F/S Airlease II, Inc. v. Simon
| Citation | 844 F.2d 99,107 C.B.C.2d 959,17 B.C.D. 734 |
| Decision Date | 19 April 1988 |
| Docket Number | No. 86-3714,Nos. 86-3712,S-J,86-3714,s. 86-3712 |
| Parties | 18 Collier Bankr.Cas.2d 959, 17 Bankr.Ct.Dec. 734, Bankr. L. Rep. P 72,242 In re F/S AIRLEASE II, INC. v. Lewis SIMON andCorporation Greycas, Inc. Appeal of The SWIG INVESTMENT COMPANY AIRCRAFT TRUST NO. 1, one of the creditors above named in this bankruptcy proceeding (Three Cases). Appeal of F/S AIRLEASE II, INC., appellant-debtor above named (Three Cases). Appeal of Lewis SIMON andFinancial Corporation (Three Cases). In re F/S AIRLEASE II, INC. v. GREYCAS, INC. F/S AIRLEASE II, INC. v. SWIG INVESTMENT COMPANY, Greycas, Inc., Appellants into 86-3720, and 86-3731 to 86-3733. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Thomas S. Galey (argued), Pamela J. Giarla, Pittsburgh, Pa., for F/S AirLease II, Inc.
Jack Weinberg (argued), Graubard, Moskovitz, Dannett, Horowitz & Mollen, New York City, Kirkpatrick & Lockhart, Pittsburgh, Pa., (George M. Cheever, Stoddard D. Platt, Robert K. Gross, of counsel), for the Swig Inv. Co. Aircraft Trust No. 1.
Alan M. Epstein (argued), Kelley Drye & Warren, New York City, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for Greycas, Inc.
Philip J. Nathanson (argued), Kasdin & Nathanson, Chicago, Ill., Dickie, McCamey & Chilcote, Pittsburgh, Pa., for Lewis Simon and S-J Financial Corp.
Before SLOVITER and STAPLETON, Circuit Judges, and FISHER, District Judge. *
The debtor in a Chapter 11 bankruptcy and its two principal creditors appeal from an order of the district court affirming the bankruptcy court's nunc pro tunc appointment of a broker for professional services rendered to debtor. The broker cross-appeals from that portion of the district court's order vacating the bankruptcy court's monetary award and remanding the case to the bankruptcy court for recalculation of the amount due the broker. We must first decide whether we have jurisdiction. If so, we will reach the issue whether this case presents such "extraordinary circumstances" as set forth in In re Arkansas, 798 F.2d 645 (3d Cir.1986), to warrant non-compliance with the prior approval rule of section 327(a) of Chapter 11 of the Bankruptcy Code.
F/S AirLease II, Inc. is a Delaware corporation engaged solely in the business of buying, selling, financing, and leasing a Boeing airplane. It purchased that plane in 1980 and then leased it to Air Florida for a ten-year term. Greycas, Inc. provided the financing for that transaction; its interest in the plane was secured by a first mortgage, and Greycas also was entitled to an assignment of rental proceeds from the Air Florida lease as partial security. In 1980, AirLease sold the plane to Comet Leasing Corporation, which then sold it to Swig Investment Company, which in turn leased it back to AirLease for an eighteen-year term. These transactions were each carried out subject to Greycas' security interest.
The Air Florida lease had been negotiated and procured for AirLease by Lewis Simon, a broker who does business through S-J Financial Corporation (collectively referred to as "Simon"), and who performed brokerage services for AirLease's affiliated companies as well. As a result of a dispute over commissions, Simon sued AirLease's parent corporation to obtain commissions allegedly due for, inter alia, his brokerage services in obtaining the Air Florida lease. A settlement agreement was reached in May of 1983 which gave Simon "the exclusive right to remarket" the Boeing aircraft, subject to the rights of the owner and other creditors, for a commission of one-half of one month's rent for each year of the re-leasing term, net of expenses.
In July 1984, Air Florida filed for bankruptcy under Chapter 11 of the Bankruptcy Code, thereby terminating its lease with AirLease and depriving AirLease of its sole source of income to satisfy its obligations to Swig and Greycas. According to an appraisal conducted at that time by AirLease's appraiser, the plane, which was missing one of its two engines, was valued at $5,242,000 and would require $763,500 worth of repairs to restore it to an airworthy condition.
Upon Air Florida's bankruptcy, AirLease immediately contacted Simon and enlisted his services for the remarketing of the plane. In response, on July 20, 1984, Simon wrote a letter to AirLease's Vice President and Treasurer, offering to remarket the plane for a flat fee of $100,000, net of expenses, "in lieu of the re-leasing fee set forth in [the May 1983 settlement agreement]." App. at 1664. This letter also requested a $20,000 advance from AirLease to cover expenses. On July 23, 1984, AirLease responded with a letter proposing additional terms and enclosing both a check for $20,000 and an escrow agreement.
