*1 795 information, Furthermore, important this he became ed the Court finds that De- very concerned and retained counsel. larceny fendant has not committed under 523(a)(4). § testimony, From the Defendant’s signed When Defendant Plaintiff, concludes that Defendant’s counsel Lease with Court he did not intend to deprive rather, recommended that he make no statements Plaintiff property; of his information, about this and Defendant fol- Defendant profitable intended to initiate a lowed this advice. While Defendant’s fail- business deal that would benefit both De- Therefore, may poorly ure to disclose reflect on De- fendant and Plaintiff. because fendant, this fact this is the requisite alone—and Defendant lacked the intent only impugning integ- deprive fact the Defendant’s property, the Plaintiff of his Plain- 523(a)(4) rity § insufficient to cause this to tiffs Court claim under fails. —is conclude that Defendant intended to harm 523(a)(6) Additionally, § Plaintiffs claim Plaintiff. Accordingly, argu- Plaintiffs fails because Defendant did not intend to point ment must fail. willfully maliciously injure the Plain- tiff. Defendant’s motive in signing the V. Conclusion simple: money Lease was to make from dischargeability excep what he believed to be a lawful transac- §of narrowly tions 523 are to be con tion, upon based his reliance on Stabell’s give strued order to effect to the fresh 523(a)(6) Therefore, representаtions. § policy start Bankruptcy Code. In discharge does bar the of this debt. Walker, (11th 1161, re 1164-65 sum, In this Court concludes that Cir.1995). Thus, exceptions to discharge- Plaintiff has any failed establish of its ability clearly “should be limited to those Accordingly, judgment claims. will be en- expressed in the statute.” Matter of simultaneously tered with the of this mem- (5th Cir.1987). 583, Boyle, 819 F.2d opinion. orandum Additionally, § under U.S.C. plaintiff bears the burden of proving the
nondisehargeability of a a prepon debt Garner,
derance of evidence. 498 U.S. at
297, 279, 111 In S.Ct. 654. the suit at
bar,
the Court
finds that Defendant
In re J & M SALUPO
not
discharge
should
be denied
under 11
DEVELOPMENT
523(a)(2)(A),(a)(4),
(a)(6).
or
CO., Debtor.
Plaintiffs claim that Defendant’s debt
should
nondischargeable
under
Nancy Hamerly,
Paul T. and
523(a)(2)(A)
fails because Plaintiff did
Plaintiffs-Appellants,
elements,
not establish all five essential
as
Mercer,
required by
Fifth
Circuit.
Mortgage Company,
Fifth Third
403; Quinlivan
F.3d at
ARGUED:
M.
Mar-
Levinson,
Pike,
gulies
OH,
Pepper
for
&
Fecher,
II.
AND STANDARD
B.
Cincinna-
JURISDICTION
William
Appellants.
Jeffrey
ti, OH,
BRIEF:
OF REVIEW
Appellee.
for
ON
Levinson,
Scharf,
&
Margulies
H.
M.
Scott
Bankruptcy
Panel
Appellate
OH,
Pike,
Levinson,
for Appel-
Pepper
(“BAP”)
jurisdic
has
Sixth Circuit
Fecher, Cincinnati, OH,
lants. William B.
appeal.
tion to
The United
decide
Hill,
Hutman, Stat-
Patricia L.
Hannah W.
Northern
States District Court for the
OH,
man,
Dayton,
Eyrich,
Harris &
appeals
has
District of Ohio
authorized
Appellee.
the BAP. A final order of a
under 28
may
appealed by right
RHODES,
FULTON,
Before:
158(a)(1).
ap
For
purposes
SCOTT,
Appellate Panel
Bankruptcy
“
final
‘ends the
peal, an order is
if it
Judges.
nothing
merits
litigation on the
and leaves
judg
for the court to do but execute
”
OPINION
Asphalt Corp.
ment.’
v. United
Midland
States,
794, 798,
S.Ct.
489 U.S.
FULTON,
Judge.
Bankruptcy
(citations
879, (1989)
1497, 103 L.Ed.2d
Nancy Hamerly (“Appel-
T.
Paul
omitted).
motion for
denying
An order
lants”) appeal
grant
re
is a
order.
In
reconsideration
final
pursuant to
pleadings
of a
Wellman,
B.R.
2006 WL
Bankruptcy
Rule
Federal
Procedure
(6th
2006) (unpublished
Cir. BAP
table
7012(c)
Mortgage
Third
favor of Fifth
decision).
granting judgment
An order
Appel-
and denial of
Company (“Appellee”)
final
is a
order.
lants’ motion for reconsideration of that
*6
that
judgment,
Appellants
which held
for dis
The standard of review
prove any
entitling
not
facts
them to
could
R.
pursuant
missal
to Fed.
