In re Redondo Constr. Corp., CASE NO. 02-02887 (ESL)
| Decision Date | 08 April 2019 |
| Docket Number | CASE NO. 02-02887 (ESL) |
| Parties | IN RE: REDONDO CONSTRUCTION CORPORATION Debtor |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
IN RE: REDONDO CONSTRUCTION CORPORATION Debtor
CASE NO. 02-02887 (ESL)
UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO
April 8, 2019
CHAPTER 11
OPINION AND ORDER
This case is before the court upon Debtor's Position as to Overpayment to Lord under the 15% Footnote Provision of the Supplement to Plan of Reorganization at Docket No. 1017 filed by Redondo Construction Corporation (hereinafter referred to as the "Debtor" or "Redondo") and the Opposition to Debtor's Position as to Alleged Overpayment under the 15% Footnote Provision filed by Continental Lord, Inc. (hereinafter referred to as "CLI" or "Lord") (Docket Nos. 2627 & 2629) and the reply and sur reply regarding this issue which were subsequently filed by the Debtor and Lord (Docket Nos. 2636, 2643). In addition, before the court is Remodelco, Inc.'s Motion to Join Continental Lord's Motion (Docket No. 2559) and Requesting Reopening of Chapter 11 Case under 11 U.S.C. §350(b) and the Debtor's Objection to Remodelco's Claim for Interest Payment (Docket No. 2644). Also, before the court is the Debtor's Renewed Objection to Reopening of the Case upon Recent Arguments Presented by Lord at Docket 2643 (Docket No. 2645) and Lord's opposition (Docket No. 2647). For the reasons stated below, the court denies Debtor's Position as to Overpayment to Lord Under the 15% Footnote Provision of the Supplement to Plan of Reorganization at Docket No. 1017 (Docket No. 2627) and grants in part and denies in part, Lord's Opposition to Debtor's Position as to Alleged Overpayment Under the 15% Footnote Provision (Docket No. 2629). The court denies Debtor's Objection to Remodelco's Claim for Interest Payment (Docket No. 2644). The court denies Debtor's Renewed
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Objection to Reopening of the Case Upon Recent Arguments Presented by Lord at Dkt. 2643 (Docket No. 2645).
The court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core proceeding pursuant to 28 U.S.C. §157(b)(1) and (b)(2)(A). Venue of this proceeding is proper under 28 U.S.C. §§ 1408 and 1409.
The travel of this particular case is not only extensive but convoluted. On June 13, 2017, the court, as part of its Order Clarifying Nature of Hearing (Docket No. 2614) included the procedural background regarding the issue of Lord's pass-through claim and the treatment that this pass-through claim has been afforded by the Debtor throughout the bankruptcy case and in adversary proceeding 03-00194. The court incorporates said procedural background in order to better understand this particular issue, the context that the same has in relation to the history of the case, and its relationship with the adversary proceeding. In order to better understand a case or a story, the same must be told from the very beginning. This is the procedural background that was included in the above referenced Order:
"The Debtor filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code on March 19, 2002. On June 18, 2002, Lord filed claim #139-1 for construction contracts performed on May 28, 1990- March 31, 2001 in the amount of $2,632,614.53. Lord's claim was filed as an unsecured claim. On December 23, 2003, the Debtor filed an adversary proceeding against the Puerto Rico Highway Authority ("PRHA") for recovery of monies and property for extra work orders for the PR 2 Mayaguez project in the total amount of $9,211,902.67, of which $1,831,085 was allocated to claims of subcontractors, and $3,985,499.95 was allocated to interest from November 1999 to November 30, 2003 (Adversary proceeding No. 03-00194, Dkt #1, pg. 5). On August 26, 2005, the Debtor filed Objections to Claims in which it included Lord's claim as part of a spreadsheet in which it disclosed that the amount expected to be allowed was in the amount of $131,273 and the amount disallowed was $2,501,341 (Docket No. 1119). On October 6, 2005, the Court granted the Debtor's objections to the claims to which no opposition had been filed (Docket No. 1210).
On October 6, 2005, the Court confirmed the Debtor's Chapter 11 Plan of Reorganization (Docket No. 879), which was supplemented on February 17, 2005 (Docket No. 1017), and further amended on September 30, 2005 (Docket No.
