450 B.R. 37
Bankr. S.D.N.Y.2011Background
- Debtors Lawrence and Julie Salander filed a joint chapter 11 case later converted to chapter 7; estate assets include real property in Millbrook, NY and a Manhattan townhouse with First Republic liens.
- Trustee and First Republic negotiated a Settlement Agreement (Oct 21, 2009) to resolve claims, providing release of estate claims against First Republic in exchange for Trustee’s deed to the Manhattan townhouse and release of liens on personal property; the Deals aimed to maximize unsecured creditors’ dividend.
- Trustee sought Court approval; order approving the Settlement was entered Oct 21, 2009; Wells Fargo objected for disclosure concerns but did not appeal.
- Trustee subsequently abandoned the Millbrook property (Oct 27, 2010); First Republic foreclosed on the Millbrook property beginning Dec 13, 2010.
- On Feb 7, 2011, Salander filed a verified answer with cross-claims/counterclaims alleging forgery related to First Republic’s liens and mortgages on the Millbrook Property.
- Salander seeks to void or modify the Settlement via Rule 60(b) and to pursue defenses in the foreclosure action; First Republic moves to enforce the Settlement; Wells Fargo cross-moves for related relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Settlement Order binds Salander and bars her counterclaims | Salander says the settlement is voidable due to abandonment and forgery. | First Republic asserts the order is final and binding; Salander is barred by res judicata. | The Settlement Order is enforceable against Salander and her counterclaims are barred. |
| Whether Salander’s pre/post-petition claims are property of the estate and governed by the Settlement | Salander contends estate abandonment revived her claims. | Trustee settled and administered the claims; abandonment did not revive them. | Salander's claims were property of the estate and were settled; they cannot be revived in state court. |
| Trustee's power to settle claims on behalf of the estate | Trustee acted to maximize unsecured creditors’ dividend through settlement. | Trustee acted with due care; settlement was within business judgment and approved by the Court. | Trustee had authority to settle; approval order has full force and effect. |
| Effect of abandonment of Millbrook Property on enforceability of the settlement | Abandonment reverts title and nullifies the related settlement provisions. | Abandonment does not nullify the settlement; claims were settled and administered, and the order remains enforceable. | Abandonment did not revoke the agreement or the order; settlement remains enforceable. |
| Salander's Rule 60(b) motion timeliness and grounds | Rule 60(b) grounds are timely and support vacating or amending the order. | Rule 60(b) motions are untimely under 9024 for a settlement order; no proper grounds shown. | Rule 60(b) motion denied; no grounds to reconsider. |
Key Cases Cited
- In re Gibraltar Res., Inc., 210 F.3d 573 (5th Cir. 2000) (finality of court-approved settlements and res judicata effect)
- In re Martin, 490 F.3d 1272 (11th Cir. 2007) (abandonment doesn't restore debtor’s right to relitigate settled claims)
- In re Nicholson, 57 B.R. 672 (Bankr. D. Nev. 1986) (trustee may abandon only certain actions; settlement drives administration)
- In re Strada Design Assocs., 326 B.R. 229 (Bankr. S.D.N.Y. 2005) (causes of action can be property of the estate and settled by trustee)
- Lombard v. Lombard, 11 A.3d 1180 (Del. 2009) (trustee exercising settlement power under Section 704(1) with diligence)