UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-60347

Summary Calendar

IN THE MATTER OF: APPLEWOOD CHAIR COMPANY,

Debtor.

APPLEWOOD CHAIR CO.,

Appellant,

VERSUS

THREE RIVERS PLANNING AND DEVELOPMENT DISTRICT,

Appellee.

Appeal from the United States District Court

for the Northern District of Mississippi

February 28, 2000

Before SMITH, BARKSDALE and PARKER, Circuit Judges.

PER CURIAM:

Applewood Chair Co. appeals the district court's order

affirming the bankruptcy court's order clarifying a confirmed

plan of reorganization. Because we find that res judicata does

not bar the bankruptcy court's clarification, we affirm.

FACTS AND PROCEEDINGS BELOW

In this bankruptcy appeal, the debtor-appellant, Applewood
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Chair Co. (“Applewood Chair”), filed a petition seeking relief

under Chapter 11 on March 30, 1994. Prior to this filing,

creditor-appellee, Three Rivers Planning and Development District

(“Three Rivers”) loaned $100,000 to Applewood Chair and to Ronnie

and Margaret Spivey (“the Spiveys”), as evidenced by a promissory

note dated November 22, 1993. As security for this note,

Applewood Chair executed a security agreement, through its

president, Ronnie Spivey, granting Three Rivers interest in all

equipment parts and inventory of Applewood Chair. In addition,

as guaranty for the note, the Spiveys, individually executed a

Mortgage Agreement, granting Three Rivers a mortgage lien on real

property they owned.

On May 2, 1994, Applewood filed a motion to approve the sale

of its assets that was subsequently granted by the bankruptcy

court on May 31, 1994 (“Sale Order”). As part of the relief

granted by the Sale Order, Applewood sold substantially all of

its assets to another entity or an entity to be formed, which was

identified as “NewCo.” A portion of the assets to be sold

consisted of the equipment used as collateral for the Three

Rivers loan which was now to be transferred NewCo. NewCo was to

assume the Three Rivers indebtedness due and owing by Applewood

Chair. Regarding Three Rivers's secured interest, the motion

(approved by the Sale Order) stated the following:

Movant's equipment currently serves as collateral to

secure an indebtedness of movant to Three Rivers. The

balance of that indebtedness is approximately

$97,000.00, and the equipment, when valued at a going
1 With a few limited exceptions, possessive singular nouns

are formed by adding an apostrophe and an s, whatever the final

consonant. See William Strunk and E.B. White, THE ELEMENTS OF STYLE

1 (3d ed. 1979); see also Bryan A. Garner, THE ELEMENTS OF LEGAL

STYLE 23 (1991). The University of Chicago Press recognizes the

general rule with a few exceptions, but also notes a distinction

employed by certain writers and editors. See THE CHICAGO MANUAL OF

STYLE 201 (14th rev. ed. 1993) (“If it ends with a z sound, treat

it like a plural; if it ends with an s sound, treat it like a

singular.”). But see id. (“[University of Chicago Press] is

willing, however, to accept other ways of handling these

situations if they are consistently followed throughout a

manuscript.”). This opinion will consistently follow the

traditional rule of adding 's to form the possessive of singular

nouns regardless of the final consonant.

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concern value, has a value of approximately that same

amount. It is unclear as to whether the liquidation

value of the equipment is equal to or greater than the

amount of the Three Rivers' [1] indebtedness. In any

event, the equipment will be sold to NewCo, in exchange

for NewCo's agreement to assume all of the movant's

obligations and indebtedness to Three Rivers under the

existing loan documents. Three Rivers' first lien upon

the equipment shall remain unaltered. Upon assumption,

all claims of Three Rivers, with respect to the

equipment, will be discharged and forgiven, as to all

existing obligors, and NewCo will assume all of the

existing obligors' obligations in connection with Three

Rivers' claims and debts . . . . (emphasis added).

