In re Regional Building Systems, Inc.
| Decision Date | 23 February 2001 |
| Docket Number | No. 93-5-7521-JS.,93-5-7521-JS. |
| Parties | In re REGIONAL BUILDING SYSTEMS, INC., Debtor. |
| Court | U.S. Bankruptcy Court — District of Maryland |
Marc R. Kivitz, Baltimore, MD, for debtor.
Gilbert Backenroth, Hahn & Hessen LLP, New York City, pro se.
Jeffrey R. Hughes, Grand Rapids, MI, pro se.
Robert J. MacPherson, Postner & Rubin, New York City, pro se.
Susan B. Naftulin, Fox, Rothschild, O'Brien & Frankel, LLP, Philadelphia, PA, pro se.
Jay G. Ochroch, Fox, Rothschild, O'Brien & Frankel, LLP, Philadelphia, PA, pro se.
William H. Roth, New York City, pro se.
Prince A. Thomas, Fox, Rothschild, O'Brien & Frankel, LLP, Philadelphia, PA, pro se.
Irving E. Walker c/o Saul Ewing LLP, Baltimore, MD, pro se.
Lynne Ann Battaglia, Office of the U.S. Attorney, Martin T. Fletcher, William L. Hallam, Joyce A. Kuhns, Saul Ewing LLP, Linda V. Donhauser, Miles and Stockbridge, Eric B. Miller, Piper Marbury, et al., F. Thomas Rafferty, Josef E. Rosenblatt, Breitbart and Assoc., Douglas H. Seitz, Scaldara and Potler, Daniel O'C Tracy, Jr., Venable, Baetjer and Howard, Gerard R. Vetter, Goldman and Vetter, Baltimore, MD, Barbara M. Cook, Howard County Office of Law, Ellicott, MD, Joel D. Dahnke, Cohen, Gettings, et al., Arlington, VA, Dennis W. King, Towson, MD, Mark N. Parry, Moses & Singer LLP, New York City, Joseph L. Steinfeld, Jr., Fairfax, VA, for creditors.
Lawrence D. Coppel, Baltimore, MD, for interested party.
DECISION RE PLAN COMMITTEE'S OBJECTION TO CLAIM OF BEDFORD CONSTRUCTION COMPANY
The Plan Committee in this case has objected to the claims asserted by Bedford Construction Company ("Bedford"). Bedford asserts claims with respect to work Bedford performed for the debtor, Regional Building Systems, Inc. ("RBS") at a site on Staten Island, New York, owned by Aspen Knolls Corporation ("Aspen Knolls"). The court concludes that Bedford is entitled to recover $22,067.82, and that the balance of its claims must be disallowed.
RBS was engaged in the manufacture and sale of modular housing units. In December 1991, RBS and Aspen Knolls1 entered into a contract ("the Aspen Knolls Contract") calling for RBS to manufacture, deliver, and install 1,000 modular housing units on the Aspen Knolls site.2 Aspen Knolls was responsible for completing the finishing work to the modular units, including installation of windows and doors.
In February 1992, RBS and Bedford entered into a subcontract ("the Bedford Subcontract" or, for short, "the Subcontract") under which, on the one hand, RBS was to manufacture the modular housing units in Maryland, and then ship them to a staging area in New York, and, on the other hand, Bedford was to transport the units to the Aspen Knolls site, and to erect and complete the construction of the modular housing units.
The Aspen Knolls Contract was RBS's primary source of revenue. Beginning in late 1992, Aspen Knolls committed a series of payment defaults to RBS, disrupting RBS's cash flow and necessitating suspensions of work from time to time. Eventually, in July 1993, Aspen Knolls ceased paying any money to RBS at all. In those circumstances, RBS was forced to terminate the Aspen Knolls Contract and the Bedford Subcontract.
Prior to termination of the Subcontract, Bedford performed work for RBS under the Subcontract.
Bedford also did work for RBS outside the Subcontract, which included completion of repetitive or routine carpentry adjustments or repairs to the modular units, usually before they were erected. This work was supervised by Bedford and separately invoiced to RBS as "Reimbursable Expenses."
In addition, Bedford loaned union carpenters to RBS in order for RBS to supervise completion of certain carpentry items on the modular units after Aspen Knolls completed its "walk-through" under the Aspen Knolls Contract. These union carpenters were supervised by RBS and their time was separately billed to RBS as "Reimbursable Labor."
