In re New Seabury Co. Limited Partnership, 05-1526.

• Decision Date: 07 June 2006
• Docket Number: No. 05-1526.,No. 05-1588.,05-1526.,05-1588.
• Citation: 450 F.3d 24
• Parties: In re NEW SEABURY COMPANY LIMITED PARTNERSHIP, Debtor, New Seabury Company Limited Partnership, Appellant, Cross-Appellee, v. New Seabury Properties, LLC, Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — First Circuit

450 F.3d 24

In re NEW SEABURY COMPANY LIMITED PARTNERSHIP, Debtor New Seabury Company Limited Partnership, Appellant, Cross-Appellee, v. New Seabury Properties, LLC, Appellee, Cross-Appellant.

No. 05-1526.

No. 05-1588.

United States Court of Appeals, First Circuit.

Heard January 12, 2006.

Decided June 7, 2006.

John J. Monaghan with whom Lynne B. Xerras, Diane N. Rallis, Esme B. Caramello and Holland & Knight, LLP were on brief for appellant, New Seabury Company Limited Partnership.

Daniel E. Rosenfeld with whom David M. Glynn, Robert N. Michaelson and Kirkpatrick & Lockhart LLP were on brief for appellee, New Seabury Properties, LLC.

Before TORRUELLA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and LIPEZ, Circuit Judge.

CAMPBELL, Senior Circuit Judge.

The parties in this case have brought what are effectively cross-appeals from an order of dismissal entered by the United States District Court for the District of Massachusetts on March 23, 2005 ("2005 District Order"), affirming the July 20, 2004 decision of the United States Bankruptcy Court on second remand from the district court.

The dispute is between New Seabury Company Limited Partnership (the "Debtor") and New Seabury Properties, LLC ("NSP") over the Debtor's claim to a share of funds in the Debtor's general operating account ("Operating Account") following the Debtor's declaration of bankruptcy and the entry of a Stipulation between the parties allowing the Debtor to retain the real estate brokerage segment of the business while turning over its other assets to NSP.

Procedural Background and Facts

The Debtor filed a Chapter 11 petition on March 31, 1997 pursuant to 11 U.S.C. §§ 1101 et seq. It owned and operated a 2000-acre planned resort community in Mashpee, Massachusetts, known as "New Seabury Resort." The Debtor's business was made up of three interrelated divisions: the Recreation Division, the Hotel Division, and the Real Estate Division. The funds relative to the divisions were commingled in the Debtor's single operating account. The functions of the three divisions were as follows:

The Recreation Division maintained and operated two golf courses and a golf club house, a tennis facility, a beach club, and a swimming pool facility.

The Hotel Division managed and maintained a hotel facility using Debtor and third-party-owned property for short term rental by guests of the New Seabury Resort.

The Real Estate Division operated a real estate brokerage (the "Brokerage"). The Brokerage operated one real estate company, New Seabury Real Estate, that sold Debtor and non-Debtor property on the New Seabury Resort and another real estate company, Sound Realty, that brokered short-term and long-term rentals of property for private individuals within New Seabury Resort. Commissions provided the Brokerage's primary source of revenue. The Brokerage was never a member of the Multiple Listing Service ("MLS") and, as the exclusive broker, sold most of the property in New Seabury. MLS brokers not related to the Brokerage sold a small percentage of the property; the Brokerage and unrelated MLS brokers would share some sales.

During the bankruptcy proceedings, the Debtor and NSP offered competing plans for reorganization of the Debtor. On May 15, 1998, the bankruptcy court entered an Order and Preliminary Decision stating that the Debtor's plan was not confirmable, but NSP's was. For two days leading up to the confirmation hearing on May 29, 1998, the Debtor and NSP engaged in negotiations to resolve the differences between their competing plans. Ultimately, on May 29, the parties executed a stipulation (the "Stipulation"), pursuant to which the Debtor withdrew its own plan for reorganization.

The Stipulation noted that NSP's plan, to which the Debtor now consented, provided for NSP to acquire substantially all of the Debtors' assets. So as to resolve the parties' controversy, however, the Debtor and NSP stipulated that "certain assets of the Debtor will not be acquired by NSP and will be retained by the Debtor free and clear of all liens, encumbrances, claims and interest." Thus, paragraph 9 of the Stipulation provided that "[t]he real estate brokerage segment of the Debtor's business, including all licenses and permits required to operate that segment of the business, shall be retained by the Debtor." Paragraph 10 of the Stipulation went on to state that the parties would execute on the plan's effective date (the "Effective Date") an agreement containing "the following provisions, and failing the execution of such agreement the provisions as set forth herein shall constitute such agreement."

