Opinion ID: 214973
Heading Depth: 1
Heading Rank: 3

Heading: discussion of the merits

Text: We now turn to the merits. `Although this appeal is from a decision by the BAP, we review only the Bankruptcy Court's decision.' Gillman v. Ford (In re Ford), 492 F.3d 1148, 1153 (10th Cir.2007) (quoting Alderete v. Educ. Credit Mgmt. Corp. (In re Alderete), 412 F.3d 1200, 1204 (10th Cir.2005)). We review matters of law de novo, and we review factual findings made by the bankruptcy court for clear error. Mathai v. Warren (In re Warren), 512 F.3d 1241, 1248 (10th Cir.2008). COP challenges the bankruptcy court's decision that the Agreement was property of the estate that could be assumed and sold by the trustee. The bankruptcy court concluded that the Agreement did not provide for automatic termination when the 60-day default notice period expired and that COP needed to take additional steps to terminate the Agreement. The court further determined that by the time the 60-day notice period had run (the close of business on January 8, 2008), the involuntary petition had been filed and the automatic stay under 11 U.S.C. § 362 prohibited COP from taking action to terminate the Agreement without first getting relief from the stay. The court therefore held that the unexpired Agreement was property of the estate and could be assumed by the trustee pursuant to 11 U.S.C. § 365. COP argues here, as in the bankruptcy court, that the Agreement automatically terminated at the close of business on January 8, 2008, when CWM failed to cure its default by the end of the 60-day notice period. COP therefore contends that the trustee could not assume the Agreement because it was not property of the estate under 11 U.S.C. § 541(b)(2). [2] That section provides that if a lease expires automatically by its terms after a bankruptcy petition is filed, then it can no longer be included as property of the estate. See id. Resolution of this appeal turns on whether the Agreement required COP to take additional steps to terminate the Agreement after the end of the 60-day notice period or whether the Agreement provided for automatic termination at the end of the 60-day notice period. The answer comes from the plain language of the Agreement. COP argues that the Agreement unambiguously provided for automatic termination if CWM failed to cure its defaults by the end of the 60-day period. COP next asserts that if the Agreement required additional action for termination, COP took such action by sending letters to CWM on January 3, 5, and 6 (the January letters), which notified CWM that the Agreement would automatically terminate unless CWM cured its defaults. Finally, COP argues that the January letters may also be considered as evidence of the parties' intent that the Agreement would automatically terminate without further action by COP.
COP claims that the bankruptcy court erred in concluding that COP was required to take additional action after the expiration of the 60-day notice period because there was no explicit language in the Agreement about further action. The relevant text is in paragraph nine: If [CWM] shall not comply with any of the provisions, or covenants, or agreements herein written and contained, and such default shall continue for a period of 60 days after service of written notice, by certified or registered mail, by [COP] identifying the default and specifying with reasonable particularity the nature and extent thereof, then and in such event this Agreement may be terminated and all of the rights of [CWM] shall cease and be wholly determined and [COP] may at once take possession of any or all of the properties herein described. Aplt.App., Vol. II at COP512. The bankruptcy court concluded: The Agreement clearly states that COP may terminate the Agreement if the Debtor fails to cure within the 60-day cure period. Although the Agreement does not include what specific action is needed, COP must take some action in order to exercise its discretionary authority at the end of the 60-day period to terminate the Agreement. Id. at COP496. COP disagrees with the bankruptcy court's conclusion that the permissive word may required COP to take additional action to terminate the Agreement. COP argues that [t]his inference contradicts the plain language of the Operating Agreement that after the 60 day notice period COP `may at once take possession of any or all the properties herein described.' Aplt. Br. at 18 (quoting Aplt.App., Vol. II at COP512) (emphasis added by COP). COP asserts that [t]he immediacy of the Operating Agreement language is inconsistent with any additional notice requirement at the end of the 60 day period. Id. The trustee argues that COP quotes out of context. Additional key language of paragraph nine states that if CWM's default shall continue for a period of 60 days after service of written notice, ... then and in such event this Agreement may be terminated and all of the rights of [CWM] shall cease and be wholly determined and [COP] may at once take possession. Aplt.App., Vol. II at COP512. The trustee contends that the Agreement demonstrates a temporal progression of events: (1) written notice of default, (2) default period lasting 60 days `after' service of the notice, (3) `then' the [Agreement] may be terminated, and upon which occurrence (4) all of CWM's rights shall cease, and (5) COP may at once take possession. Aplee. Br. at 32. In accord with Utah law, the bankruptcy court reached its decision by determining the intent of the parties from the plain language of the Agreement. As the Utah Supreme Court has explained: In interpreting a contract, the intentions of the parties are controlling. We first look to the four corners of the agreement to determine the intentions of the parties. If the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law. Cent. Fla. Invs., Inc. v. Parkwest Assocs., 40 P.3d 599, 605 (Utah 2002) (quotation, citations, and alteration omitted). We agree with the trustee that the language of the Agreement is unambiguous and supports the bankruptcy court's determination that the Agreement did not provide for automatic termination. COP needed to take additional action to exercise its discretionary authority to terminate the Agreement after the 60-day notice period expired. The Agreement established a step-by-step termination process. Only after CWM has failed to cure its default at the end of the 60-day notice period may COP then terminate the Agreement. The conditional language may be terminated gives COP the option to terminate; it does not provide for automatic termination when the 60-day notice period ends. By then, of course, COP could not take action to terminate because it was foreclosed from doing so under the automatic stay in 11 U.S.C. § 362. [3]
COP next argues that the January letters establish that the Agreement was terminated by the end of the 60-day period. This argument takes two forms. First, in its opening brief, COP claims that the letters satisfied any additional action required to terminate the Agreement. See Aplt. Br. at 18. Second, at oral argument COP suggested that the letters demonstrate the parties' intent that COP did not need to take any further action at the end of the 60-day period and that, unless CWM cured its defaults, the Agreement would automatically terminate at the close of business on January 8, 2008. The bankruptcy court refused to consider these letters because they improperly attempted to provide for the Agreement's termination in violation of the district court's Supplemental Order. We further note that the trustee submitted a supplemental appendix on appeal containing a December 10, 2009 order from the bankruptcy court arising from an adversary proceeding between the trustee and COP. In the order, the court held that the January 5 and 6 letter agreements are declared of no legal effect and avoided by reason of the fact that they were entered into in violation of the United States District Court's Supplemental Order in Aid of Enforcement of Judgment entered on December 19, 2007. Aplee. Supp.App. at 312. At oral argument, COP argued that the bankruptcy court's December 10, 2009 order did not prevent consideration of the January letters as evidence of the parties' intent. The trustee argues in his brief, however, that consideration of the January letters violates principles of contract law. We agree. Under Utah law, when contract language is unambiguous, as it is here, the plain meaning of that language determines the parties' intent. See Mid-America Pipeline Co. v. Four-Four, Inc., 216 P.3d 352, 356 (Utah 2009); Cent. Fla. Invs., 40 P.3d at 605. Extrinsic evidence such as the January letters should not be considered under these circumstances. See Mid-America, 216 P.3d at 356 (We consider extrinsic evidence of the parties' intentions only if the contractual language is ambiguous.). Moreover, COP's argument that the January letters met any action-to-terminate requirement conflicts with our and the bankruptcy court's reading of the Agreement as requiring the additional termination action to occur after the 60-day notice period expired.