The opinion of the court was delivered by: Irenas, District Judge:
HONORABLE JOSEPH E. IRENAS
This appeal requires this Court to consider the jurisdiction of the Bankruptcy Court to entertain a petition to be named as an unsecured creditor after a bankruptcy plan has already been confirmed. The Bankruptcy Court appears to have found that it lacked jurisdiction to hear the late claim and dismissed the petition. This Court finds that the Bankruptcy Court has jurisdiction to hear the claim and reverses the Order of the Bankruptcy Court.
SEBCO Laundry Systems, Inc. ("SEBCO" or "appellant") leases the laundry space located in residential apartment buildings and condominium complexes and installs and operates coin-metered laundry equipment. Tannen Towers Acquisition Corp. ("Tannen" or "Debtor") was an entity whose primary asset was a parcel of real estate located at 100 S. North Carolina Avenue, Atlantic City, New Jersey, with improvements consisting of a 294-unit apartment building ("Property"). On January 14, 1997, Tannen filed a voluntary Chapter 11 petition under Title 11 of the United States Bankruptcy Code ("Bankruptcy Code"). Vasfi Uyar ("Uyar"), along with his wife Conchita, are the equity holder's of Tannen.
On August 11, 1995, SEBCO entered into a written lease agreement ("the lease") with Uyar for the lease of laundry space at property owned by Tannen. An examination of the lease reveals that the contract was between Uyar and SEBCO without any mention of Tannen. Under this lease, SEBCO was scheduled to take possession of the laundry space on September 15, 1995. As of this date, SEBCO has never obtained possession of the premises named in the lease and contends that Uyar has not honored the terms of the lease.
SEBCO maintains that it attempted to resolve the conflict without resorting to litigation for three years until negotiation became futile. SEBCO filed a complaint against Uyar on April 13, 1998, in the Law Division of the Superior Court of New Jersey, Atlantic County, for breach of the lease, specific performance and compensatory damages, including lost profits. On July 21, 1998, Uyar filed an Answer which denied responsibility and asserted that he was not personally liable on the lease because he was acting as an agent on behalf of Tannen. SEBCO claims that it was never informed by Uyar that he was acting on behalf of Tannen, and did not know that Tannen was a potential litigant until Uyar answered the complaint.
Following Uyar's assertion of this defense, SEBCO petitioned the Bankruptcy Court to be named as an unsecured creditor in the Chapter 11 action initiated by Tannen to recover $683,841.60 in lost revenue. By the time this petition was filed, the Bankruptcy Court had already confirmed Tannen's reorganization plan without mention of SEBCO's claim. In the course of Tannen's bankruptcy proceedings, SEBCO was never named as a potential creditor and was not given notice of Tannen's plan of reorganization. SEBCO argues that if Uyar possessed the authority to bind Tannen and was exercising that authority when he entered into the lease agreement, SEBCO has a valid claim against Tannen. Despite the lateness of its request, SEBCO argues that it should be allowed to pursue the claim because it was not notified of Tannen's bankruptcy prior to the confirmation of the bankruptcy plan.
Tannen maintains that it acted in good faith when it failed to give SEBCO notice of the proceedings. Specifically, Tannen claims that Uyar acted as a principle in the negotiations with SEBCO and did not have authority to bind Tannen to the lease. Since Tannen was not a party to the lease, it argues that there was no notice of SEBCO's claim prior to the current petition. Additionally, Tannen argues that there is no evidence to suggest that it was aware that SEBCO had attempted to resolve the dispute prior to filing suit.
Tannen filed a voluntary Chapter 11 petition under Title 11 of the Bankruptcy Code on January 14, 1997. Shortly thereafter, on July 31, 1997, Tannen entered into a contract for the sale of the Property to Tannen 110 Realty, LLC, for $10,600,000.00, subject to court approval pursuant to 11 U.S.C. § 363. On October 6, 1997, an Order approving the sale was entered which required the closing to be consummated by October 21, 1997.
On August 6, 1997, the Bankruptcy Court issued a Notice of Commencement of the Chapter 11 proceedings which set a Claims Bar Date of December 1, 1997 ("claims bar date"). Tannen filed a Plan of Liquidation along with a Disclosure Statement on September 3, 1997. The Plan of Liquidation provided for the sale of the Property to Tannen 110 Realty, LLC, and a 100% distribution of allowed claims for unsecured creditors.
On December 4, 1997, Tannen filed a First Amended Disclosure Statement which was approved by the Court on December 10, 1997. On December 4, 1997, Tannen filed a First Amended Plan of Liquidation ("First Amended Plan"), which was confirmed by an Order on February 19, 1998.
On February 20, 1998, Tannen filed a motion for the authorization of the disbursement of funds, escrow for administrative expenses, and release of previously escrowed funds. On March 16, 1998, the Court authorized Tannen's counsel as the disbursing agent under the First Amended Plan, to disburse the sum of $820,131.62 to general unsecured creditors, $1,620,832.47 to Tannen's equity holders, and to retain the sum of $409,769.49 in escrow for satisfaction of administrative expenses and several other claims. *fn1
Throughout this entire process, SEBCO claims that it was unaware of the bankruptcy proceeding and its potential claim against Tannen. On August 1, 1998, within one week of learning that Uyar was claiming that he entered into the contract on behalf of Tannen, SEBCO filed its application for leave to file a late proof of claim.
On August 24, 1998, the United States Bankruptcy Court for the District of New Jersey heard argument from counsel and decided to allow additional briefing on whether the Bankruptcy Court had subject matter jurisdiction over SEBCO's application. On September 4, 1998, SEBCO submitted a Memorandum of Law in Further Support of its Application, and Tannen submitted one in opposition on September 19, 1998. ...