Harrelson Utilities, Inc.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
HARRELSON UTILITIES, INC.,
DEBTOR
CHAPTER 11
CASE NO. 09-02815-8-RDD
ORDER DENYING MOTION TO REOPEN CASE
Pending before the Court is the Motion to Reopen Case for Clarification and Enforcement
of Order Approving Settlement and Compromise (the “Motion”) filed by Blue Ridge Site
Development of NC on January 17, 2012 and the objections to the Motion filed by Harrelson
Utilities, Inc. on January 31, 2012; People’s United Equipment Finance Corp. (formerly Financial
Federal Credit Inc.) on February 3, 2012; and Ferguson Enterprises, Inc. of Virginia on March 5,
2012. The Court conducted a hearing on March 13, 2012 in Wilson, North Carolina to consider the1
Motion and the objections.
At the hearing on the Motion, Harrelson Utilities Inc. stated it no longer objected to the	1
relief requested by the Blue Ridge Site Development of NC and stated the Court should grant the
Motion to avoid inequity.
SO ORDERED.
SIGNED this 06 day of April, 2012.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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BACKGROUND
I. Procedural History
Harrelson Utilities, Inc. (the “Debtor”) filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code on April 4, 2009. On February 23, 2011, the Court entered the Final
Decree in the case after finding the plan of reorganization was substantially consummated pursuant
to 11 U.S.C. § 1101(2).
Blue Ridge Site Development Corporation of NC (“Blue Ridge”) was hired by 1st AB, Inc.
to preform construction work on a project called Ashford Village. Blue Ridge subcontracted a
portion of the work to the Debtor. Blue Ridge’s payments to the Debtor were subject to a claim of
lien on funds by Ferguson Enterprises, Inc. of Virginia (“Ferguson”) for materials and labor provided
to the Debtor.
On October 1, 2010, Ferguson and Financial Federal Credit Inc. (“FFCI”) (now People’s
United Equipment Finance Corp.) filed the Joint Motion to Approve Settlement and Compromise
(“Ferguson/FFCI Motion”), which among other things, allowed Ferguson and FFCI to each take a
50% share of a $115,379.34 bond deposited by 1st AB, Inc. to discharge Ferguson’s claim of lien
on real property on the Ashford Village project. On November 22, 2010, the Court entered the2
Order Approving Joint Motion to Approve Settlement and Compromise (the “November Order”),
which approved the Ferguson/FFCI Motion, subject to certain limitations. However, the November
Order allowed Ferguson and FFCI to split the $115,379.34 bond amount.3
The Ashford Village project was subject to a Claim of Lien on Real Property, 09 M	2
03667, in Wake County, North Carolina.
The November Order stated: “[C]ounsel for 1st AB, Inc. is hereby ordered to distribute	3
the $115,379.24 held in escrow, pursuant to earlier order of this Court, and all accrued interest on
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On August 17, 2011, Ferguson and Peak City Partners, LLC (“Peak City”) filed the Joint
Motion to Reopen Case for Clarification and Enforcement of Order Approving Settlement and
Compromise to address issues related to the settlement of the Schiefflin Industrial Park project,
which was also discussed in the November Order. Though the Ferguson and Peak City joint motion
did not address payment on the Ashford Village project, Blue Ridge filed a response to it on October
3, 2011. In the response, Blue Ridge asserted the actual amount it owed the Debtor for the Ashford
Village project was $90,171.19 instead of the $115,379.24 bond amount deposited by 1st AB, Inc.
Blue Ridge also asserted it was entitled to a $3,079.85 material credit for materials returned to
Ferguson in July 2009. Subtracting the $3,079.85 material credit from the $90,171.19 actual
indebtedness, Blue Ridge claimed the November Order’s payment of the $115,379.24 bond amount
resulted in a $28,287.90 overpayment to Ferguson and FFCI that should be refunded to Blue Ridge.
On October 14, 2011, prior to the hearing on the Ferguson and Peak City joint motion, the
parties withdrew the motion. Based on the withdrawal, the Court neither heard Blue Ridge’s
October 3, 2011 response nor addressed the issue of the $28,287.90 overpayment.