Clauses a, b, and c of paragraph 10 then provided that the Debtor, A + C Great Island, Inc., and Christopher Burden would retain a non-exclusive license to use the requested trade name "New Seabury" in connection with real estate brokerage operations conducted by one or more of them for as long as Burden or his family maintained a majority ownership interest or were involved in daily operations. The license would include the right to use the New Seabury name in marketing materials. Additionally, the Brokerage operations were to have access to all resort amenities, including related pictures and information, in its marketing and other material for viewing and touring, with specified free membership rights to be granted to Christopher and Nancy Burden in the New Seabury Club. Non-exclusive signage rights were also granted to the Brokerage operations relating to real estate service operations in NSP's post-confirmation New Seabury related property, with various limitations spelled out as to the form and location of the signage, its acceptability to the Debtor and NSP, and changes desired by NSP.

Paragraph 11 of the Stipulation also contained details and limitations relative to the retained Brokerage operation. The Debtor would retain certain specified real property on which real estate service operations are conducted, including the main New Seabury real estate office and adjacent parking facilities, and certain other parcels. On and for a two-year period following the Effective Date, the Debtor was to allow NSP use of three desks on one of these parcels rent-free, along with certain spelled-out rights to install phone lines and place its own reasonable office equipment. Properties to be retained by the Debtor were to be free and clear of all liens, encumbrances, claims and interests with additional conditions specified as to a particular note held by Burden and a mortgage on one parcel.

Paragraph 12 of the Stipulation provided for execution by the parties of a limited non-competition agreement prohibiting NSP and its assignees, successors, and assigns from engaging in real estate brokerage within New Seabury, except as to its own properties, and the Debtor, A + C Great Island and Burden from engaging in resort operations within the boundaries of the New Seabury development and within a three-mile radius. Nothing, however, was to prohibit NSP from employing a broker of its choice to market its properties.

Paragraph 13 specified that "except as provided herein and except as to the obligations of NSP under the NSP Plan," all parties "shall be deemed to have remised, released and forever discharged against the other any and all debts, demands, obligations, avoidance actions, causes of action and any other" claims, through the Effective Date of the NSP plan.

The remaining paragraphs of the Stipulation dealt with the discharge of debts, providing, inter alia, that NSP did not release its debts against the Debtor and that Burden released certain of his debts.

Nothing was said in the Stipulation as to retention or ownership of monies held in the Debtor's operating account. In particular, there was no reference to the disposition of any sums therein derived from real estate brokerage activities.

At a hearing, the bankruptcy court confirmed NSP's plan and entered a formal order on June 15, 1998 (the "Confirmation Date"). After the Confirmation Date, the Debtor continued to operate the Brokerage.

During the preparation of the documents to close the transaction transferring the bulk of the Debtor's assets to NSP, a dispute arose regarding whether the Debtor was entitled to receive and retain the net cash the Brokerage had generated through the Effective Date of NSP's plan (the "Disputed Funds"). As noted, revenue from the Brokerage operations was commingled with that from the Debtor's two other divisions in a single Operating Account.

In order to complete the closing, the documents specifically excluded the Disputed Funds pending resolution of the parties' rights (the specific language is quoted below). The parties executed the final closing documents on September 17, 1998 (the "Closing"), which was also the Effective Date of the reorganization plan. The bill of sale provided that the Debtor agreed to sell all of the Debtor's rights and title but specifically excluded:

(i) any assets being retained by New Seabury Company Limited Partnership pursuant to the Stipulation Relating to Competing Plans of Reorganization, Objections to Confirmation, Motion for Reconsideration and Motion for Plan Partnership, entered into on May 29, 1998 (the "Stipulation"); (ii) telephone number (508) 477-9400 pending a further determination of the Debtor's right to retain that number; and (iii) property, assets and rights, generated by or associated with the Seller's Real Estate Brokerage Operations (the "Brokerage Operations") including net cash generated by the Brokerage Operations from January 1, 1998 through September 16, 1998 in the amount of $553,762.00, as estimated by the Seller which amount shall remain in the Debtor's account in its entirety until such time as the Court adjudicates the rights of the Seller and NSP thereto, or until further agreement of the parties, and any Purchased Assets described on Schedules ("B," "C," "D" and "E" hereto).

After the Closing, the...