In re Atlas Mach. & Iron Works, Inc.
| Decision Date | 03 August 1998 |
| Docket Number | Bankruptcy No. 96-16755. Adversary No. 97-1012. |
| Citation | 239 BR 322 |
| Court | U.S. District Court — Virgin Islands, Bankruptcy Division |
| Parties | In re ATLAS MACHINE & IRON WORKS, INC., Debtor. Atlas Machine & Iron Works, Inc., Plaintiff, v. Bethlehem Steel Corporation, Charles McDonnell Radigan, Substitute Trustee, Defendants. |
COPYRIGHT MATERIAL OMITTED
STEPHEN C. ST. JOHN, Bankruptcy Judge.
This matter comes before the Court on the Defendants' Joint Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56 as incorporated by Federal Rule of Bankruptcy Procedure 7056. This adversary proceeding was transferred by Judge Bostetter to this Court on April 8, 1998. After consideration of the evidence submitted by the parties in support of and in opposition to this motion and the arguments of counsel, the Court makes the following findings of fact and conclusions of law.
Atlas Machine & Iron Works, Inc. ("Atlas") is engaged in the business of fabricating steel bridge components and conducts operations at its facility in Gainesville, Virginia. On October 24, 1980, Bethlehem Steel Corporation ("Bethlehem") and Atlas entered into a Loan Agreement, pursuant to which Bethlehem refinanced Atlas' existing debt to Bethlehem and Mercantile-Safe Deposit & Trust Company through a $5.5 million term loan and a revolving credit loan. To secure this loan, Atlas executed a Deed of Trust and Security Agreement in favor of Bethlehem on October 24, 1980, pursuant to which Bethlehem was granted a security interest in all of Atlas' assets, including the Gainesville property and its machinery and equipment.
In April 1984, Atlas defaulted under the Loan Agreement and acknowledged their inability to pay the outstanding debt of approximately $16 million. On April 20, 1984, Bethlehem and Atlas entered into a Liquidation Agreement, under which Atlas was to liquidate the collateral securing the debt to Bethlehem and turn over the proceeds to Bethlehem, while Bethlehem advanced additional funds, secured by the existing collateral, to permit the completion of work in progress and the completion of a liquidation. This Liquidation Agreement was to remain in effect until an Event of Insecurity, as defined in the Liquidation Agreement, occurred. Bethlehem notified Atlas that such Event of Insecurity had occurred in January 1987 and demanded the turnover of its collateral. Atlas refused to do so and sued Bethlehem in the United States District Court for the Eastern District of Virginia. This matter was settled and the parties agreed that the amount of the debt owed to Bethlehem by Atlas was $13,556,693.30. This settlement agreement was not consummated and Atlas again filed suit against Bethlehem in which Bethlehem counterclaimed for breach of the settlement agreement. Summary judgement was granted to Bethlehem in the amount of $15,886,704.84. Bethlehem has received no payment from Atlas since 1988 and as of December 1996, Atlas' indebtedness totaled over $18.5 million. Affidavit of Matthew Ruch, ¶¶ 3-10.
In October 1996, Bethlehem instructed Charles McDonnell Radigan ("Radigan"), named Substitute Trustee under the Deed of Trust, to begin foreclosure proceedings. Radigan retained the firm of R.L. Rasmus Auctioneers ("Rasmus"), which was affiliated at that time with the auctioneering firm of Fox and Associates, to conduct the sales and assist in the advertising and publicity. The sale of the Gainesville property was scheduled for December 5, 1996 and the sale of the machinery and equipment was slated for December 17, 1996. These sales were heavily publicized during the fall of 1996 through newspaper advertisements and the dissemination of information to individuals who had expressed an interest in the sales. Radigan stated in his Affidavit filed with this Court that, in addition to his Trustee fees, Bethlehem incurred more than $30,000 in preforeclosure advertising expenses.
