Opinion
Case No. 01-40539
April 11, 2003
MEMORANDUM OF DECISION
INTRODUCTION
This chapter 11 case comes before the Court for resolution of a contested matter. F.R.Bankr.P. 9014. Hearing has been held, and the parties have made their arguments. The applicable facts are established by the pleadings and documents of record in the Court's file, which have been considered by the Court under Fed.R.Evid. 201. Additionally, certain of these pleadings were submitted by Debtor and are subject to consideration as admissions under Fed.R.Evid. 801(d). See In re Webb, 03.1 I.B.C.R. 25, 26 (Bankr. D. Idaho 2003).
Chief Bankruptcy Judge Jim D. Pappas was initially assigned Debtor's case, and he presided over it from its inception in March 2001 through February 10, 2003, when an Order of Recusal was entered, Doc. No. 130, and the case was transferred to the undersigned Bankruptcy Judge.
BACKGROUND AND FACTS
AICO Recreational Properties, LLC ("Debtor") is a chapter 11 debtor in possession. It filed its voluntary petition for relief in March 2001. Doc. No. 1. The petition was executed by Terry W. Andersen as the "managing member" of the limited liability company. Id. The petition also indicates that 83 % of Debtor is owned by the "Terry W. Andersen and Rosanna Andersen Living Revocable Trust, Dated February 1, 1991" of which Terry Anderson is trustee. Id. at 4; see also, response to question 21, statement of financial affairs, Doc. No. 8 (indicating 83 % of equity security interest in Debtor held by such trust; 17 % held by Todd and Penny Andersen). Debtor was at the time of filing represented by attorney Craig Jorgensen.
Todd is the son of Terry and Rosanna Andersen. See Second Amended Disclosure Statement, Doc. No. 146, at 28.
Secured creditors Everett and Ardis McKinney ("Creditor") in May 2001 filed a motion for relief from the § 362(a) stay. Doc. No. 12. At a hearing later that month, the Court was advised that the motion was tentatively resolved. See Doc. No. 18 (minute entry). Counsel for Creditor was to submit a written stipulation and order. Id. Issues arose in regard to obtaining documentation of the parties' agreement, and no written agreement was filed.
In December 2001, Creditor filed another motion for relief from the automatic stay. Doc. No. 31. This stay relief motion was ultimately set for a final hearing Under § 362(e) to occur on January 16, 2002. A subsequent motion of Creditor for stay relief, Doc. No. 38, was also set for a final evidentiary hearing at the same time. See Doc. No. 41 (minute entry).
The hearing was held as scheduled on January 16, 2002. Debtor appeared at this hearing through its counsel, Mr. Jorgensen. Counsel for Creditor, Craig Christensen, also appeared and recited orally on the record, in detail, the terms of a stipulated resolution reached between Debtor and Creditor. Creditor noted that the parties agreed to memorialize their agreement both orally at such hearing and again later in writing.
The transcript of that hearing is a matter of record, see Doc. No. 69, and it establishes what transpired and the terms of the parties' agreement, which are only here summarized. The Court will therefore eschew page and line citations to the transcript in this Decision.
The agreement included Debtor's assumption of an obligation to make certain adequate protection payments to Creditor commencing in February and monthly thereafter; to file a disclosure statement and plan by February 28, 2002; to prepare and file operating reports and budgets; and to pay post-petition real property taxes. If the adequate protection payments were not timely made or if Debtor defaulted on any other aspect of agreed performance, Creditor was entitled to stay relief if such default(s) were not cured within 10 days of written notice. Such relief would be without further notice or hearing and could be sought from the Court ex parte. Creditor could also, on such uncured default, seek an ex parte order dismissing the case.
Debtor, through Mr. Jorgensen, confirmed and acknowledged that the recitation by Creditor was accurate, and that Debtor agreed and would be bound thereby. Mr. Jorgensen also noted that the agreement had been discussed in detail with the Andersens, who were present in the courtroom during the hearing and heard the recitation on the record, and that they also consented to the agreement.
The Court announced that it accepted the parties' agreement and expressly declared that its terms would be binding on the parties. Counsel for Creditor was to thereafter file a written stipulation and order. This written stipulation was never finalized or filed.
