Lockwood v. Wolf Corp.

• Decision Date: 06 October 1980
• Docket Number: No. 78-3380,78-3380
• Citation: 629 F.2d 603
• Parties: J.B.C. LOCKWOOD, Jr., successor to Sanford M. Sage, Trustee in Bankruptcy of Emerald Properties, Inc., Plaintiff-Appellee, v. The WOLF CORPORATION, a Delaware Corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 603

629 F.2d 603

J.B.C. LOCKWOOD, Jr., successor to Sanford M. Sage, Trustee in Bankruptcy of Emerald Properties, Inc. Plaintiff-Appellee, v. The WOLF CORPORATION, a Delaware Corporation, Defendant-Appellant.

No. 78-3380.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 8, 1980.

Decided Oct. 6, 1980.

Earl P. Lasher, G. Michael Sweet, Lasher, Johnson & Sweet, Inc., Seattle, Wash., M. Emanuel Balt, New York City, for defendant-appellant.

Allan Kolsky, New York City, for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before KILKENNY and FLETCHER, Circuit Judges, and JAMESON, ^* District Judge.

JAMESON, District Judge:

The Wolf Corporation (Wolf) appeals from summary judgment in favor of Lockwood (Trustee), the successor trustee in bankruptcy of Emerald Properties, Inc. (Emerald), enforcing a settlement agreement between Wolf and Emerald made in connection with bankruptcy proceedings. The district court also held that Wolf's counterclaim against the bankrupt estate was barred by the statue of limitations as well as by the terms of the settlement agreement. We affirm.

I. Factual Background

Emerald was indebted to Wolf, a realty investment corporation, for $705,000. Albert N. Ballard owed $200,000 to Emerald. To satisfy the debt, Ballard transferred his interests in stock of Westpoint Holding Pty., Ltd. and Australian real property to Lawrence E. McCombs, an officer of Emerald. McCombs assumed Ballard's obligations with respect to the real property. McCombs in turn gave a note for $392,051, plus 7% interest, to Emerald to satisfy Ballard's obligation. The note was due December 31, 1971, or on demand, and was secured by McCombs' interest (acquired from Ballard) in the Westpoint stock and the Australian real estate.

On January 7, 1972 Emerald assigned the McCombs note to Wolf in "partial satisfaction and discharge" of its $705,000 debt. McCombs separately assigned all of his interest in the Westpoint stock and Australian real property to Wolf, subject to underlying security interests. Emerald filed a voluntary bankruptcy petition on March 14, 1972. Since Emerald had assigned the McCombs note to Wolf in partial satisfaction of an antecedent debt within four months of bankruptcy filing, the Trustee prepared to file a preference claim, under 11 U.S.C. § 547(b), ¹ for the amount of the principal and interest on the note. Wolf denied receiving any preference and denied any liability to the Trustee.

Negotiations ensued between the Trustee and Joseph Wolf, the president of Wolf, to settle the preference claim. Attorneys for Wolf participated in the negotiations. Wolf needed the testimony of the Trustee's attorney, Jerome Shulkin, in Australian litigation over competing claims to the Australian property. The outstanding obligations and money expended by Wolf on the property were approximately $2,250,000. Shulkin agreed to testify in Australia in exchange for certain terms in the settlement agreement. The essential terms agreed upon and subsequently approved by the bankruptcy were:

(1) Wolf "acknowledge(d) an indebtedness to the Trustee in the amount of $392,051 plus interest . . . . The parties contemplate that the indebtedness will be paid in full from proceeds of a pending sale of the (Australian real property)."

(2) A division of the anticipated sale proceeds:

(a) The first $25,000 to the Trustee;

(b) The next $2,250,000 to Wolf;

(c) The next $250,000 to the Trustee;

(d) The next $125,000 to Wolf;

(e) The next funds to the Trustee, up to the remaining amount of the claim for $392,051 plus interest.

(3) Interest on the note would be abated from the date of approval of the settlement if the debt to the Trustee was paid within one year.

(4) If the sale proceeds were insufficient to give the Trustee $100,000 according to the above schedule, then $100,000 would go to the Trustee before any money would go to Wolf.

(5) Wolf would execute any necessary documents to perfect a lien for the bankruptcy estate on the property.

(6) The Trustee agreed not to pursue the preference claim in court, and Wolf agreed not to file any claim against the bankruptcy estate.

The agreement was made subject to the bankruptcy court's approval. Joseph Wolf warranted his authority to bind the corporation, which was attested by the assistant secretary of the corporation in a certification attached to the settlement agreement and bearing the corporate seal. There was no formal resolution of Wolf's board of directors to ratify the settlement agreement.

