Trs. of Conneaut Lake Park, Inc. v. Park Restoration, LLC (In re Trs. of Conneaut Lake Park, Inc.)
| Decision Date | 15 May 2018 |
| Docket Number | Bankruptcy No. 14-11277-JAD |
| Parties | IN RE: TRUSTEES OF CONNEAUT LAKE PARK, INC., Reorganized Debtor. TRUSTEES OF CONNEAUT LAKE PARK, INC., Movant, v. PARK RESTORATION, LLC, Respondent. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania |
Related to ECF No. 573
The Trustees of Conneaut Lake Park, Inc. ("TCLP") filed a motion styled as a Motion for Order (A) Enforcing the Discharge Injunction; and (B) Imposing Sanctions for Civil Contempt of the Court's Plan Confirmation Order (the "Motion to Enforce"). See ECF No. 573.
A general principal of law is that "only the court which issues an injunction has the authority to enforce it." Warren v. Wells Fargo Bank, N.A., 2015 U.S. Dist.LEXIS 145047 at *13 (W.D. Pa.)(citing In re Beck, 283 B.R. 163, 166 (Bankr. E.D. Pa. 2002).
The Motion to Enforce is a core proceeding over which this Court also has subject-matter jurisdiction pursuant to 28 U.S.C. §§ 157(b)(2)(A), 157(b)(2)(B), 157(b)(2)(O) and 1334.
The primary issue raised by the Motion to Enforce is whether a cause of action filed by Park Restoration, LLC ("Park Restoration") against TCLP in the Court of Common Pleas of Crawford County, Pennsylvania on January 17, 2018 (the "Post Confirmation Lawsuit") constitutes a "claim" in bankruptcy, and is subject to the discharge injunction as provided for in 11 U.S.C. § 1141(d)(1)(A) and the Amended Plan of Reorganization dated July 28, 2016 at ECF No. 427 (the "Amended Plan"). It is this Amended Plan which was confirmed by this Court's confirmation order dated September 6, 2016 at ECF No. 442 (the "Confirmation Order").
The Court would note that the parties do not dispute that if the Post Confirmation Lawsuit constitutes a "claim" in bankruptcy, the filing and prosecution of it by Park Restoration violates the discharge injunction. See Amended Plan at § 11.05 and 11 U.S.C. § 1141(d)(1)(A).
The parties also do not dispute the fact that the discharge injunction of thiscase extends not only to pre-bankruptcy "claims," but also to "any debt[2] that arose before the date of such confirmation" regardless of whether or not (a) a "proof of claim based on such debt is filed or deemed filed," (b) such claim has been "allowed," and (c) the holder of such "claim has accepted the plan." See 11 U.S.C. § 1141(d)(1)(A)(I) through (iii).
The definition of a "claim" in bankruptcy is quite broad. The United States Supreme Court has acknowledged that the term "claim" has the "broadest available definition." See FCC v. Nextwave Commc'ns, Inc., 537 U.S. 293, 302 (2003)(quoting Johnson v. Home State Bank, 501 U.S. 78, 83 (1991); accord JELD-WEN, Inc. v. Van Brunt (In re Grossman's, Inc.), 607 F.3d 114, 121 (3d Cir. 2010).
The plain language of the Bankruptcy Code supports a broad interpretation of what constitutes a "claim" in bankruptcy. After all, the Bankruptcy Code defines a claim as including any:
11 U.S.C. § 101(5).
Whether a creditor holds a "claim" is important in bankruptcy. Holding a claim is the "ticket" giving a creditor the ability to participate as a party-in-interest in a bankruptcy case. See 11 U.S.C. § 1109(b)(affording creditors the opportunity to appear and be heard on any issue in a bankruptcy case).
If such "claim" is allowed in a chapter 11, it also provides the creditor with the ability to vote its claim and receive a distribution to the extent provided for under the Bankruptcy Code and/or under a confirmed chapter 11 plan. See 11 U.S.C. §§ 1123 () and 1126(a)(describing who may vote to accept or reject a chapter 11 plan).
