In re Git-N-Go, Inc., 04-10509-R.

• Citation: 322 B.R. 164
• Decision Date: 23 November 2004
• Docket Number: No. 04-10509-R.,04-10509-R.
• Parties: In re GIT-N-GO, INC., Debtor In Possession.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Northern District of Oklahoma

322 B.R. 164

In re GIT-N-GO, INC., Debtor In Possession.

No. 04-10509-R.

United States Bankruptcy Court, N.D. Oklahoma.

November 23, 2004.

COPYRIGHT MATERIAL OMITTED

John David Dale, Jeffrey D. Hassell, Sidney K. Swinson, Gable & Gotwals, Tulsa, OK, for Debtor.

Leslie Rickets, Michael McBride, Michael McMahan, J. Michael McBride, P.C, Fort Worth, TX, for Movant.

ORDER DENYING MOTION BY BRINK'S, INCORPORATED FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE PRIORITY CLAIM

DANA L. RASURE, Bankruptcy Judge.

Before the Court is the Motion by Brink's, Incorporated for Allowance and Payment of Administrative Priority Claim, filed on September 16, 2004 (Doc. 962) (the "Motion"); Debtor-in-Possession's Objection to Motion of Brink's, Incorporated for Allowance and Payment of Administrative Priority Claim, filed on October 6, 2004 (Doc. 990) (the "GNG Objection"); and the Objection of The F & M Bank and Trust Company to Motion for Administrative Claim by Brink's Incorporated, filed on October 8, 2004 (Doc. 992) (the "F & M Objection").

An evidentiary hearing was held on November 10, 2004, at which Brink's Incorporated ("Brink's") appeared through its counsel, Leslie Ricketts; the Debtor-in-Possession, Git-N-Go, Inc. ("GNG"), appeared through its counsel, Sidney Swinson; and The F & M Bank and Trust Company ("F & M") appeared through its counsel, J Schaad Titus.

Upon consideration of the record in this case, the pleadings, the testimony and documentary evidence admitted at the hearing, arguments of counsel and applicable law, the Court finds and concludes as follows:

I. Jurisdiction

The Court has jurisdiction of this "core" proceeding by virtue of 28 U.S.C. §§ 1334, 157(a), and 157(b)(2)(A), (B), (M), and (O); and Miscellaneous Order No. 128 of the United States District Court for the Northern District of Oklahoma: Order of Referral of Bankruptcy Cases effective July 10,1984, as amended.

II. Contentions of the parties

Brink's contends that GNG and Brink's entered into a postpetition one-year contract for security services and that GNG breached the contract by terminating it prior to the expiration of its term and by failing to pay the remaining installments when due. Brink's contends that GNG owes Brink's $117,256.00 for the unpaid balance of the contract. Brink's further argues that because the contract was entered into postpetition, damages for its breach constitute an administrative expense pursuant to 11 U.S.C. § 503(b)(1)(A) which is entitled to priority in payment by virtue of 11 U.S.C. § 507(a)(1).

GNG concedes that it entered into the postpetition contract with Brink's, but asserts that the transaction was outside the ordinary course of business and constituted a compromise. Because the contract was not presented to the Court and parties in interest for consideration and approval pursuant to 11 U.S.C. § 363(b) or Bankruptcy Rule 9019, GNG contends that it is unenforceable. In addition, GNG argues that because Brink's did not provide any services to the estate after GNG terminated the contract, Brink's claim is not an "actual, necessary cost and expense of preserving the estate" and therefore does not qualify as an administrative expense under 11 U.S.C. § 503(b)(1)(A). GNG also disputes the amount of the claim, contending that Brink's calculation of damages is not supported by contract law.

F & M joins GNG in arguing that the contract is not enforceable and does not benefit the estate, and also contends that the estate has no unencumbered cash from which to pay Brink's claim. F & M specifically objects to the payment of Brink's claim from F & M's cash collateral because F & M has not consented to such use of its cash collateral, nor has the Court approved of such a use in a cash collateral order.

III. Findings of fact

The Court finds that notice of the Motion and the hearing were appropriate.

On January 30, 2004, GNG filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the "Petition Date"). For a period of fifteen to seventeen years prior to the Petition Date, Brink's provided armored transportation services to GNG under various written contracts. These services included transporting cash of up to $25,000 from each of GNG's convenience stores to GNG's designated banks on a daily basis. Brink's provides similar services to other convenience store chains.

