In re Commercial Financial Services, Inc., Bankruptcy No. 98-05162-R.

• Decision Date: 13 June 2003
• Docket Number: Adversary No. 02-0110-M.,Bankruptcy No. 98-05166-R.,Bankruptcy No. 98-05162-R.
• Citation: 294 B.R. 164
• Parties: In re COMMERCIAL FINANCIAL SERVICES, INC., and CF/SPC Ngu, Inc., Debtors. Commercial Financial Services, Inc., Debtor, and Bradley D. Sharp, Trustee of the CFS Liquidating Trust, Plaintiffs, v. Mike C. Temple, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Oklahoma

294 B.R. 164

In re COMMERCIAL FINANCIAL SERVICES, INC., and CF/SPC Ngu, Inc., Debtors Commercial Financial Services, Inc., Debtor, and Bradley D. Sharp, Trustee of the CFS Liquidating Trust, Plaintiffs, v. Mike C. Temple, Defendant.

Bankruptcy No. 98-05162-R.

Bankruptcy No. 98-05166-R.

Adversary No. 02-0110-M.

United States Bankruptcy Court, N.D. Oklahoma.

June 13, 2003.

Larry M. Wolfson, Robert R. Stauffer, Jenner & Block, LLC, Chicago, IL, Neal Tomlins, Tulsa, OK, for Plaintiff or Petitioner.

John B. Heatly, Oklahoma City, OK, for Defendant or Respondent.

MEMORANDUM OPINION

TERRENCE L. MICHAEL, Bankruptcy Judge.

THIS MATTER comes before the Court pursuant to the Motion to Dismiss or Alternative Motion for Summary Judgment on Statute of Limitations With Brief (the "Motion"), filed by Mike C. Temple, Defendant herein ("Defendant" or "Temple"), and the Response to Defendant's Motion to Dismiss or, Alternative Motion for Summary Judgment on Statute of Limitations (the "Response"), filed by Commercial Financial Services, Inc. and Bradley D. Sharp, Trustee of the CFS Liquidating Trust, Plaintiffs herein (collectively the "Plaintiffs"), and the various replies and responses to each. The following findings of fact and conclusions of law are made pursuant to Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52.

Jurisdiction

The Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C.A. § 1334(b).¹ Reference to the Court of this adversary proceeding is proper pursuant to 28 U.S.C.A. § 157(a). This is a core proceeding as contemplated by 28 U.S.C.A. § 157(b)(2)(H).

Summary Judgment Standard

Summary judgment is proper where "`there is no genuine issue as to any material fact.'"² Summary judgment is appropriate 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."³

The United States Court of Appeals for the Tenth Circuit has ruled that "[e]ntry of summary judgment is mandated, after an adequate time for discovery and upon motion, `against a party who fails to make a showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial'."⁴ Summary judgment is only appropriate if the facts set forth by the movant are properly supported with admissible evidence and the facts affirmatively show that movant is entitled to judgment as a matter of law.⁵

Findings of Fact

The Court finds the following facts are undisputed for purposes of the Motion and the Response:

1. Temple was employed by Commercial Financial Services, Inc. ("CFS") as its "Chief Financial Officer" pursuant to an employment agreement dated March 1, 1996.

2. On September 5, 1996, a second employment agreement was executed between Temple and CFS under which Temple's employment was continued on different terms from the first employment agreement.

3. On July 13, 1998, Temple and CFS executed an agreement entitled "Termination of Employment Agreement."

4. Under the terms of the Termination of Employment Agreement, CFS, as employer, agreed to pay Temple, as employee, a lump sum payment of $3,250,000.00, subject to tax withholdings. Said amount was payable on July 17, 1998.

5. On July 17, 1998, CFS wire transferred to Temple the sum of $2,130,375.00 (representing $3,250,000.00 less applicable federal and state taxes).

6. On December 11, 1998, CFS filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code.

7. On December 18, 1998, the United States Trustee appointed the Official Committee of Unsecured Creditors ("OCUC") in CFS's Chapter 11 case. The appointment of OCUC was amended on December 22, 1998.

8. The Court approved the appointment of multiple counsel for OCUC, including: Johnson, Allen, Jones & Dornblaser; Verner, Liipfert, Bernhard, McPherson and Hand, Chartered; and Robert Glass ("Mr. Glass") of the Glass Law Firm, P.C.

9. On November 5, 2000, Larry M. Wolfson ("Mr. Wolfson"), counsel for CFS, sent a letter to John B. Heatly ("Mr. Heatly"), counsel for Temple, concerning a proposed tolling agreement (the "Tolling Agreement") between the parties. A draft of the Tolling Agreement was included with the letter for review by Mr. Heatly.

10. On November 27, 2000, OCUC filed a motion entitled "OCUC's Motion for Authorization to Commence and Prosecute Certain Third Party Causes of Action in the Name of Debtor, and on Behalf of the Estate" (the "OCUC Motion"). In the OCUC Motion, OCUC represented to the Court that CFS, as debtor-in-possession, had decided not to pursue claims against Mike Temple.

