DocketNumber: Bankruptcy Nos. 98-10834 to 98-10839
Citation Numbers: 244 B.R. 355
Judges: Brown
Filed Date: 2/1/2000
Status: Precedential
Modified Date: 11/22/2022
REASONS FOR ORDER
This matter came on for hearing on October 20, 1999 on the motion of Southern Style Success, Inc. (“Southern Style”) for allowance of payment of administrative expenses.
I. Background
On February 23, 1998, the debtors filed voluntary petitions for relief under Chapter 11. The six different eases were consolidated for joint administration because all were home health care agencies with identical management and ownership, and with many of the same creditors. John M. Herring signed each of the petitions on behalf of the debtors.
The same day the voluntary petitions were filed, the debtors filed an emergency joint motion for authority to enter into an amended and restated healthcare receivables purchase agreement with HCR, and requested an expedited hearing on the motion.
The order approving the agreement with HCR made it clear that HCR would purchase the receivables only upon the conditions contained in the order and the agreement. The debtors acknowledged that
The parent company for each of the debtors is Home Care Center, Inc., which was owned in part by Mr. Herring. During the summer of 1998, Home Care Center, Inc. was sold to Professional Management Providers, Inc., a wholly owned subsidiary of ComTech Consolidation Group, Inc. Mr. Herring, who is also the president of Southern Style, testified that as part of the sale, the debtors entered into leases with Southern Style for five properties that were owned by Southern Style. The leases, dated October 1, 1998, were between Success Southern Style as lessor, and “Golden Age Home Care Center” as lessee.
II. Analysis
HCR and the trustee assert several arguments as to why Southern Style is not entitled to an award of administrative expenses. The court need only address the first argument.
HCR contends that the agreement it entered into with the debtors and the court order awarding a superpriority lien in HCR’s favor prevent Southern Style from recovering on its claim. The trustee contends that there were considerable administrative claims in this case, but that any available funds must go to HCR, leaving no money left over for Southern Style.
The issue is whether the order giving HCR a superpriority status is valid against Southern Style.
Southern Style argues that it did not receive notice of the order, and that the failure to receive notice is a violation of due process.
The court disagrees. Apparently Southern Style did not receive a copy of the motion at the time it was filed on February 23, 1998, and was not noticed with a copy of the order giving HCR a superpriority lien. Southern Style was clearly aware of the motion, however, because Mr. Herring, president of Southern Style was also the vice president of the debtors. In his position as vice president of the debtors, he had signed the bankruptcy petitions on behalf of the debtors. The debtors’ emergency joint motion for authority to enter into the agreement with HCR was filed contemporaneously with the debtors’ petitions. The court is convinced that Mr. Herring was aware of the motion, the order, and the relief sought. This knowledge is imputable to Southern Style, a corporation of which Mr. Herring was the president.
Furthermore, even if Southern Style did not have notice of the order, it is still bound by the order. At least one court has upheld a super-priority claim against parties that did not receive notice.
Because Southern Style is bound by the order giving HCR superpriority status, the court need not consider the remaining arguments made by HCR and the trustee.
. PI. 252.
. PI. 8.
. PL 17 and 18.
. PI. 26.
. Pl. 26 at 4.
. Ex. M-l through M-5. There is no legal entity named "Golden Age Home Care Center”.
. In re Anderson, 196 B.R. 839 (Bankr.W.D.Mo.1996)(‘ll is a well established princi-pie that ‘The knowledge of a director, officer, sole shareholder or controlling person of a corporation is imputable to that corporation.' ”)
.In re Mutschler, 45 B.R. 494 (Bankr.D.N.D.1984).