United States v. Excellair, Inc.

• Citation: 637 F. Supp. 1377
• Decision Date: 29 May 1986
• Docket Number: Civ. A. No. 84-K-1055.
• Parties: UNITED STATES of America v. EXCELLAIR, INC., Omnet International, Inc., U.S. Accessories, Inc., International Technology Resources, Inc., Nicholas Kondur and Jonathan Moore. and INTERNATIONAL TECHNOLOGY RESOURCES, INC., a Colorado corporation, and Nicholas Kondur, Third Party Plaintiffs, v. FIRST INTERSTATE BANK OF RIVERTON, N.A., a National Banking Association and William V. Maddux, Third Party Defendants.
• Court: U.S. District Court — District of Colorado

637 F. Supp. 1377

UNITED STATES of America v. EXCELLAIR, INC., Omnet International, Inc., U.S. Accessories, Inc., International Technology Resources, Inc., Nicholas Kondur and Jonathan Moore. and INTERNATIONAL TECHNOLOGY RESOURCES, INC., a Colorado corporation, and Nicholas Kondur, Third Party Plaintiffs, v. FIRST INTERSTATE BANK OF RIVERTON, N.A., a National Banking Association and William V. Maddux, Third Party Defendants.

Civ. A. No. 84-K-1055.

United States District Court, D. Colorado.

May 29, 1986.

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Janis E. Chapman, Asst. U.S. Atty., Denver, Colo., J. Christopher Kohn, Tracy J. Witaker, and Ronald H. Clark, Civil Div., U.S. Dept. of Justice, Washington, D.C., for plaintiff.

Donald E. Marturano, Marturano and Baren, P.C., Englewood, Colo., for Omnet, Excellair and Jonathon Moore.

A. Thomas Tenenbaum, and John F. Reha, Brenman Raskin Friedlob & Tenenbaum, P.C., Denver, Colo., for ITR Airlines and Nicholas Kondur.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

In three transactions defendant Excellair borrowed over $10,000,000.00 to finance the purchase of equipment necessary to its business as a commuter airlines. The United States, through the Federal Aviation Administration, guaranteed these loans. Upon Excellair's default, the government honored its guarantees and accepted from the lenders assignment of the loans. The government accelerated the loans and, upon Excellair's failure to pay the amounts owed, seized much of Excellair's assets. The government has sold a substantial portion of this dispossessed collateral for an amount substantially less than the outstanding indebtedness. Jurisdiction and venue under 28 U.S.C. §§ 1345 and 1391(b), respectively, are not contested.

In its First Amended Complaint the government joins numerous defendants in addition to Excellair and premises its right to recovery on a variety of legal theories. Count One seeks to recover from Excellair $10,738,308.88 the government paid to the lenders pursuant to its loan guaranties.¹ Count Two is an action on the same debt but joins Omnet International, Inc. and U.S. Accessories, Inc., alleged mere instrumentalities of Excellair, as defendants. Count Three asserts a claim for conversion against Excellair, Omnet and International Technology Resources, Inc, a rival commuter airline. The government alleges that following default, acceleration and non-payment the government was unable to take possession of the collateral securing the loan because a substantial portion of it was concealed and transferred to ITR. Count Four premises recovery from ITR, Excellair and Omnet on a fraudulent conveyance theory. The government asserts that assets were transferred from Excellair and Omnet to ITR with the intent to hinder, delay and defraud creditors, including the government. Count Five asserts a claim for civil conspiracy against ITR, Nicholas Kondur (ITR's president and principal shareholder) and Jonathon Moore (Excellair's president and principal shareholder). This count contends that to enhance the profitability of ITR's commuter airlines division, Kondur, through ITR, and Moore conspired to force the cessation of Excellair's business, in violation of Colorado's anti-trust provisions, Colo.Rev.Stat. § 6-4-101 et seq. (1973). These defendants' conspiracy, the government contends, directly resulted in Excellair's inability to pay the FAA guaranteed loans to the detriment of the government. Count VI states that ITR, Kondur, and Moore's conduct constituted tortious interference with the contractual relations between Excellair, its lenders, and the government. Count VII contends that Moore, solely, is liable to the United States under 31 U.S.C. § 3713 for an $800,000.00 preferential transfer.

This case is now before me on a multitude of summary judgment motions which seek to eliminate all or a portion of the government's claims². I will also address, after plodding through a procedural morass, a number of motions concerning the imposition of Fed.R.Civ.P. 11 sanctions. These motions will be considered in seriatim.

