In re Neighbors' Consejo, Case No. 15-00373
| Decision Date | 07 November 2019 |
| Docket Number | Case No. 15-00373 |
| Parties | In re NEIGHBORS' CONSEJO, Debtor. |
| Court | United States Bankruptcy Courts – District of Columbia Circuit |
Not for publication in West's Bankruptcy Reporter.
This sets aside my oral ruling at the hearing of October 22, 2019, on the debtor's Motion for Civil Contempt, seeking to hold Rafael Gil in civil contempt for violating the discharge injunction arising from the court's order confirming the debtor's First Amended Plan of Reorganization (the "Plan"). That oral ruling found Gil in civil contempt. Vacating that ruling is required because the debtor did not show that the confirmed Plan is binding on Gil even though he was well aware of the bankruptcy case. The debtor failed to present evidence at the hearing of October 22, 2019, that Gil was given notice of the confirmation hearing and of the order confirming the Plan. I erroneously assumed that Gil had received such notice, and did not require the debtor to prove that it had given Gil such notice. As explained below, lack of such notice likely would make the confirmed Plan not binding on Gil. However, the debtor was not given the opportunity to put on proof that Gil had such notice, and this decision does not adjudicate whether Gil had such notice.
The debtor filed a petition commencing this bankruptcy case on July 16, 2015. On July 24, 2019, Gil filed a complaint against the debtor in the U.S. District Court for the District of Columbia, commencing Civil Action No. 19-02197, and asserting claims of tortious conduct by the debtor in the period of September 2, 2014, through August 30, 2016, while Gil was with the debtor as a patient. In its Motion for Civil Contempt, the debtor contends that the filing of the complaint violated the discharge injunction arising upon the debtor's obtaining an order on January 25, 2018, confirming its Plan.
The debtor was a 501(c)(3) not-for-profit corporation founded to serve the homeless and persons diagnosed with substance abuse and mental health conditions. Beginning in September 2014, Gil sought treatment for alcoholism from the debtor and became an employee of the debtor, although Gil never sought employment. Gil stayed with the debtor until August 2016.
Gil knew that the debtor was going to go into bankruptcy,before the debtor filed for bankruptcy, and he received a packet, after the debtor had filed for bankruptcy, explaining the bankruptcy case, including that a meeting of creditors would be held, and notice of the deadline to file a proof of claim for any prepetition claim (that is, any claim arising prior to the commencement of the bankruptcy case). The debtor listed Gil's claim for wages as an unsecured claim entitled to priority under 11 U.S.C. § 507(a)(4) in the amount of $11,424.00, and that priority claim became an allowed claim by reason of Fed. R. Bankr. P. 3003(b)(1).
As noted previously, Gil's claims covered the period of September 2, 2014, through August 30, 2016, a period straddling the petition date of July 16, 2015. Gil never pursued in the Bankruptcy Court either his prepetition claim or his postpetition claim.
First, Gil never filed a proof of claim to assert any additional prepetition claim beyond the scheduled priority wage claim. Under Fed. R. Bankr. P. 3003(c)(2), Gil's failure timely to file a proof of claim resulted in his not being treated as a creditor with respect to any such additional prepetition claim for purposes of distribution.1 Gil never filed a motion underFed. R. Bankr. P. 3003 to allow him to file such a proof of claim out of time.
Second, Gil never filed a motion for the allowance of an administrative claim against the estate with respect to the part of his claims arising after the commencement of the bankruptcy case on July 16, 2015. The Plan provided for full payment of any Allowed Administrative Expense(s), defined to mean "all administrative expense(s) allowed under Sections 503(b) and 507(a)(1) of the Code." The Plan's reference to § 507(a)(1) was an error as the administrative claims allowed under § 503(b) in this case fit under 11 U.S.C. § 507(a)(2).2 In relevant part, 11 U.S.C. 503(b) provides that "[a]fter notice and a hearing, there shall be allowed administrative expenses, other than claims allowed under section 502(f) of this title," and Gil's claim is not a claim described in § 502(f). Necessarily, the requirement of "notice and a hearing" refers to the court within which the bankruptcy case is pending, here, the U.S. Bankruptcy Court for the District of Columbia. The Plan therefore contemplated that any administrative claim would be pursued in the BankruptcyCourt.3 Even if the discharge injunction arising from confirmation of the Plan applied to administrative expense claims, the Plan allowed pursuit in the Bankruptcy Court of such administrative expense claims.4 However, the Plan did not authorize the filing of an action elsewhere in pursuit of such discharged administrative expense claims (unless the claims were "referred" there).5 On January 25, 2018, the court confirmed the debtor's Plan. The Plan provided that all allowed prepetition claims, including Gil's allowed priority claim, would be paid in full. Gil's allowed priority claim for wages, in the $11,424.00 amount the debtor had scheduled, was paid pursuant to the Plan.
