In re Bar Servs.

1

IN RE: BAR SERVICES, LLC, Debtor.

No. 21-59648-PMB

United States Bankruptcy Court, N.D. Georgia, Atlanta Division

August 4, 2022

CHAPTER 11

Subchapter V

ORDER DENYING MOTION TO RECONSIDER ORDER SUSTAINING OBJECTION TO CLAIM OF NEASIA DANIELLE DAVIS MALLON

Paul Baisier U.S. Bankruptcy Court Judge

Before the Court are the following matters filed by Neasia Danielle Davis Mallon ("Ms. Mallon"): (1) Unsecured Creditor's Response to Debtor's Motion to Reduce Claim of Neasia Mallon filed on July 15, 2022 (Docket No 106)(the "Mallon Response"); (2) Unsecured Creditor's Supplemental Response to Debtor's Motion to Reduce Claim of Neasia Mallon filed on July 15, 2022 (Docket No. 107)(the "Supplemental Response"); and (3) Unsecured Creditor's Motion to Vacate Order, To Open Default, and Extend Time for Filing Responses and To Permit Filing of Her Tardy Responses to Debtor's Motion to Reduce Claim of Neasia Mallon also filed on July 15, 2022 (Docket No. 108)(the "Motion to Vacate" collectively, with the Mallon Response and the Supplemental Response, the "Motion to Reconsider").^[1] The Motion to Reconsider was filed Ms Mallon following entry of the Order Granting Debtor's Objection To Claim Of Neasia Danielle Davis Mallon And Fixing Amount Of Claim on July 7, 2022 (Docket No. 103)(the "Order Sustaining Objection to Claim").

The Order Sustaining Objection to Claim was entered on Debtor's Objection to Claim of Neasia Danielle Davis Mallon (the "Objection to Claim") and the Notice of Requirement of Response to Debtor's Objection to Claim of Neasia Danielle Davis Mallon; of Deadline for Filing Response; and of Hearing (the "Notice")(Docket No. 93), filed by Bar Services, LLC (the "Debtor") on June 3 2022. A hearing on the Objection to Claim was scheduled for July 18, 2022. As reflected on the docket, copies of the Objection to Claim and Notice were served upon all parties-in-interest, including Ms. Mallon, pursuant to the voluntary notice procedures authorized in the Second Amended and Restated Order, General Order No. 24-2018. Responses were due within thirty (30) days, or on or before July 6, 2022 (the "Notice Deadline"). No party-in-interest filed a response to the Objection to Claim by the Notice Deadline, and upon review, the Court duly entered the Order Sustaining Objection to Claim without the necessity of a hearing.

In the Order Sustaining Objection to Claim, the Court allowed Ms. Mallon a general unsecured claim in the total amount of $23,922.06 and disallowed any further claim on her behalf. The Motion to Reconsider was filed eight (8) days later. The Debtor filed its Response in Opposition To Motion To Vacate Order, To Open Default, And To Extend Time For Filing Response And To Permit Filing Of Her Tardy Responses To Debtor's Motion To Reduce Claim Of Neasia Mallon on July 19, 2022 (Docket No. 109)(the "Debtor's Response"), which is also before the Court.

Background

The Debtor filed a petition for relief under Subchapter V of Chapter 11 of Title 11, United States Code on December 30, 2021. According to the Motion to Vacate (p. 2), Ms. Mallon's husband, Marc A. Mallon, was involved in the decision to file this Chapter 11 case, and Ms. Mallon provided a portion of the retainer for counsel for the Debtor. In short, Ms. Mallon and her husband have been aware of this case since its inception.

In the Debtor's original schedules filed in this case (see Docket No. 39), Ms. Mallon was listed as holding a $185,000 undisputed, noncontingent, liquidated general unsecured claim. This listing, had it remained, would have eliminated any requirement that she file a proof of claim to have a $185,000 allowed claim in this case.^[2] It did not, however, remain. Instead, on March 25, 2022, the Debtor filed its Plan of Reorganization (Docket No. 66)(the "Original Plan"). In connection with the filing of the Original Plan, the Debtor amended its schedules and indicated that Ms. Mallon's scheduled $185,000 claim was "disputed." See Amendment to Schedule E/F (Docket No. 67). This amendment to the schedules triggered a requirement that Ms. Mallon file a proof of claim; however, because the Debtor never requested that the Court set a deadline for the filing of proofs of claim, Ms. Mallon's Claim is not time-barred on the basis of her failure to file a proof of claim.^[3] The Debtor did not object to her Claim or oppose the Motion to Reconsider on the basis that a proof of claim has not been filed.^[4] The Original Plan was amended on May 4, 2022 by the Modification to Plan of Reorganization (Docket No. 77)(the "Amended Plan;" together with the Original Plan, the "Plan"). The Plan provides for Ms. Mallon's claim (the "Claim") in Class 6 stating as follows:

Debtor scheduled the Class 6 Creditor as holding an unsecured claim of $185,000. Debtor intends to amend its schedules to reflect that the Claim of the Class 6 Creditor is disputed and will file an objection to same. Confirmation of the Plan does not constitute any determination of the nature, validity, or amount of the Class 6 Creditor.