Bedford also did other work for Aspen Knolls at the job site, for which RBS was not responsible, including a contract entered into November 30, 1992 for finishing work on the modular units for a total amount of $2.2 million ("Aspen Knolls Trim Work Contract") and possibly other carpentry work not covered by the Aspen Knolls Trim Work Contract.3
RBS eventually filed its voluntary petition under chapter 11 of the Bankruptcy Code on November 9, 1993. The court set a March 1994 bar date for creditors to file unsecured claims in RBS's chapter 11 case. Bedford filed no proof of claim by that bar date. However, the schedules RBS filed under F.R. Bankr.P. 1007 scheduled Bedford as holding an unsecured claim, not entitled to priority under 11 U.S.C. § 503(a), in the amount of $614,203.46. As will be seen, Bedford looks to that scheduled amount as the basis for payment of any unsecured claim it may have had against RBS to the extent that the court rejects Bedford's assertion of status of a beneficiary of a statutory trust for which RBS was the trustee under New York law.
The court confirmed a liquidating plan in this case under 11 U.S.C. § 1129 in May 1997 ("the Plan").4 In April 1997, RBS had made a recovery from Aspen Knolls of approximately $5 million, and which is the major source of funds held for distribution in this case. As provided by § 1.5 of the Plan, the funds RBS received from Aspen Knolls constituted the Aspen Knolls New York Lienholder Distribution Fund ("the Fund") and were deposited by the Plan Committee into an account segregated from other estate funds, with the Plan Committee to administer that Fund in accordance with the terms of the Plan.
The Plan called for full payment from the Fund of any Allowed New York Lienholder Claim.5 An Allowed New York Lienholder Claim was any claim's portion that is "valid under Article 3A [sic] of the New York Lien Law," and allowed as such by a final order of the court. Plan § 1.3. Article 3-A of the New York Lien Law is entitled Definition and Enforcement of Trusts and consists of N.Y. Lien Law §§ 70 through 79-a (McKinney 1993).6 Although labeled by the plan as "lienholder" claims, the New York Lienholder Claims are in fact statutory trust claims.
The Plan required claims asserting status as New York Lienholder Claims to be filed by a deadline, and provided that all such claims are deemed to be disputed with the validity and allowance of such claims to be determined by the court. Plan § 4.4(a). Bedford timely filed a New York Lienholder Claim of $1,448,226.49 plus interest.
To the extent not entitled to treatment as an Allowed New York Lienholder Claim, unsecured claims not entitled to priority treatment under 11 U.S.C. § 503(a) are to receive payment only from the funds the Plan Committee holds that are unnecessary for the full payment of Allowed New York Lienholder Claims.
Bedford has asserted (1) that on the petition date of November 9, 1993, it held valid claims against the debtor of $1,448,226.49, (2) that those claims are entitled to full payment as Allowed New York Lienholder Claims, (3) that interest on those claims is entitled to treatment as an Allowed New York Lienholder Claim, and (4) that to the extent that the claims are not entitled to Allowed New York Lienholder Claim status, then the claims owed Bedford on the petition date are entitled to share in distribution as unsecured claims up to the amount of $614,203.46 listed on the RBS's schedules.
Pursuant to the court's entry on October 1, 1998, of a Stipulation and Consent Order Allowing and Authorizing Payment of, the Undisputed Portion of the New York Lienholder Claim Made by Bedford Construction Corp., the Plan Committee paid $718,128.83 to Bedford as the amount that the Plan Committee did not dispute was owed to Bedford as an Allowed New York Lienholder Claim under the Plan. The Plan Committee disputes its obligation to pay Bedford any more than the $718,128.83 already paid.
The court examines first Bedford's New York Lienholder Claims and concludes in part III that, except for the claim for interest and a claim for termination damages, the claims are enforceable as Allowed New York Lienholder Claims if the claims would be valid claims against RBS outside of the N.Y. Lien Law.
Bedford's New York Lienholder Claims that remain in dispute are shown on the chart below:
The Plan Committee contends that, as a matter of law, even if Bedford's claims were otherwise valid claims, four of those claims would not qualify as the types of claims that may be paid from a New York Lien Law trust: Bedford's claims for (1) interest; (2) delay claims; (3) disassembly and transportation of cranes; and (4) early termination of Bedford's crane lease with United Rental Equipment Company, Inc. Accordingly, ...
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