On the morning of December 5, 1996, Atlas filed a voluntary Chapter 11 petition, in which it continues to operate as a debtor in possession. Radigan appeared at the site of the auction and announced that the sale would not take place because Atlas had filed for bankruptcy and that the sale would be postponed until December 19, 1996 so that Bethlehem could attempt to obtain relief from the automatic stay provision of 11 U.S.C. § 362. Radigan subsequently published legal notice of the postponement in the Manassas Journal Messenger, the same newspaper in which he had run prepetition advertisements of the sale. On December 5, 1996, Bethlehem filed a motion for relief from the automatic stay with the United States Bankruptcy Court for the Eastern District of Virginia and a motion to withdraw the reference from the bankruptcy court with the United States District Court for the Eastern District of Virginia. On December 18, 1996, the District Court denied the motion to withdraw the reference. Radigan again postponed the December 19, 1996 real estate auction date to April 10, 1998, which, as stated in his Affidavit, would provide the Bankruptcy Court adequate time to rule on the motion for relief from stay. Radigan again published legal notice of the postponement in the Manassas Journal Messenger. In addition, Radigan sent a letter concerning the postponement to those parties who had previously expressed an interest in the sale.1 According to the Affidavit of Arthur Miles, President of Atlas, those receiving this letter included creditors, customers, and potential customers. In his Answer to the Amended Complaint, Radigan states that the only persons to whom the letter was sent were those who had previously expressed an interest in the auction or who had registered at the pre-foreclosure meeting. Radigan stated that the reason for postponement of the foreclosure sale was to avoid the duplication of pre-foreclosure expenses incurred by Bethlehem and to maintain the pre-filing level of interest in the sales. Radigan Affidavit, ¶ 5.
Further advertisement of the sale was posted by Rasmus. This is not disputed by the Defendants. Prior to the first rescheduled foreclosure sale of December 19, 1996, a display advertisement ran in the December 16, 1996 edition of the Washington Post which announced the date and location of the rescheduled real estate auction. At least one other such advertisement appeared in the January 13, 1997 edition of the Washington Post.2 Further, the sales were advertised on the Fox and Associates' website. Atlas attached a copy of one such advertisement, dated January 7, 1997, to their complaint.3 Both Radigan and Bethlehem have denied any knowledge of these advertisements and have sworn in their affidavits that they put a stop to this advertising as soon as they became aware of it. Atlas disputed this contention in their responsive pleadings, however, at summary judgment argument, they admitted that this issue was not in dispute.4
The Bankruptcy Court denied Bethlehem's Motion for Relief from the Stay. However, on appeal, the District Court reversed and authorized the lifting of the stay. The foreclosure sale of the real estate occurred on January 12, 1998 and the sale of the equipment was held on March 15, 1998.
In Count I of its Complaint, Atlas alleges that the Defendants' actions constitute a willful violation of the automatic stay provision of 11 U.S.C. § 362 and requests that the Court issue a permanent injunction which would prohibit the Defendants from contacting Atlas' customers or potential customers, from advertising or promoting a foreclosure sale of Atlas' property, or from any other interference with Atlas' ability to seek and acquire new contracts.5 Count II of the Complaint seeks to recover actual damages, costs, and attorneys' fees pursuant to 11 U.S.C. § 362(h) and an award of sanctions pursuant to 11 U.S.C. § 105. Count III of Atlas' Complaint alleges that Bethlehem had knowledge of the continued advertising and of the letter to interested parties (via the Ruch Letter, fn 4), and that this constitutes a willful violation of the automatic stay. Because Bethlehem denied any knowledge of this in open court, Atlas further alleges that their conduct constitutes sanctionable contempt of Court.
In its Motion for Summary Judgment, the Defendants make two arguments. First, they argue that the postponement of the foreclosure sales was not a violation of the automatic stay since it merely maintained the status quo between the parties. In the alternative, the defendants argue that they should be awarded summary judgment on the plaintiff's § 362(h) claim because Atlas, as a corporation, does not fall under the definition of the term "individual" in that section.
In their Response to the Motion for Summary Judgment Atlas claims, in addition to reiterating the allegations asserted in their amended complaint, that the law of the case doctrine ought to preclude this Court from granting summary judgment. Essentially, they argue that since the Motion for Summary Judgment contains the exact same legal arguments that were contained in their previous Motion to Dismiss, which was overruled on April 30, 1997 by Judge Bostetter, law of the case should preclude the defendants from rearguing matters already determined. Additionally, at oral argument, Atlas asserted that, even in this absence of any knowledge of the Rasmus advertising, the Defendants were under an affirmative obligation to correct the alleged violations and failed to so, creating liability under § 362(h).
It is well established that the law of the case doctrine is discretionary. Denton v. Ellis, 258 F.Supp. 223, 229 (E.D.N.C. 1966); Pescatore v. Pan Am. World Airways, Inc., 97 F.3d 1, 7 (2d Cir.1996); Copeland, et al. v. Merrill Lynch & Co., Inc., et al., 47 F.3d 1415, 1424 (5th Cir. 1995); Redfield v. Continental Casualty Corp., 818 F.2d 596, 605 (7th Cir.1987) (...
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