Opinion
Case No. 03-80223-G3-7.
July 24, 2006
MEMORANDUM OPINION
The court has considered the "Motion for Summary Judgment on Objection to Proof of Claim of Receiver" (Docket No. 257), the "Amended Motion for Summary Judgment on Objection to Proof of Claim of Marisa Gayne," (Docket No. 261), the "(1) Motion to Dismiss Objection for Lack of Standing (2) Motion for Abatement or in the Alternative to Set Order of Disposition of Various Matters and (3) Response to Receiver's Objection)" (Docket No. 273), the "(1) Motion to Dismiss Objection for Lack of Standing (2) Motion for Abatement or in the Alternative to Set Order of Disposition of Various Matters and (3) Response to Receiver's Objection)" (Docket No. 275), the "Response to Document Nos. 313 and 314 (Receiver's Motions for Summary Judgment on Objection to Proofs of Claim of RMH and HAP) and Cross Motion for Summary Judgment" (Docket No. 321), and the "Corrected and Amended Response to Document Nos. 313 and 314 (Receiver's Motions for Summary Judgment on Objection to Proofs of Claim of RMH and HAP) and Cross Motion for Summary Judgment" (Docket No. 323) filed by Robert M. Hytken and Hytken's A Partnership. The court has also considered the "Receiver's Motion to Dismiss Objection of Hytken's A Partnership for Lack of Standing," (Docket No. 277), "Receiver's Motion for Partial Summary Judgment (Docket No. 281), "Supplement to Receiver's Motion for Partial Summary Judgment" (Docket No. 290), "Motion of Richard D. Johnston, Receiver, for Summary Judgment" (Docket No. 313), "Motion of Richard D. Johnston, Receiver, for Summary Judgment" (Docket No. 314), and "Receiver's Supplemental Motion for Summary Judgment" (Docket No. 383), filed by Richard D. Johnston, Receiver. The following are the Findings of Fact and Conclusions of Law of the court. A separate conforming Judgment will be entered. To the extent any of the Findings of Fact are considered Conclusions of Law, they are adopted as such. To the extent any of the Conclusions of Law are considered Findings of Fact, they are adopted as such.
Findings of Fact
Beach Development, L.P. ("Debtor") filed a voluntary petition under Chapter 11 of the Bankruptcy Code on March 4, 2003. The court directed appointment of a Chapter 11 Trustee by order entered January 28, 2004. The selection by the United States Trustee of Randy Williams as the Chapter 11 Trustee was approved by order entered February 2, 2004. On motion of the Chapter 11 Trustee, the case was converted to Chapter 7, by order entered August 27, 2004. Randy Williams ("Trustee") remains as the Chapter 7 Trustee.
On the petition date, Debtor owned interests in a 24 acre parcel of land located in Galveston, Texas (the "24 acre tract") and in seven contiguous parcels, also located in Galveston, Texas, totaling 66 acres (the "66 acre tract"). Kent Hytken owned 97% of the limited partnership interest in Debtor. The general partner was HPGP, LLC ("HPGP").
Source One Capital Group sought lifting of the stay as to the 66 acre tract. The stay was lifted, by order entered May 13, 2003, and Source One Capital Group foreclosed on Debtor's interest in the 66 acre tract on or about July 1, 2003.
On August 21, 2003, Marisa Gayne, Kent Hytken's former spouse, filed an adversary proceeding seeking, inter alia, to enjoin Kent Hytken, HPGP, and Debtor from transferring any property. Gayne asserted that she held a community property interest in the 66 acre tract (which had already been foreclosed at that time) and in the 24 acre tract.
The court subsequently severed Gayne's causes of action against Debtor from those against the other parties. The claims against Debtor were assigned the Adversary Proceeding number Adversary 04-8021.
Danmoor Investments, Inc. had sought lifting of the stay as to the 24 acre tract. The stay was lifted, by order entered September 9, 2003. Danmoor Investments, Inc. did not foreclose on Debtor's interest in the 24 acre tract.
On September 26, 2003, on motion filed by Gayne in the 312th Judicial District Court of Harris County, Texas, that court appointed Richard D. Johnston as receiver for Kent Hytken. The judgment appointing Johnston as receiver divested Kent Hytken of his interests in Debtor and HPGP. The judgment appointing Johnston also authorized Gayne's counsel, Scott Williams, to represent Johnston in the bankruptcy cases of Debtor and HPGP.
The HPGP case, Case No. 03-80779-G3-11, was filed June 30, 2003 and dismissed January 28, 2004.
On August 27, 2004, the same date on which the case was converted from Chapter 11 to Chapter 7, the court granted approval of the Trustee's motion to compromise with Gayne, as to the causes of action she asserted against Debtor's bankruptcy estate. The settlement provided generally for the Trustee to sell the 24 acre tract, and to pay 50 percent of the proceeds of sale to Gayne. On receipt, Gayne was to dismiss Adv. No. 048-021.
By separate orders, the court has disposed of all the causes of action stated in Adversary Nos. 03-8073 and 04-8021.
