Kent's Run Partnership, Ltd. v. Glosser
| Decision Date | 31 March 2005 |
| Docket Number | Bankruptcy No. 97-23098-JLC.,Civ.A. No. 03-1760. |
| Citation | 323 B.R. 408 |
| Parties | KENT'S RUN PARTNERSHIP, LTD., Appellant, v. Mark L. GLOSSER, Trustee for Midwest Portland Cement Co., Maysville Regional Water District, Office of the U.S. Trustee, Appellees. |
| Court | U.S. District Court — Western District of Pennsylvania |
George M. Cheever, Kirkpatrick & Lockhart LLP, Pittsburgh, PA, Thomas A. Young, Porter, Wright, Morris, & Arthur, Columbus, OH, for appellant.
Steven T. Shreve, Pittsburgh, PA, Linda A. Michler, Bethel Park, PA, for appellees.
Stephen I. Goldring, Office of the U.S. Trustee, Pittsburgh, PA.
The central issue in this appeal is whether the bankruptcy court erred by denying the trustee's and co-movant's motion to assume and assign an executory contract under 11 U.S.C. § 365(a). The bankruptcy court determined that 11 U.S.C. § 365(a) did not permit the contract's assumption and assignment because (1) at the time the bankruptcy petition was filed, the contract was no longer executory and (2) even if the contract were executory, the assignment of the debtor's personal easement to the co-movant/appellant would constitute an impermissible expansion of the limited property interest granted in the contract and related deed. After careful consideration of the arguments presented and the authority bearing on the matters raised, the court concludes that the motion to assume and assign the contract properly was denied. Accordingly, the bankruptcy court's order of October 10, 2003, will be affirmed.
On May 5, 1997, an involuntary bankruptcy petition was filed against Midwest Portland Cement Company ("Midwest"). During the course of proceedings, the trustee, Kents Run Partnership Ltd. ("Kents Run"), ES Cement Corporation, and ESSROC Cement Corporation entered into a settlement agreement. See Bkcy. Ct. Doc. No. 157.
Paragraph 23 of the settlement agreement obligated the trustee to institute and prosecute with reasonable diligence a proceeding pursuant to 11 U.S.C. § 365(a) and Bankruptcy Rule 6006(a) authorizing the trustee to assume and assign an executory contract. The trustee sought to assume and assign a 1993 contract between Midwest and Maysville Regional Water District ("Maysville") regarding the purchase and sale of real property and the creation of certain easements. The settlement agreement was not contingent upon the success of the trustee's motion. The bankruptcy court approved the settlement agreement, and the trustee, together with Kents Run, filed a "Motion to Assume and Assign Executory Contract" ("the motion").1
After a hearing, the bankruptcy court denied the motion in a Memorandum Opinion and Order dated October 10, 2003 ("Memorandum Opinion"). The trustee and Kents Run now appeal that ruling.
Factual history
The historical facts underlying the motion are uncontested. All of the properties involved are located in Muskingum County, Ohio.
Maysville is a municipal regional water district formed pursuant to Chapter 6119 of the Ohio Revised Code in order to supply water in a defined unincorporated area of Muskingum County. One source of Maysville's water is an impoundment of water known as Frazier Quarry. Maysville has held title to Frazier Quarry since 1971.
Midwest owned the land surrounding Frazier Quarry (the "Frazier Quarry Surrounding Property") and land located several miles south of Frazier Quarry which consisted of Lake Isabella and the property surrounding the lake (the "Lake Isabella Property"). Midwest also owned property adjacent to the Frazier Quarry Surrounding Property and Lake Isabella Property ("Midwest Adjacent Property"). Additionally, Midwest held the right to mine limestone under property owned by Kents Run immediately north of the Frazier Quarry Surrounding Property (the "Kents Run Property").2
Lake Isabella was a potential source of water for Maysville. In a letter to Midwest dated January 27, 1993, Maysville inquired about purchasing the Frazier Quarry Surrounding Property and the Lake Isabella Property. In the negotiations that followed, both parties expressed the desire that certain easements be included in any sales agreement. Midwest insisted that it receive a fifty-foot wide easement across the Frazier Quarry Surrounding Property and a narrow portion of the Frazier Quarry in order to construct and maintain both a belt conveyor system to transport stone mined from the Kents Run Property and a terminal/storage facility on the Frazier Quarry Surrounding Property for the stone (the "Midwest Belt/Storage Facility Easement"). Maysville sought several waterline and access easements from Midwest that would burden the Midwest Adjacent Property, which was not being sold to Maysville in the real estate transaction (the "Maysville Waterlines/Access Easements").3
Negotiations culminated in a contract dated March 15, 1993 ("the contract"). In the contract Midwest agreed to sell, and Maysville agreed to purchase, the Frazier Quarry Surrounding Property and the Lake Isabella Property. The contract also provided for the creation of "appropriate easements as agreed in the purchase descriptions attached." The described easements were the Midwest Belt/Storage Facility Easement and the Maysville Waterlines/Access Easements.
