In re Gloria Mfg. Corp.
| Decision Date | 20 August 1985 |
| Docket Number | Civ. A. No. 85-59-NN,85-66-NN and 85-67-NN.,Bankruptcy No. 81-00596-NN |
| Parties | In re GLORIA MANUFACTURING CORPORATION, Debtor. Ronald E. BENSTEN, Trustee, Appellant, v. Edward G. GRANT, Appellee. ILGWU INTERNATIONAL and Upper South Department, Appellant, v. Ronald E. BENSTEN, Appellee. UNITED STATES of America, Appellant, v. Edward G. GRANT and Ronald E. Bensten, Appellee. |
| Court | U.S. District Court — Eastern District of Virginia |
Marc E. Richards, New York City, for ILGWU, etc.
Ronald E. Bensten, Newport News, Va., for Bensten.
David H. Adams, Norfolk, Va., for Grant.
Raymond A. Jackson, Asst. U.S. Atty., Norfolk, Va., for U.S.
On December 11, 1981, Gloria Manufacturing Corporation (Gloria) filed for relief under Chapter 11 of the Bankruptcy Act, 11 U.S.C. § 1101 et seq. Gloria was situated in Newport News, Virginia, and was engaged in the business of a garment manufacturer and processor. On May 28, 1982, Edward G. Grant (Grant) was appointed as Trustee. The debtor continued to operate the business under Chapter 11 until February 28, 1983, when the Chapter 11 proceedings were converted into a Chapter 7 proceedings. The continued operation of the business thus permitted it to be later sold as a going concern.
During the time of the operation by Grant, as Trustee, when the weekly payrolls for the employees at the plant for the weeks ending December 3 and December 10 became due, there were no funds with which to pay them. The Trustee did not learn of this fact until time to make up the payroll and pay the employees. He advanced funds totaling $46,479.45, of which $10,000.00 was shortly thereafter returned to him. It had been expected that the balance would be forthcoming quickly. When the additional sum was not promptly returned, Grant took steps to have his claim established as one prior to other claims or expenses. He asserted that the urgent need of funds to meet the payroll, and lack of time, prevented him from first making an application to the Court to have such advance and loan given approval, as provided for in section 364(c) of the Bankruptcy Act, 11 U.S.C. § 364(c).1 Before the balance of the advance or loan was repaid, the bankruptcy action was converted to a Chapter 7 Proceedings, 11 U.S.C. § 701 et seq. Thereafter, in April 1983, Grant applied to the Court for an order granting him priority on his loan over any and all other sums, as permitted by and in accordance with 11 U.S.C. § 364(c).2 Pursuant to notice and hearing, the Bankruptcy Court by order of April 22, 1983, granted the motion, limiting the priority of the claim "only to allowed administrative expenses in the Chapter 7 proceedings." The language of the order set forth:
ADJUDGED, ORDERED and DECREED that the balance due Edward G. Grant, the Chapter 11 Trustee, of $36,479.45, without interest, is allowed as an Administrative Expense of the Chapter 11 Proceedings had herein, as the same were actual and necessary costs and expenses of preserving the estate, and which are subordinated only to allowed Administrative Expenses in these Chapter 7 Proceedings . . . (emphasis added)
No appeal was taken from that order, although the ILGWU International and Upper South Department (Union) and the Chapter 7 Trustee were present, and all others had been given notice of the hearing. The order provided that the sum was allowed without interest. By application filed July 18, 1983, Grant sought an order directing the Chapter 7 Trustee to immediately make payment of his claim of $36,479.45. Following notice and a hearing held August 12, 1983, attended by the Chapter 7 Trustee and the attorney for the debtor, the Bankruptcy Court declined to order immediate payment, because, as its minute shows:
When payment was not immediately directed, Grant filed a motion for allowance of interest on the loan. By order of September 20, 1983, the Court provided that the $36,479.45 claim should bear interest from April 22, 1983, at 12 percent per annum.