In May, 2002, Creditor filed an " ex parte motion" seeking relief from stay based on Debtor's violation of the agreement of January 16. See Doc. No. 72 (motion); Doc. No. 73 (affidavit). The transcript of the January 16 hearing was submitted in support of Creditor's request. Based upon the record before it, this Court on June 7, 2002, entered an order in favor of Creditor terminating the automatic stay of § 362(a). See Doc. No. 75 (the "Order").
On July 3, 2002, a notice of appeal was filed regarding the Order. Doc. No. 81. There has been no motion made to this Court for entry of a stay pending appeal, which motion must in the first instance be presented to this Court. F.R.Bankr.P. 8005.
It is the prerogative of the appellate court ( i.e., the U.S. District Court for this District, in Case No. CV-02-387-E-BLW), and not this Court, to rule upon the timeliness of that notice of appeal. However, it is obvious from this Court's files and records that the notice of appeal was not filed within the 10 days allowed by F.R.Bankr.P. 8002(a). That record additionally establishes that there were no motions of the sort identified in Rule 8002(b) filed which would extend or vary the time for appeal, nor any request made to extend the time for appeal under Rule 8002(c).
The Court notes that the record in Case No. CV-02-387-E-BLW includes an Order entered on February 27, 2003, denying an "Ex Parte Motion for Temporary Restraining Order and Stay of Sale and Other Proceedings to Enforce Decree of Foreclosure and Order of Sale" which had been filed by Debtor.
In July, 2002, Debtor's counsel, Mr. Jorgensen, sought leave to withdraw. Doc. No. 89. This request was granted. See [Doc. No. 92 (minute entry); Doc. No. 93 (order). Hearings occurred over the next several months on Mr Jorgensen's compensation request, during which this Court heard from Debtor's managing member about his (unsuccessful) efforts to find new counsel. Finally, in November, an order was entered that required the appearance of counsel for Debtor by December 13 or the case would be dismissed. Doc. No. 107. From December 11 to 13, pleadings were filed indicating Debtors retention and employment of Philip Hughes as its counsel. See Doc. Nos. 111, 112, 113.
As best as the Court can determine, there has never been a request by the Debtor to have the employment of Mr. Hughes as counsel approved, as required by § 327. Lack of such a request for approval, and the absence of Court approval, has several consequences, but the Court need not address them here.
In early 2003, Debtor faced a motion of the United States Trustee to convert or dismiss, see Doc. Nos. 122 and 123, and continued litigation over its former counsel's compensation. The undersigned became the presiding Judge on February 10, following a hearing on the compensation issue and the entry of a recusal order.
On March 4, 2003, Debtor, through Mr. Hughes, filed a "Motion for New Trial and Reinstatement of Automatic Stay." Doc. Nos. 137 and 138 (the "Motion"). Debtor there moved "for reconsideration or alternatively for a new trial on [the Court's] order granting relief of automatic stay on or about June 7, 2002, and for [an] order to Reinstate the Automatic Stay, and enjoin further action against the [state by disputed claimant McKinneys outside the venue of the Bankruptcy Court." Id. at 1. The Motion was "based on Rules 59 and 60 of the Federal Rules of Civil Procedure." Id. at 2.
An "amended" motion was filed on March 11, see Doc. No. 141. It does not alter the Court's analysis, and reference wilt simply be made to the Motion. Use of that term in this Decision will encompass both the original and the amended motions.
The Motion came on for hearing before the Court on March 31, 2003, and was taken under advisement at the conclusion of that hearing. The present Decision constitutes the Court findings of fact and conclusions of law on the Motion. F.R.Bankr.P. 9014, 7052.
At a hearing held on March 5, Debtor's counsel indicated that a motion to reconsider the June 7, 2002 Order or to reinstate the stay was coming before the Court and would need to be heard as soon as possible. He indicated that it would be based solely on matters already of record and legal argument. The Court therefore set the March 31 hearing on this matter by video conference, noting that no new evidence would be entertained at that hearing. The Court also set an evidentiary hearing on April 30 on other matters. All this was done at the March 5 hearing with the knowledge and concurrence of all counsel.
On March 31, Debtor filed a "Request for Evidentiary Hearing on Motion for New Trial and Reinstatement of Automatic Stay." Doc. No. 149. Not only was this untimely, being filed at or about the time the hearing was being held, it was inconsistent with Mr. Hughes' representations made almost a month earlier. To the extent this motion is properly before the Court, it is denied.
