986 F.2d 709 (4th Cir. 1993), 92-1111, Atlas Mach. & Iron Works, Inc. v. Bethlehem Steel Corp.
|Docket Nº:||92-1111, 92-1684.|
|Citation:||986 F.2d 709|
|Party Name:||ATLAS MACHINE & IRON WORKS, INCORPORATED, Plaintiff-Appellant, v. BETHLEHEM STEEL CORPORATION, Defendant-Appellee. BETHLEHEM STEEL CORPORATION, Plaintiff-Appellant, v. ATLAS MACHINE & IRON WORKS, INCORPORATED, Defendant-Appellee.|
|Case Date:||February 22, 1993|
|Court:||United States Courts of Appeals, Court of Appeals for the Fourth Circuit|
Argued Dec. 3, 1992.
H. Jason Gold, Gold & Stanley, P.C., Alexandria, VA, Michael Abbott Grow, Vorys, Sater, Seymour & Pease, Washington, DC, argued (Valerie P. Morrison, Howard I. Rubin, Gold & Stanley, P.C., Alexandria, VA, on brief), for appellant.
Leslie Margot Alden, Verner, Liipfert, Bernhard, McPherson & Hand, Chartered, McLean, VA, argued (John F. Connor, James F. Hibey, Karen P. Power, on brief), for appellee.
Before PHILLIPS, Circuit Judge, and SPROUSE and CHAPMAN, Senior Circuit Judges.
SPROUSE, Senior Circuit Judge:
This is a consolidated appeal concerning two causes of action between Atlas Machine & Iron Works, Inc. ("Atlas") and Bethlehem Steel Corporation ("Bethlehem"). The disputes stem from a 1988 settlement agreement (the "Agreement") in which Atlas promised to pay Bethlehem a previously incurred debt of $13 million by April 1990, and Atlas's failure to meet that deadline. The first action, brought by Atlas, is for breach of the settlement agreement. In the second, Bethlehem filed a
Chapter 7 1 bankruptcy petition against Atlas.
In the contract action, the district court held that Bethlehem did not breach the Agreement by filing the bankruptcy petition. It also ruled for Bethlehem on its counterclaim, holding that Atlas breached the Agreement by failing to pay its debt on time, and awarding Bethlehem judgment on the debt. We affirm the district court's decision. In the bankruptcy action, the bankruptcy court dismissed Bethlehem's Chapter 7 petition because it was defective. The district court affirmed, as do we.
The facts underlying the two actions are somewhat complex. Atlas and Bethlehem have been battling each other in various courts for the past several years. The heart of the litigation is an overdue, multimillion-dollar loan from Bethlehem to Atlas. Bethlehem has made several unsuccessful attempts to collect the debt, which is secured by a deed of trust on all of Atlas's real estate and security interests in all of its personal property.
One of the antecedent lawsuits between the two steel companies originated in November 1987. Atlas filed an action in federal district court in Alexandria, Virginia, charging Bethlehem with antitrust and other federal law violations, and Bethlehem counterclaimed. To settle the litigation, Atlas and Bethlehem entered into a settlement agreement in May 1988 and each company dismissed the claims pending against the other. The district court entered the dismissal order the day after the parties signed the Agreement. 2
Bethlehem drafted the Agreement. It provided in part:
1. Atlas agrees that the debt due Bethlehem is $13,556,693.30 (the "Debt") and that the Debt shall be paid in full in cash on or before April 20, 1990. The parties agree that time is of the essence in the performance of this obligation.
5. In the event that the Debt has not been paid in full in cash on or before April 20, 1990, Bethlehem shall have the right, without interference by Atlas, to sell or otherwise dispose of the Collateral to satisfy the debt in the manner described below. The only limitation on Bethlehem's right to sell or otherwise dispose of the Collateral is that the sale shall be conducted in accordance with applicable state law. Atlas agrees that the foreclosures, if any, will be determined to meet a standard of commercial reasonableness, and Atlas shall not object to or complain of these foreclosures in any respect. Atlas shall promptly execute any documents requested by Bethlehem in order to accomplish the sale or other disposition of the Collateral.
a. Bethlehem shall first foreclose on the real property located at Gainesville [54 acres--the entirety of Atlas's real estate] and apply the net proceeds from the auction sale against the Debt.
b. In the event that the Debt has not been satisfied in full after the application of the net proceeds from the foreclosure sale of the Gainesville property, Bethlehem shall then sell or otherwise dispose of the remainder of the Collateral in such order as Bethlehem deems appropriate.
The Agreement defined "Collateral" as all of Atlas's assets. Another section provided that the Agreement did not affect Bethlehem's perfected security interests in and liens on Atlas's assets.
Atlas did not pay any of the debt by April 20, 1990, as required by the settlement agreement. As a result, on January 11, 1991, in the previously dismissed action over which the district court had retained jurisdiction, Bethlehem asked the court to enter (a) an order requiring Atlas to turn over its bank accounts, and (b) judgment on
the debt, "to be executed upon at Bethlehem's sole discretion." The district court denied the motion, saying:
In the event Atlas failed to pay the debt by [April 20, 1990], the settlement agreement provided that Bethlehem must first proceed through foreclosure on Atlas's Gainesville property in order to satisfy the debt. Proceedings are currently pending in [Virginia state court] and there is no further enforcement action to be taken by this court at this time.
The referenced Virginia action was one brought in 1987 by Williams Industries, Inc., a large Atlas shareholder, against both Atlas and Bethlehem, in the Circuit Court of Prince William County. Bethlehem had attempted to foreclose on Atlas's land, spurring Williams Industries to file an injunctive action to bar the foreclosure. The circuit court granted a temporary injunction, which Bethlehem moved to dissolve in May 1990 after Atlas failed to pay the debt by the Agreement's April 1990 deadline. After a hearing the state court denied Bethlehem's motion, made the injunction permanent, and scheduled a trial on the merits. Williams and Bethlehem settled on July 1, 1991, the day the state trial was scheduled to begin, and the court dissolved the injunction. 3 On July 26, 1991, Bethlehem served Atlas with notice that a foreclosure sale would be held in June 1992.
In the meantime, in April 1991 Bethlehem had filed its petition to place Atlas into bankruptcy, and in May 1991 Atlas brought the contract action at issue in this appeal. It alleged that Bethlehem had breached the Agreement by trying to collect the debt through Chapter 7 instead of foreclosure. 4 Bethlehem counterclaimed...
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