A hearing was scheduled to approve the agreement. The Trustee notified Wolf of the time and place of the hearing, but the corporation did not send a representative. Other creditors of the estate were present, as were tax authorities. None objected to the agreement. Finding the settlement of the preference claim to be in the best interest of the bankruptcy estate, the bankruptcy court on November 14, 1973 approved the agreement, authorized the Trustee "to enter into that certain settlement" and ordered "that the trustee shall cause such steps as may be necessary to protect the interests of the trustee pursuant to the said settlement agreement in the form of documentation and/or security interests in and to certain properties or interests in properties in Australia as provided for in said settlement agreement."

In accordance with the terms of the settlement, the Trustee did not press the preference claim and Wolf did not file a creditor's claim against the estate. Shulkin and Joseph Wolf went to Australia, where Shulkin testified on behalf of Wolf, and they both told the Australian court that they had entered into the settlement agreement. Since then, Wolf has failed to execute any security instruments to protect the Trustee's interests under the agreement. To date the Australian property has not been sold; nor has Wolf paid the Trustee any part of the debt. In March, 1976, the Trustee brought this action to enforce the agreement and recover the amount of the "acknowledged debt." Wolf in its answer to the Trustee's complaint denied the existence of a valid debt, disavowed Joseph Wolf's authority to bind the corporation, asserted that the debt, if any, was contingent upon sale of the Australian property, and pleaded a counterclaim to recover a proportionate part of an alleged $2,000,000 debt owed by Emerald to Wolf.

The Trustee moved for summary judgment for the amount of the note and for dismissal of Wolf's counterclaim. He contended that interpretation of the settlement agreement was a question of law proper for summary judgment, and that the counterclaim was barred because it was not filed within six months as prescribed by Bankruptcy Rule 302(e), and the terms of the settlement agreement estopped Wolf from asserting the counterclaim. Wolf did not respond to the Trustee's argument regarding the counterclaim. Wolf agreed, however, that no genuine issue of material fact existed and asked for summary dismissal of the Trustee's complaint. Wolf primarily argued that Joseph Wolf lacked authority to sign the agreement, that the agreement was still executory, therefore unenforceable, and that any obligation of Wolf under the agreement was conditioned upon the sale of the Australian property. The district court agreed with the Trustee's interpretation of the agreement and granted summary judgment. In its order the court also noted that Wolf's counterclaim was barred both by the terms of the agreement and § 57 of the Bankruptcy Act, 11 U.S.C. § 93(n).

On appeal Wolf challenges the propriety of summary judgment, contending that triable issues exist as to the meaning of the agreement. The corporation reasserts its contentions that Joseph Wolf had no authority to bind the corporation, that the agreement is unenforceable, and that in any case the trial court misconstrued its terms. Wolf contends also that the district court's judgment resolves less than all of the claims in this action without the certification required by Fed.R.Civ.P. 54(b), thus depriving this court of jurisdiction to hear this appeal.

II. Jurisdiction

Fed.R.Civ.P. 54(b) provides that a judgment on fewer than all of the claims in an action, including counterclaims, does not terminate the action as to any of the parties unless the court expressly determines that there is no just reason for delaying an appeal and expressly directs that final judgment be entered. The district court made no such determination, so if the summary judgment adjudicated fewer than all the claims the judgment would not be appealable. United California Bank v. Fadel, 482 F.2d 274, 276 (9 Cir. 1973). We conclude, however, that "as a practical matter, the district court's order was a final judgment . . . and that, accordingly, we may entertain jurisdiction of this appeal." Riggle v. State of California, 577 F.2d 579, 581 n. A (9 Cir. 1978).

In its order granting summary judgment, the district court stated that Wolf's counterclaim was barred by the statute of limitations and the terms of the settlement agreement. The judgment entered on that order did not mention the counterclaim. Although the order is not the same as a judgment entered on the decision, see 6 Moore's Fed. Practice P 54.02, at 105 (2d ed. 1976), the determination of the court is clear. The district court obviously was not trying to adjudicate fewer than all the pleaded claims. The technical variance between the judgment and order in this case should not preclude our exercising jurisdiction. ² See Wescott v. Impresas Armadoras, S.A. Panama, 564 F.2d 875, 881 (9 Cir. 1977). ³ As the court noted in General Time Corporation v. Padua Alarm Systems, Inc., 199 F.2d 351 (2 Cir. 1952), cert. denied, 345 U.S. 917, 73 S.Ct. 728, 97 L.Ed. 1351 (1953),

The final judgment rule . . . has many merits in preventing appeals on form and procedure and in limiting review to the merits. It should not be pressed to the point...