In a second letter to AirLease, dated July 30, 1984, Simon confirmed that he would undertake to remarket the plane for a $100,000 flat fee. Simon also stated that he understood that AirLease would use its best efforts to obtain Swig's agreement to pay him the $100,000 fee if he was successful in releasing the plane. Simon made this offer on the condition that he be notified of Swig's decision by August 3, 1984. AirLease accepted Simon's July 30, 1984 offer on August 21, 1984, but apparently Swig did not consent to this arrangement.
On August 3, 1984, AirLease filed a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code. Greycas, the first mortgagee, asserted that it had a right to possession of the plane; on August 30, 1984, the bankruptcy court enjoined Greycas from instituting any action to obtain possession of the plane other than in AirLease's bankruptcy proceedings. The bankruptcy court subsequently awarded possession of the plane to AirLease and Greycas jointly.
Throughout the months of September and October 1984, Simon attempted to remarket the plane. At this time Greycas also was attempting to secure a new lessee, and Greycas did, in fact, make a proposal to America West Airlines which did not culminate in an agreement.
Thereafter, Simon reached an agreement with Aloha Airlines, which was memorialized in a letter agreement dated October 25, 1984, and finalized in a lease agreement at the end of November. That agreement provided for a ten-year lease term, with monthly rental payments of $90,000. The agreement further provided that Aloha would furnish the necessary engine at its own expense, and would return the plane to AirLease at the end of the lease term with two operable engines. The deal was contingent on the lease being executed by mid-December 1984, because the December holiday season was Aloha's busiest time.
AirLease quickly filed a motion in the bankruptcy court for approval of the lease to Air Florida. On the day before the bankruptcy court was to hold a hearing on the motion, counsel for Simon, in a letter dated November 28, 1984 to counsel for AirLease, confirmed his understanding reached in a telephone conversation between them that day that in the forthcoming bankruptcy court hearings AirLease would not seek to obtain any ruling from the bankruptcy court "regarding the distribution or allocation of the proceeds from the Aloha Airlines lease," but, rather, would only seek approval of the lease itself. App. at 792. The issue of "allocation and distribution of the payment derived from the lease [was to] be resolved at a later date." However, Simon understood that AirLease would "spread of record and include in any order approving the lease the fact that [Simon] initiated, procured and negotiated the Aloha Airlines lease." App. at 792.
After two days of hearings held on November 29 and 30, 1984, at which AirLease "spread of record" Simon's role in the transaction, the bankruptcy court approved the Aloha lease over Greycas' objections, finding it to be in the estate's best interests. Simon testified at the hearing about the lease; however, he did not seek his appointment as broker or approval of his services at that time. Rather, as Simon and AirLease had agreed, the sole issue raised at that hearing was the confirmation of the lease.
In June 1985, ten months after he began his efforts to remarket the plane and seven months after the Aloha lease was executed and approved by the bankruptcy court, Simon filed a petition in the bankruptcy court for payment of administrative expenses pursuant to 11 U.S.C. Sec. 503 (1982 & Supp. IV 1986). He requested $450,000, which amounted to one-half of one month's rent for each year of the Aloha lease. The bankruptcy court approved his employment nunc pro tunc and awarded him the $450,000 fee he requested. In re F/S AirLease II, Inc., 59 B.R. 769 (Bankr.W.D.Pa.1986).
AirLease, Greycas, and Swig appealed to the district court which affirmed the nunc pro tunc approval of Simon's appointment but vacated the $450,000 award, finding the amount to be insufficiently substantiated. The district court therefore remanded the case to the bankruptcy court on the issue of the amount of the award. In re F/S AirLease II, Inc., 84 B.R. 389 (W.D.Pa.1986). These appeals followed. 1
We review the bankruptcy court's ruling by the same standards the district court should apply. Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir.1981). District court review of the bankruptcy court's factual findings is under the "clearly erroneous" standard. See In re Baron v. Allied Artists Pictures Corp., 717 F.2d 105 (3d Cir.1983); see also Universal Minerals, 669 F.2d at 102. A decision to grant nunc pro tunc approval is in the discretion of the bankruptcy court, see Arkansas, 798 F.2d at 650, and is reviewed for abuse of discretion only. We have plenary review over legal questions. See Universal Minerals, 669 F.2d at 102.
All parties construe 28 U.S.C. Sec. 158(d) (Supp. III 1985) 2 as giving us jurisdiction. We are obliged, however, in every appeal presented to us to...
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