Based on the language of this Motion, Three Rivers asserts

that it understood that NewCo would assume all obligations and

indebtedness of the debtor to Three Rivers “with respect to the

equipment” only, pursuant to the above-referenced promissory note

and security agreement. The individual obligations of the

Spiveys remained intact pursuant to the terms of the promissory

note and the security agreement. Applewood Chair, on the other

hand, argues that the Sale Order, and the bankruptcy court's

order approving of the reorganization plan, discharged not only
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the debts of Applewood Chair, but also discharged all officers,

directors and shareholders from any debt due and owing from those

claims that arose prior to the confirmation of the reorganization

plan--including the Spiveys' individual guaranty of the debt owed

Three Rivers.

On June 13, 1994, pursuant to the above-referenced motion

and Sale Order, Three Rivers entered into an Assumption Agreement

with the purchaser of the Applewood Chair's assets, Allcreek

Holdings, Inc., (“Allcreek”), which entity was described in the

above motion and Sale Order as NewCo. Regarding the Spiveys'

individual indebtedness, the Assumption Agreement stated the

following:

That this assumption agreement shall in no way be

considered a novation nor shall it be construed in any

way to impair any of the current existing collateral

taken by Three Rivers at the time of the initial

execution of the Promissory Note. The parties further

agree that the individual guarantees shall not be

impaired and that this shall not be considered to be a

novation with regard to the individual guarantees of

said note.

Accordingly, pursuant to the terms of the Assumption Agreement,

only the indebtedness of Applewood Chair to Three Rivers was

assumed by Allcreek (NewCo). The individual indebtedness of the

Spiveys (as per the promissory note and mortgage agreement) to

Three Rivers, was not assumed by Allcreek, nor was such

indebtedness released by Three Rivers.

On September 1, 1994, Allcreek changed its corporate name to

Applewood Furniture Industries, Inc. (“Applewood Furniture”). In
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approximately February of 1995, Applewood Furniture was in

default and the Spiveys, individually, were in default as well

for failure to make payments pursuant to the terms of the note. 

When Three Rivers called upon Applewood Furniture to pay the

remaining indebtedness, it learned that Applewood Furniture was

no longer in business. In addition, when Three Rivers attempted

to enforce its property lien on the equipment (collateral), it

learned that the equipment was missing and could not be found.

In January of 1996, Three Rivers began efforts to foreclose

on the referenced mortgage agreement with respect to the real

property put up as collateral by the Spiveys. During the course

of these foreclosure efforts, counsel for Three Rivers received a

letter from counsel for Ronnie Spivey indicating that, with

respect to the foreclosure on the property, the district court's

confirmation of the reorganization plan not only discharged the

debts owed by the Applewood Chair, but that it would also

discharge Applewood Chair's officers, directors and principals

from any debt owed by those individuals to third parties. At

this time, Three Rivers temporarily suspended efforts to

foreclose and filed a motion for clarification of the Sale Order,

which resulted in the entry of the bankruptcy court's July 31,

1997 order and subsequent supplemental order of October 3, 1997.

In its motion for clarification, Three Rivers argued that

Applewood Chair's Chapter 11 bankruptcy proceedings did not

affect the Spivey's individual liability, nor did those
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proceedings affect Three Rivers' right to foreclose on the

mortgage agreement after the default. The bankruptcy court

agreed and stated the following in its July 31 order:

(1) This Court has continuing jurisdiction to

clarify and/or interpret the intent and effect of its

orders rendered in this Bankruptcy proceeding; and

(2) This Court's Order Approving The Sale of

Substantially All Of The Assets Of The Debtor-inPossession, etc., dated May 31, 1994, and subsequent

Order Confirming Plan of Reorganization, dated July 25,

1995, contain insufficient language and were not

intended to have the effect of releasing the individual

indebtedness of Ronnie C. Spivey and Margaret Spivey to

Three Rivers Planning and Development District, Inc.,

as evidenced and created by that certain promissory

note dated November 22, 1993, and that certain mortgage

agreement dated November 22, 1993. (emphasis added).

On May 3, 1999, the district court affirmed the bankruptcy

court's orders. Applewood Chair filed its notice of appeal on

May 13, 1999.

