In re Parsons, 00 N 273.
| Decision Date | 14 September 2001 |
| Docket Number | Adversary No. 96-1799 PAC.,No. 00 N 273.,Adversary No. 96-1494 PAC.,Bankruptcy No. 92-21114 PAC.,00 N 273. |
| Citation | 272 B.R. 735 |
| Parties | In re Robert G. PARSONS, individually, and as officer, director, and shareholder of Parsons Land & Cattle, Debtor. William W. Bass, Trustee for the Estate of Robert G. Parsons et al., Plaintiff/Appellee, v. Robert G. Parsons, Defendant/Appellant, W. Elton Kennedy, the United States of America, acting through the Internal Revenue Service, the State of Colorado, acting through the Colorado Department of Revenue, Defendants/Appellees. |
| Court | U.S. District Court — District of Colorado |
Daniel F. Lynch, Esq., Denver, CO, Roberta Earley, Colorado Springs, CO, for Defendant/Appellant.
Christopher H. La Rosa, Esq., Arthur P. Yoon, Esq., U.S. Department of Justice, Tax Division, Washington, DC, for Appellee United States of America.
D. Bruce Coles, Esq., Fish & Coles, Denver, CO, for Appellee W. Elton Kennedy.
John D. Phillips, Esq., Shughart, Thomson & Kilroy, Denver, CO, for Appellee William M. Bass.
Debtor Robert G. Parsons appeals from several orders of the bankruptcy court entered in Parsons' Chapter 11 bankruptcy proceeding and incorporated into the bankruptcy court's January 25, 2000, final judgment. Jurisdiction is based on 28 U.S.C.A. § 158(a) (West Supp.1999).
On September 2, 1992, Parsons filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C.A. §§ 101-1330 (West 1993 & Supp.2000) [hereinafter "Bankruptcy Code"]. At the time Parsons filed his Chapter 11 petition, he owned a ranch in Southern Colorado and made his living as a cattle rancher. William M. Bass ("Trustee") was appointed to serve as the trustee for Parsons' bankruptcy estate. No plan of reorganization was ever approved in this case. Instead, on December 17, 1994, in an effort to generate funds sufficient to satisfy all of the claims against Parsons' bankruptcy estate, Parsons, the Trustee, and Defendant/Appellee W. Elton Kennedy entered into a Contract to Buy and Sell Real Estate and Cattle ("Contract"). Under the terms of the Contract, Parsons and the Trustee agreed to sell to Kennedy a portion of Parsons' ranch known as the Upper Ranch and 100 head of broad cattle, as well as 4 bulls, for approximately $2.5 million. The closing price of the sale was to be sufficient to satisfy all claims, costs, and fees of Parsons' bankruptcy estate. Paragraph 24 of the Contract contained an integration clause which provided:
No change or modification of this Contract shall be valid unless the same is in writing and signed by the parties hereto. No waiver of any of the provisions of this Contract shall be valid in writing and signed by the party against whom it is sought to be enforced. This contract contains the entire agreement between the parties relating to the subject matter described herein. There are no promises, agreements, conditions, undertaking, warranties, representations, oral or written, express or implied, between the parties relating to the subject matter herein other than expressly set forth herein.
Paragraph 2 of the Contract expressly conditioned the sale of the Upper Ranch on the bankruptcy court's approval of the Contract.
On December 19, 1994, Parsons, the Trustee, and Kennedy entered into an Addendum to the Contract ("Addendum") which modified paragraphs 23 and 23(A) of the Contract. Paragraph 23 of the Contract dealt with the tax consequences expected to result from the sale of Upper Ranch. The Addendum replaced Paragraph 23 and 23(A) of the Contract and provided a mechanism for the payment of any taxes incurred from the sale of the Upper Ranch. Under paragraph 23 of the Addendum, Parsons agreed (1) to assume sole responsibility for any tax liability created by the sale of the Upper Ranch, which was estimated to be approximately $500,000, and (2) to hold the Trustee harmless and indemnify the Trustee from any tax liability. Because the proceeds from the sale of the Upper Ranch would not be available for the payment of any tax liability arising from the sale, the Addendum provided that, during calendar year 1995, Parsons could sell cattle in the ordinary course of his business and the proceeds from these sales would be deposited with the Trustee for use to satisfy Parsons' 1995 tax liability. The Addendum required Kennedy to advance Parsons up to $500,000 through an irrevocable letter of credit for use to pay Parsons' 1995 tax liability in the event of Parsons' inability to do so. The Addendum provided that, in exchange for agreeing to pay Parsons' tax liability, Kennedy could purchase other portions of Parsons' ranch not included in the Upper Ranch [hereinafter "Remaining Property"] for an amount equal to the sum drawn on Kennedy's letter of credit to satisfy Parsons' tax liability.
