In re Blackwood Associates, LP, Bankruptcy No. 891-83867-20. Adv. No. 894-8244-20.

• Decision Date: 16 October 1995
• Docket Number: Bankruptcy No. 891-83867-20. Adv. No. 894-8244-20.
• Citation: 187 BR 856
• Parties: In re BLACKWOOD ASSOCIATES, L.P., Debtor. HARVIS TRIEN & BECK, P.C., Plaintiff, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, Blackwood Associates, L.P., Herbert Brien, Lismarc Realty Management Corp., and Public Service Electric and Gas Company, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of New York

187 B.R. 856 (1995)

In re BLACKWOOD ASSOCIATES, L.P., Debtor HARVIS TRIEN & BECK, P.C., Plaintiff, v. FEDERAL HOME LOAN MORTGAGE CORPORATION, Blackwood Associates, L.P., Herbert Brien, Lismarc Realty Management Corp., and Public Service Electric and Gas Company, Defendants.

Bankruptcy No. 891-83867-20. Adv. No. 894-8244-20.

United States Bankruptcy Court, E.D. New York.

October 16, 1995.

Harvis Trien & Beck, P.C., Attn: Robert M. Trien, New York City, pro se for Plaintiff.

Hertzog, Calamari & Gleason, Attn: Carla E. Craig, New York City, for Defendant Federal Home Loan Mortgage Corporation.

Federal Home Loan Mortgage Corporation, Attn: Christopher P. Spera, Sr. Counsel, McLean, Virginia.

U.S. Trustee's Office/EDNY, Attn: David Hartheimer, Garden City, NY.

DECISION AND ORDER DENYING SUMMARY JUDGMENT TO PLAINTIFF, AND GRANTING SUMMARY JUDGMENT TO DEFENDANT, FEDERAL HOME LOAN MORTGAGE CORPORATION

Robert John HALL, Bankruptcy Judge.

PRELIMINARY STATEMENT

This matter comes before the Court¹ upon motion ("Motion") by Harvis Trien & Beck, P.C. ("HTB" or "Plaintiff") for summary judgment on its first claim for relief against Federal Home Loan Mortgage Corporation ("FHLMC" or "Defendant") pursuant to Federal Rule Bankruptcy Procedure 7056 and thereafter seeks a directive that FHLMC be directed to disgorge $535,556.00 of adequate protection payments it received and pay it to HTB as and for counsel fees and expenses previously awarded by this Court.

In opposition, FHLMC filed its motion for summary judgment ("Cross-Motion"). FHLMC also made a motion for a determination that it is entitled to a superpriority claim pursuant to 11 U.S.C. section 507(b), arguing that in the event of a disgorgement, this superpriority claim would be paid first and envelop any award of fees to be paid to HTB. In light of the Court's decision with respect to the instant motions, this motion is academic.

For the reason set forth below, HTB's Motion for summary judgment is DENIED and FHLMC's Cross-Motion is GRANTED.

HISTORICAL OVERVIEW AND RELEVANT FACTS

The saga continues with respect to the parties' interpretation of a cash collateral stipulation entered into between FHLMC and Blackwood Associates, L.P. ("Debtor") on or about July 28, 1992 ("Cash Collateral Stipulation") and thereafter approved by this Court on August 31, 1992 ("Cash Collateral Order"). The provisions of the Cash Collateral Stipulation that require a judicial reading to resolve the instant dispute are:

8. In the event that the Debtor misappropriates or attempts to misappropriate the Cash Collateral, defrauds or attempts to defraud FHLMC, or fails to make either the Adequate Protection Payment or the tax escrow payment FHLMC shall be entitled, after ten (10) days notice to Debtor during which period Debtor shall have the opportunity to cure such alleged default, to make application to the Court on notice to the Debtor for an Order granting FHLMC relief from the automatic stay to complete its remedies at law, including, without limitation, the appointment of a receiver and foreclosure of its interest in the Property.

9. In the event that relief from stay is obtained with respect to the Property, authorization to use Cash Collateral shall immediately terminate at FHLMC\'s option upon i) the appointment of a receiver for the Property, or ii) at any other date following the grant of relief from stay. At such time, all Cash Collateral shall be immediately paid in full to FHLMC.