It is appropriate to note that the evidence before the Court, upon which factual findings and legal conclusions herein are based, does not include either side's factual allegations or representations made through their counsel at the March 31 hearing. Argument has never constituted evidence. Particularly after F.R.Bankr.P. 9014 was amended in 2002 to add subpart (d), litigants are on notice of the need for proper presentation of evidence in regard to disputed factual matters. The instant Decision, therefore, is based on matters established by this Court's existing record. Fed.R.Evid. 201, 801.
DISCUSSION AND DISPOSITION
A. Motion for "new trial"
Federal Rule of Civil Procedure 59, cited by Debtor, is incorporated in bankruptcy proceedings by F.R.Bankr.P. 9023. However, there are several reasons why Debtor's "motion for new trial" under that Rule is not well taken.
First, such a motion — whether for a "new trial" or to "alter or amend" the judgment — must be filed not later than 10 days after entry of the subject judgment. See Fed.R.Civ.P. 59(b), (e). Here, the subject judgment is the June 7, 2002 Order. The March 4, 2003 motion is clearly untimely and must be denied. Id.; see also Thomason Farms, Inc. v. Tri-River Chemical Co. (In re Thomason Farms, Inc.), 02.2 I.B.C.R. 107, 108 (Bankr. D. Idaho 2002) (discussing timeliness of Rule 59 motion).
The Court also there noted that an untimely Rule 59 motion does not toll the 10 day time period for filing a notice of appeal. 02.2 I.B.C.R. at 108 n. 1.
Second, a Rule 59 motion provides a means to seek a "new trial . . . in an action tried without a jury, for any of the reasons for which rehearings have heretofore been granted in suits in equity[.]" Fed.R.Civ.P. 59(a). Here, there was no trial. The Order was entered pursuant to the earlier express agreement of the parties as to facts or conditions, provable on affidavit, which would authorize immediate ex parte relief. This Rule is inapplicable.
B. Motion for relief from judgment or order
Debtor also cites to Fed.R.Civ.P. 60(b), which addresses motions seeking relief from a judgment or order for certain specified reasons. This rule is incorporated by F.R.Bankr.P. 9024. This Rule allows the Court to enter relief from a prior judgment on the basis of mistake or "excusable neglect" (Rule 60(b)(1)); newly discovered evidence (Rule 60(b)(2)); fraud or misconduct (Rule 60(b)(3)); voidness of the judgment (Rule 60(b)(4)); satisfaction or release (Rule 60(b)(5)); or "any other reason justifying relief" from the judgment (Rule 60(b)(6)).
A request under Rule 60(b) is equitable in nature, and is committed to the discretion of the Court. In re RVP, Inc., 01.4 I.B.C.R. 142, 143 (Bankr. D. Idaho 2001) (citing Briones v. Riviera Hotel Casino, 116 F.3d 379 (9th Cir. 1997)). The concept surrounding such relief is "elastic" and the Court's equitable consideration will take into account all relevant circumstances. Id.
The Motion states:
This motion is based upon alleged defects in the security which was the subject of the Motion to for [ sic] Relief from Automatic Stay, to wit: (i) the obligation which was secured by the McKinney mortgage was never an obligation of the Debtor; (ii) the mortgage agreement was at best an executory contract within the meaning of the Bankruptcy Code; (iii) the mortgage was delivered into escrow to be recorded only if an "option" was entered by third parties in writing, (said option never having been exercised in writing or in any other manner); and (iv) the property affected by the Order for Relief from the Automatic Stay is a core asset of the estate requisite to its rehabilitation.
Doc. No. 137 and 138, at 1-2.
The types of contentions Debtor raises ( e.g, questions as to the bona fides of Creditor's security documents) are matters which should have been raised in response to the original motion for stay relief or, at a minimum, should have been taken into consideration by Debtor at the time of the January 16 hearing when its agreement to resolve the § 362 motion was read into the record. The alleged "basis" of the Motion as quoted above, and as discussed at further length in the Motion, does not explain or justify a motion for Rule 60(b) relief some eight months after entry of the Order.
In addition, Creditor filed a proof of claim on April 25, 2001. See Claim No. 8. No objection has ever been filed by Debtor or any other party, and the claim is therefore allowed. § 502(a). The proof of claim constitutes prima facie evidence of the validity and amount of that claim. F.R.Bankr.P. 3001(f).
