In re Astroglass Boat Co., Inc.
| Decision Date | 16 August 1983 |
| Docket Number | Bankruptcy No. 381-01496. |
| Citation | 32 BR 538 |
| Parties | In re ASTROGLASS BOAT CO., INC., Debtor. ASTROGLASS BOAT CO., INC., Plaintiff, v. Leonard ELDRIDGE and Joyce Eldridge, Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Tennessee |
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Robert H. Jennings, Jr., M. Taylor Harris, Jr., Nashville, Tenn., for defendants.
John Bailey, Bass, Berry & Sims, Nashville, Tenn., for plaintiff.
The issue presented is whether the defendants are bound by a compromise and settlement of their claim contained in the debtor's confirmed plan of reorganization under Chapter 11. The confirmed plan recites and details a settlement of the defendants' claim. Nonetheless, after the confirmation order became final, the defendants filed a motion seeking allowance of their claim and damages inconsistent with the provisions of the plan. The debtor objected to the claim as barred by the compromise contained in the plan and denied liability for any damages. After review of the briefs and arguments of the parties, the exhibits, testimony, stipulations, and applicable authority, I find that the defendants' claim was compromised and extinguished and that their counterclaim should be dismissed, except to the extent of certain taxes and rents admitted by the debtor.
The following constitutes findings of fact and conclusions of law as required by Rule 7052 of the Federal Rules of Bankruptcy Procedure.
The plaintiff, Astroglass Boat Company, Inc. ("Astroglass") filed a petition for relief under Chapter 11 on May 7, 1981. The list of the 10 largest unsecured creditors filed with the petition included the defendants, Leonard and Joyce Eldridge ("the Eldridges") holding a claim estimated at $248,000. The debt accrued from the original purchase of Astroglass from the Eldridges, consideration for a noncompetition agreement, and certain rental payments.
Leonard Eldridge attended a meeting of unsecured creditors on June 9, 1981. Shortly after the meeting, Eldridge met with Edward W. Plodzick ("Plodzick"), an officer and director of Astroglass. Eldridge and Plodzick discussed the Astroglass bankruptcy and the Eldridges' claim and considered the possibility that unsecured creditors would receive little or no dividend if all creditors enforced their claims. Plodzick testified that Eldridge was concerned that the proceeding would be converted to Chapter 7. Plodzick testified that Eldridge offered to forego any additional claims if Astroglass return the property, with certain repairs, and surrendered the leasehold improvements. Consistent with this proposal, Plodzick told Eldridge that he would send someone to inspect the property and determine the nature and extent of the expected repairs. The leasehold improvements that Astroglass would give to Eldridge consisted of a new building that had been constructed by Astroglass and certain additions to the property including water lines and a new compressor. Astroglass scheduled these improvements as assets with a market value of $54,000. Eldridge denies that he agreed to compromise his claim under these terms and asserts that he only agreed to release Astroglass from the remainder of its lease in exchange for a return of the property.
After the meeting, Plodzick returned to his office and notified Jack White ("White"), the president of Astroglass, and James L. Beckner, Esq., ("Beckner"), an attorney for Astroglass, that the Eldridges' claim had been settled. At trial both White and Beckner confirmed Plodzick's contemporaneous statements that a settlement had been reached on the terms described above. Plodzick instructed White to meet with Eldridge and determine the repairs to be performed on the property. In late June, White toured the Astroglass plant with Leonard Eldridge and made a handwritten list of all repairs Eldridge requested. Immediately thereafter, Leonard Eldridge met with a potential new lessee for the Astroglass property, Bobby Pulley ("Pulley"), to discuss renting the property the following month.
The Eldridges retained William G. Wilkinson, Esq. ("Wilkinson") to represent them in the Astroglass bankruptcy. Leonard Eldridge testified that he had approximately six meetings with Wilkinson concerning the case. The Eldridges filed a proof of claim on July 13, 1981.
Astroglass filed a plan of reorganization and a disclosure statement on July 24, 1981. A hearing on the adequacy of the disclosure statement was held July 31, 1981. Wilkinson and Leonard Eldridge attended this hearing. Beckner stated in open court that the Eldridges' claim had been settled. Neither Wilkinson nor Eldridge voiced any concern or objection. The court fixed August 17, 1981 as the last day to file written acceptances or rejections of the plan. The Eldridges did not object to the plan.