Having a "claim" is also important from the debtor's perspective because claims and/or debts are subject to both the automatic stay and discharge in a chapter 11 bankruptcy. See 11 U.S.C. §§ 362, 524 and 1141.
The law in the Third Circuit is that a claim "arises when an individual is exposed . . . to . . . conduct giving rise to an injury, which underlies a 'right to payment' under the Bankruptcy Code." In re Grossman's, 607 F.3d at 125.
Of course, this broad definition of a "claim" is not without limits. Even if a claim accrues prior to confirmation, such claim could survive the chapter 11 discharge if the claimant was deprived of due process (i.e., the claimant did not have notice and/or an opportunity to be heard prior to the claim being discharged). In re Energy Future Holdings Corp., 522 B.R. 520, 527-28 (Bankr.D. Del. 2015).
This due process concern, however, is not present in the case sub judice. The Court reaches this conclusion because the undisputed record reflects the following:
Turning to the ultimate issue presented by the Motion to Enforce, this Court concludes that the "conduct" to which Park Restoration was "exposed," which in-turn gives rise to the "injury" supporting its Post Confirmation Lawsuit, occurred prior to confirmation of the Amended Plan. The undisputed record supports this conclusion.
The Post Confirmation Lawsuit is essentially a lawsuit by which Park Restoration asserts causes of action sounding in unjust enrichment and indemnity. The gist of the action is that Park Restoration paid for an insurancepolicy on a piece of real estate known as the "Beach Club." The Beach Club was managed by Park Restoration and owned by TCLP. When Park Restoration entered into the management agreement for the Beach Club, TCLP was severely delinquent in its local tax obligations. Not only were these obligations secured by the underlying realty, the law of the Commonwealth of Pennsylvania provided that should the property burn down, fire insurance proceeds were first payable to delinquent tax obligations on the realty and then any remaining proceeds were to be paid to the insured or the loss payee under the applicable policy. See 40 P.S. § 638.
In August of 2013 the Beach Club burnt down, and Erie Insurance was prepared to tender the proceeds pursuant to applicable law. But, in September of 2013, Park Restoration commenced a declaratory judgment action (the "Declaratory Judgment Action") in state court asserting a claim to all of the insurance proceeds. In connection with the state court proceedings, Erie Insurance interpleaded the fire insurance proceeds with the state court.
Thereafter, on December 4, 2014, TCLP filed the instant bankruptcy case, and the Declaratory Judgment Action was removed to this Court on February 3, 2015 (and the funds subject to the interpleader were also removed to registry of the Clerk of the Bankruptcy Court).
On December 22, 2015, this Court made its ruling in the Declaratory Judgment Action, holding that the taxing bodies were entitled to approximately$478,000 of the insurance proceeds pursuant to 40 P.S. § 438. See Park Restoration, LLC v. Erie Insurance Exchange, et al. (In re Trustees of Conneaut Lake Park, Inc.), 543 B.R. 193 (Bankr. W.D. Pa. 2015). An appeal was then taken by Park Restoration to the District Court, which reversed this Court's opinion. Another appeal was pursued by the taxing bodies to the Third Circuit Court of Appeals, which reversed the District Court and reinstated this Court's judgment. See Park Restoration, LLC v. Erie Insurance Exchange et al. (In re Trustees of Conneaut Lake Park, Inc.), 855 F.3d 519 (3d Cir. 2017). No further appeals were lodged. Because all appeals were exhausted, in 2017, this Court entered an order authorizing the remaining insurance proceeds to be released from the Court's registry to the taxing bodies.
With the Confirmation Order having been entered on July 28, 2016, it is clear that Park Restoration's civil claims, as set forth in the Post Confirmation Lawsuit, arose well before plan confirmation.3
Support for this conclusion is that all of the pertinent facts supporting Park Restoration's well pleaded complaint occurred prior to the date of the Confirmation Order. In fact, the majority of these events occurred prior to the commencement of TCLP's case. These events are:
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