1. The effect of the January 16 agreement
Debtor argues that the Order should be subject to reconsideration because the oral agreement of January 16 was never reduced to writing or filed with the Court. See, e.g, Amended Motion, Doc. No. 141, at 9, ¶¶ 1, 2. These arguments are not persuasive.
This "amended" motion adds these two paragraphs, which were missing from the Motion, Doc. No. 137/138. Otherwise the two pleadings are identical.
First of all, the transcript of the January 16 hearing, Doc. No. 69, makes it quite clear that the terms of the agreement as orally presented were agreed and consented to by Debtor, without qualification. The Court expressly declared and ordered that the terms so recited were binding. Creditor (perhaps, as it turns out, for good reason) apparently decided to take a "belt-and-suspenders" approach, having the agreement and its terms confirmed by Debtor on the open record as well as seeking to reduce it to a written stipulation and order. This cautious approach, however, does not vitiate or impair the effectiveness of the oral agreement. Debtor did not make its announced consent to the terms of the agreement contingent on anything, including a later written document.
The Ninth Circuit in Doi v. Halekulani Corp., 276 F.3d 1131 (9th Cir. 2002), considered a similar issue. There, after the material terms of an agreement were read into the record in open court, Doi unambiguously (albeit ungrammatically) voiced her consent. She later claimed the consent was conditional, and that she did not intend to be bound until there was a written agreement. 276 F.3d at 1137.
Doi had stated, in response to a question from the bench, "[a]fter I see the documents." The Court of Appeals nevertheless "[found] no merit in this argument [that her consent was conditional]." Id. Here, there wasn't even that degree of alleged equivocation, as Debtor's consent was express and unconditional.
The court rejected Doi's several arguments, and held that she had entered into a binding settlement agreement in open court, and the trial court did not abuse its discretion in enforcing it. 276 F.3d at 1137-40. Among other authorities, Doi cited Sargent v. HHS, 229 F.3d 1088, 1090 (Fed. Cir. 2000) ("it is well established that an oral agreement is binding on the parties, particularly when the terms are memorialized into the record"); and In re Christie, 173 B.R. 890, 891 (Bankr. E.D. Tex. 1994) ("An agreement announced on the record becomes binding even if a party has a change of heart after [she] agreed to its terms but before the terms are reduced to writing.") 276 F.3d at 1138.
Decisional law is rife with observations about the importance of negotiated settlements of disputes. They are, for several prudential reasons, to be encouraged. This might be viewed as particularly true in bankruptcy litigation, where the preciousness of both time and money is accentuated. To be of value, however, settlements must be enforceable and must be enforced. If parties were at liberty to disavow or modify their prior agreements, there would be a serious impact on the utility of freely-bargained settlements of disputes. These views are in accord with those of Chief Judge Pappas, who wrote:
This Court has repeatedly emphasized the importance of strict compliance with stipulations negotiated by parties in pending bankruptcy cases. Such stipulations play a critical role in the bankruptcy process. If obedience to the promises made in connection with a bankruptcy case is easily excused, negotiations between parties will be chilled and the process of obtaining cooperation and consensus in bankruptcy cases will be impaired. The Court declines to compromise the integrity of such agreements without a compelling reason to do so.
In re Blele, 03.1 I.B.C.R. 85, 86 (Bankr. D. Idaho 2003) (citations omitted).
This Court has therefore been loath to tolerate a party's attacks on or disavowal of its prior settlement agreements. Id, see also In re Bish's Boys, LLC, 02.1 I.B.C.R. 6 (Bankr. D. Idaho 2002); In re Burrows, 95 I.B.C.R. 26, 28 (Bankr. D. Idaho 1995) (refusing to allow a chapter 12 debtor to modify a plan in a fashion which would negate a prior "drop-dead" stipulation, noting that parties "should be required to show compelling cause why they should be excused from a negotiated agreement containing a default condition" and such cause "should be both unanticipated and consist of circumstances for which [they] should not be justly held accountable.") Accord, In re Wald, 211 B.R. 359, 361 (Bankr. D.N.D. 1997).
