Crane Rental Company, Inc.

OCR transcription for search; preserved printed pages are authoritative

Case 05-43338 Doc 297 Filed 05/01/06 Entered 05/01/06 15:16:05 Desc Main
Document Page1of6

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS

WESTERN DIVISION
)
In re: )
)
Crane Rental Company, Inc., ) Chapter 11
) Case No. 05-43338-JBR
Debtor. )
)

MEMORANDUM OF DECISION

This matter came before the Court on the Creditor International Union of Operating
Engineers Local 4 Trust Funds’ (“Funds”) “Motion to Amend Proof of Claim, or in the
alternative for Leave to File Late.” (Doc. 279) Crane Rental Company, Inc (“Debtor) filed an
opposition to the motion. (Doc. 288) The Court held a non-evidentiary hearing and took the
matter under advisement.

Background

The facts are not disputed.
1. The Funds provides health care, disability, pension and 401(K) plan benefits to heavy
equipment operators working in the construction industry, including the employees of the Debtur.
2. On May 17, 2005, the Debtor filed its voluntary Chapter 11 bankruptcy petition with this
Court.
3. The Funds were listed in the Debtor’s schedules as the largest unsecured claim, with a claim
of $206,727.19. The claim was listed as disputed
4. Also the Debtor listed the Funds as a creditor holding an unsecured priority claim of
$244,267.00. The claim was listed as disputed.

5. The Debtor filed a motion for the establishment of a bar date for filing proofs of claim. The

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

Case 05-43338 Doc 297 Filed 05/01/06 Entered 05/01/06 15:16:05 Desc Main
Document Page 2 of6

bar date set by the Court was August 19, 2005. Notice was provided to all creditors, including
the Funds.

6. On August 1, 2005, the Funds filed a timely Proof of Claim. That Claim stated that the dates
that the debt was incurred were “1/03 - 5/05" and listed as due and owing the amount of
$108,219.05 and claimed additional amounts for interest, attorney’s fees, and costs.

7. On September 12, 2005, the Debtor submitted its 100% Plan of Reorganization and
Disclosure Statement which was confirmed on January 12, 2006.

8. The Funds received a payment of $111,278.78 on March 1, 2006 representing a one hundred
(100%) percent payout with interest to the Funds upon the Funds’ Claim as filed, and as provided
in the confirmed plan.

9. On March 15, 2006, the Funds filed a second proof of claim and filed a motion to amend the

original proof of claim or alternatively to accept a late-filed claim adding an unsecured non-
priority claim of $190,101.60.
Discussion

The Proposed Amended Proof of Claim

The Court must determine whether the second Proof of Claim is an amendment to the
original Claim or a new claim. Amendments to proofs of claim are “‘to be freely allowed as long
as the purpose of the amendment is to cure a defect in the claim, to describe the claim with
greater particularity, or to plead a new theory of recovery.” Jn re Callery, 274 B.R. 51, 56
(Bankr. D.Mass. 2002). See also In re Clamp-All Corp., 235 B.R. 137, 140 (1st Cir BAP 1999)
(“Post-bar date amendments should be scrutinized to ensure that the amendment is not making a
new claim against the estate.”)

“The Court must scrutinize both the substance of the proposed amendment and the

original proof of claim to ensure that the amendment meets three criteria.” Woburn Associates v.

Case 05-43338 Doc 297 Filed 05/01/06 Entered 05/01/06 15:16:05 Desc Main
Document Page 3of6

Kahn, 954 F.2d 1, 10 (ist Cir. 1992), cert denied, 510 U.S. 914, 114 S.Ct. 303, 126 L.Ed.2d 251
(1993). “First, the proposed amendment must not be a veiled attempt to assert a distinctly new
right to payment as to which the debtor estate was not fairly alerted by the original claim.” Jd.
“Second, the amendment must not result in unfair prejudice to other holders of unsecured claims
against the estate.” Jd. “Third, the need to amend must not be the product of bad faith or dilatory
tactics on the part of the claimant.” /d.; Gens v. Resolution Trust Corp., 112 F.3d 569, 575 (1st
Cir. 1997).

In the instant case, the Debtor acknowledges that the need to amend was not the result of
bad faith or dilatory tactics on the part of the Funds. Additionally, the Court finds that there
would be no unfair prejudice to other holders of unsecured claims against the estate as this was
an one hundred (100%) percent plan and almost all distributions under the plan have already
been made. At the hearing, the Funds stated that if a shortfall did occur, it would not request a
pro rata distribution from the paid unsecured creditors. Instead, the Funds would absorb any
shortfall.

Therefore, the only issue is whether the amended proof of claim meets the first of the
three criteria. The first criterion requires the Court to make the determination that the proposed
amendcd proof of claim does not assert a new right to payment. The Court finds that the
proposed amendment does assert a new right to payment. The original proof of claim stated that
the debt was incurred 1/03 - 5/05 and classified the debt as priority. In the amended proof of
claim, the dates the non-priority debt was incurred remain the same, however, the Funds include
an additional sum of monies owed as unsecured.! “The fact that a subsequent proof of claim is

for a larger sum than that earlier proof does not prevent the latter from amending the former.” Jn

' The Funds states in the amended proof of claim that the unsecured portion of the debt
equals $190,101.60. This increases the overall claim to $298,320.60.