The Settlement Agreement attached to the motion to compromise, which was signed by Trustee and by Gayne, provides in pertinent part:
WHEREAS, Trustee and Gayne have conducted negotiations, and in order to avoid the expense, inconvenience, delay and uncertainty of litigation, the Trustee and Gayne have reached an agreement to fully and completely resolve any and all claims and disputes between the Trustee and Gayne in connection with or arising from any and all claims of the bankruptcy estate.
* * *
2. Release. Except for the obligations provided for in this Settlement Agreement, the Debtor and Trustee, on behalf of himself as well as all present agents, attorneys, representatives and assigns and Gayne on behalf of herself as well as all present agents, attorneys, representatives and assigns hereby forever and unconditionally release and discharge the other and its agents, attorneys, representatives and assigns from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses including but not limited to attorneys' fees, damages, and causes of action each may have against the other and its agents, attorneys and representatives.
(Docket No. 142, Exhibit A).
Gayne, Johnston, Hytken's A Partnership, and Robert Hytken have each filed claims against the bankruptcy estate. Robert Hytken has objected to the claims of Gayne (Docket No. 221) and Johnston (Docket No. 222). Johnston has objected to the claims of Hytken's A Partnership (Docket No. 239), and Robert Hytken (Docket No. 240).
In the instant motions filed by Robert Hytken and Hytken's A Partnership, they seek summary judgment (Docket Nos. 257, 261) as to their objections to claims of Johnston and Gayne, on three grounds: that Johnston lacks standing to pursue a claim as a result of Gayne's settlement with Trustee; that Gayne has released her claim in the settlement; and that the claims asserted by Johnston are barred by res judicata. They seek dismissal (Docket Nos. 273, 275) or summary judgment (Docket Nos. 321, 323) as to Johnston's objections to their claims, on grounds Johnston lacks standing to object to claims as a result of Gayne's settlement with Trustee.
In the instant motions filed by Johnston, he seeks dismissal of Hytken's A Partnership's objection to his claim (Docket No. 277) asserting that Hytken's A Partnership's claim is fraudulent, and thus Hytken's A Partnership lacks standing to object to Johnston's claim. He seeks summary judgment (Docket Nos. 281, 290) determining that the res judicata arguments raised by Robert Hytken and Hytken's A Partnership fail. He seeks summary judgment (Docket Nos. 313, 314, and 383) determining that Robert Hytken and Hytken's A Partnership lack claims against the estate, as a result of deposition testimony of Robert Hytken and Kent Hytken.
In Robert Hytken's deposition of June 9, 2005, he testified that he did not know when the advances he asserts he made to Debtor were to be repaid. (Exhibit 7, Docket No. 322).
In Kent Hytken's deposition of April 14, 2006, taken in connection with a state court proceeding, he testified that Robert Hytken "invested monies in the Galveston property." He also made a reference to Robert Hytken's "claim secured by the Galveston land — that was secured by the Galveston land but was released." He also testified that Robert Hytken's "investment — I take that back. It was not an investment in Galveston. I correct myself. It was a loan in Galveston. It was always a loan in Galveston." (Exhibit A, Docket No. 383)
Conclusions of Law Standing of Johnston
Section 502(a) of the Bankruptcy Code provides that a claim is deemed allowed, unless a party in interest objects. 11 U.S.C. § 502(a).
The Bankruptcy Code does not define a "party in interest" who has standing to object to claims. Caserta v. Tobin, 175 B.R. 773 (S.D. Fla. 1994).
Johnston has asserted ownership by the receivership of a portion of Debtor's equity securities. There exists a possibility that there will be a surplus after payment of claims, for distribution to equity security holders. Accordingly, Johnston has a pecuniary interest, and thus is a party in interest with standing to object to claims. See e.g., In re Woods, 139 B.R. 876 (Bankr. E.D. Tenn. 1992); In re Coleman, 131 B.R. 59 (Bankr. N.D. Tex. 1991).
Standing of Hytken's A Partnership
Johnston asserts that the proof of claim filed by Hytken's A Partnership is fraudulent, and thus that Hytken's A Partnership lacks standing. Johnston's only citation to authority is In re Coho Energy, Inc., 395 F.3d 198 (5th Cir. 2004). In Coho Energy, the Fifth Circuit denied standing to a contingent fee law firm which had been fired, seeking to object to a settlement of the underlying litigation (upon which its fees were based) negotiated by subsequent counsel. The court determined that, because the possibility that the fees awarded might exceed the amount in the court's registry as a result of the settlement was remote, the potential injury to be suffered by the law firm was indirect and remote. Thus, the law firm was not a "person aggrieved" with standing to challenge the settlement.
In the instant case, Hytken's A Partnership has filed a proof of claim asserting a claim for $3 million. There exists a possibility that there will be funds to pay all unsecured claims in full. An entity is a party in interest, with standing to object to claims, unless the proof of claim is withdrawn (See In re Gurst, 76 B.R. 985 (Bankr. E.D. Pa. 1987), or disallowed (See In re Aronson, 1994 WL 497541 (E.D. Pa. 1994). The court concludes that Hytken's A Partnership has standing to object to claims in the instant case.
