585 B.R. 685
Bankr. S.D.N.Y.2018Background
- FIGI (debtor) and its subsidiary FIC (insurance company) occupied contiguous tracts at Rock Hill, NY, later labeled Parcels A (headquarters), B (parking), and C (Nana's House + pole barn).
- Prepetition, FIGI and FIC conveyed legal title to an IDA under a tax-abatement/PILOT scheme that contemplated reversion to the "Company" (documented as FIC) after PILOT payments completed.
- FIGI filed chapter 11; IMG bought FIGI debt and plan transferred FIGI's assets (except certain Trust Assets and FIC stock) to reorganized FIGL, confirmed in 2005.
- During the chapter 11, FIGI scheduled Nana's House and the pole barn (Parcel C) as estate property and initially listed the headquarters (Parcel A) but later removed it; Parcel B was not separately described in schedules.
- The state rehabilitator for FIC (later Liquidator) participated in the bankruptcy: filed a large proof of claim, negotiated a settlement incorporated into Plan materials, voted to accept the Plan, and did not assert reversionary claims to Parcels B and C in the bankruptcy.
- After FIC’s rehabilitation was converted to liquidation (2012), the Liquidator contested ownership; this court held a trial and concluded the Plan and confirmation order bound the Liquidator and vested Parcels B and C in FIGL, directing IDA to convey title to FIGL.
Issues
| Issue | Plaintiff's Argument (Lawski/Liquidator) | Defendant's Argument (FIGL) | Held |
|---|---|---|---|
| Whether Parcels B and C were "dealt with" by FIGI's confirmed Plan so as to vest in FIGL and bar Liquidator's claim | Liquidator: prepetition IDA documents show FIC (not FIGI) was the reversionary owner; debtor's schedules/Disclosure did not adequately identify Parcel B; Plan cannot confer title to another's property absent deed | FIGL: Plan, schedules and parties' shared understanding treated Parcels B and C as FIGI assets; Rehabilitator participated in the case, negotiated settlement, voted, and did not preserve contrary claim; §1141 and res judicata bind Liquidator | Court: Parcels B and C were dealt with by the Plan; confirmation vested them in FIGL and precludes Liquidator from contesting them |
| Whether Bankruptcy Code §1141 and res judicata / confirmation preclusion override New York Statute of Frauds requirement of a deed | Liquidator: Statute of Frauds requires signed deed for reversionary real property interests | FIGL: §1141(b)-(c) vests property on confirmation; res judicata and plan binding effect preempt Statute of Frauds for plan purposes | Court: §1141 preempts the need for a deed for plan vesting; Statute of Frauds does not prevent plan-based vesting |
| Whether the Rehabilitator/Liquidator "participated" sufficiently in the bankruptcy so §1141(c) extinguishes his interest | Liquidator: even if participated, failure to describe Parcel B means it wasn’t dealt with; Rehabilitator’s proof of claim did not assert these parcels | FIGL: Rehabilitator actively participated (large claim, negotiations, settlement, vote) and understood FIGI owned Parcels B and C; did not preserve contrary claim | Court: Rehabilitator participated; his failure to assert contrary position during the case and his active role mean §1141(c) applies to bar later claim |
| Whether judicial estoppel or nondisclosure should bar FIGL from asserting Parcel B post-confirmation | Liquidator: FIGI failed to disclose Parcel B specifically; estoppel should preclude FIGL’s post-confirmation claim | FIGL: nondisclosure was not prejudicial to general creditors; parties (including Rehabilitator) shared understanding that FIGI held Parcels B and C; nondisclosure not willful or injurious | Court: Judicial estoppel not applied to overcome the Plan/§1141 effect because nondisclosure caused no creditor harm and parties had mutual understanding; allowing estoppel would unjustly undo the Plan |
Key Cases Cited
- Brown Media Corp. v. K & L Gates, LLP, 854 F.3d 150 (2d Cir.) (bankruptcy confirmation orders require broader preclusion analysis given collective asset allocation role of Chapter 11)
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (Sup. Ct.) (confirmation order has res judicata effect and is entitled to preclusive effect)
- Travelers Indem. Co. v. Bailey, 557 U.S. 137 (Sup. Ct.) (limits on collateral attack and binding effect of bankruptcy orders)
- In re Northern New England Tel. Operations, LLC, 795 F.3d 343 (2d Cir.) (§1141(c) "dealt with" and participation analysis for extinguishing interests)
- In re Conco, Inc., 855 F.3d 703 (6th Cir.) (contextual inquiry into whether an asset was dealt with by confirmed plan)