The confirmation hearing was held August 21, 1981. Wilkinson represented the Eldridges at the hearing. The settlement of the Eldridges' claim was again outlined in open court. The plan compromised the Eldridges' entire unsecured claim in exchange for an immediate return of the leasehold and a surrender of all leasehold improvements. Other unsecured creditors were to receive a 30% dividend on their claims. At the confirmation hearing, Wilkinson affirmatively represented to the court that the Eldridges' claim had been settled according to the specified terms.
The confirmation order was signed on August 26, 1981. On the same day, Beckner forwarded a copy of the order to Wilkinson. Wilkinson replied by letter dated August 27, 1981 that there had been a "misunderstanding," and that the Eldridges would not settle their claim unless they also received the 30% dividend provided for the unsecured creditors. On September 2, 1981, Beckner responded that Astroglass intended to enforce the settlement outlined in the confirmation order. Consistent with the confirmed plan, Eastern Discount Corporation advanced Astroglass substantial funds to further the reorganization on September 17, 1981.
On September 24, 1981, Wilkinson filed a "Motion to Allow a Hearing to Settle Claims of Leonard Eldridge and Joyce L. Eldridge." On October 14, 1981, Astroglass objected to the claim and the bankruptcy court ordered the objection treated as an adversary proceeding. The Eldridges filed an answer to the objection on December 28, 1981. On March 12, 1982, the Eldridges filed an amended answer and a counterclaim for alleged damage to the property: $600 for a missing air conditioner, $500 for built-in desks, $12,600 to replace or repair several "chopper guns," $287.84 for light fixtures, $200.20 to replace fluorescent lights, and $2,100 for missing boat racks. The Eldridges also counterclaimed for forklift and truck damage, water problems, resurfacing an excavated area, and the removal of hardened resin from the leasehold work areas.
A trial was held December 1 and 2, 1982.
The confirmation order states explicitly that the Eldridges' claim has been compromised and details the material terms of settlement. The confirmation order provides that:
(b) The claims of Leonard and Joyce L. Eldridge, as stated in open court by counsel for the said Leonard and Joyce L. Eldridge and counsel for the Debtor, have been compromised and settled in full pursuant to which Mr. and Mrs. Eldridge cancelled the terms and provisions of a certain lease agreement by and between the Debtor and the said Eldridges, and the Debtor is relieved of all payments due or to become due under a certain purchase obligation and under a certain noncompete agreement by and between the Debtor and Mr. Eldridge, said claims totalling $250,000, more or less, and Mr. Eldridge receives, in consideration for the release of said claims, all fixed assets contained on the property formerly leased by the Debtor from Mr. Eldridge at Pleasant View, Tennessee, and the Debtor and Mr. Eldridge are to file an agreement to this effect with the Court on or before October 10, 1981.
The essential elements of the compromise— the return of the property, the surrender of the fixed assets and leasehold improvements, and the Eldridges' release of their claim—are unambiguously set forth.
If the settlement detailed in the confirmation order was not an accurate reflection of the parties' intent, simple remedies were available. The Eldridges could have moved the court to reconsider the confirmation order or appealed that order. Rule 805 of the Federal Rules of Bankruptcy Procedure allowed the defendants to obtain a stay of the confirmation order until their appeal could be addressed by providing that the bankruptcy judge "may suspend or order the continuation of proceedings or make any other appropriate order during the pendency of an appeal upon such terms as will protect the rights of all parties in interest." Rule 802 of Federal Rules of Bankruptcy Procedure, however, requires that a notice of appeal be filed within 10 days of the entry of the order.2 No notice was filed. The record before this court does not provide an explanation why appropriate motions or an appeal were not filed. As indicated by the exchange of correspondence between Beckner and Wilkinson, both Eldridge and Wilkinson were aware of the precise contents of the confirmed plan within the time period to file an appropriate attack.3 Rule 803 of the Bankruptcy Rules provides that "unless a notice of appeal is filed as prescribed by Rules 801 and 802, the judgment or order of the referee shall become final." See also Martin v. First National Bank, 573 F.2d 958 (6th Cir.1978). Because the plan and order of confirmation fixed the rights of the parties, Occidental Petroleum Co. v. Walker, 289 F.2d 1 (8th Cir.1961), the settlement contained in the order determines the status of the defendants' claim.4
Once a confirmation order becomes final, the only remedy5 available is to have the order set aside pursuant to Rule 60 of the Federal Rules of Civil Procedure.6 Rule 924...
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