On October 5, 2000, GNG and Brink's entered into a contract, effective November 1, 2000, for a three year term and "thereafter from year to year until cancelled, by either party, on thirty days written notice prior to any anniversary date hereof." Brink's Exhibit 3 (the "2000 Agreement"). The 2000 Agreement, in which Brink's agreed to provide armored transport services to approximately fifty of GNG's convenience stores in the Tulsa metropolitan area, superseded and canceled a prior contract between the parties dated November 1, 1997. The parties refer to the stores within the Tulsa metropolitan area as "Tulsa metro locations." The parties agree that the 2000 Agreement expired by its terms on or about November 1, 2003, and that as of the Petition Date, GNG did not have a contract with Brink's to service its Tulsa metro locations.

On May 31, 2001, GNG and Brink's entered into a contract, effective June 13, 2001, in which Brink's agreed to provide armored transport services to twenty-one of GNG's convenience stores that were located outside the Tulsa metropolitan area. Brink's Exhibit 2 (the "2001 Agreement"). The parties refer to these stores as "over the road locations." The contract indicated that it was a "NEW" contract that did not supersede or cancel any prior contract. The 2001 Agreement was to be effective for a period of three years "and thereafter from year to year until cancelled, by either party, on thirty days written notice prior to any anniversary date hereof." As of the Petition Date, the 2001 Agreement was in its third year and would not expire until June 13, 2004. Under the 2001 Agreement, Brink's was permitted to charge $580 to $690 per month for servicing each over the road location in the third year, for a total of $12,730 per month. As of the Petition Date, GNG had not paid the January 2004 installment and the total of the monthly installments remaining under the 2001 Agreement was $57,285.¹

On or about April 11, 2003, GNG entered into a contract with Loomis, Fargo & Co. ("Loomis") to provide armored transport services to seventy-eight stores (including both Tulsa metro and over the road locations) beginning December 1, 2003 and continuing for a term of two years (the "Loomis Contract"). Some of the over the road locations were the same stores Brink's was under contract to service through June 2004 pursuant to the 2001 Agreement. Loomis serviced the Tulsa metro and the over the road locations ² from December 1, 2003 until its contract was rejected by GNG in March 2004.

In February 2004, GNG's chief restructuring officer instructed GNG's president, Ron Ford, to obtain new bids from Brink's and Loomis for postpetition armored transport services because GNG intended to reject the 2001 Agreement and the Loomis Contract. On February 18, 2004, approximately three weeks after the Petition Date, Ron Ford negotiated and executed a services agreement with Brink's, in which Brink's agreed to provide armored transport services to GNG beginning on March 1, 2004 and continuing "for a period of one year and thereafter from year to year until cancelled, by either party, on thirty (30) days written notice prior to any anniversary date hereof." Brink's Exhibit 1 (the "2004 Agreement"). Having been advised that GNG had or would reject the 2001 Agreement, Brink's agreed to provide services going forward under the terms of the new agreement. The 2004 Agreement specifically states that it supersedes and cancels the 2000 Agreement (which had already expired). The 2004 Agreement also provides—

This Agreement and the applicable Schedules, exhibits, attachments and/or riders that are incorporated herein by reference, all as may be amended from time to time, constitute the entire agreement between Customer and Brink's with respect to the subject matter hereof and supersede and cancel any and all prior and/or contemporaneous offers, negotiations, promises, exceptions and understandings, whether oral or written, express or implied between the parties. This Agreement may be altered, amended or superceded in writing signed by the parties or by an executed oral agreement, unless otherwise specified herein.

Brink's Exhibit 1, ¶ X(6) (emphasis added). Thus, although the parties did not specifically discuss "settling" or "compromising" the 2001 Agreement, Brink's form of contract had the effect of canceling and superseding the 2001 Agreement as of March 1, 2004.

On March 11, 2004, GNG filed a motion to reject the Loomis Contract and a Brink's contract dated May 31, 2003 (which the parties agree was the 2001 Agreement) and the motion was granted on March 30, 2004. GNG Exhibits 4 and 5. It is undisputed that after the Loomis Contract was rejected, GNG expected Brink's to provide all armored transport services to GNG at the rates and on the terms set forth in the 2004 Agreement for as long as such services were necessary.

In the 2004 Agreement, Brink's agreed to provide services to twenty-two Tulsa metro locations and to eighteen over the road locations.³ For transporting money from the stores to GNG's designated bank, Brink's agreed to charge a monthly fee of $260 to $312 for each Tulsa metro location and $425 for each over the road location. Brink's also agreed to charge a monthly fee of $195 for transporting "paperwork, payroll, reports, VCR tapes" from a designated office to GNG's headquarters five days a week. GNG's monthly obligation under the 2004 Agreement was $14,657. Brink's relied upon GNG's chapter 11 status in bidding on and entering into the 2004 Agreement, believing that GNG's obligations under the contract would be...