II. Present Motion to Reopen Debtor’s Chapter 11 Case
Blue Ridge brought the Motion pursuant to 11 U.S.C. §§ 105, 350, 502, 541, and 1142 and
Bankruptcy Rules 5010 and 9019 seeking to clarify and enforce the November Order. Blue Ridge
argues § 350(b) allows a case to be reopened to administer assets, accord relief to the debtor, or for
other cause. Blue Ridge also argues § 1142 allows the court to “direct the debtor or any other
necessary party to execute or deliver . . . any instrument required to effect a transfer of property dealt
said sum, as follows: $57,689.62 plus 50% of any accrued interest to Ferguson Enterprises, Inc.
of Virginia; and $57,689.62, plus 50% of any accrued interest, to Financial Federal Credit Inc.”
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with by a confirmed plan, and to perform any other act . . . that is necessary for the consummation
of the plan.” Motion at 1 In re Harrelson Utilities, Inc., No. 09-02815-8-RDD (Bankr. E.D.N.C.
Jan. 17, 2012).
In the Motion, Blue Ridge asserts the Ferguson/ FFCI Motion prejudiced Blue Ridge because
Ferguson and FFCI did not properly serve the joint motion on Blue Ridge and inaccurate accounts
receivable balances were used to calculate the bond off amount. Blue Ridge argues the effect of
approving the Ferguson/FFCI Motion resulted in an overpayment of $28,287.90 or $14,143.95 each
to Ferguson and FFCI.
Blue Ridge claims the Ferguson/FFCI Motion was not properly served on it because the
Debtor’s creditor matrix incorrectly listed Blue Ridge’s address as P.O. Box 5884, Cary, North
Carolina instead of the correct address, P.O. Box 5885, Cary, North Carolina. Blue Ridge states it
became aware of Ferguson and Peak City’s joint motion and filed a response to it on October 3,
2011. Blue Ridge asserts it raised the issue of improper service as well as the $28,287.90
overpayment in its response to Ferguson and Peak City’s joint motion to reopen the Debtor’s case.
However, because Ferguson and Peak City withdrew the motion before the hearing scheduled for
October 19, 2010, the Court did not hear the issue of the $28,287.90 overpayment.
Therefore, Blue Ridge asks the Court to “right a wrong” resulting from the Ferguson/FFCI
Motion by reopening the Debtor’s Chapter 11 case to clarify the intent and scope of the November
Order with regard to the distribution of the bond amount set aside for the Ashford Village project.
According to Blue Ridge, this entails enforcing the terms of the November Order using an accurate
accounts receivable balance of $87,091.34 ($90,171.19 less the $3,079.85 material credit) and
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requiring Ferguson and FFCI to each refund $14,143.95 to Blue Ridge on account of the
overpayment.
At the hearing, Ronald Biggers, the President of Blue Ridge, testified he first learned of the
Debtor’s bankruptcy case in 2009. Mr. Biggers stated he received several notices related to the
bankruptcy case in the mail, although he could not explain how the notices were placed in his post
office box in light of the incorrect mailing address. Mr. Biggers testified when he received a notice
related to the bankruptcy case, he would place the notice in a file and would discuss the bankruptcy
case with his attorney from time to time. Mr. Biggers testified he did not contact his attorney
regarding every notice he received about the bankruptcy case, but discussed notices he believed to
be important with his attorney. Mr. Biggers stated he did not learn of the effect of the November
Order disbursing payment of the Ashford Village bond amount to Ferguson and FFCI until he
received notice of the Ferguson and Peak City’s joint motion in the fall of 2011. Mr. Biggers
explained he believed Blue Ridge’s response to Ferguson and Peak City’s joint motion would
address the overpayment resulting from the November Order. Mr. Biggers offered no explanation
as to why no action was taken to seek relief from the November Order after Ferguson and Peak
City’s motion was withdrawn or why the present motion was not filed until January 17, 2012.
In their objections to the Motion, both Ferguson and People’s United Equipment Finance
Corp. (formerly Financial Federal Credit Inc.) (“People’s”) both argue the Motion is effectively a
motion under Federal Rule of Civil Procedure 60 through application of Federal Rule of Bankruptcy
Procedure 9024. The foundation of this argument rests on the contention that the Motion is not
seeking clarification or enforcement of the November Order, but rather seeks to set aside the order.
Both Ferguson and People’s assert the Motion should be denied because it was not timely filed
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within the one year statute of limitations for setting aside orders on the basis of mistake,
inadvertence, surprise, or excusable neglect provided by Rule 60. Furthermore, Ferguson and
People’s assert Blue Ridge was aware of the overpayment prior to the August 17, 2011 joint motion
and failed to take action to protect its rights prior to the expiration of the one year so required by
Rule 60(c)(1).
