In re Suwannee Swifty Stores, Inc.

223 B.R. 834, 1998 Bankr. LEXIS 1084, 33 Bankr. Ct. Dec. (CRR) 173, 1998 WL 547005
CourtUnited States Bankruptcy Court, M.D. Georgia
DecidedAugust 17, 1998
DocketBankruptcy No. 96-60807-JTL
StatusPublished

This text of 223 B.R. 834 (In re Suwannee Swifty Stores, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, M.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Suwannee Swifty Stores, Inc., 223 B.R. 834, 1998 Bankr. LEXIS 1084, 33 Bankr. Ct. Dec. (CRR) 173, 1998 WL 547005 (Ga. 1998).

Opinion

MEMORANDUM OPINION

JOHN T. LANEY, III, Bankruptcy Judge.

On May 21, 1998, the court held a hearing on the motion of the Georgia Self-Insurers & Guaranty Trust Fund (“Trust Fund”) for payment of administrative expenses and to pay workers’ compensation claims on a regular basis. At the conclusion of the' hearing, the court took the matter under advisement. After consideration of the applicable statutory law and case law, the court, for reasons indicated below, will approve partial payment of the administrative expenses requested. However, the court will not allow the payment of future claims for administrative expenses without receiving further court approval.

Facts

On December 12, 1996, Debtor, Suwannee Swifty Stores, Inc. (“Suwannee Swifty”) filed a petition for relief under Chapter 11 of the Bankruptcy Code (“Code”). Prior to filing for bankruptcy relief, with respect to workers’ compensation insurance, Suwannee Swifty was self-insured in accordance with Georgia law. See O.C.G.A. § 34-9-380 et seq. In order to participate as a self-insurer, Suwan-nee Swifty caused letters of credit to be issued by NationsBank N.A. (South) (“Nati-onsBank”) and The Citizens National Bank of Quitman (“Citizens Bank”) The letters of [836]*836credit, which totaled $350,000, were issued in favor of the Trust Fund to operate as security for Suwannee Swifty’s workers’ compensation obligations.

On December 24, 1996, the court entered an order authorizing Suwannee Swifty to continue to be self-insured and to continue to pay any prepetition workers’ compensation claims. Additionally, on July 11, 1997, Su-wannee Swifty filed an adversary proceeding against the Trust Fund and NationsBank.1 Suwannee Swifty sought both preliminary and permanent injunctive relief as well as a temporary restraining order.

On July 18, 1997, the court entered a temporary restraining order (“TRO”) preventing the Trust Fund from drawing upon the letter of credit with NationsBank. The TRO was conditioned on Suwannee Swifty paying all prepetition and postpetition non controverted workers’ compensation claims as they arose as well as all administrative charges incurred for administering Suwannee Swifty’s workers’ compensation claims. If Suwannee Swifty failed to pay any claims as they became due, the TRO authorized the Trust Fund to submit notice of its intent to revoke Suwan-nee Swifty’s self-insured status and to draw upon the NationsBank letter of credit.

On July 9,1997, the court entered an order approving the joint motion of Suwannee Swifty and NationsBank to amend the letter of credit with NationsBank. The amendment extended the expiration date of the letter of credit to August 27, 1997. Moreover, on August 25, 1997, the court entered an order on a second joint motion of Suwan-nee Swifty and NationsBank to amend the letter of credit. This amendment further extended the expiration date of the letter of credit to November 25,1997.

The Trust Fund subsequently issued notice of its intent to revoke Suwannee Swifty’s self-insured status. No objections were made and the Trust Fund collected on both letters of credit. Since the Trust Fund revoked Suwannee Swifty’s self-insured status, the Trust Fund has regularly paid all of Suwannee Swifty’s unpaid workers’ compensation liabilities. Included in the payments the Trust Fund has made are amounts for at least four (4) postpetition injuries to Suwan-nee Swifty employees. Prior to Suwannee Swifty’s self-insured status being revoked, Suwannee Swifty paid $132,924.15 in prepetition workers’ compensation claims and $36,-978.29 in postpetition workers’ compensation claims.

On January 6, 1998, the Trust Fund filed two proofs of claim in this case. Proof of claim number 350 is in the amount of $88,-000.00, purported to be for an administrative expense claim for postpetition workers’ compensation claims. Proof of claim number 351 is in the amount of $611,000.00, purported to be an unsecured non priority claim for pre-petition workers’ compensation claims. Both claims are based upon what the Trust Fund predicts it will have to pay. At the time of the hearing, the Trust Fund had paid out a total of approximately $190,000 in both pre-petition and postpetition claims.

On April 23, 1998, the Trust Fund filed an application for payment of administrative expense and motion to compel debtor to pay postpetition workers’ compensation claims on an ongoing basis. In its motion, the Trust Fund asks the court to approve as an administrative expense $39,490.42. This represents the amount of payments the Trust Fund has made on postpetition workers’ compensation claims on behalf of Suwannee Swifty.

Moreover, the Trust Fund also asks in its motion for the court to approve future ongoing postpetition claims as administrative expense without the necessity of the Trust Fund having to file applications for the payments. The Trust Fund contends that it is undersecured with respect to the prepetition claims it has paid and it would be appropriate for the court to approve future administrative expense claims without court approval for each specific claim.

Suwannee Swifty objects to the Trust Fund’s motion.2 Suwannee Swifty contends that before the Trust Fund would be entitled to an administrative expense claim it should [837]*837have to exhaust the letters of credit proceeds first. Furthermore, Suwannee Swifty disputes the propriety of part of the Trust Fund’s postpetition workers’ compensation claim.

Discussion

The court will first address whether the proceeds from the letters of credit secure the prepetition claims or the postpetition claims. Next, the court will address whether the Trust Fund is entitled to an immediate payment as an administrative expense for the amounts that it has expended for postpetition claims. Finally, the court will address whether the Trust Fund is entitled to payment of future amounts expended for postpe-tition claims on an ongoing basis without court approval.

Section 34-9-382 of the Official Code of Georgia Annotated (“O.C.G.A.”) establishes the Georgia Self-Insurers Guaranty Trust Fund. The Trust Fund requires all participants to maintain an acceptable form of security, such as an irrevocable letter of credit, in an amount not less than $100,-000.00. O.C.G.A. § 34—9—386(b)(2). The Trust Fund is authorized to seek reimbursement from a participant for any payments the Trust Fund makes on behalf of the participant. O.C.G.A. § 34-9-387(a). Moreover, the Trust Fund is authorized to use a participant’s security deposit to satisfy the participant’s workers’ compensations obligations. O.C.G.A. § 34-9-387(b).

As a result, Suwannee Swifty was required to maintain some form of security with the Trust Fund. Suwannee Swifty accomplished this by causing the letters of credit to be issued. The letters of credit operated as security for any obligations the Trust Fund paid on behalf of Suwannee Swifty.

The court notes that the letters of credit were issued prepetition.

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223 B.R. 834, 1998 Bankr. LEXIS 1084, 33 Bankr. Ct. Dec. (CRR) 173, 1998 WL 547005, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-suwannee-swifty-stores-inc-gamb-1998.