Case 05-43338 Doc 297 Filed 05/01/06 Entered 05/01/06 15:16:05 Desc Main
Document Page 4of6

re Hanscom Retail Foods, Inc., 96 B.R. 33, 35 (Bankr. E.D.Pa. 1988). Courts have found that
merely increasing the amount of a claim will not prevent the amended proof of claim from being
allowed. Courts have drawn a distinction, though, between merely increasing the amount owed
and adding a new type of payment, i.e. a new type of tax. Jd. “[W]here a claimant attempts to
change the nature of a proof of claim, such as when the taxing authority attempts to increase its
proof of claim by adding different types of taxes . . ., such amendments have generally been
disallowed.” Jn re Metro Transportation, Co., 117 B.R. 143, 148 (Bankr. E.D.Pa. 1990). This is
exactly what the Funds has done, it is seeking to increase the amount of its claim by adding
different type of debt, a non-priority unsecured debt. The Court finds that the proposed amended
proof of claim is a new claim, and therefore the Funds shall not be allowed to amend its original
proof of claim.

Excusable Neglect

The Funds, in the alternative, asked the Court to allow it to file a late proof of claim.
Under Bankruptcy Rule 9006(b)(1), the Court has discretion “to permit a late filing if the
movant’s failure to comply with an earlier deadline ‘was the result of excusable neglect.’”
Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 382,
113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). To find neglect the Court must conduct a two part
inquiry: (1) whether there was neglect; and 92) whether it was excusable.

In Pioneer Investment, the Court found that neglect had a broad interpretation that
allowed courts, where appropriate, to accept late filings caused by inadvertence, mistake, or
carelessness, as well as by intervening circumstances beyond the party’s control. Jd. at 388, 113
S.Ct. at 1494. “The ordinary meaning of ‘neglect’ is ‘to give little attention or respect’ to a
matter, or, closer to the point for our purposes, ‘to leave undone or unattended to esp[ecially]

through carelessness.’ Webster’s Ninth Collegiate Dictionary 791 (1983).” Jd. In the instant

Case 05-43338 Doc 297 Filed 05/01/06 Entered 05/01/06 15:16:05 Desc Main
Document Page 5of6

case, counsel for the Funds admitted that the unsecured portion of the claim for the time period
pre-dating the priority period had been inadvertently omitted. She stated, “When the proof of
claim in this matter was filed in August, a mistake was made.” Echoing the Court’s words,
counsel admitted that once filed, the proof of claim went “off of everybody’s radar screen.” It
was not until the Funds received a payment of $111,278.78 on March 1, 2006, representing a
100% payout with interest to the Funds upon the Funds’ Priority Proof of Claim as filed, did it
realize that the non-priority portion of the claim had not been included in the original filing.
Under the standard set forth in Pioneer Investment, the Court finds that there was neglect on the
part of the Funds.

The second inquiry is whether the Funds’ neglect of the Bar Date was excusable. The
determination of whether the neglect is excusable “is at bottom an equitable one, taking account
of all relevant circumstances surrounding the party’s omissions. These include . . . the danger of
prejudice to the debtor, the length of the delay and its potential impact on judicial proceedings,
the reason for the delay, including whether it was within the reasonable control of the movant,
and whether the movant acted in good faith.” Jd., 507 U.S. at 395, 113 S.Ct. at 1498. The first
criterion to be considered is whether allowing the late filed claim will prejudice the debtor. In
the instant case, the Debtor’s confirmed plan is a liquidating plan. The Debtor is not a
reorganized business whose cash flow will be affected by a late filed proof of claim. The Debtor
is no longer operating. Additionally, in the instant case, the Debtor raises the argument of
prejudice to the equity holders. The Pioneer Investment test examines whether there is prejudice
to the debtor, not the equity holders. It is irrelevant under this criterion whether the equity
holders will be prejudiced. The Court finds that the Debtor will not be prejudiced by allowing

the Funds to file a late proof of claim.

The other factors to be considered by the Court support a finding that the neglect by the

Case 05-43338 Doc 297 Filed 05/01/06 Entered 05/01/06 15:16:05 Desc Main
Document Page 6 of 6

Funds was excusable. No other creditors are going to be impacted by any potential judicial
proceedings as all creditors have received distribution under the plan. The Debtor argued that by
allowing the Funds’ late Claim there would be harm to equity holders. The Court recognizes that
the equity holders may be affected by allowing this proof of claim, but the plan calls for
distributions to all holders of other claims to be paid in full. A liquidating Chapter 11 is
tantamount to a Chapter 7. The rule under a Chapter 7 is even late claims are paid out before the
equity holders receive a distribution. See 11 U.S.C. § 726(a)(3) (2006). The equity holders are
subordinated to all other creditors. The Court does not find the Debtor’s argument to be
persuasive.

Finally, it is not an issue before this Court whether the Funds acted in good faith. The
Debtor conceded that bad faith was not an issue.

Conclusion

The Court finds that the Proof of Claim filed by the Funds is not an amended claim

because it asserts a new right to payment. The Court will allow the Funds to file the late proof of

claim as the Court finds that there was excusable neglect on the part of the Funds.

A Separate Order will issue.

Bb laut

oel B. Rosenthal
United States Bankruptcy Judge

Dated: May 1, 2006