UNITED STATES
BANKRUPTCY COURT
EASTERN DISTRICT OF
KENTUCKY
LEXINGTON DIVISION
IN
RE:
HUBER
ENTERPRISES, LLC dba
HUBER
CONSTRUCTION fdba
HUBER
PERFORMANCE GROUP
DEBTOR CASE NO. 08-50020
ORDER
This matter having come before the court on Trustee’s
Objection to Proof of Claim No. 27 as a Priority Claim and Opportunity to
Object (DOC 72), and the matter having been heard on February 12, 2009, and the
matter having been taken under submission, the court hereby issues this order
setting evidentiary hearing.
The trustee objects to the claim of Amy
Peabody as a priority claim arguing that 11 U.S.C. § 507(a)(7)
does not apply. The trustee does not dispute that Amy Peabody, an attorney and
officer of the court, did in fact pay an additional $4,500.00 to Chavez
Concrete to complete a construction contract.
The court has reviewed the file, and it
appears that this type of claim is the type of claim contemplated by 11 U.S.C. §
507(a)(7). “Another troublesome situation is where the
consumer has received a portion of the goods or services. The legislative
history cites the example of a health club membership or a service contract.
Both seem at odds with the idea of a deposit, since the consumer usually pays a
fixed amount up front for the services to be provided later. At the time the
debtor files a case under the Bankruptcy Code, the consumer is likely to have
received or had available some of the agreed-upon services. Most courts
considering such situations have permitted the consumers to assert priority
claims.” 4 Colliers on Bankruptcy, ¶ 507.08[2][b]
(15th ed. rev. 2008).
Thus the court must calculate the amount
of damages due to the failure of the debtor to finish construction. “Where the
contractor fails to keep the agreement, the measure of the employing property
owner’s damages, whether sought in an independent action or by recoupment or
counterclaim, is always the sum which will put him or her in as good a position
as if the contract had been performed.” Williston on
Contracts § 66:17 (4th ed. rev. 2008). Measure of damages
for defective performance of construction contract is cost of remedying defect.
See Baker Pool Co. v. Bennett, 411 S.W.2d 335
(Ky. 1967).
The court calculates the damages as
follows:
Deposit: $4,820.00
+ Remaining on Contract: $2,380.00
Total Contract: $7,200.00
- Cost to Finish $4,500.00
= $2,700.00
Deposit: $4,820.00
- $2,700.00
Damages: $2,120.00
Thus the claimant’s calculation for a
priority claim under 11
U.S.C.
§ 507(a)(7) is correct.
For that reason, Trustee’s Objection to
Proof of Claim No. 27 as
a Priority Claim and Opportunity to Object (DOC 72) is
hereby
OVERRULED.
Copies
to:
J.
James Rogan, Esq.
Amy
Peabody, Esq.