Civ.
of a case
real property
clear title to certain
obtain
12(c)
Pro.
is the same as for a civil action
warranting
of
equitable
subordination
Proce
pursuant
to Federal Rule of Civil
such
Appellee’s mortgage against
proper-
12(b)(6).
legal
It is a
re
dure
conclusion
a
ty. Appellee had extended
construction
v.
quiring
Hughes
novo review.
Sand
de
Development
& Salupo
loan to J M
Co.
(6th Cir.2006).
ers,
novo
803
agreement provided
delivery
for
Code,
of title Bankruptcy
§
such as 11 U.S.C.
365(i)(2)(B)
§
free
clear
liens and
U.S.C.
encumbrances.
contains no ex-
case,
press grant of power
In either
Appellants would not
be
trustee to
eliminate other
property.
interests
entitled to transfer of
property
to them
And,
in stark
contrast
to 11 U.S.C.
by the trustee free and clear of liens and
363(b),
§
there is no requirement under 11
First,
encumbrances.
the Panel notes that
365(i)(2)(B)
§
U.S.C.
holding
creditors
the trustee in this
has
case
abandoned the
аgainst
liens
property
be
no-
accorded
real
property
question.
In
See
re Ea
tice
opportunity
hearing
regarding
(Bankr.N.D.Ohio 1985)
gle,
804 Benjamin v. nally to set forth in Diamond requires purchaser the This subsection Co.), 692, (In under the F.2d payment(s) re Mobile Steel 563 required make the (5th Cir.1977). the gives, limits and but have purchase contract Most courts 699-700 the to, against of setoff right a applied the Mobile uniformly followed and by damages occasioned price for purchase test, three following requiring Steel of the any obligation of “nonperformance by preponderance a to shown conditions rejection, or which after the date debtor” justify equitable in order to of the evidence to damages for failure presumably includes subordination: Thus, 11 and clear title. transfer free engaged must 1. The сlaimant have 365(i)(2)(A) § 11 U.S.C. U.S.C. conduct; inequitable some of type 365(i)(2)(B) a set forth together § read The must have resulted 2. misconduct putative purchaser scheme which of the injury as trustee has creditors title may obtain such stated payment of the conferred an unfair ad- property upon bankrupt or for dam- claimant; some amount vantage consideration less on incomplete result of as a ages incurred Equitable of the claim 3. subordination purchase of the contract.3 performance must inconsistent with the not be Appel- if light foregoing, In even of provisions Bankruptcy [Code]. proved purchase that the lants could have Co., Mobile Matter Steel of to them for transfer agreement provided (5th Cir.1977). See Terra Erie 699-700 encumbrances, free and clear of liens (In Bank Mace Elec. Assocs. Maine re under a trustee not have been would (Bankr. Ohio, Inc.), B.R. of property Appellants duty to transfer the 1988); Equities, In re Medical N.D.Ohio encum- of all liens and free and clear (Bankr.S.D.Ohio Inc., B.R. 961-62 The Panel concludes brances. 1987). apply How Mobile Steel courts granting of depends whether creditor test also on Appellees in favor an insider or a non-insider. reversible ground not constitute did error. su- primary The distinctions between
2. Subordination Equitable claims of insiders ver- bordinating the in thе sus those of non-insiders lie for estab legal standard severity origi- required of the misconduct lishing equitable subordination was reading only asserting ostensibly "plain” that the dissent focuses on 3. can surmise In its 365(i)(2)(B), declines provisions phrase § 11 U.S.C. the dissent the title because of the "the with the to read that subsection context trustee shall title.” But there is abso- deliver 365(i) other of 11 U.S.C. subsections Congress’ lutely no use of the indication Bankruptcy provisions of other crucial Code, phrase word "title” in that was meant Moreover, as 11 U.S.C. such modify phrase appearing "in accor- later reading dissent’s provisions with dance such contract.” "plain” the dissent is not as as explanation plausible exists. A much more dissent in would Panel believe. The have this phrase Congress simply "the trustee used trustee "the essence asks the Panel read trans- shall deliver because that is how title” purchaser in accor- to such shall deliver title commonly fers of real are described. provisions contract” dance of such with physically itself hand- The real is not actually says deliver as if it "the trustee shall purchaser, ed off from not even trustee purchaser in with the title to accordance such Congress logically twig, key, did clod or so Obviously, provisions title of such contract.” say something "the shall deliv- like trustee real estate have numerous contracts property.” real er the provisions provisions. Panel beyond title