* * * * * *

13. FHLMC agrees that i) fees of the U.S. Trustee shall be paid from the Cash Collateral and, ii) Debtors counsels fees and disbursements approved by the Court upon requisite notice and application as required by the Bankruptcy Code and Rules shall be paid from the Cash Collateral. Nothing contained herein shall constitute a waiver of FHLMC\'s right to object on a substantive basis to particular amounts requested in any such fee application.

Cash Collateral Stipulation, ¶ 8, 9, 13.

This Court's previous determination with respect to HTB's entitlement to compensation as attorneys for the Debtor pursuant to their second interim fee application is discussed in In re Blackwood Assocs., L.P., 165 B.R. 108 (Bankr.E.D.N.Y.1994). We need not revisit the issue of entitlement. What does need to be addressed is if (emphasis added) the entitlement will be satisfied from disgorged adequate protection payments that had been received by FHLMC, Debtor's senior secured creditor.

By motion dated April 8, 1994, FHLMC sought reconsideration, amendment or clarification of this Court's Order and Decision dated March 30, 1994 ("March 30, 1994 Decision") that granted HTB's second interim fee application (the "Award"). The motion was denied and the Court opined that its independent review and analysis of the application and the Court's overall review and consideration of the posture of the case justified the Award. However, the Court did consider FHLMC's revelation that no funds had been generated from rental income on the property prior to March 31, 1993² that were available to pay the Award.

At the time of its March 30, 1994 Decision, this Court believed that based upon the information provided, or in this instance not provided, that there were sufficient monies available in the estate to satisfy the Award.

Based upon this disclosure the Court directed in a June 14, 1994 Order,

. . . to the extent that it seeks to require FHLMC to pay any portion of the fees and disbursements awarded, to commence an adversary proceeding to determine its rights, if any, to require FHLMC to disgorge any portion of the cash collateral received by FHLMC pursuant to the Cash Collateral Order, and to use such disgorged fees to pay HTB\'s allowed fees and disbursements.

HTB commenced the adversary proceeding with the gravamen of its complaint focusing on paragraph 13 of the Cash Collateral Stipulation and their belief that this "carveout" was an unconditional and self-executing provision that would allow fees to be paid from the cash collateral.

HTB in its amended complaint dated November 29, 1994 asks the Court to award a judgment against FHLMC in the amount of $535,556.00 and to direct FHLMC to disgorge $535,556.00 from the cash collateral it received to satisfy that judgment.

FHLMC in its amended answer dated December 12, 1994 asserts that the complaint fails to state a cause of action upon which relief may be granted based upon their view that the provisions of the Cash Collateral Order do not give HTB any rights against FHLMC as there are no priority provisions or any other basis for the payment of fees to HTB once the automatic stay was lifted.

DISCUSSION

Under Fed.R.Civ.P. 56(c) summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The fact that both parties have moved for summary judgment does not in and of itself say that there are no genuine issues of material fact. In this instance, both parties seek summary judgment based upon the express language of the Cash Collateral Stipulation.

HTB seeks summary judgment based upon this Court's previous actions with respect to the Cash Collateral Stipulation and their reading of the Cash Collateral Stipulation. That is, that the stipulation is enforceable against FHLMC with respect to their inalienable obligation to pay counsel fees. HTB relies on the unambiguous language of the Cash Collateral Stipulation. They rely on the fact that the Court placed its imprimatur on the Cash Collateral Stipulation when it was so ordered on August 31, 1992. They rely on this Court's March 30, 1994 Order providing for the Award. They rely on this Court's June 14, 1994 Order that denied FHLMC's motion for reconsideration or amendment of the Award.

On the other hand, FHLMC also seeks summary judgment based on their reading of the Cash Collateral Stipulation. FHLMC argues that the terms of the Cash Collateral Stipulation are explicit and unequivocal, i.e., adequate protection payments had to be made so that the automatic stay would not be terminated, an event that could, that did, unilaterally terminate Debtor's authorization to use cash collateral. Contending that no material...