On February 7, 1985, Grant again filed a petition for an order directing the Chapter 7 Trustee to immediately make payment to him of his claim of $36,479.45, with interest, as having a priority over other administrative expenses in the Chapter 11 proceedings. In addition, Grant set forth that there was due to him for compensation as Trustee $14,321.70 and reimbursement expenses of $1,236.24. The application further set forth that there were sufficient funds in the hands of the Chapter 7 Trustee, after paying the Chapter 7 administrative expenses, to pay said sums. At a hearing on said application held March 15, 1985, after notice, the Court by order entered March 22, 1985, directed the Chapter 7 Trustee to forthwith pay to Grant the sums allowed him by the orders of April 22 and September 20, 1983. But, the order did not direct payment of the compensation and expense reimbursement sums. As to the order of March 22, 1985, the Chapter 7 Trustee, the United States,3 and Union appealed. The United States also filed a motion for the Bankruptcy Court to reconsider its order. By order of April 10, 1985, the Bankruptcy Court denied the motion to reconsider; affirmed its granting of the priority permitted by § 364(c); and set forth that Grant was entitled to the § 364(c) priority and it had been the intention of the Court to grant such a priority in 1983. To the appeals, Grant filed a motion to dismiss, asserting the orders of March 22 and April 10, 1985 were not final orders, and therefore not appealable orders; that they merely directed the performance of a ministerial act; and that the time within which an appeal could be taken from the orders of April 22 and September 20, 1983 had long passed. Appellants asserted that the orders of March 22 and April 10, 1985 established Grant's claim as a prior claim under § 364(c), which the orders of 1983 had not done; and that the 1983 orders merely classified Grant's claim as an administrative expense in the Chapter 11 proceedings. The Court, by order and opinion of July 17, 1985, denied the motion to dismiss, finding that the appeal was from the orders of 1985. The Court did not reach the issue of whether the appeal sought to challenge the 1983 orders at that time. The parties were then directed to file briefs and the matter was scheduled for a hearing.
Grant contends that the Bankruptcy Court by its orders of April 22 and September 20, 1983 granted his claim priority over all administrative expenses, demands or claims in the Chapter 7 and Chapter 11 proceedings, except the administrative expenses of the Chapter 7 proceedings; that the allowance of his claim was in accordance with and as provided for by 11 U.S.C. § 364(c); and that when the time for appeal from those two orders had passed, the findings became final and binding. Appellants assert that the language of the 1983 orders does not grant the priority allowed by § 364(c) and that the order merely provided that the claim of Grant was to be considered as a part of the regular Chapter 11 administrative expenses as provided for in 11 U.S.C. § 503(b)(1)(A), to share pro rata with the other administrative expenses, including the claims of the United States for taxes incurred by the bankrupt estate.4 Further, appellants assert that the Bankruptcy Court did not give the notice and hold the hearing as required by § 364(c) prior to the making of the loan or advance.
If, in fact, the language of the orders of April and September, 1983 do give and grant the priority permitted under § 364(c) to the claim of Grant, then that determination is final and binding on appellants and all other parties and any attempt to now appeal the grant of priority is not timely. That is, if the orders of 1983 do establish the claim as having the priority permitted by § 364(c), then this appeal from the order of March 22, 1985 cannot challenge the grant of priority provided for in the 1983 orders. However, if the orders of 1983 were not effective in establishing the § 364(c) priority, then the issue of whether the Bankruptcy Court erred in granting such a priority by the March 22nd and April 10, 1985 orders is the proper issue before the Court.
Rule 8001 of the Bankruptcy Rules provides for an appeal, as of right, from a final judgment, order, or decree of a bankruptcy judge to the district court by the filing of notice. Rule 8002 requires that the notice of appeal shall be filed with the Clerk of the Bankruptcy Court within 10 days of the date of the entry of the judgment, order, or decree appealed from. Paragraph (c) of Rule 8002 gives the Bankruptcy Court the authority to extend the time for filing the notice of appeal for a period not to exceed 20 days from the expiration of the time otherwise provided by the Rule. The rule "makes clear that compliance with the filing requirement is an absolute prerequisite to the district court's jurisdiction to hear the appeal." In the Matter of Colorado Energy Supply, Inc. v. Price, 728 F.2d 1283, 1285 (10th Cir.1984); Union Trust & Savings Bank v. Jasperson, 37 B.R. 956 (N.D. Iowa 1984); Re: Soter, 31 B.R. 986 (D.C.Vt.1983).
As is often the case, had the order of April 22, 1983 used the language of 11 U.S.C. § 364(c), or if the order had set forth in undeniable language that the claim was granted the priority permitted by § 364(c), the question would be at an end. Grant says that the record, the language of the order as used, and all that has heretofore transpired makes it clear that the Bankruptcy Court intended to and did in fact allow the claim with the priority provided for by § 364(c). Appellants say otherwise. They argue that the 1983 orders only allowed the Grant claim as an administrative expense, to share with other administrative expense claims in the Chapter 11 proceedings.
Appellants...
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