In re Peck
Decision Date | 04 June 1993 |
Docket Number | Bankruptcy No. 5-89-01414,Motion No. 864. |
Citation | 155 BR 301 |
Court | U.S. Bankruptcy Court — District of Connecticut |
Parties | In re Arnold PECK, Debtor. |
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Francis G. Pennarola, Gager & Henry, Danbury, CT, For CTB Realty Ventures XIII, Inc.
Stephen P. Wright, DiPietro, Gulliver & Wright, New Haven, CT, for debtor.
ALAN H.W. SHIFF, Bankruptcy Judge.
CTB Realty Ventures XIII, Inc. ("CTB") seeks to hold the debtor, Arnold Peck, in civil contempt of this court's October 15, 1990 order (the "Stipulated Order") approving a stipulation (the "Stipulation"), also dated October 15, 1990, between CTB and Peck. As a threshold issue, the parties have requested, and this decision addresses, a determination of whether a breach of the Stipulation, attached as an exhibit to the Stipulated Order, constitutes a violation of that order.1
For the purpose of this threshold determination only, the parties have stipulated to the facts submitted by CTB, which, as supplemented by undisputed facts apparent from the record, follow.
On September 24, 1990, Peck filed his Second Amended Plan of Reorganization (the "Plan"). At that time he was the president and one of two directors, and owned 51% of the stock, of Fairway Land Acquisition Company ("FLAC"). FLAC owned the Grassy Hill Country Club (the "Club") located in Orange, Connecticut. CTB and its parent, Centerbank (or the "Creditors") held mortgages on the Club and other property which were being foreclosed when Peck filed his Plan. On October 9, 1990, Centerbank filed an objection to Peck's Plan because it would have allowed Peck to take equity and commission income from the sale of the Club and the other properties, which were owned by entities in which Peck had an interest. The Creditors voted to reject the Plan.
Stipulation, ¶ 5(a), (c). Centerbank, for its part, agreed in the Stipulation to make payments to Peck as debtor in possession when title to certain properties vested in Centerbank. In consideration of Peck's agreement, the Creditors amended their ballots to reflect their acceptance of the Plan and Centerbank withdrew its objection. Stipulation at ¶¶ 9, 10.
Paragraph 11 of the Stipulation provided: "This Stipulation shall not be effective unless and until it has been executed by the parties hereto and submitted to the Bankruptcy Court and approved and SO ORDERED by the Bankruptcy Court" (emphasis added). The parties jointly sought approval of the Stipulation and obtained the Stipulated Order on October 15, 1990. See Rule 9019(a), Fed.R.Bankr.P. Peck and the Creditors consented to the form and text of the Stipulated Order to which the original executed Stipulation was attached as Exhibit A. Tr., January 22, 1993, at p. 7. The Stipulated Order noted that Centerbank's objection to the Plan had been resolved by the Stipulation; found that there was good cause for approving the Stipulation; and provided that: "It is hereby ORDERED that the Stipulation attached hereto as Exhibit A and all . . . the terms and conditions contained therein are approved." The Plan was confirmed on October 22, 1990.
On November 21, 1990, Peck, as shareholder and director of FLAC, voted to authorize FLAC to file a chapter 11 petition. On June 26, 1991, Peck, as president, authorized FLAC's bankruptcy filing. On June 28, 1991, FLAC filed a chapter 11 petition. It is therefore apparent that when Peck authorized FLAC's filing, he breached the Stipulation in that he directly or indirectly had some involvement in or control over or interfered with the management of the Club; he directly or indirectly dealt with the Club or FLAC; and he attempted to bring the Club under the jurisdiction of the bankruptcy court.
Young v. United States Dep't of Justice, 882 F.2d 633, 639 (2d Cir.1989), cert. denied, 493 U.S. 1072, 110 S.Ct. 1116, 107 L.Ed.2d 1023 (1990) (citations omitted); see also Kale v. Obuchowski, 985 F.2d 360, 361-362 (7th Cir.1993); Sperling v. United States, 692 F.2d 223, 228 (2d Cir.1982), cert. denied, 462 U.S. 1131, 103 S.Ct. 3111, 77 L.Ed.2d 1366 (1983) (Van Graafeiland, C.J., concurring) ( ); Petition of Transrol Navegacao S.A., 782 F.Supp. 848, 852-853 (S.D.N.Y.1991). Since as noted the Plan could not have been confirmed without the entry of the Stipulated Order, Peck may not now be heard to argue that the Stipulated Order is defective. See Merrill Lynch, Pierce, Fenner & Smith Inc. v. Georgiadis, 903 F.2d 109, 114 (2d Cir.1990) ( ).
The doctrine of equitable estoppel applies with equal force. It is "a means of precluding the assertion of a claim or defense against a party who has detrimentally relied on the conduct of the party asserting the claim or defense." Olsen v. United States, 952 F.2d 236, 241 (8th Cir.1991). There is no question but that the Creditors gave up a right to oppose the Plan in consideration for Peck's consenting to the Stipulated Order. Now, despite the well-established principle that a party may not unilaterally withdraw from its stipulation, United States v. New England Teamsters and Trucking Industry Pension Fund, 737 F.2d 1274, 1278 (2d Cir.1984), Peck in effect argues that the Stipulated Order was binding on the Creditors but not on him.
Peck also argues that since he was a fiduciary of FLAC, the Stipulation cannot be enforced against him for public policy reasons because it restricted him from acting in FLAC's best interest. Peck's Memorandum of Law in Support of Objection to Movant's Motion for Contempt, November 12, 1992, at pp. 8-9. That argument is also flawed. Peck knew what his obligations were with respect to FLAC when he agreed not to take any action to interfere with the Creditors' foreclosure action. Having induced the Creditors to support his Plan, Peck is estopped from asserting the argument that his fiduciary obligations to FLAC freed him from his side of the bargain, i.e., any restraint established by the Stipulation and Stipulated Order.2
Peck claims the Stipulated Order violated Rule 65(d), Fed.R.Civ.P., because it referred to the Stipulation which was attached as an exhibit. That rule provides in relevant part:
Every order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained. . . .
The Federal Rules of Bankruptcy Procedure, not the Federal Rules of Civil Procedure, govern practice and procedure in cases under title 11 of the United States Code. 28 U.S.C.A. § 2075 (West 1982); Rule 81(a)(1), Fed.R.Civ.P. Thus, Rule 7065, Fed.R.Bankr.P., and not Rule 65, Fed.R.Civ.P., governs the issuance of injunctions in title 11 cases. That distinction is significant because Rule 7065 provides that Rule 65, Fed.R.Civ.P., applies, with certain limitations, in adversary proceedings. Rule 7001(7), Fed.R.Bankr.P., defines adversary proceedings to include any proceeding "to obtain an injunction or other equitable relief." The Stipulation and Stipulated Order did not result from an adversary proceeding. Therefore, Rule 65 is inapplicable.3
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