Summary
declining to punish priority creditor for filing claim one day after deadline
Summary of this case from In re Johnson Rehabilitation Nursing Home, Inc.Opinion
No. C-2-94-0430, Bankruptcy No. 93-50205.
April 12, 1995.
Brenda L. Dodrill, U.S. Attorney's Office, Columbus, OH, for appellant.
Louis William Cennamo, Columbus, OH, for debtors.
Steven Roy Kerber, Bricker Eckler, Columbus, OH, for David M. Whittaker, Trustee.
OPINION AND ORDER
This matter comes before the Court to consider an appeal from the bankruptcy court's April 5, 1994 order. The court below held that subordination is a proper penalty for a priority creditor when that creditor filed a tardy claim despite having notice of the bankruptcy filing. This Court has jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges. 28 U.S.C. § 158(a); Bankr. Rule 8001. A district court's appellate review of a bankruptcy court decision is governed by Bankruptcy Rule 8013. A bankruptcy judge's conclusions of law are subject to de novo review. For the reasons set forth below, the judgment of the bankruptcy court is REVERSED.
This appeal presents the following question of law: if a priority creditor had notice of the case and claims bar date but filed a claim one day after the bar date, should the creditor recover under 11 U.S.C. § 726(a)(1) or § 726(a)(3)? In a recent case, the Sixth Circuit indicated that untimely filed priority claims in Chapter 7 proceedings may retain their priority status. United States v. Chavis, 47 F.3d 818 (6th Cir. 1995). In Chavis, the Sixth Circuit approved of the reasoning supporting the holding in In re Vecchio, 20 F.3d 555 (2d Cir. 1994). Vecchio stands for the proposition that a priority creditor with notice of the case and bar date is entitled to § 726(a)(1) priority despite filing a late claim. Vecchio, 20 F.3d at 560. As the Sixth Circuit has stated, "[t]here are valid reasons for permitting all tardily filed priority claims to be paid whether or not the creditor had notice." United States v. Cardinal Mine Supply, Inc., 916 F.2d 1087, 1091 (6th Cir. 1990). In light of the legal standards in the Sixth Circuit, the Court cannot punish a priority creditor for filing its claim one day after the deadline.
The parties agree upon the relevant facts.
Upon consideration and being duly advised, the Court finds appellant's arguments to be meritorious. Therefore, the decision of the bankruptcy court is REVERSED. The case is REMANDED for any necessary further proceedings.
The Government's motion for leave to file its brief out of time is GRANTED.
IT IS SO ORDERED.