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In re Ottawa Bus Service, Inc.

United States District Court, D. Kansas

August 16, 2013

In re OTTAWA BUS SERVICE, INC., Debtor.
v.
Ottawa Bus Service, Inc., Appellee. Webster Capital Finance, Inc. f/k/a Center Capital Corporation, Appellant,

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[Copyrighted Material Omitted]

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James F. Freeman, III, Swanson Midgley, LLC, Kansas City, MO, for Appellant.

Robert E. Arnold, III, Arnold Law Firm, LLC, Olathe, KS, for Appellee.

MEMORANDUM AND ORDER

ERIC F. MELGREN, District Judge.

In this bankruptcy appeal, appellant Webster Capital Finance, Inc. f/k/a Center Capital Corporation (" Webster Capital" ) seeks review of various orders issued by the United States Bankruptcy Court for the District of Kansas. Webster Capital challenges the bankruptcy court's order denying its untimely objection to confirmation, confirming the debtor's Chapter 11 Small Business Plan, and treating Ottawa Bus Service, Inc., as a small business debtor. For the reasons set forth below, the bankruptcy court's order is affirmed.

I. Factual and Procedural Background

A. Ottawa Bus's Bankruptcy Filing and Chapter 11 Small Business Plan

Webster Capital is a Connecticut corporation that provides financing to various business ventures. Defendants Daniel Newby and Thomacine Newby are residents of Kansas City, Missouri, who operate Ottawa Bus Service, Inc. (" Ottawa Bus" ), a Kansas corporation. On February 19, 2002, Webster Capital and Ottawa Bus entered into Master Loan and Security Agreement No. 31505 (the " Master Loan Agreement" ), which provided the terms under which Webster Capital would extend credit and financing to Ottawa Bus. Pursuant to the Master Loan Agreement, Webster Capital and Ottawa Bus entered into at least six loan schedules, under which Webster Capital financed and obtained a purchase money security interest in several pieces of collateral. Ottawa Bus failed to pay monthly installments for July, August, and September 2010. Accordingly, on September 2, 2010, Webster Capital sent Ottawa Bus a Notice of Default, which accelerated the balance due under the various loan schedules.

On November 22, 2010, Ottawa Bus filed a voluntary petition for bankruptcy protection under Chapter 11. The voluntary petition did not identify Ottawa Bus as a small business debtor. Schedule D of the petition listed Webster Capital as a secured creditor that was owed $508,025.38 as of the petition date. On May 19, 2011, Webster Capital filed its secured proof of claim in the amount of $482,257.23. Several days later, the bankruptcy court entered a stipulation and agreed order regarding adequate protection payments from Ottawa Bus to Webster Capital.

On November 15, 2011, Ottawa Bus filed its Chapter 11 Small Business Plan (the " Plan" ), which listed Webster Capital as a secured creditor. The Plan provided that " [t]he rights and obligations of any entity named or referred to in this Plan will be binding upon ... such entity." [1] On January 3, 2012, the bankruptcy court set a confirmation hearing for February 22, 2012, and sent notice of the hearing to all parties involved, including counsel for

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Webster Capital. Webster Capital did not file an objection prior to that date, it did not return a voting ballot rejecting the Plan, and its attorneys did not appear at the hearing to protect Webster Capital's interests. Accordingly, at the confirmation hearing on February 22, 2012, the bankruptcy court conditionally confirmed the Plan, subject to the resolution of two timely-filed objections by other secured creditors. Ottawa Bus resolved both timely-filed objections in early March 2012.

B. Webster Capital's Untimely Objection to Confirmation

On April 5, 2012, more than six weeks after the bankruptcy court conditionally confirmed the Plan, Webster Capital filed an objection to confirmation. Ottawa Bus submitted a response and moved to strike the objection as untimely. Webster Capital then filed a motion for leave to file an objection out of time, asserting that its delay constituted excusable neglect under Fed. R. Bankr.P. 9006. In support of its motion for leave, Webster Capital alleged that it had numerous email discussions and telephone conferences with Ottawa Bus's attorneys regarding the Plan, such that Webster Capital believed it could negotiate a resolution in good faith.[2] The bankruptcy court scheduled a hearing for these motions to take place on May 8, 2012, but Webster Capital sought and obtained a continuance. Finally, on June 20, 2012, the bankruptcy court heard oral argument and declined to consider Webster Capital's untimely objection, reasoning as follows:

The Court has already conditionally, some months ago, confirmed this plan subject to the changes that have been agreed upon with the timely objecting creditors and the ones who appeared at the hearing. And so the Court is going to grant the motion to strike and will not consider, obviously, the untimely filed objections to confirmation. I just think that not timely filing an objection to confirmation and/or not appearing at a ...

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