UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON

IN RE:

PHOENIX COAL COMPANY, INC. CASE NO. 89-20786

DEBTOR

This matter is before the Court upon the Motion filed by the Chapter 7 Trustee herein on October 17, 1991 for approval of a proposed settlement of an adversary proceeding between the Debtor and Belva Coal Company, Inc. ("Belva") and Rich Creek Processing, Inc. ("Rich Creek") and upon the Objection filed by Belva and Rich Creek on February 18, 1992 to the claims of Amah, Inc., Amah Coal Company, Amah, Inc. II, Amah, Inc. III and World Coal Company (the "Amah Entities"). The Court heard oral argument on the Objection to the proposed settlement by Debtor on December 3, 1991 and on the Objections to the particular claims involved on March 3, 1992. Belva and Rich Creek have thoroughly briefed their positions on both motions and the Amah Entities have filed their response to the Objection to their claims. The Debtor has filed its Objection to the proposed settlement herein.

This proceeding began by the filing of a voluntary petition under Chapter 11 on August 2, 1989. The case was converted to a Chapter 7 proceeding on March 6, 1991 and James Nolan was appointed as Trustee by a notice filed in the Court March 19, 1991. On August 16, 1989, the Debtor, during the pendency of the Chapter 11 proceeding, filed adversary proceeding No. 89-0178 against Caymen Coal, Incorporated, Rich Creek and Belva.

The Statement of Assets and Liabilities of the Debtor filed on September 1, 1989, indicated, in Schedule B-1 thereof, that the Debtor owned six real estate leases, the value of which was unknown. The Debtor listed no other assets in that filing. Schedule A-3 thereof listed the Amah Entities and their claims therein as undisputed claims for equipment leases or loans. By amendment filed September 13, 1989, the Debtor amended Schedule B-2 to include two accounts receivable totalling $130,000 and coal exceeding 5,000 tons from its mining operations. Contrary to the assertions of the Amah Entities, the amended filings of the Debtor indicated assets in the case.

The adversary proceeding filed against Rich Creek and Belva by the Debtor has certainly had a checkered history. After an initial dismissal by another Judge in this Court, and after various appeals and remands, the Plaintiff/Debtor was ultimately given an opportunity to file an amended complaint but apparently chose not to do so. It is that proceeding that the Trustee now seeks to settle for the sum of $15,000.00.

On April 5, 1991, the Debtor filed a Motion to Dismiss the Chapter 7 proceeding which Motion was denied by Order entered May 24, 1991. The Debtor filed a subsequent Motion to Dismiss on July 30, 1991 which was overruled by Order entered September 11, 1991. The Amah Entities have joined with the Debtor in objecting to the settlement proposed by the Trustee.

The attorney for the Amah Entities, Richard E. Wentz, is general counsel for the Debtor and for all of the Amah Entities. The Debtor is owned by Austin J. McGinn and the Amah Entities are owned in various proportions by McGinn, his wife, Wentz and other parties.

The Debtor filed its Objection to the Proposed Settlement and Motion for Evidentiary Hearing on November 4, 1991 and hearing was held herein on December 3, 1991 on Trustee's Motion, the Objection, and the Motion for an Evidentiary Hearing. The Objection makes reference to a higher offer made to the Trustee in the amount of $20,000 by McGinn. Apparently, he would desire to purchase the lawsuit in order to attempt to pursue claims against Belva and Rich Creek. The only reference to such offer appears in the Objection of the Debtor and in the Response filed by Belva and Rich Creek on November 27, 1991. Belva and Rich Creek contend that they are the only creditors unless the claims of the Amah Entities are allowed by the Court.

Belva and Rich Creek suggest that the litigation against them is simply vexatious and the purpose of the Debtor in objecting to the settlement is simply to stop the settlement in order that this litigation can be continued against them. They further suggest that the timing of the filing of the claims of the Amah Entities relates more to the desire of the Amah Entities to assist the Debtor in the opposition to the settlement than to the Amah Entities' desire to file claims for the purpose of receiving a distribution on their claims. Because of the interlocking ownership of the Debtor and Amah Entities, it appears that the timing is more than coincidental.

The Amah Entities argue that while their counsel was aware of the proceeding, he is general corporate counsel with no special knowledge of bankruptcy law and relied on other counsel who informed him that no claims need be filed. He further states that he did not receive the Court's March 25, 1991 Notice of Order Fixing Date of Meeting of Creditors and Fixing Time for Filing Claims and certain Complaints. The Certificate of Mailing indicates that a copy of the Notice was mailed to Amah, Inc. at Mr. Wentz' address. The Amah Entities further indicate that, based upon Rule 2002(e), no bar date is appropriate since they claim there are no assets in the within case. It is plain from the face of matters that this is not a no asset case in the sense of the application of Rule 2002(e).

The essence of the objections made to the Amah claims is only to their timeliness. No objection is made to the substance of the claims involved.

Bankruptcy Rule 3002 controls the filing of a proof of claim in a Chapter 7 proceeding. Subsection (c) indicates the time for filing a claim is within ninety (90) days after the first date set for the meeting of creditors. The Amah Entities admit that their claims were filed after this deadline had passed.

Bankruptcy Rule 9006(b) addresses enlargement of times provided for in the Bankruptcy Rules. Subsection (3) indicates that Bankruptcy Rule 3002(c) is a Rule under which the Court may enlarge the time for taking action "only to the extent and under the conditions stated" in that Rule. A reading of Bankruptcy Rule 3002(c) indicates that there are several exceptions to the Rule, none of which appear to apply to the present case. The "excusable neglect" standard of Bankruptcy Rule 9006(b)(1)(2) therefore does not apply to offer any relief to the Amah Entities as regards the filing of their claim herein. In re Davis, 108 B.R. 95 (Bankr. D. MD. 1989)

The facts of the case make plain to the Court that Amah's counsel was aware of the proceedings herein and had actual notice of both the Chapter 11 and subsequent Chapter 7 proceeding. Accordingly, the objection to the claims filed by the Amah Entities is well taken.

The Court must now consider the settlement proposed by the Trustee in this matter. The allowed claims in this matter are limited to those of Belva, Rich Creek and the United States Trustee. The claim of the United States Trustee is a priority claim from the preceding Chapter 11 action and, as such, leaves only the Belva and Rich Creek claims as timely filed claims of unsecured creditors.

Where only Belva and Rich Creek may benefit or suffer detriment in the unsecured class from the settlement proposed by Trustee, and it appears that the Debtor has had its day in Court, it would appear appropriate for the Court to approve the settlement which will be done by separate Order.

Dated this ________ day of ________________________, 1992.

BY THE COURT

_____________________________________

BANKRUPTCY JUDGE

COPIES TO:

Debtor

Robert Treadway, Esq.

Virginia Snell, Esq.

James A. Nolan, Esq.

Ronald E. Butler, Esq.

U.S. Trustee