In re Bullet Jet Charter, Inc.
| Decision Date | 06 February 1995 |
| Docket Number | Bankruptcy No. 94 B 11418. Adv. No. 94 A 01217. |
| Citation | 177 BR 593 |
| Parties | In re BULLET JET CHARTER, INC., an Illinois corporation, Debtor. SOFTWARE CUSTOMIZER, INC., a Nevada corporation, Plaintiff, v. BULLET JET CHARTER, INC., Defendant. BULLET JET CHARTER, INC., Counterplaintiff, v. SOFTWARE CUSTOMIZER, INC., Counterdefendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Richard Steck, Steck & Spataro, Chicago, IL, for plaintiff.
Mitchell E. Jones, Rooks Pitts and Jones, Chicago, IL, for defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This Adversary proceeding relates to the bankruptcy case of Bullet Jet Charter, Inc. ("Bullet Jet" or "Debtor"), filed under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101 et seq.
The action arises out of a contract, executed pre-petition, for sale of an aircraft by Bullet Jet to Software. Bullet Jet did not fulfill its obligations under the contract, and Software now seeks specific performance of the contract or, in the alternative, an order for replevin under Section 2-716(1) of the Illinois Uniform Commercial Code. Bullet Jet contests the action primarily on theories (1) that the elements required under non-bankruptcy law for specific performance were not established, or (2), in the alternative and as pleaded in its counterclaim, that Bullet Jet, as debtor-in-possession, may reject the contract as executory under 11 U.S.C. § 365, or (3) that Bullet Jet may avoid the contract in its capacity as debtor-in-possession under 11 U.S.C. § 544(a)(1).
This case came on for trial upon complaint of Plaintiff Software Customizer, Inc. ("Software") and counterclaim of Debtor-Defendant Bullet Jet. The Court considered testimony and exhibits admitted into evidence and the arguments of counsel, and now makes and enters the following Findings of Fact and Conclusions of Law. For reasons stated below, judgment will be entered in favor of Software on the Complaint and against Bullet Jet on the Counterclaim.
1. Plaintiff Software is a Nevada corporation with its principal place of business in Las Vegas, Nevada. Debtor-Defendant Bullet Jet is an Illinois corporation with its principal place of business in St. Charles, Illinois. Prior to filing bankruptcy, Bullet Jet operated an aircraft charter operation. As of the trial date, it no longer operated charters, and does not do so now.
2. This Adversary involves a controversy over an aircraft asserted by Bullet Jet to be one asset of debtor's estate in bankruptcy under Chapter 11 of the Bankruptcy Code— specifically, a 1972 Aero Commander 690 aircraft, serial number 11009, bearing FAA registration number N25BD (the "Aircraft").
3. On or about March 8, 1994 (three months before the bankruptcy filing), Bullet Jet and Software entered into a written contract for the sale of the Aircraft by Bullet Jet to Transservice International, Inc. ("Transservice") on behalf of Software, a customer of Transservice (the "Agreement"). On the same day, Transservice contracted to resell the Aircraft to Neil Barron, President of Software, on behalf of his company.
Bullet Jet makes much of the fact that there were some differences between its contract to sell and the Transservice contract to resell, but has no standing or privity to rely on the resale contract. On the other hand, Bullet Jet's agents and officers accepted Software as the ultimate purchaser and dealt with Software as the intended purchaser, as more fully found below. Software sues here with standing to enforce the Transservice contract entered into on its behalf.
4. The original agreed sale price for the Aircraft was $205,000.00. On or about April 15, 1994, the contracting parties entered into a written modification of the contract, entitled Amendment "A", which provided that the parties were to split the cost of compliance with a service bulletin issued by the Aircraft manufacturer as # 211, which was adopted by the Federal Aviation Administration ("FAA") as an Airworthiness Directive.
5. The written modification increased the purchase price of the Aircraft as set forth in the original contract by the sum of $5,000.00, raising the total sale price to $210,000.00.
6. An escrow was established with Insured Aircraft Title Service, Inc. ("Aircraft Title"), for the purpose of closing the transaction.
7. Software, as purchaser of the Aircraft, deposited $210,000.00 into escrow, as required by the modified written contract.
