United States v. Coleman American Companies, Inc. (In Re Coleman American Companies, Inc.)

D. Kansas

United States v. Coleman American Companies, Inc. (In Re Coleman American Companies, Inc.)

26 B.R. 825, 1983 Bankr. LEXIS 7037, 10 Bankr. Ct. Dec. (CRR) 185

CourtUnited States Bankruptcy Court, D. Kansas

DecidedJanuary 13, 1983

Docket19-20379

StatusPublished

Cited by39 cases

This text of 26 B.R. 825 (United States v. Coleman American Companies, Inc. (In Re Coleman American Companies, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

United States v. Coleman American Companies, Inc. (In Re Coleman American Companies, Inc.), 26 B.R. 825, 1983 Bankr. LEXIS 7037, 10 Bankr. Ct. Dec. (CRR) 185 (Kan. 1983).

Pincite

Opinion

MEMORANDUM AND ORDER

JAMES A. PUSATERI, Bankruptcy Judge.

In this chapter 11 proceeding, the debtor-in-possession objected to various IRS proofs of claim before confirmation. The hearing on this matter took place after confirmation of the plan of reorganization.

The issues presented for determination are:

1. Which party carries the burden of proof where the debtor objects to IRS proofs of claim.

*827 2. Are tax penalties that are not in compensation for actual pecuniary loss entitled to priority claim treatment.

3. Did the parties sustain their respective burdens of proof in the instant objections.

A hearing was held, briefs have been submitted, and the matter is ready for resolution.

FINDINGS OF FACTS

The various Coleman companies (Coleman) filed their chapter 11 petition in bankruptcy on March 5, 1980.

In November, 1978 Coleman of Nebraska and Coleman of Kansas were delinquent to the IRS in payment of unemployment taxes (F.U.T.A.) and social security withholding taxes (F.I.C.A.). Max Kennedy, a Revenue Officer with the IRS, was assigned the Kansas Coleman and Nebraska Coleman files to try and work out the delinquencies. At first, he attempted to have the delinquency cured in a single payment, but because the delinquency was over $100,000, Coleman could not comply. Next, a written agreement was executed between the Kansas and Nebraska Coleman and the IRS. Attached to the agreement was a payment schedule calling for installment payments of $3,000. To secure the arrangement, a mortgage on real estate held by American Properties, Inc., a related holding company to Coleman, was granted.

Some payments were mailed to the IRS and others were delivered in person. Coleman, however, defaulted in the agreement by not making the proper $3,000 payments, or by sending checks that bounced.

During the time the default in the agreement occurred, similar tax problems began to arise with other Coleman companies. After the default, Nebraska and Kansas Coleman continued to make $3,000 payments, but some of the payments were used by the IRS to “put out the fires” of other Coleman companies. The IRS through Max Kennedy contends that the $3,000 was never applied to other Coleman company tax obligations without first receiving the approval of James or Doug Coleman, officers of the various Coleman companies, or at least first letting them know what he was going to do.

James Coleman testified that he did not have any other agreements with the IRS to apply money to the liabilities of other companies. He testified that his primary concern was satisfying the Kansas and Nebraska obligations to satisfy the debt and release the collateral. Doug Coleman also testified that he had no agreements with Mr. Kennedy to apply funds other than according to the written agreement. Doug Coleman further testified that he did not have the authority to make such an agreement.

Part of the problem with application of funds involved the nature of Coleman’s directions to the IRS. Cashier checks were issued to the IRS and the remitter was simply Coleman American Moving Services, without any indication which Coleman company (Nebraska, Kansas, Alabama or Louisiana Coleman) was the actual remitter. None of the checks specified on which Coleman entity’s behalf they were sent. Also, the IRS had supplied Coleman with computer cards for each entity’s obligation. A computer card for an entity was supplied and was to be submitted to the IRS each time that entity made a payment. There were problems with the computer cards, however, and at times, Coleman submitted a payment on behalf of one company with a computer card indicating the payment was on behalf of another company.

From the evidence, both documentary and testimony, the Court finds that there was no misapplication of Coleman payments after the default. The Court found the testimony of Mr. Wood and the lack of a notation on checks, the failure to designate a specific entity on checks, and the computer card problems more persuasive.

The Court now turns to the specific allegations surrounding the proofs of claim in controversy.

*828 Claim No. 268 — Kansas Entity

Coleman asserts the IRS claim is overstated by $8,510.44 plus interest because the IRS did not apply payments pursuant to the agreement. The IRS proof of claim No. 268 is for a total of $304,746.61. A portion is secured by filed tax liens and the mortgage executed by the parties when the payment agreement was executed. The claim is as follows:

Free access — add to your briefcase to read the full text and ask questions with AI