I. SUMMARY JUDGMENT MOTIONS

A. STANDARDS OF DECISION

Summary judgment pursuant to Fed.R. Civ.P. 56 is a drastic remedy which is appropriate only where no genuine issue of material fact exists and, as a matter of law, the movant is entitled to judgment beyond all reasonable doubt. In order to determine the propriety of summary judgment I must construe all pleadings, affidavits, and depositions liberaly in favor of the non-movant. Where different inferences can be drawn from conflicting affidavits, judgments and pleadings, summary judgment should not be granted. United States, etc. v. Santa Fe Engineers, Inc., 515 F.Supp. 512, 514 (D.Colo.1981).

B. ALL COUNTS

1. Election by Estoppel

In May of 1984 the government repossessed from Excellair four aircraft, eight engines and various spare parts. On July 17, 1984 an involuntary bankruptcy proceeding was instituted against Excellair, catalyzing the bankruptcy code's automatic stay provision, § 362, which prohibited the disposition of the seized collateral. In August of 1984 the aircraft and engines were appraised on behalf of the government at a value in excess of $4,000,000.00. On November 27, 1984 the bankruptcy proceeding was dismissed and the stay, accordingly, extinguished. In May of 1985, the government sold four engines and two aircraft, which had been valued the previous August at $1,100,000.00, for $549,000.00. C.R.S. § 4-9-505(2) provides that a secured creditor in possession of repossessed collateral may opt to retain the collateral in satisfaction of the underlying obligation. C.R.S. § 4-9-504(3) provides that "disposition of ... (repossessed) ... collateral may be ... at any time and place and on any terms, but every aspect of the disposition including the method, manner, time, place and terms must be commercially reasonable".

Defendants³ assert that the government's failure to dispose of the collateral in a commercially reasonable fashion pursuant to C.R.S. § 4-9-504(3) constitutes an election by estoppel to retain the collateral in satisfaction of the obligation pursuant to C.R.S. § 4-9-505(2). This argument is unavailing.

While in certain circumstances a secured party's failure to dispose reasonably of repossessed collateral may operate as an election to retain the collateral in full satisfaction of the debt, the instant case does not present such a circumstance. I need not address defendants' election by estoppel argument because defendants have not proven as a matter of law, the government's partial disposition and continued retention of the remainder of the collateral is commercially unreasonable. C.R.S. § 4-9-507(2) states

The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not in itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the secured party either sells the collateral in the usual manner in any recognized market therefor or if he sells at the price current in such market at the time of his sale or if he has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold, he has sold in a commercially reasonable manner ...

C.R.S. § 4-9-504(3) requires consideration of "every aspect of the disposition including the method, manner, time, place and terms ..." It is beyond cavil that

It is the aggregate of circumstances in each case — rather than specific details of the sale taken in isolation — that should be emphasized in review of the sale. The facts of the manner, method, time, place and terms cited by the (Uniform Commercial) Code (as adopted by C.R.S. § 4-9-504(3)) are to be viewed as necessary and interrelated parts of the whole transaction.

C.I.T. Corp. v. Lee Pontiac, Inc., 513 F.2d 207, 210 (9th Cir.1975) (paranthetical phrase added); see also In re Zsa Zsa Ltd, 352 F.Supp. 665 (S.D.N.Y.1972), aff'd 475 F.2d 1393 (2nd Cir.1973) and Oliner v. Slavik, 475 F.2d 1393 (2nd Cir.1973).

Defendants premise their argument upon the government's alleged untimeliness and the inadequacy of the price received, but they urge consideration in a vacuum. Nowhere do defendants address market conditions at the time of the sale, the method of sale, or reasonable and normal practices in the airline industry with respect to the purchase and sale of used aircraft and engines.

A sale price less than the market value, or the appraised value, is not dispositive of commercial unreasonableness. C.R.S. § 4-9-507(2). A sale price less than the debtor expected does not require a finding of commercial unreasonableness. Credit Alliance Corp. v. Cornelius and Rush Coal Co., Inc., 508 F.Supp. 63 (D.Ala. 1980). As well, the fact that a different price might have been obtained at a different time does not establish commercial unreasonableness. C.I.T. Corp. v. Duncan Grading and Const., Inc., 739 F.2d 359 (8th Cir.1984); Fedders Corp. v. Taylor, 473 F.Supp. 961 (D.Minn.1979).

Accordingly, defendants' motion for summary judgment on all claims with respect to the reasonableness of the government's disposition of the collateral is denied.

2. Equitable Estoppel

With respect to all claims set forth by the government, defendants ITR and Kondur contend the government is estopped from asserting the transfer of assets from Excellair to ITR was fraudulent because the government has acknowledged that ITR was a bona fide secured creditor of Excellair.

On April 18, 1985 the government and Excellair entered into a settlement agreement concerning Excellair's $2,250,000.00 tort claim against the government for a federal air traffic controller's negligence in causing a mid-air collision. The agreement provided the proceeds of the settlement were to be paid to ITR, because they...