598 B.R. 87
S.D. Ill.2019Background
- FIC (an insurer) and FIGI (its corporate parent) owned adjacent properties in Rock Hill, NY; parcels later labeled A (FIC HQ), B (parking), and C (Nana's House and a pole barn). CSIDA held deeds under PILOT agreements with reversion provisions naming FIC as the beneficiary.
- FIGI filed Chapter 11 in 2005; its Amended Schedule A listed structures (Nana's House, the pole barn) as assets and as successor-in-interest to CSIDA; it did not use the later "Parcel B/C" labels.
- FIC was in state rehabilitation (later liquidated); FIC's rehabilitator (the predecessor to the Liquidator) filed a large proof of claim in FIGI's bankruptcy but did not claim the Rock Hill parcels during FIGI's case and accepted the FIGI plan settlements.
- FIGI's Chapter 11 plan (confirmed December 1, 2005) revested all FIGI estate property (except specified Trust Assets) in the reorganized debtor FIGL; the Disclosure Statement referenced FIGI's schedules but did not list the Rock Hill property among "significant assets."
- In 2014 the Liquidator sued to reclaim the Rock Hill parcels; the bankruptcy court held a trial to decide whether Parcels B and C were "dealt with" by FIGI's confirmed plan and therefore vested in FIGL free and clear of FIC's claims.
- The bankruptcy court found (1) the rehabilitator/ Liquidator participated in FIGI's case; (2) FIGI's Amended Schedule A and the parties' shared understanding sufficiently identified Parcels B and C as FIGI assets; (3) nondisclosure of the label "Parcel B" was harmless; and (4) judicial estoppel did not bar FIGL's claim. The district court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Parcels B and C were "dealt with" by FIGI's confirmed Chapter 11 plan (so they vested in FIGL under 11 U.S.C. §1141) | Lawsky: Plan/Disclosure/Confirmation did not identify Parcels B and C; schedules were not "explicitly incorporated," so plan cannot preclude FIC's state-law reversion claim | FIGL: Amended Schedule A (listing buildings) and parties' shared understanding sufficiently identified the land as FIGI assets; plan revested all non-Trust estate property in FIGL | Court: Parcels B and C were sufficiently identified by FIGI's Amended Schedule A and the parties' mutual understanding; they vested in FIGL and Liquidator is precluded from contesting ownership |
| Whether the bankruptcy court should have ignored FIGI's Amended Schedule A as not incorporated into plan/disclosure | Lawsky: Schedules must be explicitly incorporated to have preclusive effect | FIGL: Courts can consider schedules and the surrounding record to resolve ambiguous plan scope | Court: It was proper to consider Amended Schedule A and the Disclosure Statement references; contextual evidence resolves ambiguity |
| Whether judicial estoppel bars FIGL from claiming Parcel B because FIGI omitted that label | Lawsky: Nondisclosure of Parcel B supports judicial estoppel | FIGL: No inconsistent prior position; parties treated the areas as FIGI's, nondisclosure was harmless and not misleading | Court: Judicial estoppel inapplicable—no clear inconsistency and nondisclosure was harmless; applying estoppel would unfairly unwind the plan |
| Whether state-law conveyance/formalities or FIC's rehabilitation divest bankruptcy court from vesting real property | Lawsky: New York requires written conveyance/description; state rehabilitation limits transfers without court approval | FIGL: Bankruptcy Code §1141 can vest estate property on confirmation; plan governed and controlled over state formalities | Court: Bankruptcy Code and confirmed plan can vest estate property without a deed; state rehabilitation did not negate bankruptcy jurisdiction or vesting effect |
Key Cases Cited
- In re N. New England Tel. Operations, 795 F.3d 343 (2d Cir. 2015) (discusses when property is "dealt with" by a confirmed plan and §1141(c) preclusion)
- BPP Illinois, LLC v. Royal Bank of Scotland Grp. PLC, 859 F.3d 188 (2d Cir. 2017) (judicial estoppel bars post-bankruptcy claims omitted from schedules in certain circumstances)
- Adelphia Recovery Tr. v. Goldman, Sachs & Co., 748 F.3d 110 (2d Cir. 2014) (judicial estoppel doctrine varies with factual context; standards for application)
- Clark v. AII Acquisition, LLC, 886 F.3d 261 (2d Cir. 2018) (identifies the "unusual case" where nondisclosure had de minimis effect and estoppel is inappropriate)
- In re Motors Liquidation Co., 500 B.R. 333 (S.D.N.Y. 2013) (bankruptcy-plan interpretation with deference to factual findings about parties' expectations)
- In re Hudson Valley Ambulance Serv., Inc., 11 B.R. 860 (Bankr. S.D.N.Y. 1981) (property of the estate includes legal or equitable interests regardless of state receivership possession)
- New Hampshire v. Maine, 532 U.S. 742 (2001) (judicial estoppel principles aimed at protecting judicial integrity)