In re Amarex, Inc.
| Decision Date | 19 January 1989 |
| Docket Number | Bankruptcy No. BK-82-02335(A),No. CIV-87-382-A.,CIV-87-382-A. |
| Parties | In re AMAREX, INC., Debtor. TEMEX ENERGY, INC., Plaintiff/Appellant, v. HASTIE AND KIRSCHNER, a professional corporation, Defendant/Appellee. |
| Court | U.S. District Court — Northern District of Ohio |
Ernest L. Nix, Davidson & Nix, Shreveport, La. and H.D. Binns, Jr., James N. Atkins, Oklahoma City, Okl., for Temex Energy, Inc.
Frank R. Monroe & Elizabeth S. Coddou, Sheinfeld, Maley & Kay, Houston, Tex. and Hastie and Kirschner by Michael Paul Kirschner, Oklahoma City, Okl., for defendant/appellee.
This is an appeal of the bankruptcy court's order of September 26, 1986 dismissing a Complaint to Avoid Preferential Transfer. The appellant, Temex Energy, Inc. argues that the bankruptcy court erred in its interpretation of the subject plan of reorganization and in its application of certain provisions of the Bankruptcy Code. The appellee, Hastie and Kirschner (H-K) has responded, and the issues presented are ready for determination.
The record indicates that an involuntary Chapter 7 Petition was filed as to the debtor, Amarex, Inc., on December 2, 1982 and that, on the following day, the case was converted to Chapter 11. Several reorganization plans were proposed and, on September 6, 1985, the bankruptcy court entered an order confirming the Third Amended Joint Plan of Reorganization (Third Amended Plan).
Under the Third Amended Plan, the debtor, Amarex, was to be merged with Temex, a wholly owned subsidiary of Templeton Energy, Inc., a Delaware corporation. On November 27, 1985, the bankruptcy court entered several orders in aid of closing in which it recognized the merger of Amarex and Temex. It stated that the entity created by the merger would also be referred to as Temex. Subsequently, on December 5, 1985, the court entered an order on the substantial confirmation of the Third Amended Plan, stating, inter alia, that "(i) Amarex has ceased to exist, and (ii) Temex is vested with the properties and rights of Amarex and survives as a wholly owned subsidiary of Templeton." The order explained that the entity referred to as "Reorganized Amarex" in the Third Amended Plan should now be referred to as Temex.
The Third Amended Plan contains specific provisions regarding the retention and enforcement of claims and the retention of jurisdiction by the bankruptcy court. With regard to the former, Article XX of the Third Amended Plan provides:
All claims for return of Preference Payments or for fraudulent transfers pursuant to Sections 547 and 548 of the Code . . . and all other claims owed to or in favor of the Debtor to the extent not specifically compromised and released pursuant to this Plan or an Agreement referred to and incorporated herein, are hereby preserved and retained for enforcement by Reorganized Amarex subsequent to the effective date of this Plan.
As to the retention of jurisdiction by the bankruptcy court, Article XXIII of the Third Amended Plan states:
On July 31, 1986, Temex filed a Complaint to Avoid Preferential Transfer against the appellee, H-K. Temex sought to recover some $190,101.00 from H-K and contended that this sum had been transferred to H-K within 90 days of the filing of Amarex's bankruptcy petition such that the sum constituted an avoidable preference under the Bankruptcy Code. Subsequently, H-K filed a Motion to Dismiss this Complaint, and on September 26, 1986, the bankruptcy court entered an order granting H-K's motion.
In its order of dismissal, the bankruptcy court first found that in light of Article XXIII of the Third Amended Plan, it did not have jurisdiction to hear Temex's Complaint. The court reasoned that the Plan retained jurisdiction in the bankruptcy court only as to disputes arising under the Plan that were for the purpose of recovering assets of the debtor or adjudicating claim objections. According to the bankruptcy court, Temex's Complaint was outside the scope of this jurisdictional grant because it arose under 11 U.S.C. § 547 rather than under the Plan, because it was to recover assets of the debtor-in-possession rather than the debtor, and because it did not involve an objection to a claim.
The bankruptcy court further found that even if the Plan did confer jurisdiction to hear such a complaint, Temex was not the proper party to bring the action because it was not a representative of the estate pursuant to 11 U.S.C. § 1123(b)(3)(B). The court also noted that any recovery obtained by Temex in the instant adversary proceeding would be of no benefit to Amarex's unsecured creditors.
Finally, the bankruptcy court found that the claims asserted by Amarex had previously been determined in adversary proceeding number 84-561. In that case, a settlement agreement had been entered between the parties, and the court found that the matters raised by Temex in its Complaint were within the scope of that settlement agreement.
