In re Allied Artists Pictures Corp.
| Decision Date | 04 March 1987 |
| Docket Number | No. 86 Civ. 0368 (CBM).,86 Civ. 0368 (CBM). |
| Citation | 71 BR 445 |
| Parties | In re ALLIED ARTISTS PICTURES CORPORATION, Debtor. Kenneth E. RAINE, as Trustee under a certain Trust Agreement entitled "Hollywood Film Trust Agreement (February 1, 1954)" with Allied Artists Pictures Corporation and Allied Artists Productions, Inc., Appellant-Plaintiff, v. ALLIED ARTISTS PICTURES CORPORATION, Respondent-Defendant. |
| Court | U.S. District Court — Southern District of New York |
Bryer & David by Marvin M. David, New York City, for appellant-plaintiff.
Angel & Frankel, P.C. by Bruce Frankel, Martin Eisenberg, New York City, for defendant-appellee.
Kenneth Raine, as Trustee of the "Hollywood Film Trust Agreement (February 1, 1954)" appeals from the order of Bankruptcy Judge Cornelius Blackshear dismissing his complaint against the debtor, Allied Artists Pictures Corporation, for failure to state a claim upon which relief can be granted. The basis for the bankruptcy judge's decision, as expressed orally from the bench, was essentially that Raine's cause of action had been mooted by events subsequent to the filing of the complaint. Upon full review of the record, and for the reasons that follow, the decision of the bankruptcy judge is affirmed.
In 1979, defendant-appellee Allied Artists Pictures Corporation ("Pictures") filed for Chapter 11 bankruptcy. Among the debtor's significant assets was a library of motion pictures. At least some of these movies were subject to a trust agreement, the "Hollywood Film Trust Agreement (February 1, 1954)." Simply for context, and very broadly speaking, it will suffice to say that the purpose of the Trust Agreement was to obtain for producers the permission to televise movies in which professional musicians had performed. In exchange for this right, a system was established whereby royalties were paid into the Trust for the benefit of the community of professional musicians. More to the point at issue here, Allied Artists Pictures, as a first party signatory to the Trust Agreement, was required to make certain payments to the Trustee each time Pictures authorized covered films to be televised. The Agreement also provided that none of the covered films could be sold or otherwise transferred unless the transferee was already, or was willing to become, a first party signatory to the Trust Agreement.
Soon after Pictures filed for Chapter 11 reorganization, plaintiff-appellant Raine, as Trustee of the Hollywood Trust Agreement, filed a complaint in the Bankruptcy Court seeking a declaratory judgment that the debtor could not transfer its film library except in accordance with the Trust Agreement. Specifically, Raine sought a judgment that the covered films could not be transferred to anyone who was not a participant in the Trust Agreement and thus would not be bound by its royalty provisions. By stipulation of the parties and upon order of the then Bankruptcy Judge Galgay dated October 11, 1979, the declaratory judgment proceeding was adjourned sine die, the court having found that no transfer seemed imminent. The stipulation and order provided, however, that prior to any proposed sale of its rights in covered films, Pictures was to give mail notice of such proposed sale to the Trustee so that the declaratory judgment proceeding could be reactivated if desired.
In March of 1980, after notice to Pictures' creditors, the bankruptcy judge issued an order authorizing Pictures to sell substantially all of its assets, including its film library and the rights thereto, to Lorimar Productions, Inc. Soon thereafter, Pictures proceeded with the sale to Lorimar, a non-signatory to the Trust Agreement. The parties disagree as to whether Pictures furnished the Trustee with the requisite notice prior to this sale, as agreed to and ordered in the October 1979 stipulation adjourning the Trustee's declaratory judgment action. This court notes, however, that on February 21, 1980, several weeks prior to the bankruptcy judge's order authorizing the deal with Lorimar, the Trustee had in fact filed an objection to the proposed sale based in part on the fact that Lorimar was not a signatory to the Trust Agreement.
Subsequent to Lorimar's purchase of its films, Pictures gave the Trustee and other interested parties notice of the sale by way of a motion to reject contracts. Productions' motion to reject, which in addition to the Trust Agreement at issue here involved numerous movie distribution agreements, was based on the fact that Pictures no longer owned the films which had formed the subject of these many contracts. The Trustee timely filed an opposition to the motion to reject.1 Argument on this motion was continuously adjourned, however, and in May 1984 when Bankruptcy Judge Galgay died, the matter was apparently still not resolved.
Subsequent to Judge Galgay's death, the Trustee succeeded in having his declaratory judgment action against Pictures restored to the bankruptcy court's active calendar. Pictures moved to dismiss the complaint on the ground that since Pictures no longer possessed any interest in the covered films, the question as to whether it was bound by the transfer restrictions of the Trust Agreement was moot. Pictures also argued laches. After oral argument, but without formal opinion, Bankruptcy Judge Blackshear summarily granted the motion to dismiss.
Under the standard of review that this court must apply to the bankruptcy judge's decision, findings of fact may not be set aside unless clearly erroneous. Bankruptcy Rule 8013, 11 U.S.C. The district court must make an independent review, however, of the bankruptcy court's conclusions of law. In re Tesmetges, 47 B.R. 385, 388 (E.D.N.Y.1984).
Although the bankruptcy judge issued no formal findings of fact or conclusions of law, in his statements from the bench, and in his order's explicit reference to the parties' submissions in the case, the judge made quite clear the factual and legal basis for his dismissal of the Trustee's declaratory judgment action. See Transcript of Dec. 5, 1985 hearing, p. 19-20. Cf. In re Clarkson, 767 F.2d 417 (8th Cir.1985)(explicit determinations reviewable despite failure to elucidate factual findings). The basis for the dismissal was simply that the Trustee's action had been mooted approximately five years earlier by Pictures' sale of its film library to Lorimar.
Accordingly, the single factual determination material to the bankruptcy judge's decision2 was that Pictures had sold its covered films to Lorimar in the spring of 1980.3 That this sale was effectively accomplished at that date does not appear to be disputed by either party. The only ground on which the bankruptcy judge's decision can be challenged, therefore, is his legal conclusion that the case was moot due to the fact that Pictures had disposed of the covered films years earlier.
The purpose of a declaratory judgment, which is provided for by Bankruptcy Rule 7001(9), is to settle legal rights and remove uncertainty and insecurity from legal relationships without awaiting violation of rights or disturbance of relationships. See 28 U.S.C. section 2201; Fed. R.Civ.P. 57; Beacon Construction Co., Inc. v. Matco Electric Co., Inc, 521 F.2d 392, 397 (2d Cir.1975). A distinctive characteristic of this remedy is that the declaration stands by itself and no executory process follows as a matter of course. Gutensohn v. Kansas City Southern Ry. Co., 140 F.2d 950, 953 (8th Cir.1944). But see 28 U.S.C. section 2202 (...
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