ISSUES ON APPEAL

Applewood raises the following issues on appeal:

1. Whether Three Rivers's motion for clarification of

the Sale Order should have been filed as an

adversary proceeding, as opposed to a motion,

pursuant to Bankruptcy Rule 7001.

2. Whether Three Rivers is barred from pursuing its

claim against the Spiveys by the doctrine of res

judicata.

STANDARD OF REVIEW

We review the bankruptcy court's ruling on these issues as

if they were on direct appeal to us. In re Charrier, 167 F.3d

229, 232 (5th Cir. 1999). We review the bankruptcy court's fact

findings under the clearly erroneous standard and its conclusions
2 Bankruptcy Rule 7001 lists 10 types of proceedings (e.g.,

to determine whether a debt can be discharged, to obtain

equitable relief) that qualify as “adversary proceedings” and

require the filing of a complaint, as opposed to a motion, to

resolve.

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of law de novo. See id.

THREE RIVERS'S MOTION FOR CLARIFICATION

Applewood Chair argues that Three Rivers's motion for

clarification should have been filed as an adversary proceeding. 

Applewood Chair categorizes Three Rivers's motion as a prayer for

declaratory relief and for a determination of the validity of

Three Rivers's claim against the Spiveys. Three Rivers argues

that its motion sought to clarify the “intent and effect” of the

bankruptcy court's Sale Order and order confirming the

reorganization plan as to the individual indebtedness of the

Spiveys pursuant to the promissory note and mortgage agreement. 

We agree with the latter argument.

The relief requested by Three Rivers does not qualify as a

type of proceeding required by Rule 7001 to be brought as an

adversary proceeding.2 The validity of Three Rivers's lien

against the equipment which belonged to Applewood Chair was never

in question. This equipment was part of the bankruptcy estate

until it was sold to Allcreek who then assumed Three Rivers's

lien against the equipment. Three Rivers's motion for

clarification was properly filed as a motion rather than an

adversary proceeding.

RES JUDICATA EFFECT OF BANKRUPTCY COURT'S ORDERS
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Applewood Chair argues that Three Rivers was barred from

seeking clarification of the Sale Order under the theory of res

judicata. In Republic Supply v. Shoaf, 815 F.2d 1046 (5th Cir.

1987), we held that the confirmation of a clear and “unambiguous

plan” of reorganization that “expressly released” a third-party

guarantor has a res judicata effect on a subsequent action

against the guarantor who is also a creditor. See Shoaf, 815

F.2d at 1049-50. Because we find Shoaf distinguishable from the

facts of this case, we reject Applewood Chair's argument.

The general rule is that a discharge in bankruptcy does not

affect a guarantor's liability. See 11 U.S.C. § 524(e) (1994)

(“[D]ischarge of a debt of the debtor does not affect the

liability of any other entity on, or the property of any other

entity for, such debt.”); see also N.C.N.B. Texas Nat'l Bank v.

Johnson, 11 F.3d 1260, 1266 (5th Cir. 1994) (holding that to

allow a confirmed reorganization plan to effect an accord and

satisfaction on a loan guaranty “would defeat the purpose of loan

guaranties; after all, a lender obtains guaranties specifically

to provide an alternative source of repayment in the event that

the primary obligor's debt is discharged in bankruptcy”); Matter

of Sandy Ridge Dev. Corp., 881 F.2d 1346, 1351 (5th Cir. 1989)

(“A discharge in bankruptcy will simply not affect the liability

of a guarantor.”). The Spiveys did not file for individual

bankruptcy protection, Applewood Chair was the debtor in this

bankruptcy proceeding. Thus, our analysis of this issue should
3 Appellant's brief highlights this omitted language from

Shoaf and compares the language to the release language in this

case. See Shoaf, 815 F.2d at 1050 (“Neither this motion, nor the

bankruptcy court's order granting the relief, addressed the

provision of the Plan relating to the release of Shoaf's

guaranty, but dealt only with provisions of former paragraph 7

relating to general releases, a paragraph which had been

eliminated before the Plan was confirmed.”).

