597 B.R. 796
Bankr. W.D. Pa.2019Background
- Margaret Jager executed a $300,000 commercial promissory note to InFirst Bank in 2012 secured by ~55 acres (two tax parcels) improved by a farmhouse, a rental (Small House), and a barn with an apartment (the Collateral).
- The Pennsylvania DEP obtained orders requiring remediation of ~400+ tons of manure on the Collateral; the Debtors were found in contempt in 2017 for failure to remediate.
- InFirst confessed judgment (2015) and obtained relief from the stay in the Debtor’s prior New York Chapter 7 case; a sheriff’s sale was scheduled in August 2018.
- Debtors filed a Chapter 11 small-business case (July 30, 2018). InFirst moved for relief from the automatic stay (Aug. 1, 2018); after evidentiary hearings the bankruptcy court granted stay relief (Nov. 20, 2018).
- Debtors moved to amend/reopen under Fed. R. Civ. P. 59/60 (filed Dec. 4, 2018), asserting newly proposed “Plan 3,” challenging the court’s findings on feasibility and arguing the timing deprived them of a breathing spell; the court held a hearing and took the matter under advisement.
- The court denied the Motion to Amend, finding no basis under Rules 59/60: Plan 3 was not newly discovered, Debtors failed to show feasibility (including remediation), and Debtors’ tactical choices did not justify extraordinary relief. The court clarified the stay-relief order applies to both parcels.
Issues
| Issue | Debtors' Argument | InFirst Bank's Argument | Held |
|---|---|---|---|
| Whether Rule 59/60 relief (new trial / amend findings / alter judgment) is warranted | Court erred; new evidence (Plan 3) and other omissions justify new trial or amendment | No new, material evidence; Debtors knew Plan 3 pretrial; relief is an improper second bite | Denied — Debtors failed to meet Rule 59/60 standards; Plan 3 not newly discovered and would not likely change outcome |
| Whether Plan 3 constitutes "newly discovered evidence" | Plan 3 makes reorganization feasible (move to Small House, lower payments) and was not presented earlier due to lack of authorization | Plan 3 was known before trial; failure to present was tactical; not newly discovered | Denied — Plan 3 was known pre-hearing; Debtors bear heavy burden and did not satisfy it |
| Whether a creditor may move for stay relief during the debtor’s exclusivity period (and whether Timbers requires a "soft" standard) | Filing a §362 motion during exclusivity improperly imposes a de facto liquidation plan; Timbers should be applied gently near petition date (no confirmation-level scrutiny) | §362 permits stay relief during exclusivity; Timbers requires a reasonable prospect of effective reorganization and courts may grant relief if none exists | Denied — Congress did not bar stay motions during exclusivity; Timbers applies (reasonable possibility of reorganization in prospect), and Debtors failed to show feasibility |
| Whether relocating manure to the barn is a plausible remediation and affects feasibility | Moving manure into barn would satisfy DEP and make plans feasible | DEP court order requires removal/land-apply/export/dispose; barn relocation likely violates the order and DEP must inspect; costs and credibility problems | Denied — Barn relocation is not an established solution, conflicts with court order, lacks DEP approval, and Debtors lack funds/credibility to complete remediation |
Key Cases Cited
- United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assoc., Ltd., 484 U.S. 365 (1988) (sets standard for stay relief — collateral must be necessary to an effective reorganization that is "in prospect")
- Compass Tech., Inc. v. Tseng Labs., Inc., 71 F.3d 1125 (3d Cir. 1995) (Rule 59/60 newly discovered evidence standard and overlap discussed)
- Max's Seafood Cafe v. Quinteros, 176 F.3d 669 (3d Cir. 1999) (standards for Rule 59(e) relief: change in law, new evidence, or clear error/manifest injustice)
- Klapprott v. United States, 335 U.S. 601 (1949) (Rule 60(b)(6) as equitable power to vacate judgments under extraordinary circumstances)
- In re Cardell, 88 B.R. 627 (Bankr. D.N.J. 1988) (creditor’s early foreclosure motion may be viewed as imposing its plan; equity considerations applied after §362 analysis)
- In re Fairfield Exec. Assocs., 161 B.R. 595 (D.N.J. 1993) (discusses that lift-stay hearings should not be confirmation hearings but debtors must show plan is not patently unconfirmable)