Be-Mac Transport Co., Inc., In re

• Decision Date: 16 May 1996
• Docket Number: BE-MAC,95-3251,Nos. 95-3249,s. 95-3249
• Citation: 83 F.3d 1020
• Parties: In reTRANSPORT COMPANY, INC., Debtor. FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. UNION ENTITIES, Appellant (Two Cases). FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. TRANSPORT COMPANY, INC., and the Plan Committee, Appellants. FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. TRANSPORT COMPANY, INC., Appellant. to 95-3253.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1020

83 F.3d 1020

29 Bankr.Ct.Dec. 69

In re BE-MAC TRANSPORT COMPANY, INC., Debtor.

FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. UNION ENTITIES, Appellant (Two Cases).

FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. BE-MAC TRANSPORT COMPANY, INC., and the Plan Committee, Appellants.

FEDERAL DEPOSIT INSURANCE CORPORATION, Appellee, v. BE-MAC TRANSPORT COMPANY, INC., Appellant.

Nos. 95-3249, 95-3251 to 95-3253.

United States Court of Appeals Eighth Circuit.

Submitted April 8, 1996.

Decided May 16, 1996.

A. Thomas DeWoskin, St. Louis, Missouri, argued for appellants Plan Committee and Be-Mac Transport, and Jan Bond, St. Louis, Missouri, argued for Union Entities.

J. Scott Watson, Washington, D.C., argued for appellee.

Before BOWMAN, BEAM, and MURPHY, Circuit Judges.

DIANA E. MURPHY, Circuit Judge.

Appellants claim that the district court ¹ erroneously reversed the bankruptcy court's decisions denying appellee, the Federal Deposit Insurance Corporation (FDIC), leave to file a second amended proof of claim and confirming a reorganization plan. The appellants are Be-Mac Transport Company, Inc. (Be-Mac), the debtor; the Plan Committee, supervisor of Be-Mac's activities; and the Union Entities, a creditor consisting of several unions and trust funds that represent many of Be-Mac's current employees and over 700 former employees. The FDIC is a Be-Mac creditor. We affirm the district court.

I.

In June 1989, Be-Mac received a series of loans from Metro North which were reflected in various Uniform Commercial Code (UCC) filings and loan documents. About a year later, in March 1990, Be-Mac received some secured loans from Congress Financial Corporation (CFC). Metro North participated in about $1.8 million of CFC's loan, and also subordinated to CFC about $1.8 million of its 1989 loans to Be-Mac. After Metro North became insolvent in November 1992, the FDIC was appointed receiver.

Be-Mac subsequently filed for Chapter 11 bankruptcy in January 1993. In its bankruptcy schedule, Be-Mac initially listed the FDIC as having an undisputed, secured, and unliquidated claim of $614,947.78. Be-Mac later amended its schedule to reflect that it disputed the FDIC's secured claim. The bankruptcy court set the claims bar date for August 10, 1993.

On June 18, 1993, the FDIC filed a timely initial proof of claim for a secured amount of $1,793,280.22 and an unsecured amount of $623,533.08. Attached to this claim were some fourteen documents, including those underlying the 1989 Metro North loans and the 1990 agreements between Metro North and CFC. In November 1993, CFC paid the FDIC approximately $1.8 million using some of the liquidation proceeds paid to it by Be-Mac. The FDIC then discovered that its original claim had incorrectly included an unsecured portion and that it should have listed its entire claim as secured.

Because of this discovery, the FDIC filed an amended proof of claim on November 22, 1993. On the claim form, the FDIC noted the $1,793,280.22 payment it had received from CFC, but stated that it was still owed $1,103,040.14 in principal and interest. In response to paragraph 4, which requested attachment of the writing on which the claim was founded, the FDIC wrote "See Attached." The FDIC attached a copy of the first page of the original claim form and a letter to the bankruptcy clerk requesting that the amended claim be filed. Paragraph 9 of the claim form stated that

No security interest is held for this claim except [If security interest in the property of the debtor is claimed] The undersigned claims the security interest under the writing referred to in paragraph 4 hereof....

The FDIC left this paragraph blank.

Following the filing of this amended proof of claim, the FDIC spoke on various occasions with Be-Mac about the nature of its claim. In December 1993, a FDIC credit specialist, Edward Campbell, explained to counsel for Be-Mac, Robert Sass, that the original claim form should have listed its entire claim as secured, and that the amended proof of claim represented the correct amount of its secured claim. Sass asked for supporting documentation. In February 1994, an FDIC attorney, Michael Kalkowski, called Sass and discussed the possibility of stipulating as to the correct amount of the FDIC's secured claim. Sass again asked for documentation, which was supplied sometime thereafter. Some two months later, in April, Sass called Kalkowski and stated that he would send him a letter with an offer to settle the claim. The promised letter arrived in June, stating that Sass had received the requested documents and proposing an offer of settlement. Sass and Kalkowski discussed the offer a few days later, but could not reach an agreement.

