In re Redondo Construction Corporation, BAP NO. PR 07-051 (B.A.P. 1st Cir. 12/18/2007)
| Decision Date | 18 December 2007 |
| Docket Number | Adversary Proceeding No. 02-00113-GAC.,BAP NO. PR 07-051.,Bankruptcy Case No. 02-02887-GAC. |
| Parties | REDONDO CONSTRUCTION CORPORATION, Debtor. BONNEVILLE CONSTRUCTION, S.E., Appellant, v. PUERTO RICO HIGHWAY AUTHORITY, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
Appeal from the United States Bankruptcy Court for the District of Puerto Rico (Hon. Gerardo A. Carlo, U.S. Bankruptcy Judge)
Before Hillman, Feeney & Kornreich, United States Bankruptcy Appellate Panel Judges.
Pedro A. López Onna Esq., on brief for the Appellant.
Luís A. Rivera-Cabrera, Esq. and Maria del Pilar García-Incera Esq., on brief for the Appellee.
Appellant Bonneville Construction S.E. ("Bonneville") appeals the order denying its request to intervene in the adversary proceeding which the debtor, Redondo Construction Corporation ("Redondo"), brought against appellee, Puerto Rico Highway Authority (the "Authority"), and the order denying reconsideration of that ruling. For the reasons set forth below, the Panel AFFIRMS both orders.
Redondo filed a Chapter 11 petition on March 19, 2002. On September 6, 2002, Redondo filed a complaint commencing an adversary proceeding against the Authority (the "Complaint"). In the Complaint, Redondo alleged that it had entered into six construction contracts with the Authority which it had completed and sought compensation for the alleged damages it incurred as a result of "major cardinal changes to the projects." In its Answer to the Complaint, the Authority denied liability for sums due under the contracts.
One of the contracts that Redondo identified was Contract AC-019916-Ave. Las Cumbres-El Capa ("the Contract") under which Redondo was to construct a roadway in exchange for payment of $6,182,000. Although in the Complaint Redondo claimed to have attached a copy of the Contract at Exhibit 4, that exhibit is a letter from Bonneville to the Authority seeking compensation for extra costs and damages. In the Complaint Redondo listed its claim under the Contract as $5,644,638.66. It included in the calculation of that amount a "Sub Contractor Claim" of $269,632.45.
The docket in the Adversary Proceeding reflects considerable delay. The Authority disputed the bankruptcy court's jurisdiction over the matter and the parties failed to comply with discovery requests and orders. In March, 2006, Redondo moved to waive one of the six contract claims and sever another until a later date; the Authority objected. The bankruptcy court issued an order granting the waiver request and denying the request to sever. Consistent with this order, the bankruptcy court entered partial judgment with respect to the waived claim.
Also in March, 2006, the parties submitted their Proposed Pre-Trial Order. In the Pre-Trial Statement, the parties devoted five pages to a discussion of the Contract. In the itemization Redondo provided regarding its claim under the Contract, it included Bonneville's claim for $269,632.45. The Pre-Trial Statement also contained thirty-five, one-sentence paragraphs of admitted facts regarding the Contract. In the Pre-Trial Statement, the Authority represented that one of its contested issues of fact was "[w]ith respect to [Redondo's] claims for subcontractor costs, whether [Redondo] was paid previously in whole or in part in respect of such claims." Redondo explained that it was submitting approximately 30 exhibits regarding the Contract, two of which were exhibits relating to Bonneville's claims. It was clear from the reservations in the Pre-Trial Statement that the parties had not completed discovery at that time. Thereafter, the parties engaged in further discovery disputes which resulted in an order in mid-September, 2006 in which the bankruptcy judge denied a motion in limine and admonished counsel to behave cordially and ethically.
On November 21, 2006, the bankruptcy judge held a hearing regarding, inter alia, scheduling the trial. The transcript of the hearing reflects Redondo's representation that, at trial, one of its expert witnesses was going to provide testimony regarding the Contract. No party mentioned the status of Bonneville's claim. On November 26, 2006, Redondo filed its Motion Amending Plaintiff's Part of the Pre Trial Report which motion did not address the issue of the Contract.
