Page v. Castiel (In re Ellipsat, Inc.)

• Decision Date: 29 November 2012
• Docket Number: Adversary Proceeding No. 12-10026,Case No. 09-00148
• Parties: In re ELLIPSAT, INC., formerly known as ELLIPSO, INC., Debtor. JOHN H. PAGE, Plaintiff, v. DAVID CASTIEL, et al., Defendants.
• Court: United States Bankruptcy Courts. District of Columbia Circuit

In re ELLIPSAT, INC., formerly known as ELLIPSO, INC., Debtor.

JOHN H. PAGE, Plaintiff, v. DAVID CASTIEL, et al., Defendants.

Case No. 09-00148

Adversary Proceeding No. 12-10026

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF COLUMBIA

Dated: November 29, 2012

The document below is hereby signed.

_________________

S. Martin Teel, Jr.

U.S. Bankruptcy Judge

(Chapter 11)

For publication in West's

Bankruptcy Reporter.

MEMORANDUM DECISION AND ORDER DENYING

THE PLAN PROPONENTS' SECOND MOTION FOR SUMMARY JUDGMENT

Before the court is the second motion for summary judgment filed by the defendants. In their motion, the defendants contend that John Page is barred from seeking revocation of the order of confirmation because he has repeatedly demanded payment of his allowed claims and then accepted payment of all that he was entitled to receive under the confirmed chapter 11 Joint Plan. Page is the plaintiff in this adversary proceeding and a creditorin the main bankruptcy case.

I

Summary judgment will be granted where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (incorporated in Fed. R. Bankr. P. 7056). Whether a fact is material is determined by looking to the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510 (1986). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. A dispute is "genuine" where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. In evaluating a motion for summary judgment, the court must view the evidence in the light most favorable to the nonmoving party. Arrington v. U.S., 473 F.3d 329, 333 (D.C. Cir. 2006).

Page filed this adversary proceeding pursuant to 11 U.S.C. § 1144 alleging that the confirmation order of May 1, 2012, was procured by fraud and should be revoked by the court. Under 11 U.S.C. § 1144:

On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation, and after notice and a hearing, the court may revoke such order if and only if such order was procured by fraud. An order under this section revoking an order of confirmation shall--(1) contain such provisions as are necessary to protect any entity acquiring rights in good faith reliance on the order of confirmation; and

(2) revoke the discharge of the debtor.

II

Page has not set forth any disputed material facts, and accordingly there is no genuine dispute as to any material fact. The undisputed facts are as follows. On May 1, 2012, the court confirmed the Joint Plan of Reorganization. On May 8, 2012, Page received the financial records from the chapter 11 trustee which form the basis of his claim of fraud in this adversary proceeding. On May 16, 2012, the Joint Plan became effective, and pursuant to the Joint Plan, the escrow agent and attorney for the Joint Plan proponents, Wilson, gave Page a check in the amount of $6,000 for payment of Page's administrative expense claim allowed by this court. On June 3, 2012, Page filed the complaint in this adversary proceeding seeking revocation of the order confirming the Joint Plan pursuant to 11 U.S.C. § 1144. On September 25, 2012, the court allowed Page's priority unsecured claim in the amount of $10,950 and his general unsecured claim in the amount of $61,050.

Page then began to seek payment of his claims. On October 1, 2012, he e-mailed Wilson requesting that the priority portion of his claim be paid. Page wrote to Wilson: "According to the terms of the Joint Plan of Reorganization and the court's order confirming that plan, the priority portion ($10,950) of my claimis immediately due." Exhibit 1 (Dkt. No. 79). Wilson replied in part, "You have created this problem by filing your adversary proceeding and cannot argue that you should have the best of all worlds, getting a distribution contingent on the implementation of the very plan whose confirmation you are attempting to have revoked." Id. Later that day, Page wrote back to Wilson: "You are in breach of your duties as escrow agent under a binding contract." Id.