805 shown, degree and the to which the tion of the court. Metropolitan Huff Co., (6th court will scrutinize the claimant’s ac- 119, Ins. 675 F.2d 122 Cir. Life 1982). tions toward the debtor or its credi- Moreover, such a motion is an “ex tors. Where the claimant is a non- traordinary remedy and grant should be insider, egregious conduct must be sparingly ed because of the interests in fi proven particularity. with It is insuf- nality and judicial conservation of scarce objectant ficient for the in such cases resources.” American Textile In Mfrs. merely to sharp dealing; establish stitute, Limited, Inc., Inc. v. 179 F.R.D. rather, prove hе must that the claim- (S.D.Ohio 541, 1998). 547 A may guilty gross ant is of misconduct tan- (1) previous reconsider a judgment: to ac ‘fraud, tamount overreaching or commodate an intervening change in con spoliation to the detriment of others.’ (2) law; trolling to account for newly dis (3) evidence; First Nat'l Bank Barnesville v. covered to correct a clear Rafoth (In (4) Inc.), law; re Baker Getty & Fin. Servs. 974 error of or prevent manifest (6th Cir.1992). 712, F.2d injustice. It is undis GenCorp, See Inc. v. American puted Appellee Underwriters, (6th is a non-insider. Int’l 178 F.3d Cir.1999). 59(e) “A motion under Rule Because Appellee is not an insid provide parties intended to an op er, Appellants required would have been portunity to relitigate previously-decided prove egregious conduct Appellee to present matters or the case under new establish that equitable subordination is Rather, theories. such motions in are appropriate. Upon of Appellants’ review tended to allow for the correction of mani complaint, the Panel finds no factual alle law, fest errors of fact or or for pres that, true, gations if would amount entation newly-discovered evidence.” ‘fraud, “gross misconduct tantamount Nosker, (Bankr. In re 267 B.R. overreaching spoliation or to the detriment 2001). S.D.Ohio “The burden of demon Therefore, of others.’” bankruptcy strating the existеnce of a manifest error judgment favor of fact or party law rests with the seeking Appellee on this ground was appropri reconsideration.” Id. at 565. ate.
B. Motion Reconsideration/New The Panel reviews the
Trial
Appellant’s
court’s denial of
motion for
reconsideration or a
trial for
new
abuse of
Appellants filed a motion for reconsider-
Here,
discretion.
the Panel finds that the
ation, or in the alternative for a new trial.
bankruptcy court’s denial was in fact rea
if they
It is not clear
relying
were
on Rule
sonable. For the
part, Appellants’
most
59(e)
60(b).
or Rule
generally
Courts
motion
arguments previously
reasserted
treat a motion for reconsideration as a
rejеcted by
Typi
court.
motion to alter or
amend the
cally a motion for reconsideration that sim
pursuant
to Federal Rule of Civil Proce-
ply
arguments
restates the same
will be
59(e).
(In
dure
Aguilar
Abraham v.
re
denied. Sault
Marie
Chippe
Ste.
Tribe
(5th Cir.1988).
Aguilar),
II. that nothing As 365(i)(2)(B) § in language the of sug- even Hamerlys If prove the do that the debt- gests reading, compels that let alone It it. obligated by purchase agree their was true, asserts, majority is as the that title, ment to deliver clear then under the 365(f)(2)(B) § relieves the trustee of “all 365(i)(2)(B), §of plain language upon re other obligations perform to under the jection in bankruptcy, of the contract the contract,” but the “all other” language ex- obligated trustee is likewise to deliver plicitly very obligation excludes the at is- simply plainly clear title. That section sue obligation here-the to “deliver title to rejection, states that upon “the trustee purchaser such in pro- accordance with the shall to in purchaser deliver title such visions of the contract.” provisions accordance with the of such con- language This ambigu tráete.]” is neither Finally, majority argues the that the Supreme ous nor absurd. The has Court 365(i)(2)(B) § obligation trustee’s under held that our is role these circumstances conjunction must pur- be read with the only apply plain language the as writ 365(f)(2)(A) § right chaser’s under to setoff Trustee, ten. Lamie v. U.S. 540 U.S. damages against purchase price. The 534, 124 1023, 1030, 157 S.Ct. L.Ed.2d majority presumes then that these dam- (2004); Underwriters Ins. v.Co. Hartford ages may any damages include caused Bank, A., 6,1, N. Union Planters 530 U.S. the trustee’s failure to deliver clear title. 1, (2000); 120 S.Ct. 147 L.Ed.2d difficulty The with this presumption is that Enters., Inc., United States v. Ron Pair when the of mortgage balance exceeds 235, 241, 489 U.S. 109 S.Ct. here, purchase price, balance of the as (1989). L.Ed.2d 290 365(i)(2)(A) § purchaser’s rights meaningless. Nothing become whatever majority’s rationale in circumvent- 365(f)(2)(B) language in the suggests of ing plain language result is strained at Congress that purchas- intended that the Initially, best. majority argues that right upon payment er’s to clear title proper- because the trustee abandoned the the balance of the ty price would by filing report, a no asset the trustee depend on whether the balance of the longer any no has title to transfer to the mortgage is less than the balance of Hamerlys. argument merely This gives purchase price. the trustee permission unilateral to violate 365(f)(2)(B) Hamerlys’ both sub- III.
