Search by Case Name
Search by Case Number
Search by Keyword

#2272 signed 9-23-96

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS







In Re:

AMERICAN FREIGHT SYSTEM, INC.,

DEBTOR(S).

NO. 88-41050-11

CHAPTER 11

ORDER ALLOWING FRANK WEAVER TO AMEND HIS CLAIM AND

GIVING THE DEBTOR TIME TO OBJECT TO THE AMENDED CLAIM

This matter is before the Court on Frank Weaver's motion to allow claim and the debtor's objection. Mr. Weaver appears by counsel John H. Stauffer, Jr. Debtor American Freight System, Inc. (AFS), appears by counsel Kurt Stohlgren. The Court has reviewed the relevant pleadings and is now ready to resolve part of this dispute.

FACTS

In July 1988, Frank Weaver was working for AFS when he was injured on the job. He filed a Workers' Compensation claim in Kentucky. AFS filed for bankruptcy in August 1988. A bar date was set and Mr. Weaver's attorney filed a timely proof of claim for him; it was claim number 6603 against AFS. The first two pages of the claim declared that AFS owed Mr. Weaver $39,644.79 as of the petition date. The next page, although repeating the total amount owed, stated that AFS owed Mr. Weaver $330.53 per week from 7-27-88 through the present for temporary total disability, was self-insured for Workers' Compensation, and had made no payments, and that Mr. Weaver was "expected to be so disabled for the next few months." Copies of medical bills were also attached to the claim.

In July 1989, the Court issued an order substantively consolidating AFS with three related debtors. This order did not address the proper method for asserting claims against the consolidated debtors.

After the bar date ran, Mr. Weaver's attorney withdrew and he hired another. In June 1990, his Workers' Compensation claim was adjudicated. Mr. Weaver was found to be totally occupationally disabled, partly due to pre-existing conditions, and AFS was found liable to him for 50% of his wage benefits, or $165.26 per week, from July 27, 1988, and "continuing thereafter during disability." Something called the "Special Fund" was found liable for the other 50%. However, AFS was ordered to pay all compensation awarded against both it and the Special Fund "for the number of weeks proportionate to its liability," and the Special Fund would thereafter pay all compensation "for the remainder of the compensable period." Nothing in the order indicated what the "compensable period" might be. AFS was also found liable for medical expenses reasonably required for treating Mr. Weaver's occupational disability.

In July 1990, Mr. Weaver's new attorney sent a proof of claim, with a copy of the Workers' Compensation award attached, to the Clerk of the Bankruptcy Court, including the case numbers for AFS and the three consolidated debtors but naming only AFS. This claim did not refer to any previously-filed claim. It included what is apparently Mr. Weaver's address but not his attorney's. Rather than filing the claim, the clerk returned it to the only address provided on the claim (but including the names of both Mr. Weaver and his attorney) with a notification of defective claim which stated, "These cases are not consolidated for the filing of claims."

Apparently Mr. Weaver received the materials mailed by the clerk but did not take them to his attorney.

In November 1990, Mr. Weaver's attorney submitted another proof of claim in Mr. Weaver's name, again including the case numbers for AFS and the three consolidated debtors but naming only AFS. This claim also did not refer to any previously-filed claim, and it included Mr. Weaver's address but also gave the name and address of a law firm, presumably the one his lawyer worked for. A copy of a Workers' Compensation order for AFS and the Special Fund to pay a fee to Mr. Weaver's attorney was attached to this claim. The original of this claim was filed as claim number 9842 against AFS, and copies of it were filed as claims against each of the other three consolidated debtors. The claims files contain nothing indicating who made the copies of the claim or who decided to file the claim this way. AFS objected to all four copies of the claim and an order disallowing them was entered in August 1991.

Mr. Weaver concedes AFS paid him $39,644.47 on claim number 6603, but says he "has received no distributions based upon the award granted by the Kentucky Workers' Compensation Board and is currently owed an amount equal to $99,898.49." AFS contends it paid him an additional 30% for a total of $51,538.23. It also says it understands he has received a distribution of $20,339.75 from a Workers' Compensation bond AFS had paid to the State of Kentucky.

DISCUSSION AND CONCLUSIONS

Mr. Weaver argues he should be allowed now to file the claim rejected by the clerk because his failure to file it before the bar date was the result of excusable neglect. This argument overlooks the fact Mr. Weaver does not allege he made any attempt to file the rejected proof of claim until July 1990, after the bar date had already run. But more importantly, it mistakenly suggests the rejected proof of claim asserted a totally new claim, rather than simply offered new information about his previously-filed claim. AFS also asks the Court to treat Mr. Weaver's claim for additional money as a brand-new claim. A new claim probably would be barred by the terms of AFS's confirmed reorganization plan.

In reality, however, Mr. Weaver is not trying to make a new claim but to amend claim number 6603. That claim notified AFS that additional amounts were continuing to accrue weekly since Mr. Weaver was "expected to be so disabled for the next few months." Neither AFS nor Mr. Weaver sought to have the claim either estimated or finally determined before AFS's plan was confirmed, so pursuant to 11 U.S.C.A. §502(a), it would presumably have been deemed allowed in an undetermined amount. AFS suggests any increase in the claim is now barred by certain provisions in that plan, but they merely address the effect of confirmation of the plan on claims that were or could have been made, not its effect on a claim allowed in an undetermined amount. Perhaps AFS would have been spurred to seek a determination of the claim if the clerk had filed the forms submitted in July 1990, but that cannot be known now. Perhaps Mr. Weaver's attorney would have done something if he had been informed the clerk had rejected the forms, but that cannot be known now either. The Court believes both sides are at fault for failing to have the full amount of Mr. Weaver's claim resolved.

At one time, the Court might have concluded Mr. Weaver's failure to take action to have his claim finally determined should prevent him from adding to his claim now because the other unsecured creditors would have been prejudiced. They have, however, all been paid 130% of their claims, the maximum amount the plan called for them to be paid, and so will not be affected if Mr. Weaver is now paid more than he has already received. Instead, any additional money paid to him will come from funds that would otherwise be paid to or for the benefit of the former equity holders of the debtors. AFS could have objected to Mr. Weaver's original claim because it was unliquidated but did not. This failure precludes those with lower priority than Mr. Weaver's unsecured claim from complaining of prejudice if he is now allowed to recover the full amount of his claim. AFS will be permitted to object to the additional amount Mr. Weaver claims, if it has some basis to do so other than the fact its plan provided for the discharge of prepetition claims.

From the materials submitted, the Court is unable to determine how Mr. Weaver calculated the amount he alleges is due him. AFS will have until October 31 to investigate the claim and file any objection it may have to the amount sought.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of September, 1996.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

Search by Case Name
Search by Case Number
Search by Keyword