Wilson refused to make the requested distribution. On October 4, 2012, Page filed a Motion to Compel Priority Claim Payment Under Joint Plan of Reorganization (Dkt. No. 1789 in Case No. 09-00148). His motion states that "the Joint Plan became a binding contract upon the Plan Proponents." At a hearing on October 10, 2012, the court denied Page's motion as premature and declined to offer guidance to Wilson as to whether he should make distributions while Page's adversary proceeding was still pending, and Wilson and the defendants never filed a motion requesting a stay, pending the outcome of this adversary proceeding, of the obligation to make payment to Page. On October 16, 2012, Page e-mailed the Plan Proponents and Wilson requesting that they make immediate payments. On October 22, 2012, Page filed a Motion to Compel Claim Payments Under Joint Plan of Reorganization (Dkt. No. 1797 in Case No. 09-00148). Wilson asked the court to deny the motion as moot because allremaining distributions required by the Joint Plan had been mailed on October 24, 2012, and the entire $250,000 deposited into the escrow account had now been distributed. On October 31, 2012, Page cashed his payment from the escrow account in the amount of $12,778.71.

III

The defendants assert that the confirmed Joint Plan of reorganization is a contract subject to the general rules governing the interpretation of contracts. They argue that Page has ratified and accepted the Joint Plan and therefore may not seek to void the contract under 11 U.S.C. § 1144. They further allege that because Page has accepted the benefits under the Joint Plan, he is estopped from rejecting the burdens of the contract and seeking rescission of the contract. Finally, the defendants allege that Page's actions in obtaining payment under the Joint Plan constitute a waiver of his right to pursue this adversary proceeding to revoke the plan.

Page devotes most of his Opposition to arguing that the Joint Plan is not a contract between the Plan Proponents and the creditors, including himself, but rather that the Joint Plan is a binding contract between the Plan Proponents and the estate of the debtor.

Contrary to the defendants' argument, there is no limitation in 11 U.S.C. § 1144 that an action to revoke an order ofconfirmation may be brought only by a party who has not received a distribution under the confirmed plan. Instead, 11 U.S.C. § 1144 states: "On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation, and after notice and a hearing, the court may revoke such order if and only if such order was procured by fraud" (emphasis added). The argument advanced by the defendants grafts onto the statutory provision a requirement that is not found in its text. Therefore, their argument fails. Imposing non-acceptance of plan payments as a requirement for revocation of an order confirming a plan would impose a requirement on persons seeking to revoke an order of confirmation that is not found in 11 U.S.C. § 1144. At issue is the revocation of an order, not the rescinding of a contract.

IV

The defendants point to two cases that purport to support their argument that Page's acceptance of benefits pursuant to a court order precludes him from seeking revocation of that order. The first is Thoubboron v. Ford Motor Company which states that "a party with full knowledge of the facts, which accepts the benefits of a transaction, contract, statute, regulation, or order may not subsequently take an inconsistent position to avoid the corresponding obligations or effects." 809 A.2d 1204, 1212 (D.C. 2002). The court set forth the following as elementsrequired to establish estoppel: "'[t]he party seeking to invoke the estoppel ... must have been an adverse party in the prior proceeding, must have acted in reliance upon his opponent's prior position, and must now face injury if a court were to permit his opponent to change positions.'" Thoubboron, 809 A.2d at 1213 (quoting Konstantinidis v. Chen, 626 F.2d 933, 937 (D.C. Cir. 1980)). While these elements are similar to those required for judicial estoppel, the court specifically declined to address whether judicial estoppel applied. Thoubboron, 809 A.2d at 1212 n.9; see also Moses v. Howard Univ. Hosp., 606 F.3d 789, 798 (D.C. Cir. 2010) ("[W]e have explained that [c]ourts may invoke judicial estoppel [w]here a party assumes a certain position in a legal proceeding, ... succeeds in maintaining that position, ... [and then,] simply because his interests have changed, assume[s] a contrary position.") (quoting Comcast Corp. v. F.C.C. , 600 F.3d 642, 647 (D.C. Cir. 2010)) (internal quotation marks omitted). Even though the court in Thoubboron did not apply judicial estoppel, it is evident that the court was addressing estoppel in the context of a party maintaining inconsistent positions in successive legal proceedings.

Here, there was no prior proceeding in which Page asserted a position inconsistent with his current position. Therefore, the elements of the estoppel doctrine in Thoubboron are not met in this case. More importantly, Page is not changing positions onan issue. Rather, he is asserting that the order confirming the Joint Plan was procured by fraud, but, nevertheless he wants to be paid his share of the plan distributions in the event that the order is not revoked. That is not a change of positions.

V

The defendants also cite Union Provision & Distributing Corporation v. Thomas J. Fisher & Co., Inc. for the rule that "[o]ne can not accept or secure a benefit under a judgment and then repudiate the judgment and prosecute an appeal...