631 B.R. 492
Bankr. N.D. Fla.2021Background
- Manown Engineering filed Chapter 7 on July 23, 2018; Mary W. Colon appointed Chapter 7 Trustee.
- On Sept. 1, 2017 a Tennessee federal court entered a $221,384.66 default judgment in favor of Kim Frazier against Manown and others.
- On Sept. 22, 2017 Manown, its president Gilmore, ACT, Frazier, Larry Steele and Steele Group agreed (via Steele’s proposal and emails) that Steele Group would pay $55,000 to Frazier (and $100 to Manown) to obtain the assets free and clear; Frazier’s counsel acknowledged receipt and filed a Satisfaction of Judgment on Oct. 27, 2017.
- The agreement required Manown to ‘‘immediately’’ list real property and liquidate personal property (180‑day target), with specified splits of net proceeds if sold; Steele/Manown listed the real property (asking $300,000) and Gilmore met an auctioneer, but no assets were sold pre‑petition.
- An auction did not occur because of lender interference and lack of funds to advance a $15,000 auctioneer fee; Steele reported there was an offer in May 2018, but no sale closed before bankruptcy.
- Trustee objected to Claim No. 4 (filed by claimant’s counsel for $168,218.82) on grounds that the Judgment had been satisfied and no new enforceable obligation was shown; after an evidentiary hearing the Court sustained the objection and disallowed the claim in full.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Claim No. 4 is allowable after Frazier filed a Satisfaction of Judgment in exchange for the settlement | Frazier: the settlement contract (payment of $55,000) created a new obligation/claim based on the agreed sharing of future sale proceeds | Trustee: the Satisfaction extinguished the judgment and Frazier failed to prove any continuing enforceable obligation | Disallowed — Trustee rebutted the claim; Frazier failed to prove a valid enforceable post‑judgment claim |
| Whether Manown materially breached the settlement by failing to “immediately” place assets for sale and liquidate them | Frazier: Manown failed to immediately sell or properly price assets, constituting a material breach that revives the original judgment or yields damages | Trustee: Manown took required steps (selected realtor, listed realty, met auctioneer); delays were caused by lender issues and lack of funds, not a material breach | No material breach — Court found Manown substantially complied with obligation to attempt sale |
| Burden and effect of objection to a proof of claim | Frazier: Claim, properly filed, is prima facie valid and should stand unless clearly disproven | Trustee: Once she produced evidence rebutting the claim’s validity, burden shifted to Frazier to prove the claim | Court applied standard: Trustee rebutted; burden shifted to Frazier, who did not meet it |
| Whether Frazier may recover full pre‑existing judgment (or damages) because of alleged breach | Frazier: material breach would allow reinstatement of the full judgment or total damages | Trustee: reinstatement/damages are not available absent proof of material breach and resulting damages | Denied — Court refused to resurrect the original judgment or allow Claim No. 4 in the absence of proven material breach and damages |
Key Cases Cited
- Whitney v. Dresser, 200 U.S. 532 (1906) (properly filed proof of claim is prima facie evidence of validity)
- Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009) (elements required to prove existence of contract)
- In re Jeffrey L. Miller Invs., Inc., 610 B.R. 692 (Bankr. M.D. Fla. 2019) (burden‑shifting on objections to proof of claim; material breach analysis)
- Benkovitch v. Vill. of Key Biscayne, [citation="778 F. App'x 711"] (11th Cir. 2019) (nonbreaching party may reinstate a larger judgment after the other party materially breaches a settlement)
- Forbes v. Prime Gen. Contractors, Inc., 255 So. 3d 448 (Fla. 2d DCA 2018) (when a material breach occurs, nonbreaching party may treat contract as discharged and seek damages)