Ramco-Remodel Am. Corp. v. Wallis (In re Ramco-Remodel Am. Corp.)

• Decision Date: 06 May 2015
• Docket Number: Adv. Proc. No. 13–00522,Case No. 09–20539
• Citation: 536 B.R. 206
• Parties: In re Ramco–Remodel America Corp., Debtor. Tax ID: 62–15700996 Ramco–Remodel America Corp., Plaintiff, v. William and Barbara Wallis, Defendants.
• Court: U.S. Bankruptcy Court — Western District of Tennessee

536 B.R. 206

In re Ramco–Remodel America Corp., Debtor. Tax ID: 62–15700996Ramco–Remodel America Corp., Plaintiff

v.William and Barbara Wallis, Defendants.

Case No. 09–20539

Adv. Proc. No. 13–00522

United States Bankruptcy Court, W.D. Tennessee, WESTERN DIVISION .

Signed May 6, 2015

Filed May 7, 2015

John Edward Dunlap, Edwin C. Lenow, Memphis, TN, for Plaintiff.

Michael P. Coury, Glankler Brown PLLC, Memphis, TN, for Defendants.

MEMORANDUM AND ORDER RE DEFENDANTS' MOTION IN LIMINE COMBINED WITH RELATED ORDERS AND NOTICE OF THE ENTRY THEREOF

David S. Kennedy, UNITED STATES CHIEF BANKRUPTCY JUDGE

INTRODUCTION

The instant proceeding arises out of the “Defendants' Motion In Limine” filed on March 10, 2015, by the defendants, William and Barbara Wallis(collectively, “the Wallises”), and the “Response” filed thereto by the plaintiff, Ramco–Remodel America Corporation(“Ramco”), in the above-captioned adversary proceeding filed in the Chapter 11 case of Ramco, the abovenamed debtor in possession.The narrow question for judicial determination is whether John E. Dunlap, Esquire(“Mr.Dunlap”), attorney for Ramco, may testify at the trial of this adversary proceeding as to the substance of the postpetition communications exchanged between himself and Earl Buckles, Esquire(“Mr.Buckles”), former attorney for the Wallises, who is now deceased, that ultimately gave rise to the December 30, 2009 Consent Order (“the Consent Order”) entered into by these parties, which resulted in the withdrawal of the Wallises rejection of Ramco's Chapter 11 plan of reorganization (the “Plan”).On April 28, 2015, the court held a hearing on the Motion in Limine and the Response.

This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), and (L).The following shall constitute this court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.

BACKGROUND FACTS AND PROCEDURAL HISTORY

The relevant background facts and procedural history may be briefly summarized as follows.Prior to the commencement of this Chapter 11 case, the Wallises filed a civil action lawsuit in the County Court of Desoto County, Mississippi, for damages against both Ramco and Les W. Stone(“Mr.Stone”), individually.Mr. Stone owns Ramco.The Wallises obtained a default judgment on January 14, 2008, against Ramco and Mr. Stone in the amount of $51,872.18, plus all attorneys' fees and reasonable costs associated with collection of the judgment.Ramco filed this voluntary Chapter 11 case on January 16, 2009.The Wallises timely filed a proof of claim in the amount of $56,747.80 on February 11, 2009, arising out of the prepetition default judgment obtained in Desoto County, Mississippi.

On April 3, 2009, Ramco filed an objection to the Wallises' claim, in essence, asserting that the claim should be disallowed because it involved a disputed judgment.Ramco later filed its proposed Chapter 11 plan on November 19, 2009, which provided, in relevant part, that the Wallises, as a class 7 general unsecured creditor, would receive a distribution of $333.33 for their prepetition claim.The Wallises voted against Ramco's plan.¹To resolve the Wallises' rejection to the confirmation of the plan, Ramco entered into a Consent Order with the Wallises, on December 31, 2009, whereby the Wallises withdrew their rejection to the plan for consideration of a lump sum payment of $5,000.This resulting Consent Order is the underlying document that is the basis of the instant adversary proceeding.The Consent Order provided, in pertinent part, that the “consideration for the withdrawal of Ballot [rejecting the proposed plan] is the payment to Wallis by Debtor of Five Thousand Dollars ($5,000.00) on or before January 30, 2010.”[Docket # 93].The remainder of the Consent Order provided the consequences of and remedies available to the Wallises in the event of non-payment.

Ramco initiated this adversary proceeding on November 14, 2013, seeking a declaratory judgment involving the prior Consent Order agreed to by Ramco and the Wallises regarding the withdrawal of the Wallis' rejection to Ramco's plan.Mr. Stone was not a party/signatory to the Consent Order.In this adversary proceeding, Ramco alleges that the “Plaintiff[Ramco] and Defendant[Wallises] negotiated terms to resolve the [rejection of the plan and the] objection to confirmation as well as the entire debt.”[Docket # 1].Furthermore, the complaint states that the Consent Order “was intended to resolve the debt as to all parties, not simply the Debtor/Plaintiff.”Id.(emphasis added).In response to Ramco's adversary proceeding, the Wallises denied that “they settled any claim against any non-debtor,” which would, in this case, be Mr. Stone.The Wallises additionally claimed that the $5,000 lump sum payment was consideration solely for withdrawal of their ballot rejecting Ramco's plan rather than a full settlement of the claim in its entirety.[Docket # 2].The Wallises further point out that the plan similarly fails to provide for the release of any co-debtors or the like.