Plan, Sec. 4.6, p. 17. The Court entered its Order Confirming Plan Under Bankruptcy Code § 1191(b) on May 19, 2022 (Docket No. 84).^[5]

As recited in the Objection to Claim, in preparing the Plan, the Debtor through counsel had requested documentation in support of the Claim from Ms. Mallon and her husband via e-mail dated March 18, 2022. In response, Marc Mallon^[6] provided 42 pages of documentation that allegedly supported the Claim, copies of which are attached to the Objection to Claim as "Exhibit A". Upon evaluation of the submitted materials, the Debtor's counsel replied via e-mail on April 1, 2022, that the documents did not "add up" to the Claim in the amount asserted and further requested an itemized spreadsheet, which was never offered. (A copy of this e-mail chain is attached to the Objection to Claim as Exhibit "B".) The Debtor included its own detailed analysis of the documentation provided in Exhibit "C" to the Objection to Claim. From a total asserted amount of $106,191.44 based on the aforesaid documentation, the Debtor acknowledged an amount due and owing on the Claim of $23,922.06.^[7]

As mentioned above, Ms. Mallon did not file a timely response to the Objection to Claim. The Order Sustaining Objection to Claim was entered on July 7, 2022, allowing the Claim in the adjusted amount contended by the Debtor.

Discussion

In the Mallon Response (p. 1), filed after entry of the Order Sustaining Objection to Claim, Ms. Mallon offered a "trimmed down version of the documents previously provided" allowing for those claims not attributable to the Debtor, in a revised approximate amount of $83,000. To this amount, she added $6,448 she claims to have paid to cover certain payroll checks to Jermaine Cruz.^[8] In addition, Ms Mallon alleges she has a claim for $104,000 arising from payments made for the Debtor's benefit under a Consent Final Order and Judgment for unpaid rent entered in a dispossessory action commenced in the State Court of Fulton County, Georgia on December 30, 2019, against the Debtor and others in favor of Roberts & Shefrin, LLC (the "Consent Judgment"). In the Supplemental Response, Ms. Mallon provided a copy of the Consent Judgment (attached thereto as Exhibit "A") plus copies of six (6) cashier's checks. Ms. Mallon contends this evidence proves a claim of $122,322 for payments made pursuant to the Consent Judgment that she alone funded. ^[9]

Finally, in the Motion to Vacate, Ms. Mallon repeats her contention that she paid approximately $90,000 ($83,000 + $6,448) in unreimbursed business expenses for the Debtor plus $104,000 ($52,500 + $26,240 + $26,240) in satisfaction of the three (3) arrearage installments due under the Consent Judgment from her personal funds. Although she omits the $17,352 for January 2020 rent as asserted in the Supplemental Response, she adds that she provided $10,000 cash towards the $20,000 retainer requested by Debtor's counsel to file this bankruptcy case. Ms. Mallon maintains good faith efforts were made to supply the Debtor's counsel with the required proofs no later than June 29, 2022, prior to the Notice Deadline. Ms. Mallon also insists it would be inequitable to reduce the Claim from nearly $200,000 to $23,000. Ms. Mallon asks that the Order Sustaining Objection to Claim be vacated so that she may submit her documents.

In response, the Debtor asserts that its counsel has spent time and money attempting to "decipher" the documents provided by the Mallons in various states of disorganization, and that it has been requesting the documents that support the Claim since March of 2022. It adds that Ms. Mallon did not contest confirmation of the Plan (which indicated her Claim would be paid in a reduced amount and would be objected to) and evidently concluded that she did not need to address the Debtor's detailed analysis and proposed reduction of her Claim as set forth in the Objection to Claim. Despite ample time to properly present evidence of her Claim, Ms. Mallon has yet to do so, even with her latest series of pleadings and exhibits, and she is bound by the Order Sustaining Objection to Claim.

On review, although styled as a Motion to Vacate, it might benefit Ms. Mallon if the relief pursued by Ms. Mallon were construed instead as motion for reconsideration.^[10] See Federal Rule of Bankruptcy Procedure 3008.^[11] Under 11 U.S.C. § 502(j), "[a] claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case." Before considering the equities, the existence of "cause" must first be found. See Beam v. Chase Home Fin. (In re Beam), 510 B.R. 399, 407 (Bankr. N.D.Ga. 2014), citing Warren...