8. Bullet Jet deposited into the escrow an appropriately executed Aircraft Bill of Sale to effectuate sale of the Aircraft to Software and transfer of title thereto. That document never left escrow and therefore was never registered with the FAA, but the state of FAA records pertaining to title in the subject Aircraft was not established by the evidence. It was not proved that no document at all pertaining to transfer of title to Software was ever filed with the FAA.
9. On or about April 14, 1994, the purchaser Software released $25,000.00 of its money from escrow for benefit of the seller, Bullet Jet, to pay for certain repairs contractually required of Bullet Jet to comply with the original contract or otherwise necessary for the Aircraft. Bullet Jet was short of funds and needed such funds to pay for those repairs. Bullet Jet requested such release from Software in order to use those funds to pay for such repairs, and it used the money for that purpose. Software's release of such funds by written authorization (Pl.'s Ex. 6) constituted an effective written acceptance of the Aircraft under the amended sale contract.
10. During pendency of the contract, while the Aircraft was undergoing inspections and maintenance contractually required to be performed by seller prior to delivery, Software expended sums over and above the contract price for additional maintenance items not contractually required. Bullet Jet consented to all such expenditures by Software to improve the Aircraft above contract specifications.
11. On or about May 11, 1994, the Aircraft was ready for delivery pursuant to terms of the contract as amended, Bullet Jet having performed the maintenance and inspections required by the contract to the satisfaction of the purchaser. The additional maintenance work separately ordered by Software had also been completed. Software sent its representative to Indianapolis, Indiana, to accept delivery. Software was ready, willing, and able to execute an additional written acceptance of the Aircraft, and to release the remaining sale proceeds due that were in the escrow.
12. On or about May 14, 1994, Bullet Jet as seller failed to deliver the Aircraft to Software because a third party in possession of the Aircraft refused to release it due to an unpaid maintenance bill.
13. On or about May 20, 1994, Bullet Jet demanded from Software an additional sum of $61,000.00, not provided for by contract between the parties, as a condition of delivery. The additional sum was demanded both to pay the unpaid maintenance bill owed by Bullet Jet and also to provide it with a net cash benefit that it then desired. This new demand was not based on the contract or on any right under law. Software refused to pay the additional price demanded, and Bullet Jet thereupon refused to release the Bill of Sale it had deposited into escrow.
14. The Bank of Spooner holds a claim secured by the Aircraft, which would be paid from the amount of the purchase price presently held in escrow upon delivery of the Aircraft pursuant to the contract.
15. On May 23, 1994, Software filed suit in United States District Court for the Northern District of Illinois, seeking specific performance of the contract from Bullet Jet. Software Customizer, Inc. v. Bullet Jet Charter, Inc., No. 94 C 3169.
16. Two weeks later, on June 7, 1994, Bullet Jet filed its Chapter 11 bankruptcy petition. It soon ceased operations except for those directed at maintaining and selling its three aircraft (one of which is the Aircraft in question here). Bullet Jet's Plan in Chapter 11 is one of liquidation. It has no hope of reviving any operations.
17. The Aircraft is diminishing in value while it remains in Bullet Jet's possession. Bullet Jet has no means to pay for appropriate and continuing maintenance required of it except through borrowing monies for that purpose. Such borrowings were obtained for a time with consent of this Court. Nonetheless, the Aircraft is gradually diminishing in market value due to passage of time. Moreover, since the trial, Bullet Jet has conceded that an engine needs repair and has been removed. The Aircraft is not flyable for that reason and sits outside of any hangar, exposed to the winter elements. Bullet Jet presently lacks funds sufficient to fix the engine. Since the Aircraft cannot be flown, it cannot be flown for maintenance flights.
18. Bullet Jet lacks significant equity in the property, the balance of the sale price due being only about $25,000.00 in excess of the amount due the secured creditor, Bank of Spooner, based on aircraft value as more fully found hereinbelow. In light of the need for engine repair and inability to hangar the Aircraft over the winter, Bullet Jet has no material equity in the Aircraft, if indeed it still has any equity at all.
19. The aircraft is burdensome to the estate in that it constituted a daily expense (at least through trial) for maintenance, insurance, and ramp or hangar space. The estate is further required to make payments to the secured creditor who advanced money for this purpose.
20. The Aircraft is rare in terms of its exceptional condition in all respects except for the removed engine.
21. Software, as purchaser, has no prospect to cover by purchasing an alternative aircraft. There is no realistic possibility of finding a similar or better aircraft, and no possibility to obtain replication, if replication is at all possible, without considerable...
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