In Bish's Boys, the Court considered a Rule 60(b)(1) "excusable neglect" contention raised in connection with a prior agreement and order. While recognizing the remedial power of Rule 60(b) should be liberally applied, the Court noted that "`not even a liberal interpretation of excusable neglect will excuse every error or omission in the conduct of litigation.'" 02.1 I.B.C.R. at 7 (quoting In re Wahobin, 225 B.R. 756, 758, 98.4 I.B.C.R. 97 (Bankr. D. Idaho 1998)). After noting the applicable factors in an excusable neglect analysis, the Court rejected the attempt to obtain relief. Id. It noted that "as a matter of policy, [the Court] should be reluctant to disturb the obligations undertaken by parties in stipulations reached in the context of a contested bankruptcy proceeding, where negotiation and compromise play so vital a role in the reorganization process." Id. While the agreement there in question, first made on the open record and then memorialized, may have been regretted or even made by the lawyer without his client's consent, it was nevertheless entitled to be enforced, and "`neither ignorance nor carelessness on the part of the litigant or his attorney provide grounds for relief under Rule 60(b)(1).'" Id. (quoting Engleson v. Burlington Northern R.R. Co., 972 F.2d 1038, 1043 (9th Cir. 1992)).
These factors include the length of delay and its potential impact on judicial proceedings, and the reason for the delay including whether it was within the reasonable control of the movant. 02.1 I.B.C.R. at 7 (citing Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 395 (1993)). Both these factors weigh heavily against Debtor here.
Debtor argues here that failure to reconsider the Order will effect the loss of a "core asset" of the estate required for reorganization. See, e.g, Motion, at 1. A similar plea in Bish's Boys was unavailing: "Needless to say, the Court appreciates that enabling Debtor's primary secured creditor to repossess and sell its collateral if it chooses to do so could complicate, perhaps even practically preclude, Debtor's attempt to successfully reorganize. . . . [T]he time to consider the severity of the remedy for Debtor's default . . . was . . . when Debtor and its lawyer agreed to the `drop-dead clause,' not now." 02.1 I.B.C.R. at 8.
The Court finds, after evaluation of all Debtor's submissions and arguments, that no credible basis has been alleged, much less shown, to support relief from Debtor's prior binding agreement. Even if not faced with the compelling policies in favor of enforcement of settlement agreements, Debtor has failed to establish any grounds for reconsideration of or relief from the Order under any of the subdivisions of Rule 60(b).
C. Reinstatement of the § 362(a) stay
Debtor also asks that the Court "reinstate" the automatic stay of § 362(a). No legal authority or analysis supporting this suggested relief is stated in the Motion, nor has any been advanced through Debtor's arguments and submissions at hearing. That no basis exists allowing the Court to reimpose or reinstate the automatic stay once it has been terminated was made clear by this Court some time ago in Jones v. Wood (In re Wood), 33 B.R. 320, 322-23, 83 I.B.C.R. 112, 114-15 (Bankr. D. Idaho 1983). Wood remains good law. Accord, Canter v. Canter (In re Canter), 299 F.3d 1150, 1155 n. 1 (9th Cir. 2002).
Wood was discussed and followed in United States v. Marine Power Equipment Co. (In re Marine Power Equipment Co.), 71 B.R. 925, 928-30 (W.D. Wash. 1987), and cited with approval in Official Creditors' Committee v. Metzger (In re Dominelli), 788 F.2d 584, 586 (9th Cir. 1986).
The Motion also asks that this Court "enjoin" Creditor from pursuit of its state law rights and remedies as a secured creditor. Debtor has not established a right to injunctive relief. See, e.g, Morrow v Torrance Bank (In re Morrow), 189 B.R. 793, 802 n. 7 (Bankr. C.D. Cal. 1995) (noting Ninth Circuit standards for injunctive relief); see also F.R.Bankr.P. 7065 (incorporating Fed.R.Civ.P. 65). Moreover, an in junction may be sought only through an adversary proceeding. See F.R.Bankr.P. 7001(7). Debtor has not properly sought such relief, and this is an additional basis for denial of the request. Great Western Bank v. Snow (In re Snow), 201 B.R. 968, 977 (Bankr. C.D. Cal. 1996); Ramirez v. Whelan (In re Ramirez), 188 B.R. 413, 416 (9th Cir. BAP 1995) (Klein, J, concurring).
CONCLUSION
For the foregoing reasons, Debtor's Motion seeking relief from the Court's Order of June 7, 2002, will be denied. Counsel for Creditor may submit a proposed order in accord herewith.