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#1924

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

DUCKWALL-ALCO STORES, INC.,

DEBTOR(S)

NO. 89-40642-11

CHAPTER 11



MEMORANDUM OF DECISION ON THE

ADMINISTRATIVE EXPENSE CLAIM OF WARREN DISTRIBUTION, INC.

This matter is before the Court on the request of Warren Distribution, Inc. (Warren), for the allowance of an administrative expense claim. Warren appears by counsel Raymond R. Aranza and George E. Erickson, Jr. The debtor appears by counsel John V. Donner and David M. Becker. The Court has reviewed the relevant pleadings and is now ready to rule.

FACTS

The debtor filed for bankruptcy on May 8, 1989. The debtor operated numerous retail stores, and many suppliers sought to reclaim goods they had delivered shortly before the bankruptcy filing. On May 18, Warren mailed the debtor a notice of reclamation, which the debtor received on May 19. Sometime later, the debtor filed Adversary Number 89-7243, seeking a declaratory judgment determining the rights of all the suppliers who had made reclamation claims.

The debtor, its Official Unsecured Creditors' Committee (UCC), and the reclaiming suppliers conducted a joint investigation of the reclamation claims. A summary prepared by counsel for the UCC, and apparently verified by counsel for the reclaiming suppliers, contained the following information about Warren's claim:

Date on Demand 5/18/89

Date Received 5/19/89

10 Day Period 5/9/89-5/19/89

Total Amt. Claimed $87,171.01

Valid Reclamation Amt. - 0 -

Comments Numerous invoices referenced to list attached to the demand letter. Any goods delivered in 10 day period are post-petition.

The parties relied on the summary in preparing a proposed settlement of Adversary No. 89-7243, which was ultimately approved by the Court. Warren was listed in the settlement on an exhibit identifying "Non-Valid Defendants."

Thereafter, Warren amended its proof of claim to reflect its belief the parties had stipulated that the goods for which it had sought reclamation had actually all been delivered post-petition. It then filed the present request for the allowance of an administrative expense, also based on this purported stipulation. The debtor objected to both the proof of claim and the request for administrative expense, contending that Warren had no valid reclamation claim because its reclamation demand was made too late and that a review of its records revealed only one shipment identified in Warren's reclamation demand which the debtor received post-petition. At a hearing about this matter, Warren and the debtor agreed to submit affidavits (and depositions, if necessary) in support of their positions, and agreed the Court should decide the dispute based on those materials. Warren submitted the affidavits of two attorneys and its senior vice-president, and the debtor submitted the affidavits of an attorney, its vice-president of finance, and its vice-president and general counsel.

Warren's first affidavit is that of Stephen P. Mayka, who served as lead counsel for the reclaiming suppliers. He states that he engaged in settlement negotiations to try "to structure a settlement for the benefit of all the creditors asserting priority claims against the Debtor under 11 USC §546(c) on account of their claims for reclamation of good[s] sold and delivered to the Debtor within ten (10) days prior to the date of the filing." He indicates he has no specific knowledge of the reason Warren was classified as a "non-valid defendant," but asserts his interpretation of the summary mentioned above is that the parties concluded all the goods Warren had sought to reclaim had been received by the debtor post-petition. Its second affidavit is that of Daniel J. Gronniger, an attorney who indicates he was involved in verifying the information contained in the summary of the reclamation claims. The Court cannot discern any information included in this affidavit which would help resolve the present dispute. Warren's third affidavit is that of Charles Downey, its senior vice-president, who indicates that Warren delivered its invoices to the debtor separately from the goods themselves, that Warren believed the goods involved had been delivered "around the time Debtor's bankruptcy petition was filed," and that Warren understood it had been listed in the settlement as a "non-valid defendant" because its deliveries were determined to be post-petition deliveries.

The debtor's first affidavit is that of Kay Standridge Kress, one of the attorneys for the UCC and the person who prepared the summary mentioned above. She declares she determined that Warren had no valid reclamation claim solely because its reclamation demand was effective, if at all, only for a period that was completely post-petition. She contends no review of Warren's invoices was made to determine whether the goods were received either pre- or post-petition, and nothing in her summary or the settlement was intended to stipulate that Warren's goods were delivered post-petition. Its second affidavit is that of Gary Lowry, its vice-president of finance. He simply provided a copy of Warren's demand for reclamation, which included a list of over two hundred invoices covered by the demand. The debtor's third affidavit is that of Charles E. Bogan, its vice-president and general counsel. He indicates that the debtor routinely stamped on invoices the date the shipment was received and that the attached copies of invoices are all those included in Warren's reclamation demand which the debtor had a record of receiving. A review of a sample of the invoices actually indicates the debtor placed a stamp on each invoice which left a space for the date of shipment to be filled in, and someone, presumably an employee, wrote the date in by hand. Mr. Bogan also indicates the records submitted show that only one of Warren's shipments was received post-petition, invoice number 47912 for $237.78.

Based on the materials submitted, the Court finds as follows. The more reasonable interpretation of Ms. Kress's summary of the reclamation claims is that Warren's claim was determined to be invalid because its demand was made too late, not that the deliveries all occurred post-petition. In the context of the declaratory judgment action, the parties would have found it much simpler to review each reclamation demand to determine whether it could be effective before they bothered to check records of a large number of deliveries to see whether they actually fell within the time frame for reclamation. As stated by Mr. Mayka, only goods delivered within ten days before the bankruptcy could give rise to a valid reclamation claim under §546(c), so once the parties saw that Warren's demand was too late to protect any pre-petition deliveries, they would have had no reason to review over two hundred invoices to see whether any of the shipments were delivered post-petition. Charges for post-petition deliveries would qualify as administrative expenses under §503(b)(1)(A) without regard to §546(c). Thus, the Court concludes the settlement in Adversary No. 89-7243 merely established that Warren's reclamation demand came too late to apply to any pre-petition deliveries, not that all the deliveries included in its demand were made post-petition.

The debtor presented evidence to show that only one of Warren's shipments was delivered to the debtor post-petition. Warren relied solely on the purported stipulation, and chose not to present any contrary evidence on this point. Consequently, the Court accepts the debtor's evidence and concludes Warren is entitled to an administrative expense in the amount of $237.78, the charge for the one shipment delivered to the debtor post-petition.

The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by FRBP 9021 and FRCP 58.

Dated at Topeka, Kansas, this 3rd day of August, 1993.













_________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE



IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS









In Re: )

)

DUCKWALL-ALCO STORES, INC., ) NO. 89-40642-11

) CHAPTER 11

DEBTOR(S). )

JUDGMENT ON DECISION RESOLVING THE

ADMINISTRATIVE EXPENSE CLAIM OF WARREN DISTRIBUTION, INC.

This matter was before the Court on the request of Warren Distribution, Inc. (Warren), for the allowance of an administrative expense claim. Warren appeared by counsel Raymond R. Aranza and George E. Erickson, Jr. The debtor appeared by counsel John V. Donner and David M. Becker.

Based on the "Memorandum of Decision" entered about this matter, judgment is hereby entered granting Warren $237.78 as an administrative expense.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of August, 1993.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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