Midwest signed a deed conveying to Maysville the Frazier Quarry Surrounding Property and the Lake Isabella Property ("the deed") on December 22, 1993. The deed, which was subsequently recorded, included specific provisions describing the easements reserved by and/or granted to Midwest and Maysville.4 The deed was not signed by Maysville, even though it had agreed to burden the Frazier Quarry with the Midwest Belt/Storage Facility Easement.
The deed described the Midwest Belt/Storage Facility Easement as follows:
Reserving to [Midwest] a non-assignable easement to be held only by [Midwest] for the purpose of the construction and maintenance of a beltline and terminal area for a 50 foot (wide) easement across the Frazier Quarry property (providing for a stone "belt" conveyor) from the north to the south (bridging the quarry at a narrow point in the southern part of the quarry) and termination into a Storage Facility in the area of Well # 17. Stone may be transferred from this point by truck through a cut (to be made) in the spoil bank and on to Old Town Road. This easement to be more particularly described after construction of said terminal and beltline.
1993 Deed, reproduced as Exhibit E to the Motion to Assume and Assign Executory Contract (Bkcy.Ct.Doc. No. 194) (emphasis added).
The Maysville Waterlines/Access Easements were described in five separate sections of the deed. Each section began with "[a]lso granting to [Maysville] an easement for the purpose of..." and ended with:
This easement which is located on adjoining property of [Midwest] shall be binding upon and inure to the benefit of the parties hereto, their heirs, administrators, successors, and assigns, and shall be part of and run with the above described property. Any conveyance of [Midwest]'s adjoining property shall be made subject to this easement.
Id. The deed also stated the Maysville Waterlines/Access Easements were "to be more particularly described after construction of a waterline." Id.
After the filing and recording of the deed, the parties did not execute any other deeds, nor did they file or record any additional documents related to any of the easements. None of the easements have ever been "more particularly described" as permitted by the deed. As of the petition date, neither Midwest nor anyone else constructed the stone belt conveyor system or the storage facility permitted by the Midwest Belt/Storage Facility Easement.
In the Memorandum Opinion, the bankruptcy court addressed the matters raised by the motion. The co-movants took the position that material unperformed obligations remained on the part of both Midwest and Maysville under the contract. Specifically, they argued that both Midwest and Maysville had failed to take the appropriate steps to create and perfect the easements promised in the contract. From their perspective, this failure rendered the contract executory and therefore assignable.
After discussing the development of the case and the parties' arguments, the bankruptcy court observed that the trustee and Kents Run admitted that the deed legally created the easements as between Midwest and Maysville without any further recording. After further analysis, the bankruptcy court concluded that the contract ceased to be executory upon the presentation and acceptance of the deed.
The bankruptcy court further opined that the Midwest Belt/Storage Facility Easement could not be assigned to Kents Run even if the contract were executory. It reasoned that the language of the deed created a non-assignable easement in gross, personal to Midwest, and the assignment of Midwest's personal easement to Kents Run would transform the personal easement into an easement appurtenant, causing it to run with the land. Such an assignment would assertedly constitute an impermissible expansion of the limited property interest granted in the contract and the related deed. For these reasons, the bankruptcy court denied the motion.
Appellants contend the bankruptcy court erred in concluding that the contract was no longer executory. They argue the execution and recording of the deed performed only a portion of Midwest's and Maysville's obligations under the contract and there remained unperformed obligations that the bankruptcy court failed to recognize as material. In addition, appellants contend the Midwest Belt/Storage Facility Easement was an assignable interest in land because the bankruptcy code expressly permits a bankruptcy trustee to assign an executory contract "notwithstanding a provision in [such] executory contract ......
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...Ladner, § 11.01 at p. 2. An easement in gross is an easement with a servient estate but no dominant estate. Kent's Run P'ship, Ltd. v. Glosser, 323 B.R. 408 (Bankr.W.D.Pa.2005). The open space easement at issue here is properly classified as an easement in gross because it benefits a partic......
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