The Addendum designated the Trustee to act as an escrow agent. The Trustee would hold Kennedy's letter of credit, the deeds to the Remaining Property, and the proceeds from the cattle sales. In the event that the proceeds for Parsons' cattle sales were insufficient to satisfy Parsons' tax liability, the Trustee was to draw on Kennedy's letter of credit to satisfy the balance of Parsons' tax liability and to deliver the deeds to the Remaining Property to Kennedy. If Kennedy acquired the Remaining Property, paragraph 23(g) of the Addendum granted Parsons a five-year option to redeem the Remaining Property at a price equal to the amount drawn on Kennedy's letter of credit less the sum collected by the Trustee from Parsons' cattle sales, plus real estate taxes on the Remaining Property paid by Kennedy and interest. In the event a dispute arose over the monies for the tax payment held by the Trustee, paragraph 23(k) of the Addendum provided that the Trustee could, in his sole discretion, "interplead all parties and deposit any monies into a [c]ourt of competent jurisdiction and recover court costs and reasonable attorneys' fees in so interpleading such fees." The Addendum also stated that (1) it was Parsons' intent to seek a dismissal of his chapter 11 petition upon full payment of all of the bankruptcy estate's creditors and administrative expenses, and (2) that the Contract, as modified by the Addendum, shall survive the dismissal of Parsons' bankruptcy proceeding.
On December 17, 1994, the same day that Parsons, the Trustee, and Kennedy entered into the Contract, Parsons and Kennedy entered into a separate, written consulting agreement ("Consulting Contract"). Under the Consulting Contract, Kennedy agreed to retain Parsons as a consultant beginning on the date Kennedy acquired ownership of the Upper Ranch. Included in the Consulting Contract were provisions for Parsons to receive $1500 per month as compensation for his services and $200 per month in lieu of a specific health insurance policy. The Consulting Contract was to continue indefinitely unless either party terminated it for cause. Neither the Contract nor the Addendum referred, directly or indirectly, to the Consulting Contract.
On December 19, 1994, the bankruptcy court, pursuant to 11 U.S.C.A. § 363(b)(1), held a hearing on the Trustee's motion to approve the sale of the Upper Ranch under the terms specified in the Contract and Addendum. During the hearing, Parsons' counsel informed the bankruptcy court of the existence of the Consulting Contract, but represented to the bankruptcy court that the Consulting Contract was not an element of the Contract or Addendum and that the Contract and Addendum did not contain any consulting arrangement. On January 11, 1995, nunc pro tunc December 19, 1994, the bankruptcy court entered an order in which the court (1) approved the sale of the Upper Ranch in accordance with the terms of the Contract and Addendum, and (2) ordered Parsons and the Trustee to seek an order dismissing the case so as to preclude any tax liability to Parsons' bankruptcy estate resulting from the sale of the Upper Ranch. The bankruptcy court did not approve the Consulting Contract nor was the Consulting Contract incorporated into the bankruptcy court's order.
On February 15, 1995, the Trustee and Kennedy entered into an Escrow Agreement for the purpose of implementing the Addendum. Pursuant to the Escrow Agreement, the Trustee agreed to release Kennedy's letter of credit to the issuing bank if Parsons failed to deliver his 1995 income tax return to the Trustee by April 1, 1996. That same day or thereabout, Kennedy paid the purchase price for the Upper Ranch and delivered the letter of credit to the Trustee. The Trustee delivered the deed to the Upper Ranch to Kennedy and distributed the sale proceeds to the bankruptcy estate's creditors. Parsons delivered the deeds to the Remaining Property to the Trustee. In addition, Parsons sold cattle and remitted $168,493.16 in proceeds from these sales to the Trustee.
On December 15, 1995, nunc pro tunc, December 3, 1995, the bankruptcy court granted the Trustee's motion to dismiss Parsons' Chapter 11 petition. On December 19, 1995, nunc pro tunc, December 5, 1995, the bankruptcy courted entered a corrected order dismissing Parsons' bankruptcy case. Although the bankruptcy court dismissed Parsons' bankruptcy case, the bankruptcy court's corrected order of dismissal expressly ordered that, for cause found under 11 U.S.C.A. § 349, the bankruptcy court retained jurisdiction over the case to: (1) enforce the bankruptcy court's previous orders approving the sale of Parsons' various real estate holdings and cattle; (2) determine all previous orders relative to the Trustee's authority to have acted pursuant to a bankruptcy court order; and (3) implement and resolve any disputes regarding executory contracts which were executed and approved by the bankruptcy court during the pendency of the case. The bankruptcy court...
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