DISCUSSION
Blue Ridge filed the Motion pursuant to 11 U.S.C. §§ 350(b) and 1142. Section 350(b)
provides a case may be reopened to “to administer assets, to accord relief to the debtor, or for other
cause.” 11 U.S.C. § 350(b). Reopening a closed case is within the court’s discretion. Hawkins v.
Landmark Finance Co. (In re Hawkins), 727 F.2d 324, 326 (4th Cir. 1984). The party moving to
reopen the case bears the burden of proof. In re Lee, 356 B.R. 177, 180 (Bankr. N.D.W.Va. 2006)
(citing In re Cloniger, 209 B.R. 125, 126 (Bankr. E.D.Ark. 1997)).
The Court finds no sufficient cause exists to reopen the Debtor’s case. Blue Ridge asserts
it is entitled to relief because it did not receive proper notice of the Ferguson/FFCI Motion and had
no knowledge of the November Order as a result of the incorrect address. The Court finds that while
Blue Ridge may not have received all notices in the bankruptcy case, it did receive some notices
related to the November Order. The President of Blue Ridge testified that despite the address issues
he personally received notices concerning the Debtor’s case and placed them in a separate file to
discuss with his attorney. Furthermore, the Court finds Blue Ridge was aware of the November
Order on October 3, 2011, at the latest, when it filed a response to the Ferguson and Peak City joint
motion. After learning Ferguson and Peak City withdrew their joint motion, Blue Ridge failed to
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take any action until January 17, 2012 when it filed the Motion. Blue Ridge failed to present any
evidence why the Court should excuse such a delay.
Additionally, should the Motion be treated as a motion for relief from an order pursuant to
Federal Rule of Bankruptcy Procedure 9024, the Court finds the Motion was not timely filed and
should be denied. Rule 9024 incorporates Federal Rule of Civil Procedure Rule 60. Rule 60(b)
provides a party may be relieved from a final judgment, order, or proceeding based on mistake,
inadvertence, surprise, or excusable neglect. Fed. R. Civ. Pro. 60(b)(1). The party seeking relief
under Rule 60(b) must show the motion is timely filed, the movant has a meritorious defense, and
the opposing party would not be unfairly prejudiced by granting the proposed relief. In re Canovali,
Case No. 09-05342-8-RDD, 2011 WL 307374 at *5 (Bankr. E.D.N.C. Jan. 27, 2011) (citing Park
Corp. v. Lexington Ins. Co., 812 F.2d 894, 896 (4th Cir. 1987); Compton v. Alton Steamship Co., 608
F.2d 96, 102 (4th Cir. 1979)). To be timely, a motion brought under Rule 60(b)(1) must be made
“no more than a year after the entry of the judgment or order.” Fed. R. Civ. Pro 60(c)(1).
Blue Ridge seeks relief from the November Order, which was entered on November 22,
2010. The Motion was not filed until January 17, 2012, almost two months after the expiration of
the time provided by Rule 60(c)(1). Thus, the Motion was not timely filed. Furthermore, at the time
Ferguson and Peak City withdrew their joint motion, Blue Ridge still had more than thirty days
before the expiration of the time provided by Rule 60(c)(1) in which to seekApril 5, 2012 relief from
the November Order. Blue Ridge took no action until January 17, 2012. Therefore, despite some
evidence that Blue Ridge was served notices at an incorrect mailing address, the Court finds no
evidence that rises to the level of excusable neglect.
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Biggers admitted he looked at some correspondence and pleadings, and others he just placed
in a file. Some he forwarded to his attorney and some he did not. There was no evidence Biggers
hired his attorney to be attorney of record in the case. For several years, Blue Ridge was guilty of
neglect in handling its affairs and communicating with its attorney. Such is not excusable. A party
is required to handle its legal affairs in a timely and diligent manner. See Robinson v. Wix Filtration
Corp., LLC, 599 F.3d 403, 413 (4th Cir. 2010) (finding a party that fails to act with diligence is
unable to establish excusable neglect). To set aside the November Order of Comprise and settlement
and undo the negotiated settlement agreement some fifteen (15) months later would not be in the
interests of justice.
Accordingly, the Motion to Reopen Case for Clarification and Enforcement of Order
Approving Settlement and Compromise is DENIED.
SO ORDERED.
END OF DOCUMENT
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