Summary Judgment Standards
Summary judgment is warranted if a party establishes that there is no genuine dispute about any material fact and the law entitles it to judgment. Fed.R.Civ.P. 56(c). Rule 56(c) mandates "the entry of summary judgment, after adequate time for discovery and upon motion, against any party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex v. Catrett, 106 S.Ct. 2548, 2552 (1986).
All justifiable inferences will be drawn in the nonmovant's favor, see Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505 (1986). Conclusory affidavits will not suffice to create or negate a genuine issue of fact. Reese v. Anderson, 926 F.2d 494 (5th Cir. 1991); Shaffer v. Williams, 794 F.2d 1030 (5th Cir. 1986).
Robert Hytken and Hytken's A Partnership's Claim Preclusion Argument
Claim preclusion is proper when the parties are identical, the prior judgment was rendered by a court of competent jurisdiction, there was a final judgment, and the same cause of action was involved in both cases. Russell v. SunAmerica Securities, Inc., 962 F.2d 1169 (5th Cir. 1992). Claim preclusion applies also against a litigant who is in privity with a party to the original suit. In re Erlewine, 349 F.3d 205 (5th Cir. 2003). Claim preclusion "bars all claims that were or could have been advanced in support of the causes of action on the occasion of its former adjudication, not merely those that were adjudicated." Nilsen v. City of Moss Point, 701 F.2d 556 (5th Cir. 1983).
The claim preclusion argument raised by Robert Hytken and Hytken's A Partnership depends on their contention that Johnston is in privity with Gayne, and thus is bound by her settlement with Trustee. Under Texas law, a receiver appointed by a state court is not a representative of the parties, but rather is an officer of the appointing court. Security Trust Co. of Austin v. Lipscomb County, 180 S.W.2d 151 (Tex. 1944). Robert Hytken and Hytken's A Partnership cite no authority for the proposition that a receiver appointed by a state court is in privity with the parties in the state court. The court concludes that Johnston is not in privity with Gayne. Thus, the parties were not identical in the state court action, and claim preclusion does not bar Johnston's claim or Johnston's objection to the claims of Robert Hytken and Hytken's A Partnership.
Robert Hytken and Hytken's A Partnership's Release Argument
Robert Hytken and Hytken's A Partnership argue that Gayne's release covers the claims asserted by Johnston. As a threshold matter, as stated above, Johnston is not in privity with Gayne. Thus the question of whether Johnston is bound by Gayne's release depends on interpretation of the language of the settlement agreement. Gayne's release purports to bind "all present agents, attorneys, representatives and assigns." It is clear that, because Johnston is not in privity with Gayne, Johnston is not Gayne's agent, attorney, representative, or assign. The only way in which Johnston could be bound is through the argument that Gayne bound her attorneys, including Scott Williams, and that Williams also later served as attorney for Johnston, and thus Johnston may be somehow bound by the release. The court declines this argument.
Whether or not a settlement is incorporated into an agreed judgment, principles of contract interpretation apply. Mantas v. Fifth Court of Appeals, 925 S.W.2d 656 (Tex. 1996); Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417 (Tex. 2000).
The determination of whether a contract is clear or ambiguous is a question of law. If the contract is determined to be ambiguous, the determination of the parties' intent from parol evidence is a question of fact. In re Texas General Petroleum Corp., 52 F.3d 1330 (5th Cir. 1995).
If a written contract is so worded that it can be given a definite or certain legal meaning, then it is not ambiguous.Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280 (Tex. 1996).
The court finds unambiguous the provision binding Gayne's attorneys. The provision binds Gayne's attorneys as Gayne's attorneys, not as individuals. The court concludes that Gayne's release on behalf of her attorneys does not bind Scott Williams in his role as attorney for Johnston, and thus does not bind Johnston.
Johnston's Motions for Summary Judgment Based on Deposition Testimony of Robert Hytken and Kent Hytken
Johnston argues, in his initial motions for summary judgment (Docket Nos. 313, 314) that Robert Hytken's deposition testimony establishes that Robert Hytken intended that the advances which form the basis of the proofs of claim filed by Robert Hytken and Hytken's A Partnership be equity investments in Debtor. In the deposition testimony to which Johnston directs the court's attention, Robert Hytken testified that he did not know when the advances were to be repaid. Taken in the light most favorable to the non-movant, that testimony is insufficient to establish the absence of a genuine issue of material fact.
The court notes that Johnston did not authenticate the deposition of Robert Hytken. However, Robert Hytken and Hytken's A Partnership attached to their response a copy of the deposition bearing the court reporter's certificate.
Johnston argues, in his supplemental motion for summary judgment (Docket No. 383) that Kent Hytken's deposition testimony establishes that Robert Hytken's advances were equity investments. Taken in the light most favorable to the non-movant, Kent Hytken's deposition testimony is insufficient to establish the absence of a genuine issue of material fact.
Based on the foregoing, a separate conforming Judgment will be entered.