On appeal, Temex challenges all these conclusions. Since the issues raised involve questions of law, the Court will engage in de novo review. See In re Branding Iron Motel, Inc., 798 F.2d 396, 399-400 (10th Cir.1986).
Temex first argues that the bankruptcy court erred in concluding that the Plan did not confer jurisdiction to hear the instant preference action against H-K. According to Temex, the court's reading of the Plan is belied by the express terms of Article XX.
In interpreting the terms of a chapter 11 plan, the general rules of contractual interpretation are to be applied. In re Stratford of Texas, Inc., 635 F.2d 365, 368 (5th Cir.1981); Eaton v. Courtaulds of North America, Inc., 578 F.2d 87 (5th Cir. 1978). One well established interpretive rule is that, if possible, all of the terms of the contract are to be given effect. Fortec Constructors v. United States, 760 F.2d 1288 (Fed.Cir.1985); HBOP, Ltd. v. Delhi Gas Pipeline Corp., 645 P.2d 1042 (Okla. App.1982); Board of Regents of Oklahoma Colleges v. Walter Nashert & Sons, Inc., 456 P.2d 524 (Okla.1969). An interpretation that gives effect to all the provisions of a contract should be favored over one that renders certain provisions inoperative. Fortec, 760 F.2d at 1290.
In the instant case, as noted above, Article XX of the Third Amended Plan clearly states that all claims for the return of preference payments are "preserved and retained for enforcement by Reorganized Amarex." Further, it is uncontroverted, that "Reorganized Amarex" is the same entity as the appellant Temex.
The bankruptcy court's interpretation of Article XXIII renders this provision of Article XX of no effect, and, for this reason, it is unconvincing. The interpretation is also called into doubt by several courts that have relied on the express terms of plan provisions such as Article XX in concluding that a particular entity was the proper party to bring post-confirmation preference actions. See, e.g., In re Tennessee Wheel & Rubber Co., 64 B.R. 721 (Bankr.M.D.Tenn.1986), aff'd, 75 B.R. 1 (M.D.Tenn.1987); In re Xonics, 63 B.R. 785 (Bankr.N.D.Ill.1986).
In its reading of Article XXIII, the bankruptcy court was undoubtedly correct in concluding that a distinction exists under the Bankruptcy Code between the terms "debtor" and "debtor-in-possession" and that the right to bring a preference action belongs to a debtor-in-possession, a trustee, or representative of the estate rather than to a debtor. See Tennessee Wheel, 64 B.R. at 724; 11 U.S.C. § 1123(b)(3)(B). Nevertheless, this Court cannot conclude that this distinction is such that Article XXIII of the Third Amended Plan can properly be read to divest the bankruptcy court of jurisdiction to hear Temex's preference action. Article XXIII's statement that the bankruptcy court of jurisdiction "to recover all assets and property of the debtor" must be read in conjunction with Article XX's authorization of post-confirmation preference actions brought by Reorganized Amarex/Temex. In light of Article XX, the fact that the Plan uses the term debtor rather than the term debtor-in-possession in Article XXIII is not significant.
This conclusion is directly supported by In re J.E. Jennings, Inc., 46 B.R. 167 (Bank.E.D.Pa.1985). In Jennings, the defendant in a post-confirmation preference action argued that a debtor-in-possession was not the proper party to pursue the action. In finding that the debtor-in-possession was the proper party, the court relied on a provision of the plan of reorganization that stated that the bankruptcy court would retain jurisdiction over all causes of action "between the Debtors and any other party including but not limited to any right of the Debtors to recover assets pursuant to the provisions of the Code." 46 B.R. at 170. emphasis added.
Accordingly, the Court finds that neither the Third Amended Plan's failure to use the term "debtor-in-possession" in the jurisdictional section nor any other section of the Plan deprived the bankrutpcy court of jurisdiction to hear preference actions brought by the very party designated to bring them. The bankruptcy court's conclusion to the contrary was erroneous.1
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Westchester Fire Ins. Co. v. Schorsch
...(Citicorp Acceptance Co. v Robison [In re Sweetwater], 884 F2d 1323, 1327 [10th Cir 1989] quoting Temex Energy, Inc. v Hastie & Kirschner [In re Amarex, Inc.], 96 BR 330, 334 [WD Okla 1989]). Following such a finding and upon confirmation, RCAP, as the proponent of the plan, became merely a......
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Westchester Fire Ins. Co. v. Schorsch
...(Citicorp Acceptance Co. v Robison [In re Sweetwater], 884 F2d 1323, 1327 [10th Cir 1989] quoting Temex Energy, Inc. v Hastie & Kirschner [In re Amarex, Inc.], 96 BR 330, 334 [WD Okla 1989]). Following such a finding and upon confirmation, RCAP, as the proponent of the plan, became merely a......