11. In the OCUC Motion, OCUC stated its intention to file suit against several individuals, including Temple, prior to December 11, 2000, if the OCUC Motion was granted. The OCUC Motion was set for a November 30, 2000, hearing. The Court's order setting the OCUC Motion for hearing was served on Mr. Heatly on November 27, 2000.

12. On November 29, 2000, Mr. Glass had a telephone conversation with Mr. Heatly regarding his intentions of filing a suit against Temple prior to December 11, 2000, if the Court approved the motion. Mr. Glass also stated that he would delay filing suit if Temple entered into a tolling agreement with CFS.

13. On November 29, 2000, Mr. Heatly revised the Tolling Agreement proposed by CFS. His revisions included striking a recital paragraph as well as extending the definition of CFS in paragraph 1(a) to include OCUC, the Official Committee of Asset-Backed Security Holders, and any other person or entity authorized to assert claims on behalf of CFS or its bankruptcy estate. These revisions were hand-written into the Tolling Agreement by interlineation. The revised Tolling Agreement was then sent to Mr. Glass and to a Mr. John D. Eaton by facsimile.

14. On November 29, 2000, Richard P. Steinkin ("Mr. Steinkin") of Jenner & Block, counsel for CFS, sent a letter to Mr. Heatly by facsimile transmitting the Tolling Agreement, revised as requested by Temple. Mr. Steinkin requested that Temple sign the Tolling Agreement before the hearing on OCUC's motion set for November 30, 2000.

15. On November 29, 2000, Temple signed the Tolling Agreement identical to the Tolling Agreement which Mr. Steinkin had sent to Mr Heatly. The Tolling Agreement contains the following provisions:

3. Nothing in this agreement shall be construed as an admission by Temple that any Claim could properly be asserted against him or that such Claim would have any basis in law or fact. Except insofar as this agreement relates to timing defenses, this agreement is not intended to and shall not have any effect whatsoever upon any defense Temple may assert in response to any claim in any action or proceeding. This agreement does not revive any claim that would have been barred as of the time of the agreement.

* * * * * *

7. This agreement may not be amended, extended or otherwise modified without the prior written agreement of each party hereto.

8. This agreement may be executed in identical counterparts with the facsimile signatures having the same force and effect as original signatures.

16. On November 29, 2000, at 1:56 p.m., Mr. Heatly sent the signed Tolling Agreement by facsimile to Mr. Glass and Mr. Steinkin. Counsel for CFS confirmed the receipt of the faxed Tolling Agreement with Temple's signature the same day.

17. The Tolling Agreement was signed by Fred Caruso, president of CFS, on November 29, 2000.

18. At the November 30, 2000, hearing, Mr. Glass and Neal Tomlins ("Mr. Tomlins"), counsel for OCUC and CFS respectively, announced to the Court that CFS had entered into the Tolling Agreement with Temple. Mr. Glass and Mr. Tomlins also advised the Court at the hearing that the OCUC Motion would be withdrawn and that OCUC and CFS would not pursue any claims against Temple at that time. Neither Temple nor anyone on his behalf was present at the hearing.

19. On December 1, 2000, Mr. Glass filed a Notice of Withdrawal of the OCUC Motion. The certificate of mailing on this notice states that it was mailed to "Counsel for Michael Temple: John B. Heatly, Esq."

20. No suit or adversary proceeding was commenced against Temple by CFS or OCUC before December 11, 2000.

21. Jerry L. Switzer ("Mr. Switzer"), counsel for CFS, sent a letter dated April 10, 2001, to Mr. Heatly expressing CFS's desire to extend the Tolling Agreement until September 30, 2001. Mr. Heatly signed the letter from Mr. Switzer accepting the offer to extend the Tolling Agreement on behalf of Temple on April 24, 2001. In addition, Mr. Heatly expressed his view in a separate letter that the original Tolling Agreement was not effective because CFS had not "communicated its acceptance" of the Tolling Agreement to Temple. Mr. Heatly, however, agreed on behalf of Temple that the extension of the Tolling Agreement effected by his signature on Mr. Switzer's letter of April 10, 2001, was effective to toll the statute of limitations as to all "viable" claims.

22. Mr. Switzer sent a letter dated September 21, 2001, to Mr. Heatly, expressing CFS's desire to extend the Tolling Agreement until November 30, 2001. Mr. Heatly signed the letter from Mr. Switzer accepting the offer to extend the Tolling Agreement on behalf of Temple on September 24, 2001. In addition to signing the letter, Mr. Heatly again expressed his view that the Tolling Agreement was not effective because CFS had not "communicated its acceptance" of the Tolling Agreement to Temple. Mr. Heatly agreed on behalf of Temple, however, that the extension of the Tolling Agreement effected by his signature on Mr. Switzer's letter was effective to toll the statute of limitations as to all "viable" claims.

23. Corali Lopez-Castro, Esq., of Kozyak, Tropin & Throckmorton, a law firm retained as special counsel to CFS, sent a letter...