Trial commenced on November 27, 2006. On November 30, 2006, as the trial transcript reflects, Redondo reported to the bankruptcy court that it was not presenting any evidence regarding Bonneville's claim as shortly before the trial Redondo had asked Bonneville to hire counsel and intervene and Bonneville had declined. Redondo explained that not only was it waiving the claim because it did not have any authority to represent Bonneville but it was also voluntarily dismissing the Bonneville portion of the Contract claim because it had insufficient evidence regarding the claim. The Authority responded that up to that time it did not know Redondo would waive the subcontractor claim.
There is no indication that Bonneville was present on November 30, 2006, or that Bonneville was notified of the foregoing discourse. The bankruptcy court did not enter an order on the docket reflecting that Redondo had waived the subcontractor portion of its claim on the Contract. There is no reference on the docket of the main case that Redondo had abandoned a claim which it previously was pursuing as an asset.
Forty days later, on January 9, 2007, Bonneville filed its Urgent Motion Requesting Intervention (the "Motion to Intervene"). In it, Bonneville explained that it had filed a proof of claim in the Debtor's main bankrutpcy case on May 23, 2002 and that it understood that the trial in the Adversary Proceeding was not to commence until June, 2007. Bonneville alleged that it had evidence to support its claim, including a witness. Bonneville argued that the Motion to Intervene was timely and that it was the proper party to protect its interest in the Adversary Proceeding. The Authority did not respond to the Motion to Intervene.
On March 9, 2007, the bankruptcy court held a hearing to consider the Motion to Intervene. Bonneville requested that it be permitted to join the Adversary Proceeding as a co-plaintiff because, although Bonneville had failed to provide Redondo with certain evidence, its claim should not have been removed from Redondo's claim on the Contract. Redondo represented that it had no objection to the requested intervention. The Authority, however, objected on the ground that the opportunity for discovery had expired. Bonneville responded that no further discovery was necessary and, in fact, all the evidence regarding its claim had been produced. The Authority pointed to the fact that the reason that Redondo had not pursued the claim was that Bonneville had failed to assist Redondo with the trial. Redondo explained that Bonneville had provided evidence of its claim, and it had turned over the evidence Bonneville produced to the Authority. The ground for waiving the claim, it asserted, was that Bonneville had not responded to Redondo during trial preparation.
The bankruptcy judge found that intervention would be burdensome to the Authority and that Bonneville's claim could be raised in a different forum. He ruled that the request was untimely and denied the Motion to Intervene. He suggested that Bonneville could file a motion for reconsideration.
On March 19, 2007, Bonneville filed its Motion for Reconsideration (the "Reconsideration Motion"). In it, Bonneville explained that intervention is governed by Fed. R. Civ. P. 24 which mandates that an intervention motion must be timely. Bonneville argued that the test for timeliness is the totality of circumstances and, in applying that test to the question of whether it timely filed the Motion to Intervene, the bankruptcy judge should have determined that intervention was appropriate. That is, according to Bonneville, it filed its proof of claim four years prior to trial, the trial was not going to resume again until June, 2007, and its subcontractor claim had been included in Redondo's claim for the Contract since the inception of the litigation. Bonneville attached to the Reconsideration Motion a letter from Bonneville to the Authority dated May 22, 2002 in which it provided a detailed breakdown of the amounts it claimed it was due for the work it performed.
The Authority objected to the Reconsideration Motion on the ground that Bonneville did not and could not meet the exacting standards for reconsideration. With respect to the Motion to Intervene, the Authority argued that it did not comply with Fed R. Civ. P. 24 as it lacked a description of Bonneville's purported claim. The Authority claimed that the Motion to Intervene was untimely because Redondo had already presented its case and rested with respect to all of its claims other than the severed claim. The Authority considered intervention an undue burden as discovery had closed. The Authority also argued that Bonneville's predicament was the result of its own failure to cooperate with Redondo and that there was no prejudice to Bonneville as it retained a claim against Redondo based upon its proof of claim.
The bankruptcy judge did not hold a hearing on the Reconsideration Motion and objection. Rather, on May 31, 2007, he issued his Decision and Order (the "Order"). In it, he reviewed the facts relating to the Motion to Intervene and described how Redondo had withdrawn the subcontractor claim it had brought on behalf of Bonneville. He also explained the position of the parties regarding the Reconsideration Motion. With respect to reconsideration, he explained that such a motion cannot repeat prior arguments but must have facts or law which strongly convince the trier to reconsider. The bankruptcy judge then repeated the grounds upon which he denied the Motion to Intervene.
The Order was docketed...
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