On June 30, 1994, Be-Mac and a committee of unsecured creditors filed a disclosure statement and joint plan of reorganization. The disclosure statement stated that

The Class 3.3 Secured Claim of the FDIC arises from the transactions among Be-Mac, Metro North, and Allen Musgrove described in Article II above, "History."

Although the FDIC originally filed a Proof of Claim in this Case with both secured and unsecured components, it subsequently filed an Amended Claim containing only an unsecured component. However, the FDIC has not released its lien on the Assets by terminating its UCC filings. Therefore, the Plan provides that Confirmation of the Plan constitutes a release of any lien in favor of the FDIC and a termination of any related UCC filings.

Accompanying this statement, the plan provided that "Class 3.3 shall consist of any Secured Claim of the FDIC" and that it would be treated as an unsecured claim, consistent with its amended proof of claim. The plan further stated that

All liens not expressly preserved by the terms of this Plan shall be deemed voided by the entry of the order confirming the Plan and all filing relating to said liens deemed released. All Creditors are precluded from asserting lien rights against the Assets, either in this case or in any other proceeding.

On November 7, 1994, the bankruptcy court approved an amended version of the plan and disclosure statement, which did not affect the provisions regarding the FDIC's claim, and scheduled a hearing for confirmation of the plan for December 12.

Shortly after the FDIC received a copy of the November plan and disclosure statement, it filed on November 25, 1994, a Motion for Leave to File Amended Proof of Claim, along with a second amended proof of claim. In its motion, the FDIC asserted that it had a $2,878,220.22 secured claim which represented the approximately $1.8 million of Metro North's participation in CFC's 1990 loan to Be-Mac, and the remaining $1 million which CFC had not yet repaid under the 1990 subordination agreement between CFC and Metro North. The purpose of the motion was to clarify the FDIC's status as a secured creditor for purposes of voting and distribution in the reorganization proceedings.

The bankruptcy court held a hearing on the FDIC's motion to file a second amended proof of claim on December 5, 1994. Counsel for FDIC explained that its motion was for an amendment to the amount of its secured claim, not a change from an unsecured to a secured claim. The appellants disagreed, arguing that the FDIC's first amended claim, filed in November 1993, only stated an unsecured claim, and that they had detrimentally relied on this status in drafting the reorganization plan. They urged the court to disallow the FDIC's untimely amendment. The bankruptcy court agreed, stating that "the FDIC waited just too long" to file its claim clarifying its secured status. The court entered a written order denying the FDIC's motion on December 8, 1994, stating that the FDIC's November 1993 amended claim was "allowed as a general unsecured claim in the amount of $1,080,940.78." The FDIC immediately filed a motion for reconsideration.

On December 14, 1994, the bankruptcy court held a hearing on the FDIC's motion for reconsideration and its objection to the plan. In the hearing on the reconsideration motion, the court told the FDIC counsel that it had denied leave to file a second amended claim because "you didn't seem to have a good reason to wait so long." Edward Campbell and Michael Kalkowski, the FDIC representatives who had worked on the case, then explained that they had discussed the FDIC's secured status with Be-Mac's counsel throughout the proceedings. The court recognized that the plan and disclosure statement unequivocally indicated that Be-Mac knew the FDIC was asserting a secured claim. It concluded, however, that both parties could have better clarified their positions throughout the proceeding. The court therefore denied the FDIC's motion for reconsideration. The FDIC then filed a notice of appeal in the district court from the orders denying its motion to file a second amended claim and denying its motion for reconsideration.

In the hearing on the confirmation of the plan that same day, the bankruptcy court stated that the FDIC's ballot as a secured creditor would be disregarded, and that only its ballot filed as an unsecured creditor would be counted for purposes of accepting or rejecting the plan. The FDIC's negative vote as an unsecured creditor was not enough to defeat the plan. ² The FDIC objected to the plan on the basis that its secured claim was improperly disallowed as untimely. The court overruled the objection and indicated its approval of the plan. It then issued an order confirming the plan on January 13, 1995, which stated that all the bankruptcy code requirements under 11 U.S.C. § 1129(a) had been satisfied. The FDIC timely filed a notice of appeal in the district court from the order confirming the plan.

The district court consolidated the FDIC's appeals, and reversed the bankruptcy court decisions on June 27, 1995. Citing 11 U.S.C. § 506(d) and Matter of Tarnow, 749 F.2d 464 (7th Cir.1984), the court held that a lien interest could not be...