DEBTOR CASE NO. 91-21031





This matter is before the Court on the debtor's Objection to Claim No. 962 of the Commonwealth of Pennsylvania ("Pennsylvania"), filed herein on October 19, 1992. This Court had, on June 10, 1992, entered an Order Sustaining Objection of the Debtor and Debtor in Possession to Secured Claim Number 962 (Pennsylvania Department of Revenue). This Order disallowed Pennsylvania's claim against the debtor as a secured claim and reserved the debtor's right to object to determine the allowed amount of Pennsylvania's unsecured claim.

Pennsylvania has responded to the objection, and, upon the Court's Order of February 12, 1993, has provided further documentation of its claim. The debtor responded with documentation in support of its position in this matter as well. Pennsylvania filed a Replication to the Debtor's Response on April 30, 1993. The debtor filed an Amended Motion to Strike Replication Filed by the Commonwealth of Pennsylvania in Relation to Objection to Claim No. 962 and 1376 on June 4, 1993.

Pennsylvania's claim is for corporate, withholding and sales taxes in the total amount of $12,559.37. The debtor maintains that all amounts due were paid and that it owes Pennsylvania nothing further. The largest component of Pennsylvania's claim is for withholding taxes in the amount of $7,516.27 (the amount stated in the Replication is $7515.80). The debtor has submitted in response to this aspect of the claim copies of an "Employer Withholding Statement of Account" dated June 27, 1990, provided by Pennsylvania, and a cancelled check.

The amounts shown on this statement of account for taxes and penalties through the last quarter of 1989 appear to be the same as those on the print-out dated February 25, 1993, submitted by Pennsylvania as proof of the amount owed. The interest amounts on the Pennsylvania print-out are higher. The debtor states that in response to the statement of account it tendered the above-referenced check dated February 1, 1991, in the amount of $9,627.33 to "Pa. Department of Revenue Withholding Tax". The copy of the check shows that it was honored on February 16, 1991.

The statement of account shows that the debtor's account balance after the fourth quarter of 1989 was $6,905.03. The debtor cannot explain why it tendered a check for $2722.30 more than that account balance, but surmises that the surplus was for amounts owed through the last quarter of 1990 which, it states, were included in the payment. In response, Pennsylvania states in its "Replication" that the $9,627.33 was mistakenly returned to the debtor as a refund in the amount of $9,431.95 ($9,627.33-$195.38 backed out for the 1/31/91 period). Pennsylvania has provided a copy of that refund check which shows that it was deposited by the debtor on or about January 13, 1992. The debtor's Amended Motion to Strike points out that Claim No. 962 was filed prior to the date the refund check was issued.

As concerns the sales and corporate taxes, Pennsylvania claims that the debtor owes $1290.10 in sales taxes and $3,753.00 in corporate taxes. The debtor states that it paid $25,168.14 in sales tax, penalties and interest in June 1990 for taxes due from May 1987 through March 1990. The debtor further states that it paid corporate taxes due in the amount of $2,437.00 for the tax year ending June 30, 1987 which was last due without penalty on March 15, 1988. (See March 31, 1993 Affidavit of Dennis Smith, former controller of the debtor).

Pennsylvania admits that the debtor paid the above-referenced $2,437.00 for Midwest United Corporation, but did not file its own report for the subject period. Pennsylvania states, and its records show, that the debtor merged into Midwest United Corporation on October 23, 1986, and that Midwest United Corporation changed its name to Midwest Communications Corporations. Pennsylvania states that the former Midwest never filed a final report from July 1, 1986 to the date of merger. Pennsylvania therefore informed the debtor by letter dated July 28, 1989, that it must file a single Pennsylvania corporation tax report consisting of a "Last Report" up to the date of merger and an amended "First Report" for Midwest United Corporation.

The burden of proof for claims brought under 11 U.S.C. '502(a) initially rests on the claimant, who must allege facts sufficient to support the claim. If this standard of sufficiency is met, the filed claim is considered prima facie valid. The burden of going forward then shifts to the objecting party "to produce evidence sufficient to negate the prima facie validity of the filed claim". In re Allegheny Intern., Inc., 954 F.2d 167 (3rd Cir. 1992), at 173. In this matter, the debtor has not produced evidence sufficient to negate Pennsylvania's unsecured claim for withholding, corporate and sales taxes. It is therefore the opinion of this Court that the debtor owes a total of $12,559.37 claimed for withholding, corporate and sales taxes.

In consideration of all of the foregoing, it is therefore the opinion of this Court that the debtor's Objection to Claim No. 962 of the Commonwealth of Pennsylvania should be overuled. An order in conformity with this opinion will be entered separately.


By the Court -







Copies to:


Arnold A. Barnabei, Esq.

Margaret W. Burgin, Esq.

U.S. Trustee