1. PREJUDICE DUE TO DELAY - D & A asks that I reconsider that it has not been prejudiced by the delay in addressing the KPB administrative claim. I found no substantial prejudice to D & A.

D & A objected to my characterization in the memorandum granting summary judgment that it essentially got a $30,000+ loan from KPB by not paying the administrative expense claim shortly after confirmation as anticipated by § 1129(a)(9)(A). At page 9 of its Memorandum of Law Motion for Summary Judgment (Docket Entry 9), D & A indicates that it had $100,000 after confirmation which should have been sufficient to pay the claim of KPB. D & A argues at page 2 of the Motion to Reconsider that it was only obligated "to disburse under the plan a finite sum of money [Part VIII of the Third Amended Plan of Reorganization]. It was to disburse that money first to pay administrative expense claimants and then to prepetition claimants." (emphasis added).

I interpreted D & A's argument to be that there was only a certain amount of money to pay administrative expenses and unless the KPB got its claim in, it was out of luck. This begs the question of whether the KPB ever got an effective notice cutting off its right to make a claim for administrative expenses.

I confirmed the plan because the debtor must have represented to me, in establishing its right to confirmation under § 1129(a), that there was enough money to pay administrative expenses. D & A's statement that it had $100,000 at the time of confirmation and that this was sufficient to have paid KPB seems to verify this.

My conclusion is that, if the money was due and not paid on confirmation, D & A got the benefit of not having paid the money to KPB which it was due on confirmation. This is the "loan" I analogized in my original memorandum.

If D & A's argument is that it paid the money to the unsecured creditor class believing it was safe to do so, I have stated that its notice of such a deadline was too obscurely buried in its documents to bind KPB. In other words, if D & A will ultimately overpay under the terms of the plan, that is D & A's fault, not KPB's. Since D & A knew the KPB administrative tax claim was disputed, it took the risk of disbursing without liquidating or estimating that claim. See the discussed at the end of § 2 of this memorandum.

2. 11 USC §§ 503(b) and 507(a) - D & A's argument that KPB is not entitled to recover because it did not file a request under § 503(a), (b) of the Bankruptcy Code is fallacious. D & A argues that KPB lost its rights as an administrative claimant under § 1129(a)(9)(A) because it did not file a claim under § 507(a)(1). The latter section provides for allowance of administrative expense claims after notice and hearing.

First, the adversary proceeding we are involved in is exactly the request under § 503(b)(1) that D & A alludes to. This adversary encompasses the notice and hearing referred to in § 503(b)(2).

Secondly, to read §§ 503(b)(1) and 507(a)(1) as strictly requiring an actual notice and hearing before payment of every administrative expense is not consistent with chapter 11 practice.
      3 ABR 228  Debtor was in the grocery business and presumably had hundreds if not thousands of creditors it dealt with post-petition in stocking its supermarket. Most of these creditors obviously did not seek payment through the notice and hearing process. This is because the debtor is authorized to operate the business in a chapter 11 and actual notice and hearing is not required for ordinary, on-going business transactions. § 1108 of the Bankruptcy Code. See also, § 102(1) of the Bankruptcy Code defining "after notice and a hearing" to mean such notice as is appropriate to the circumstances. Thus, many voluntary, agreed upon, ordinary-course-of-business payments do not require actual notice and an opportunity for a hearing.

A debtor-in-possession authorized to operate the business can obtain unsecured credit and incur unsecured debt in the ordinary course of business allowable under § 503(b)(1) as an administrative expense. See, § 364(a) of the Bankruptcy Code.

Likewise, the debtor authorized to operate the business can enter into transactions, including the sale or lease of property of the estate, in the ordinary course of business, without notice or hearing, and may use property of the estate in the ordinary course of business without notice and hearing. See, § 363(c)(1) of the Bankruptcy Code.

A trustee (read, "debtor-in-possession") must pay its taxes. 28 USC § 959(b).

Debtor's argument implying that, because KPB had not sought authorization for its administrative expense under § 503(b)(2), it was therefore not entitled to the benefits of § 1129(a)(9)(A) appears without foundation or authority. It is still an administrative expense of the kind described in § 507(a)(1), whether or not the request for payment has actually been made. The plan itself seems to provide for post-confirmation resolution of administrative expense claim.

If D & A realized there was an unliquidated administrative expense which, if established, D & A could not fund or which would effect the amount of payments to junior creditors, this should have been brought to the court's attention because the court would have had to estimate the claim to determine if D & A met the criteria for confirmation. See, In the Matter of Pizza of Hawaii, Inc., 761 F2d 1374, 1382 (9th Cir 1983).

3. COURT'S RELIANCE ON FRBP 9006(b)(2) - The court's reliance of FRBP 9006(b)(1) was a miscitation. D & A argues that the court could not sua sponte enlarge the time limits because the time had already elapsed, citing FRBP 9006(b)(1). That, indeed, is the literal reading of the rule. The correct citation which the court should have used is FRCP
      3 ABR 229  9006(b)(2). That is the rule referring to "excusable neglect."

What the court did in a shorthand way was to infer such a motion for an extension due to "excusable neglect" from KPB's arguments in its motion for summary judgment although KPB did not cite FRBP 9006 directly. Indeed, it is not improper for a court to suggest the filing of a motion that would dispose of an issue. See, Gonzales v. Park, 830 F2d 1033, 1037 (9th Cir 1987).

I deemed the "excusable neglect" matter to have been sufficiently raised, although in a fuzzy manner. If not raised by KPB in its summary judgment motion, I certainly suggested to KPB in oral argument that the ground of excusable neglect was available and the KPB seemed to concur by its acquiescence with such an approach.

4. UNTIMELINESS OF THE KPB ADMINISTRATIVE EXPENSE CLAIM -D & A seems to argue that the time to raise the KPB claim has expired. On page 6 of its motion to reconsider, D & A suggests "there are three logical points at which an application for payment under § 503(b) could logically occur in a chapter 11: (1) confirmation of the plan; (2) entry of the final decree; or (3) when performance under the plan is otherwise complete". There is no basis for arbitrarily limiting an application for administrative expenses to these three points on the time-line.

Unless there is some kind of a valid and enforceable cutoff date (and, I found there was not in this case due to lack of adequate notice), it is reasonable to limit the time to make an application for administrative expense to some appropriate statute of limitations period.

If the application in this case was made within six years of the accrual of a cause of action on the tax claim, I presume it is timely. Cf, AS 09.10.120. If D & A thinks there is an appropriate statute of limitations argument or other grounds for shortening time which creates a bar date (other than the one I have already denied in my summary judgment for KPB), D & A can raise that argument.

HERBERT A. ROSS
Bankruptcy Judge