The Consent Order giving rise to this proceeding was negotiated by Mr. Dunlap, then attorney for Ramco, and Mr. Buckles, then attorney for the Wallises.Unfortunately, Mr. Buckles is now deceased.On a limited basis, Mr. Dunlap has since withdrawn from representation of Ramco in this adversary proceeding in order that he might be a witness at the trial of this adversary proceeding to account for the substance of the settlement negotiations, as well as the parties' intent, involved in the attorneys' agreement embodied in the Consent Order.It is observed that Mr. Dunlap still is the attorney of record in this case—just not this particular adversary proceeding.On March 10, 2015, the Wallises filed a Motion in Limine to prevent Mr. Dunlap from testifying as to the contents of the above-referenced settlement negotiations.Ramco filed a Response to the Motion in Limine on April 10, 2015.The court held a hearing on the Wallis' Motion in Limine on April 28, 2015, and took the matter under submission.

DISCUSSION

A.Competency

Rule 601 of the Federal Rules of Evidence, made applicable here by virtue of Fed. R. Bankr.P. 9017, provides that “[e]very person is competent to be a witness unless [the] rules provide otherwise.But, in a civil case, State law governs a witness's competency regarding a claim or defense for which state law supplies the rule of decision.”Fed. R. Evid. 601.Because the instant issue involves a consent order agreed upon by both Ramco and the Wallises, Tennessee State law will apply to determine the competency of any witness since state law applies to rules of decisions governing contracts.SeeU.S. v. ITT Continental Baking Co.,420 U.S. 223, 238, 95 S.Ct. 926, 935, 43 L.Ed.2d 148(1975)(“Since a consent decree or order is to be construed for enforcement purposes basically as a contract [...]”)

Tennessee continues to recognize a limited version of the Dead Man's Statute, as codified in Tenn. Code Ann. § 24–1–203.The statute provides

In actions or proceedings by or against executors, administrators, or guardians, in which judgments may be rendered for or against them, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate, or ward, unless called to testify thereto by the opposite party.If a corporation is a party, this disqualification shall extend to its officers of every grade and its directors.

Tenn. Code Ann. § 24–1–203(2014).As such, this statute does not come into play in this case.In order to exclude testimony, both of the following must be evident: “(1) the proposed witness must be a party to the suit in such way that judgment may be rendered for or against him/her, and (2) the subject matter of the testimony must be concerning some transaction with or statement by the testator.”Leffew v. Mayes,685 S.W.2d 288, 293(Tenn.Ct.App.1984)(citingMontague v. Thomason,91 Tenn. 168, 18 S.W. 264(1892) );See alsoTrial Handbook for Tenn. Law§ 14:1.Since Mr. Dunlap is not a party to the action, but instead was a former attorney of a current party, judgment cannot be rendered for or against him.Inasmuch, the first prong of exclusion is not satisfied.Moreover, the instant adversary proceeding does not concern actions “by or against executors, administrators, or guardians” as required by the statute.Tenn.Code Ann. § 24–1–203.The Tennessee Dead Man's Statute will not, on its own, prohibit Mr. Dunlap from acting as a witness on behalf of the Ramco.

B. Parol Evidence

It is well-settled that where a contract is facially unambiguous, it must be interpreted as it is written.See, e.g.,Sutton v. First National Bank of Crossville,620 S.W.2d 526, 530(Tenn.Ct.App.1981)(“If the language of a written instrument is clear and unambiguous, the court must interpret it as written, rather than according to the unexpressed intention of one of the parties.”);U.S. v. Alpine Industries, Inc.,352 F.3d 1017, 1028(6th Cir.2003)(upholding the district court's exclusion of extrinsic evidence to a consent order).The intentions of the parties, moreover, should be discerned from the four corners of the contract, and terms embedded in the contract should be given their “ordinary” meaning.U.S. v. Tennessee,632 F.Supp.2d 795, 800(W.D.Tenn.2009).However, if a term included in the contract is ambiguous or requires additional explanation, parol evidence may be admissible to supplement the terms of the contract.Strickland v. City of Lawrenceburg,611 S.W.2d 832, 838(Tenn.Ct.App.1980)(“Evidence of a prior or contemporaneous agreement inconsistent with or varying the terms of a written contract is, of course, inadmissible under the parol evidence rule.But the terms of a written agreement intended by the parties as a final expression may be explained or supplemented by evidence of consistent additional terms unless the court finds the writing to...