UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
HUBER ENTERPRISES, LLC dba
HUBER CONSTRUCTION fdba
HUBER PERFORMANCE GROUP
DEBTOR CASE NO. 08-50020
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[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:
+ Remaining on Contract: $2,380.00
Total Contract: $7,200.00
- Cost to Finish $4,500.00
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
J. James Rogan, Esq.
Amy Peabody, Esq.