Internal Revenue Service v. Davis

                       United States Court of Appeals,

                                 Eleventh Circuit.

                                     No. 94-7107.

           In re James DAVIS and Leonila Davis, Debtors.

               INTERNAL REVENUE SERVICE, Plaintiff-Appellee,

                    S & S Limited, Plaintiff-Appellant,

                                          v.

          James DAVIS, Leonila Davis, Defendant-Appellees.

                                  April 23, 1996.

Appeal from the United States District Court for the Northern
District of Alabama. (No. CV 94-P-539-S), Sam C. Pointer, Jr.,
Chief Judge.

Before ANDERSON and COX, Circuit Judges, and RONEY, Senior Circuit
Judge.

     PER CURIAM:

     This Chapter 7 bankruptcy appeal involves whether an Internal

Revenue   Service      ("IRS")       claim     for   taxes   under   11    U.S.C.   §

507(a)(7),      untimely     filed    under     Bankruptcy    Rule   of   Procedure

3002(c), should be paid as a priority claim under 11 U.S.C. §

726(a)(1), as ruled by the district court, or as an unsecured claim

under 11 U.S.C. § 726(a)(3), as decided by the bankruptcy court.

The district court held that, even though untimely filed, the claim

should    be    paid   as    a   priority      claim   because   the      timeliness

provisions of Rule 3002(c) do not apply to distributions under

section 726(a)(1).          Since no distribution of the bankrupt estate

had yet occurred under section 726, the court held it need not

reach the question of whether the IRS would still be entitled to

section 507(a)(7) priority after distribution.                 We affirm.

     We follow the holdings of the Second and Ninth Circuits.                       In
re Pacific Atlantic Trading Co., 33 F.3d 1064, 1067 (9th Cir.1994)

("Section 726(a)(1) makes no distinction between late and timely

claims."); In re Vecchio, 20 F.3d 555, 557 (2d Cir.1994) ("Section

726(a)(1) accords priority status to claims specified in 507

without regard to the timeliness of filing.").

     Apparently no other circuits have definitively decided this

precise issue in a Chapter 7 bankruptcy.           But see United States v.

Cardinal Mine Supply, Inc., 916 F.2d 1087 (6th Cir.1990) (upholding

priority status where IRS not notified and had no knowledge of

debtor's bankruptcy case or of bar date).

     The   Chapter   13   cases   relied    upon    by       the   appellant   are

inapplicable.    See In re Osborne, 76 F.3d 306 (9th Cir.1996) (In

holding a timeliness requirement "in Chapter 13 reorganization

cases, we do not intend to detract from the efficacy of                  Pacific

Atlantic in Chapter 7 cases filed prior to the effective date of

the Bankruptcy Reform Act of 1994.           Moreover, we emphasize the

substantial difference in the considerations relevant to Chapter 13

and Chapter 7 cases.");    Matter of Waindel, 65 F.3d 1307, 1312 (5th

Cir.1995) (Duhe, J. concurring) ("The majority rejects the bar date

because 726(a) allows the payment of a claim even if proof of it is

tardily filed.    But § 726 does not apply to a case under Chapter

13.");   In re Chavis, 47 F.3d 818, 823 (6th Cir.1995) ("There are

fundamental     differences   between      Chapter       7    and    Chapter    13

bankruptcies that effectively limit the Second and Ninth Circuit

decisions ... to Chapter 7 actions").

     We note that this decision is controlled by the Bankruptcy

Code in effect prior to the 1994 amendments. Bankruptcy Reform Act
of 1994 § 702, Pub.L. No. 103-394, 108 Stat. 4106 (1994).
     AFFIRMED.