stantive rights, all without notice Moreover, argument proves Underlying argument to them. Third’s Fifth much, majority opinion suggestion too because it would relieve the is the that obligation give priority trustee of the to deliver title it is somehow unfair to to a subject mortgage. purchaser’s right even to the contract to clear title mortgagee’s security over a interest. The majority then concludes suggestion is both irrelevant and mistaken. interpreted must re- creditors, It is irrelevant because to there quire delivery only such as title is very little that is ever fair about bank- First, acquires trustee from the debtor. ruptcy. argument this is inconsistent with the ma- jority’s case, previous argument, specifically which would More this both the any obligation relieve the trustee of to purchaser mortgage and the holder are any impor- deliver title. Second and more A judgment creditors debtor. tantly, majority explain just fails to un- mortgage what holder would be as worth more than balance for the as a purchaser to the
fair holder mortgage purchase price, hold mortgage would be attempt capture might prefer symmetry Congress had break er. advantage through foreclo- incremental creditor’s which unfairness and choose be no fairness But there would By plain sure. give priority. *13 claim ad- that incremental attempt, because 365(i)(2)(B), chose Congress §of language pur- from the likely would result vantage for a court It is not claim. purchaser’s construction. judgment chasеr’s contribution Congressional to overturn Moreover, unfairness ad- that economic is fair. of what on its own sense based recorded, 13-14, mortgage if is Underwriters, heres even at 530 U.S. Hartford (“[W]e the build- agreement between do because 147 L.Ed.2d 120 S.Ct. ordinarily would not purchaser and the merits of er the relative not sit to assess closing, the final title before bankruptcy require clear to various approaches different would know that. mortgage holder policy a and Achieving better problems.... is that-is urges petitioner outcome-if what reasonably no foresee- are thus There courts.”). See not the Congress, task for a mortgage a circumstanсes which able Unsecured also Committee of Official more on its equitably realize holder should Chinery, Cybergenics Corp. Creditors of if for market claim it sells the Cir.2003) (“Kit (3d for is not sale than if value at foreclosure judgment policy their to substitute courts pur- of the pays the balance purchaser of fairness Our notions Congress’s.”). for clear title under price chase and obtains irrelevant. legally are 365(i)(2)(B). rights un- § The allocation of 365(i)(2)(B) perfectly § is consistent Moreover, of unfairness der suggestion with these undeniable econom- aligned purchaser judgment in a for ic, 365(i)(2)(B) legal equitable realities. Plainly, is also mistaken. in which the balance usual case thе more further consideration important Another pay is sufficient purchase price of the unfairness any suggestion of undermines will be satis- mortgage, everyone off the purchasers these judgment in a full pay will bal- purchaser The fied. is in mortgage holder circumstances. title; ance; clear the trustee will deliver approval, and process, full over the control paid in mortgage holder will be and the draws, both amounts of all construction proceeds for the may even be full. There pur- and the before and after the builder exemption on the debtor’s pay trustee agreement. a purchase chaser enter into Inexpliсably, other creditors’ claims. or fully capable of mortgage is holder anyone unfairness to despite the lack of proper- the market value appraising circumstances, majority happy those any stage construction and to ty at prohibit would nevertheless opinion in the against the risk of loss protect itself applying from value, simply at the market event a sale 365(i)(2)(B) result. to order that Indeed, is limiting exposure. there by its mortgage for a no business reason purchase rational if the balance of the But even more building project into a off the mort- holder to lend pay price is insufficient will then be worth money project than that in a there is no unfairness gage, hand, the the other in the market. On from an eco- purchaser, because for the over the rela- foreclosure, never has control purchaser upon perspective, nomic mort- and the tionship between the builder on its claim mortgage will realize holder holder, in it. any participation gage If or even is worth. only what as between the Accordingly, holder, entirely it fair to mortgage full mortgage
allocate to the holder the risk, any including economic
burden the build-
risk of default
er, mortgage as well as the risk that the it controls will exceed the
balance of the market value
balance entirely It is therefore fair for
price. require mortgage accept pur-
holder to the balance of the *14 price
chase while the obtains Any suggestion contrary
clear title.
is mistaken.
I would therefore vacate the and remand for a deter-
mination of whether the debtor and the
Hamerlys obligate intended to the debtor upon payment clear title deliver so,
purchase price. Hamerlys If are judgment they
entitled to the seek.
In re J & M SALUPO
DEVELOPMENT
CO., INC. Debtor.
No. 06-11373. Court, Bankruptcy
United States Ohio,
N.D.
Eastern Division.
June