Opinion
Civil Action Nos. 03-6721, 03-6722.
October 4, 2004
MEMORANDUM AND ORDER
Cross-appeals from an order of the Bankruptcy Court in an adversary proceeding. After reviewing the record and the briefs of the parties, I conclude that the Bankruptcy Court did not err and therefore affirm the November 6, 2003 order of the Honorable Thomas M. Twardowski.
The relevant background, as stated in the Joint Stipulation of Uncontested Facts, is this: Robert and Lynne Weedling filed for bankruptcy protection in 1992. PNC held two promissory notes (for $2,000,000 and $300,000) issued by the Weedlings and secured by mortgages on the Weedlings' properties. As part of the bankruptcy proceedings, an Amended Disclosure Statement and Plan of Reorganization (the "Amended Plan") was filed by the Weedlings and confirmed by the Bankruptcy Court in 1996. This Amended Plan provided PNC with secured liens on certain residential properties owned by the Weedlings and their son and daughter-in-law (who are also parties to these appeals) limited to a total principal sum of $130,000 to be amortized over a 20 year period. The liens were to be secured by new mortgages with the same lien priority as the existing mortgages. Neither the Weedlings nor PNC ever prepared or executed any promissory notes, mortgages, or other documents to effect the provisions of the Amended Plan. In 1998, the Weedlings filed an action against in the Court of Common Pleas of Northampton County, Pennsylvania against PNC; that action was dismissed in 1999 for lack of jurisdiction. Also in 1999, PNC sent notices to the Weedlings of its intent to enforce collection of debts owed to it, whereupon the Weedlings successfully moved to reopen the Bankruptcy case and commenced an adversary proceeding.
At trial before Judge Twardowski, the Weedlings contended that PNC was responsible for providing new mortgage documents, that it had failed to do so, and that the failure caused damage to the Weedlings by, among other things, interfering with their ability to secure credit for a new business. Judge Twardowski's November 6, 2003 order entered judgment in favor of PNC because "no actions on the part of the Defendant constituted the proximate cause of any alleged loss to Plaintiffs; and (b) Plaintiffs were at least equally at fault in perpetuating the impasse" after confirmation of the Amended Plan. Judge Twardowski also ordered that "each party shall bear their/its own costs and counsel fees" in the action. The Weedlings appeal the ruling against them on the merits, and PNC cross-appeals for counsel fees.
The Weedlings' appeal does not provide any basis for reversing the determination of the Bankruptcy Court. The Weedlings state the evidence in manner most favorable to their cause; the Bankruptcy Court, which heard from the witnesses, was entitled to conclude that the Weedlings did not prove that any actions by PNC Bank caused them any loss and that they were equally responsible for keeping the mortgage process at a standstill.
The trial evidence supports this conclusion. Robert Weedling acknowledged that the order confirming the Amended Plan did not direct PNC to follow-up with the mortgage. See N.T. of 5/16/03 trial at 54-58. Neither party was delegated the responsibility, and just as Robert Weedling testified that he believed PNC was in the better position to issue the loan documents, PNC's representative, Michael Valerio, testified to his understanding that having the Weedlings prepare the documents would limit PNC's cost.See id. 126. Thus, it was entirely reasonable for the Bankruptcy Court to conclude that both sides were equally responsible for the procedural stalemate.
In its cross-appeal, PNC contends that the Bankruptcy Court erred in not awarding counsel fees. It bases its argument on a stipulation entered into by the parties and approved by the Bankruptcy Court in August 2003, after the trial, but before the decision. The stipulation primarily dealt with the establishment of an escrow account, but one sentence stated that "[b]oth parties reserve the right to petition for legal fees at the conclusion of this case." Stip. of 8/15/03 at ¶ 3. According to PNC, this sentence meant that the parties contemplated an award of fees. Even if this were so, PNC overlooks several salient facts. First, PNC never filed a petition for fees in the Bankruptcy Court (and a review of the transcript reveals no mention of fees at trial). Second, even if PNC had requested fees, the stipulation was ambiguous as to whether it constituted a "loser pays" agreement — the stipulation simply recited that both parties (not, it should be noted, the "prevailing party") could petition for fees. The discretion to grant or deny such a petition (had one been filed) rested with the Bankruptcy Court. Finally, although PNC mentions section 506(b) of the Bankruptcy Code, it does not present any argument that the section applies to adversary proceedings such as the one instituted by the Weedlings. The cross-appeal is also denied.
An appropriate Order follows.
ORDER
AND NOW, this day of October, 2004, upon consideration of the appeals in these actions, and after review of the record,It IS hereby ORDERED that the Order of the Bankruptcy Court dated November 6, 2003 is AFFIRMED. The appeals are DISMISSED and the Clerk is directed to mark both actions CLOSED.