United States District Court, N.D. Alabama, Eastern Division
IN RE: GTM ENERGY PARTNERS, LLC, Debtor.
WILLIAM S. KAYE, Plan Administrator, et al., Appellees. ROY DOBBINS, Appellant,
R. DAVID PROCTOR, District Judge.
This matter is before the court on the appeal filed by Roy S. Dobbins from the bankruptcy court's March 6, 2014 Order sustaining objections by the Chapter 11 Plan Administrator, William S. Kaye, to the proof of claim filed by Dobbins on behalf of Southern Energy Development Company, Inc. ("SEDCO").
This case involves an October 2013 claim by Dobbins that debtor GTM Energy Partners, LLC failed to pay all royalties owed to SEDCO - a corporation owned by Dobbins' wife - in connection with a 2004 mining lease that expired in 2009.
A. The 2004 Lease
Lowell Barron and SEDCO were the record owners of the Property when the 2004 Lease was executed. (Bankr. Case Doc. # 741-2). Dobbins, acting on behalf of SEDCO, and Barron executed a coal mining lease dated November 4, 2004, in favor of D & E Mining, LLC (the "2004 Lease"). (Bankr. Case No. Case 11-80568-JJR11 (hereinafter "Bankr Case") Doc. # 741-3 at 1, 4; Doc. # 1-4 Dobbins Dep. 60:15-61:2). D&E Mining subsequently assigned the 2004 Lease to GTM Energy Partners, LLC ("GTM"), and GTM mined the Barron/SEDCO Property until approximately September 2009. (Doc. # 1-4 Dobbins Dep. 70:6-17). By its own terms, the 2004 Lease expired on November 4, 2009. (Bankr. Case Doc. # 741-3 at 1). The 2004 Lease provides for the following consideration:
A. LESSEE shall pay the LESSOR 10% per ton based on the Pit Price and based on the LESSOR owning the mineral rights or at 5% based on the pit price if the mineral rights are not owned. All production royalties are to be paid on the twentieth (20th) day of each month for all coal mined and sold from the demised premises during the next preceding month.
(Doc. # 1-4 at p. 119) (emphasis added). The term "Pit Price" is not defined in the 2004 Lease. ( Id ). The term "Sale Price" is later defined to include "BTU Bonus" or "BTU Penalty." ( Id. ).
According to GTM, all royalties due were paid in full at the end of the lease. (Doc. # 1-2 at 24). GTM did not pay the lessors any BTU bonuses or penalties because there was no provision for that in the lease. (Doc. # 1-2 at 25). Following the expiration of the lease in 2009 until October 2013, neither Dobbins nor Barron ever contacted GTM claiming they were owed any money under the 2004 Lease. (Doc. # 1-2 at 24).
B. GTM Files Chapter 11 Bankruptcy
On February 16, 2011, more than a year after the 2004 Lease expired, GTM filed a chapter 11 bankruptcy petition with the United States Bankruptcy Court for the Northern District of Alabama, and that filing commenced the underlying bankruptcy case. (Bankr. Case Doc. # 1). When GTM filed its bankruptcy case, neither Dobbins' address shown in the 2004 Lease, nor any other address for Dobbins, was included in the mailing matrix.
In May 2011, the bankruptcy court approved a sale of substantially all of the assets of GTM. (Bankr. Case Doc. # 247 at 1, 16). Shortly after the sale closed, on June 27, 2011, the deadline for filing proofs of claim in the Bankruptcy Case expired. (Bankr. Case Doc. # 695 at ¶ 5). On December 12, 2011, the bankruptcy court confirmed GTM's chapter 11 plan (the "Plan"). (Bankr. Case Doc. # 451). Dobbins was not scheduled as a creditor, and there was no evidence that he received any notice of GTM's bankruptcy proceedings.
The Plan contemplated that, after payment of all allowed claims with interest, and payment of the fees and expenses of the Plan Administrator, the remaining assets of GTM would be turned over to the equity holders of the company. (Bankr. Case Doc. # 349 at 2, 11-16, 18-22). As of September 2013, the Plan Administrator had paid all allowed proofs of claim timely filed in the Bankruptcy Case, with interest at the Plan rate. (Bankr. Case Doc. # 683 at 1-3).
C. Dobbins's Proof of Claim
On October 9, 2013, Dobbins filed a proof of claim in the bankruptcy case on behalf of SEDCO (the "Proof of Claim"). (Bankr. Case Claim # 72-1 (Doc. # 687-1); Doc. # 1-1 McGee Dep. 46:2-5). The Proof of Claim asserts an unsecured, pre-petition claim in the amount of $452, 606.00, consisting of the following: (a) $52, 597.84 for "premiums for BTU which would have been at least 10% of my total royalties received;" (b) $100, 009.00 for "coal mined from my property in 2007 and 2008 [that] went to the washer and I was never paid for... it would have been approximately 25% of total mined... for this period;" and (c) $300, 000.00 for "damages for trespassing on my property." In support of the Proof ...