In Re International Horizons, Inc.

31 B.R. 723, 8 Collier Bankr. Cas. 2d 937, 1983 Bankr. LEXIS 6093, 10 Bankr. Ct. Dec. (CRR) 895
CourtUnited States Bankruptcy Court, N.D. Georgia
DecidedJune 2, 1983
Docket17-42801
StatusPublished
Cited by4 cases

This text of 31 B.R. 723 (In Re International Horizons, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re International Horizons, Inc., 31 B.R. 723, 8 Collier Bankr. Cas. 2d 937, 1983 Bankr. LEXIS 6093, 10 Bankr. Ct. Dec. (CRR) 895 (Ga. 1983).

Opinion

*724 ORDER

W. HOMER DRAKE, Jr., Bankruptcy Judge.

This case is before the Court on the debtors’ Motion for Summary Judgment and on the May 6, 1983 cross-Motion for Summary Judgment filed by the United States of America, by and through its agency, the Internal Revenue Service (“the Service”) with respect to the debtors’ March 25, 1983 objection to certain proofs of claim. Initially, the Court notes that an objection to the allowance of a proof of claim is not equivalent to the commencement of an adversary proceeding. But see In the Matter of Sims, C82-1799A, (N.D.Ga., April 7, 1983). The Advisory Committee Notes to Rule 306(c) of the Rules of Bankruptcy Procedure clearly state that

“The contested matter initiated by such an objection to a claim is governed by Rule 914, unless a counterclaim by the trustee is joined with the objection to the claim. ■ The filing of a counterclaim ordinarily commences an adversary proceed- . ing subject to the Rules in Part VII.”

The comment to Bankruptcy Rule 306(c) under the 1978 Bankruptcy Code sets forth the fact that Rule 306(c) remains effective under the Code. Accordingly, this case is properly before the Court.

A brief review of the factual background of these proceedings as it relates to the matters now before the Court is in order. These reorganization proceedings were commenced on March 20,1981 upon the filing of voluntary Chapter 11 petitions by International Horizons, Inc., International Horizons (Curacao), N.V., North American Exports, Inc., and International Horizons, N.V. Thereafter, on July 7,1981, two affiliates of the original four debtors, World of English, N.V. and Communication & Studies International, Ltd., also filed for reorganization under Chapter 11 of the Bankruptcy Code. On February 1, 1982, another affiliate, Financial Resources K.K., filed its Chapter 11 petition. Throughout these proceedings, the debtors have operated their businesses as debtors in possession.

On June 17, 1981, pursuant to Rule 3001(b)(2)(B) of the Interim Bankruptcy Rules, adopted by this Court and applicable only to cases under Chapter 11 of Title 11 of the United States Code, this Court established August 31, 1981 as a bar date by which all creditors desiring to assert claims against International Horizons, Inc., International Horizons (Curacao), N.V., North American Exports, Inc., or International Horizons, N.V. were required to file their respective proofs of such claim. Notice of that Order issued to all creditors of the debtors, including the Service. The Service has not applied for an extension of time to file claims.

On May 18, 1981, and June 29, 1981, the Service filed timely proofs of claim as to the debtor, North American Exports, Inc. (“NAE”), asserting claims for withholding taxes and Federal Unemployment Tax Act (“FUTA”) taxes. On May 18, 1981, the Service filed a timely proof of claim as to debtor, International Horizons, Inc. (“IHI”), asserting claims for withholding taxes for two quarterly tax periods. These proofs of claim were the only proofs of claim filed by the Service in the Chapter 11 proceedings of NAE and IHI on or before August 31,1981.

On November 2, 1982, the Service filed a new proof of claim as to NAE, reasserting its earlier claims for withholding and FUTA taxes and adding a new claim for corporate income taxes for the taxable years 1974 and 1975 in the principal amount of $14,886,-908.00, plus interest, and penalties aggregating approximately $9,000,000.00. On November 18, 1982, the Service filed a new proof of claim as to IHI reasserting its earlier claims for withholding taxes, and also adding a new claim for corporate income taxes for the taxable year 1980 in the principal amount of $1,719,649.00, plus interest in the amount of $81,412.42.

The debtors have not objected to the May 18,1981, and June 29,1981 claims. Accordingly, these claims are deemed to be allowed pursuant to 11 U.S.C. § 502(a). The debtors have objected to the November 2, 1982 and November 18, 1982 claims to the extent that they assert claims against NAE and IHI for corporate income taxes. The *725 debtors base these objections on the ground that claims for corporate income taxes are untimely.

The question before the Court is whether the Service should be allowed to amend the May 18, 1981, and June 29, 1981, proofs of claim, which it filed timely as to the debtors, North American Exports, Inc. (“NAE”) and International Horizons, Inc. (“IHI”), asserting claims for withholding taxes and Federal Unemployment Tax Act (“FUTA”) taxes, by adding claims for corporate income taxes for the taxable years 1974 and 1975. The subject amendments were filed on November 2, 1982, and November 18, 1982, as to NAE and IHI, respectively.

Rule 914 of the Rules of Bankruptcy Procedure governs the procedure to be employed in contested matters. While Rule 914 does not specifically provide for the application of Rule 715 of the Rules of Bankruptcy Procedure to contested matters, Rule 914 does give the Court the discretion to “direct (at any stage in a particular matter) that one or more of the other rules in Part VII shall apply.” The Court now makes Rule 715 of the Rules of Bankruptcy Procedure applicable to the contested matter before the Court.

Rule 715 of the Rules of Bankruptcy Procedure incorporates Rule 15 of the Federal Rules of Civil Procedure for determining when amendments to pleadings are to be allowed in bankruptcy cases. Generally, the Court is to grant liberally leave to amend a pleading under the Federal Rule of Civil Procedure 15(a). As the United States Supreme Court stated in Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962), the mandate that leave to amend shall be freely given when justice shall require it is to be heeded. However, the courts have limited the use of amendments to assert an entirely new claim. In the Matter of Commonwealth Corp., 617 F.2d 415 (5th Cir.1980). With these general guidelines in mind, the Court will undertake its analysis of whether to allow the Service to amend its May 18, 1981, and June 29, 1981, claims filed against NAE and IHI. 1

Prior to commencing its analysis of this case, the Court notes that the bar Order entered in these cases was issued pursuant to Rule 3001(b)(2)(B) of the Interim Bankruptcy Rules, while all the cases on which the Court relies in this Order concerned acts which took place while § 57n of the Bankruptcy Act was in effect. The judicial establishment of a bar date is entitled to no less dignity than the statutory establishment of a bar date for the filing of proofs of claim in reorganization proceedings.

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31 B.R. 723, 8 Collier Bankr. Cas. 2d 937, 1983 Bankr. LEXIS 6093, 10 Bankr. Ct. Dec. (CRR) 895, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-international-horizons-inc-ganb-1983.