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1180) (Docket No. 1209). The Debtor also filed a Supplement to First Amended Disclosure Statement amending Exhibit C which is a list of the proof of claims filed against Debtor, in particular the amount expected to be allowed for Continental Lord's claim was amended to $157,509.15 (Docket No. 1016). The Debtor's Plan of Reorganization had 10 classes of claims. Class 8 consisted of the allowed general unsecured claims, which were estimated in the amount of $24,345,650 (Docket No. 879, pgs. 17, 51-52). The amended distribution of the claimants of Class 8 was as follows, "[h]olders of [a]llowed [g]eneral [u]nsecured [c]laims shall receive their pro-rata share of the funds available for distribution from the Litigation Trust, plus interest at the rate of two percent (2%) per annum from the Confirmation Date until full payment of their claims, plus interest at the rate of one percent (1%) per annum for the period from the Petition Date to the Confirmation Date; it being understood that after the realization of Debtor's Claims and Causes of Action the Litigation Trust Board of Supervisors will conduct an evaluation of the resulting proceeds and depending on the available balance to Equity Holders will decide if an additional one percent (1%) in interest is to be paid for the period from the Petition Date to the Confirmation Date as provided in Section 5.6 below, provided that under no circumstances shall the holders of Allowed General Unsecured Claims against Debtor receive in excess of 100% of the amount of such holders' Allowed General Unsecured Claims. Any such excess recoveries shall revest in Debtor or the Reorganized Debtor. Class 8 claims will be paid within two (2) years from the Effective Date" (Docket No. 1017, Exhibit A). Retention of Jurisdiction is covered by Article XI1 of the Plan (Docket No. 879, pgs. 68-69).
As part of its Plan of Reorganization, the Debtor filed its Proof of Claims Reconciliation (Docket No. 879, Exhibit C) in which it listed Lord's claim in the amount of $2,632,615 and the expected amount to be allowed of $131,273. It also listed BBV- Argentaria's claim #107 in the amount of $2,732,178 and the expected
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amount to be allowed is listed as -- which is $0. Desarrolladora Piloto, S.E. bought BBV's proof of claim #107 (Docket Nos. 302, 317). On October 5, 2005, Desarrolladora Piloto, S.E. filed its ballot accepting the Debtor's Plan (Docket no. 1198). On October 10, 2005, Desarrolladora Piloto, S.E. bought General Electric Capital Corporation's claim #192 which was amended on June 30, 2004 (proof of claim #287) (Docket No. 1224; See also Docket Nos. 1313, 1344, 1385 and 1660). Pursuant to the Debtor's proof of claims reconciliation, General Electric Capital Corp of PR's claim #192 is listed in the amount of $14,406,305 and the expected amount to be allowed is - which is $0. The claims reconciliation schedule also lists GE Capital claim #287 in the amount of $2,704,007 and the expected amount allowed is $592,765 (Docket No. 879, pg. 244). Exhibit F of the Plan of Reorganization includes a Proof of Claims Reconciliation which lists the amount of $5,782,836 expected to be allowed for claimant Desarrollo Piloto, S.E. (Docket No. 879, pg. 264). The Plan's supplement also included an amended Estate's Claims and Causes of Actions which forms part of the Schedule of Plan Documents. The PR-2 Mayaguez project is included as part of the Estate's claims and causes of action. There is a footnote 1 next to the PR-2 Mayaguez project that reads as follows: "[a]s per an agreement of August 15, 1994, as amended, with Continental Lord, Inc. ("CLI"), CLI is entitled to a 15% pass through from the recovery by Debtor, less proportioned expenses" (Docket No. 1017).
Subsequently, in the adversary proceedings, the Plaintiff/Debtor filed its Post-Trial Memorandum on November 9, 2007 and provided a summary as to the PR-2 Mayaguez project (Adversary proceedings #03-00192, 03-00194, 00195, Docket No. 145, pgs. 9-24, Docket No. 115, and Docket No. 112). The Plaintiff in its post-trial memorandum states that, "Lord's and Remodelco's claims against RCC are included in Joint Ex 41, in accordance to Section 109.04 of the Blue Book. They are the only two subcontractors with claims (EX 68)(Tr. Of 2/14/07, pp. 658-659, 668-691; Tr. Of 7/02/07, pp. 1242-1243)" (Adversary proceeding No. 03-00192, Docket No. 145, pg. 17-18). The Debtor/Plaintiff breaks down the amounts owed by the PRHA for the PR-2 Mayaguez project and includes a line item for Claims for subcontractors for Lord in the amount of $1,746,085 and for Remodelco in the amount of $85,000 for a total of $1,831,085 (Adversary proceeding, Docket No. 145, pgs. 20-21). The claims of subcontractors are included as part of the total claim values of $11,565,959.94 which is the figure used to calculate the interest amount of $4,621,947.72. The Plaintiff/Debtor concludes that, "[n]otwithstading RCC's demands for the amounts owed thereto and its two subcontractors under the contract, PRHA to date, more than 13 years after the substantial completion of the project, is still to proceed with its liquidation and as a consequence, has failed to pay RCC the items claimed to be due under the contract" (Adversary proceeding No. 03-00192, Docket No. 145, pgs. 24).
The final decree was entered on August 29, 2008 (Docket Nos. 1799, 1964, 1965). Litigation continued for various years as to these adversary proceedings; namely, 03-00192, 03-00194 and 03-00195. On July 12, 2012, the Litigation Trust paid Lord's "pass through claim" of $1,746,085 (the principal amount) and rendered a check to Lord in the amount of $1,395,381 after deducting legal fees and
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administrative expenses (Docket No. 2559,...
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