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bear in mind the general rule codified in § 524. See, e.g.,

United States v. Stribling Flying Serv., Inc., 734 F.2d 221, 223

(5th Cir. 1984) (noting that the obligations of individual thirdparty guarantors were not affected by a corporate debtor's

Chapter 11 proceeding).

In Shoaf, this Court recognized the res judicata effect of

an approved reorganization plan which expressly provided for the

release of a third party guarantor who was also a creditor. See

815 F.2d at 1051-55. The issue stated in Shoaf illustrates the

limited nature of its holding: “In this appeal we address the

question whether the bankruptcy court's confirmation order which,

beyond the statutory grant of the Code, expressly released a

third-party guarantor, is to be given res judicata effect.” 815

F.2d at 1047. The approved final reorganization plan contained a

specific paragraph for the release of Shoaf's guaranty. See id.

at 1049. Importantly, the final reorganization plan confirmed by

the bankruptcy court in Shoaf omitted a paragraph that provided

for a general release,3 leaving the paragraph specifically

releasing the Shoaf guaranty in the plan. See id. 

The reorganization plan approved by the bankruptcy court in
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the case sub judice contained no provision specifically releasing

the personal guaranties of the Spiveys. The plan did contain a

general release that stated the following:

The provisions of the confirmed plan shall bind

all creditors and parties in interest, whether or

not they accept the plan and shall discharge the

Debtor, its officers, shareholders and directors

from all claims that arose prior to Confirmation.

Applewood Chair argues that because Mr. Spivey was an officer,

director and shareholder, and because Mrs. Spivey was a

shareholder of the debtor company that this cases falls under the

rationale of Shoaf. This argument invites this Court to extend

that holding to an inapposite factual situation. We decline the

invitation.

As Three Rivers points out in its brief, the circumstances

which would justify abrogation of the general rule codified in §

524--i.e., application of Shoaf--are not present in this case. 

No specific discharge or release of the Spiveys' individual

guaranties to Three Rivers was enumerated or approved by the

bankruptcy court in this matter. The bankruptcy court recognized

this and stated as much in its July 31, 1997, order when it noted

that the Sale Order and reorganization plan “contain[ed]

insufficient language and were not intended to have the effect of

releasing the individual guaranties of Ronnie C. Spivey and

Margaret Spivey to Three Rivers.” The lack of a specific

discharge distinguishes this situation from that in Shoaf and

thus, does not warrant the application of its holding as
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appellants assert. See In re Taylor, 132 F.3d 256, 260 (5th Cir.

1998) (noting that the bankruptcy court's order of confirmation

in Shoaf “included express language noting the release of the

guarantor”); Enterprise Financial Grp. v. Curtis Mathes Corp.,

197 B.R. 40, 46 (E.D. Tex. 1996) (refusing to apply the res

judicata principle of Shoaf “to a retention-of-jurisdiction

provision contrary to the Code but nonetheless placed in a plan

which was confirmed and never appealed”); Austin Hardwoods, Inc.

v. Vanden Berghe, 917 S.W.2d 320, 325 (Tex. App.--El Paso 1995,

writ denied) (distinguishing Shoaf because the “issue in Shoaf

was the res judicata effect of a confirmed reorganization plan on

a guarantor where the confirmed plan expressly provided for the

release of the guarantor who was a party to the bankruptcy

proceedings”).

The Sale Order only discharged those claims of Three Rivers

“with respect to the equipment.” The individual guaranties of

the Spiveys--unlike the specific releases of the individual

guaranty in Shoaf--were not discussed in the bankruptcy

proceedings. The assumption agreement entered into, pursuant to

the Sale Order, between Three Rivers and the purchaser of the

debtor's assets (Allcreek) supports appellee's argument.

Thus, the individual guaranties of the Spiveys were not assumed

by Allcreek, nor were the guaranties released by Three Rivers.

CONCLUSION

Because we decline to extend the holding of Shoaf to
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situations where a plan of reorganization does not contain a

specific discharge of the indebtedness of a third-party, we

affirm the decision of the district court.

AFFIRMED