At the hearing of October 22, 2019, I assumed that thedebtor had given Gil, as a creditor participating in the case, notice of the confirmation hearing and of the order confirming the Plan, such that Gil was bound by the confirmed Plan. That might not be the case.
Gil acknowledged at the hearing of October 22, 2019, that he was aware of the bankruptcy case and had received notice of the bar date to file a proof of claim. He also acknowledged that he was aware that the debtor had proposed a reorganization plan. However, the filings in the bankruptcy case do not show that the debtor served on Gil a copy of the Plan and the court's order setting the confirmation hearing leading to the confirmed Plan.
A certificate of service (Dkt. No. 313) reveals that the debtor mailed to Gil, at 6323 Georgia Avenue, Suite 206, Washington, DC 20011, the order (Dkt. No. 302) setting a hearing of December 21, 2017, on the debtor's disclosure statement (Dkt. No. 287) regarding its original proposed plan (Dkt. No. 288). At the hearing of December 21, 2017, as noted by the Case Hearing Summary (Dkt. No. 344), the court held that changes had to be made to the debtor's original plan and to the disclosure statement, but indicated that the court would approve the forthcoming amended disclosure statement relating to the forthcoming amended plan. On December 22, 2017, the court entered an Order Approving Debtor's Forthcoming First Amended Disclosure Statement and Fixing Time for Filing Objections toConfirmation and for Filing Acceptances or Rejections of the Debtor's Forthcoming First Amended Plan Combined with Notice of Hearing on Confirmation of First Amended Plan (Dkt. No. 346). The debtor later filed the Plan (Dkt. No. 350) incorporating the required changes and a First Amended Disclosure Statement (Dkt. No. 349) (the "Disclosure Statement"). In relevant part, in approving the forthcoming Disclosure Statement, the court's Order:
On December 27, 2017, the debtor filed a Certificate of Service (Dkt. No. 351) reflecting that it had mailed the court's Order, the Disclosure Statement, the Plan, and a ballot for voting on the Plan to various creditors. The Certificate of Service does not list Gil as a creditor upon whom those documentswere served.
At the confirmation hearing, the debtor presented a tally of ballots showing that one creditor in Class 2 had accepted the Plan, with no creditors in Class 2 rejecting the Plan. Class 2 was a class of general unsecured claims (claims not entitled to priority over other unsecured claims), and was the class in which Gil's tort claims belonged. Class 2, which was an impaired class, was deemed to have accepted the Plan, thereby satisfying the requirement of 11 U.S.C. § 1129(a)(10) that at least one class of impaired claims have accepted the Plan. Had Gil cast a ballot rejecting the Plan, Class 2 would have been deemed under 11 U.S.C. § 1126(c) to have rejected the Plan. However, Gil could not have cast a ballot if he was unaware of the Plan and the right to vote on the Plan.
The court's order (Dkt. No. 372) confirming the Plan directed the debtor to serve that order on creditors. The debtor's Certificate of Service (Dkt. No. 375) does not reflect that it served the confirmation order on Gil. However, the debtor should be allowed to put on proof that it gave Gil notice of the confirmation hearing and of the order confirming the Plan.
In the District Court civil action, the debtor has not appeared or responded to Gil's complaint. The debtor reports that Gil has never properly served the complaint on the debtor. The debtor served its Motion for Civil Contempt on Gil on August22, 2019. Instead of withdrawing his complaint, Gil opposed the Motion for Civil Contempt. That led to the hearing of October 22, 2019. The court ruled that Gil was in civil contempt and continued the hearing to November 5, 2019, to determine whether Gil had purged himself of civil contempt. The debtor's counsel reported at the hearing of November 5, 2019, that Gil had dismissed...
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