar date to
While, here, the allowance of the January Claim would not result in the dismissal of the Debtor's bankruptcy case, the other creditors would be prejudiced. Also, as in
Garner,
the Fund has been unable to articulate any reasons to justify its error in initially allegedly misclassifying its Claim. We agree with the court in
Unroe,
The bankruptcy court has broad discretion in allowing post-bar-date amendments to proofs of claim.
Milan Steel, supra,
3. Payments for Premiums due under the Pennsylvania Workmen’s Compensation Act are not an “Excise Tax” entitled to priority under 11 U.S.C. § 507(a)(7)(E).
The substance of the Fund’s position in its Motion is that it is entitled to priority under 11 U.S.C. § 507(a)(7)(E) 3 because it is for an excise tax. We disagree. The payments due to the fund under Act are “charges,” not an excise tax and, therefore, are not entitled to priority under 11 U.S.C. § 507(a)(7)(E) in any event.
To reach this conclusion, we first reviewed the Act but were mindful that, while “a state’s determination of whether something is a tax is persuasive and entitled to great weight, it is not binding.”
In re Adams,
Further, labels such as the terms “premium” and “tax” which are used in a statute are also not controlling. It is incumbent upon the reviewing court to look past the labels to the substance of the statute.
See New Neighborhoods,
In an early decision,
In re Lexie Mining Co.,
the Insurance Fund is entitled to claim priority in payment of an unpaid premium, duly settled, if the lien is not to be held to be secret by reason of the fact that no provision is made in the act creating it, for certification of it or issuance of any certificate by the board, or the keeping of any record of the unpaid premiums.
Id. at 347.
The court concluded that the 1915 Act created a secret lien invalid against other lienholders because it failed to “provide for the certification of the lien by a particular officer, or by the Insurance Board” but, rather, for the certification of the lien on demand. Id. Therefore, it disallowed the Fund the priority which it sought.
The section of the 1915 Act discussed by the court in Lexie Mining remains materially unchanged in the present version of the Act, at 77 P.S. § 343. The Lexie Mining decision, therefore, supports our conclusion, although we arrive at that conclusion by taking a different road, see pages 152-54 infra, i.e., that charges due under the Act are not entitled to priority treatment under the Code as taxes. Our conclusion is consistent with the result in Campbell v. Harrisburg Manufacturing & Boiler Co., 19 D. & C. 558, 561-62 (Dauphin Co.C.P.1933), which held that a claim of the State Workmen’s Insurance Fund for the unpaid balance of a workmen’s compensation insurance premium was not a lien upon the property of the insured, nor was it entitled to priority in distribution of the insured’s assets upon insolvency.
As we indicated at page 145 supra, Section 221 of the Act, 77 P.S. § 221, establishes the State Workmen’s Insurance Fund. We note that this section and the following sections utilize the terms “premiums,” “insuring ... against liability,” “rates of insurance,” “subscribers,” and “policies” in discussing the Fund. See 77 P.S. §§ 221, 241, 242, 261, 262. The use of these terms evinces a general intent on the part of the Commonwealth that the Fund be considered an insurance vehicle, not a tax vehicle.
While the language of the Act is the appropriate starting point, federal law regarding whether a charge is a tax or simply a fee is controlling. The pertinent case-law provides us with several standards to assist us in making this determination. In
City of New York v. Feiring,
The Fourth Circuit, in
New Neighborhoods, supra,
In
Adams, supra,
Under federal law, a tax has certain characteristics which distinguish it from a mere debt or charge. The major distinction lies in whether it is an involuntary charge assessed on all or a charge for services rendered in the nature of a contractual or quasi-contractual obligation as the Anderson Court explained:
“[a] tax is a pecuniary burden laid upon individuals or property for the purpose of supporting the government.
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Taxes are not debts ... Debts are obligations for the payment of money founded upon contract, express or implied. Taxes are imposts levied for the support of the Government, or for some specific purpose authorized by it. The consent of the taxpayer is not necessary for their enforcement. They operate in invitum. Nor is their nature affected by the fact that in somestates ... an action of debt may be instituted for their recovery. The form of the procedure cannot change - their character (emphasis added).”
The Sixth Circuit, in
United States v. River Coal Co.,
An excise tax has been defined as “an indirect tax, one not directly imposed upon persons or property (citation omitted), and is one that is imposed on the performance of an act, the engaging in any occupation, or the enjoyment or [sic] a privilege.”
In re Tri-Manufacturing & Sales Co.,
In
Smith-Jones, supra,
the Minnesota bankruptcy court reviewed the Ohio Workers’ Compensation Fund and concluded that even though “the State insurance fund is in lieu of private workers’ compensation insurance carriers operating in the state” and “participation in the fund is mandatory for employers in Ohio,”
Similarly, in
Brock v. Washington Metropolitan Area Transit Authority,
In
Union Pacific R.R. v. Public Utility Commission,
By way of contrast, the Fourth Circuit Court of Appeals, in
New Neighborhoods, supra,
interpreted the West Virginia Workers’ Compensation Law and concluded that the premiums collected thereunder were “pecuniary burdens for public governmental use,” and, therefore, taxes.
By way of contrast to the West Virginia law, the Pennsylvania Act is not a revenue-raising statute for the benefit of the general public. It is, rather, a statute intended to regulate employers’ liability for workplace accidents and injuries. Contribution to the Fund is not a burden shared by all taxpayers indiscriminately. Only a very specific group of taxpayers contribute to the Fund. Premiums paid to it are not mandatory payments for that group either, as they may elect to self-insure or obtain comparable insurance from a private insurer elsewhere. The latter option is not available to West Virginia employers, placing the Fund, in Pennsylvania, on a par with numerous private insurers. The benefits from the Fund are also earmarked for a very specific group: those injured in the workplace whose employers are contributors to the Fund. Thus, the Fund’s charges have very little similarity to a “tax.”
It must be recalled that there is a “presumption in bankruptcy cases ... that the debtor’s limited resources will be equally distributed among his creditors, [causing] statutory priorities [to be] narrowly construed.”
In re Great Northeastern Lumber & Millwork Corp.,
D. CONCLUSION
On the basis of either of two alternative, equally strong grounds, we are compelled to enter an order rejecting the Fund’s attempt to assert a priority claim, denying the Motion before us, and establishing the Claim as an unsecured claim in the amount of $91,460.
Notes
. The Fund's November 22, 1989, proof of claim does not appear on the court’s claims docket. The Fund produced a transmittal letter requesting the Clerk’s Office to docket this Proof of Claim at the April 25, 1990, hearing, but did not produce a time-stamped copy of the claim. We would therefore not consider this claim as validly filed if this issue were relevant to the outcome herein, which it is not.
. B.Rule 3002(c)(1) provides, in pertinent part, “On motion ..., the court may extend the time for filing of a claim by the United States." As the District Court noted, in
Owens II,
. This Code section provides as follows:
§ 507. Priorities
(a) The following expenses and claims have priority in the following order:
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(7) Seventh, allowed unsecured claims of governmental units; only to the extent that such claims are for—■
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(E) an excise tax on—
(i) a transaction occurring before the date of the filing of the petition for which a return, if required, is last due, under applicable law or under any extension, after three years before the date of the filing of the petition; or
(ii) if a return is not required, a transaction occurring during the three years immediately preceding the date of the filing of the petition;
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