Matter of Robmac, Inc., Bankruptcy No. B79-2977.

• Decision Date: 18 November 1979
• Docket Number: Bankruptcy No. B79-2977.
• Citation: 8 BR 1
• Parties: In the Matter of ROBMAC, INC. d/b/a Chattahoochee Plantation Club, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

8 B.R. 1 (1979)

In the Matter of ROBMAC, INC. d/b/a Chattahoochee Plantation Club, Debtor.

Bankruptcy No. B79-2977.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

November 18, 1979.

David Pollard, Swift, Currie, McGhee & Hiers, Atlanta, Ga., for debtor.

Amy Z. Gershonfield, Troutman, Sanders, Lockerman & Ashmore, Atlanta, Ga., for Georgia Power Co.

ORDER

WILLIAM L. NORTON, Jr., Bankruptcy Judge.

Georgia Power Company (herein "GPC"), is a public utility which supplies electric service to RobMac, Inc. d/b/a Chattahoochee Plantation Club (herein "debtor"), which, on October 12, 1979, filed a petition for relief under Chapter 11 of the Bankruptcy Code (11 U.S.C. § 1101 et seq.). Pursuant to 11 U.S.C. § 366(b), GPC, by letter dated November 2, 1979, requested that debtor provide GPC with a deposit in an amount equal to twice an average monthly bill to secure payment of the account to which service would be charged, after the date of filing, and during the pendency of the Chapter 11 case. To support its contention that the formula which it uses to determine the amount of the deposit requested (that is, twice an average monthly bill) is reasonable and appropriate, GPC argues that this formula has been approved by the Georgia Public Service Commission and carries the weight, therefore, of a legislative determination of reasonableness.

On November 15, 1979, debtor notified GPC that debtor objected to the amount of the security deposit sought by GPC and, by motion to this Court, requested a determination by this Court as to whether the demand of the utility is excessive and as to what constitutes adequate assurance of payment, and requested an expedited hearing by this Court, which was granted. Since the filing of the petition, debtor has been paying the bills issued by GPC promptly as those bills have become due.

ISSUES PRESENTED

Two issues are presented. First, was the proper procedure used to bring this objection to the Court's attention? Secondly, is the amount of the security deposit requested pursuant to GPC's formula reasonable in conformity with the Bankruptcy Code?

Section 366(b) of the Bankruptcy Code provides:

§ 366. Utility Service

. . . . .

(b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.

According to the terms of § 366(b) no initiating action by the utility is required. The request by GPC, by its letter to the debtor, making demand for a deposit is not, however, improper and may well be the better method to create compliance with § 366(b).

The term "party of interest" includes the utility as well as the debtor or trustee; hence the utility or debtor or trustee may initiate the proceeding for hearing and ruling by the Court.

The statute apparently expects the debtor or trustee to initiate action toward the utility to provide the utility the adequate assurance of future payment for electric service; and it implicitly authorizes a utility to request adequate assurance of payment; and it expressly allows the utility to take action, including terminating service to a debtor, if no adequate assurance is provided by the debtor or trustee in the form of a deposit or other security within twenty (20) days of the order for relief. Although § 366(b) imposes upon the debtor or the trustee the burden of coming forward to the utility within twenty days with adequate assurance of payment even in the absence of a demand by the utility, and does not require prior demand or notice to the debtor from the utility, here GPC gave written notice to debtor of GPC's demand for a deposit in a specified amount. Such a written demand to the debtor is not forbidden and is surely permitted by the statute. However, the statute further allows the debtor or other party of interest to object to the amount demanded by the utility by moving the court for a hearing at which the court, after such notice as the Court may deem appropriate,¹ shall determine the method or means appropriate to furnish to the utility the "security necessary to provide adequate assurance of payment." The Court construes this provision to mean that the request for such a hearing under § 366(b) must be made (1) within twenty days of the order for relief or (2) prior to termination of service by the utility. Even after termination of service or after a prior order or agreement which has provided adequate assurance of payment, the debtor may request a hearing and the court may order reinstatement of service or reasonable modification of the amount of the deposit or other security in a modified order which shall provide adequate assurance. The utility must be given notice of the request for such hearing and an opportunity to be heard.

The...