Opinion ID: 449697
Heading Depth: 1
Heading Rank: 3

Heading: Perry's Claim

Text: 20 Perry advances several arguments for treating its claim for the cost of cleanup of the leasehold premises as an administrative claim under section 503 having a first priority under 11 U.S.C. Sec. 507 (1982). Perry's first argument is that Johnson's failure to disclose the existence of a hazardous waste problem amounted to fraud. The bankruptcy court rejected Perry's fraud claim, finding that Johnson had made no misrepresentation; that the sludge piles were not concealed, and that Perry had actual notice of the existence of the sludge and the condition of the pond. The court found that under the circumstances Perry, an experienced buyer and seller of industrial sites, should have made additional inquiries. These findings are not clearly erroneous, and they preclude any common law fraud claim. 21 Perry urges, however, that the common law standards for fraud should not apply because it was in a fiduciary relationship with the debtor in possession and that this created an affirmative obligation on the part of Johnson to disclose. In support of that contention Perry refers us to cases holding that a trustee or a debtor in possession in a reorganization proceeding is a fiduciary. 2 No doubt a trustee, or a debtor in possession, is in a fiduciary relationship with creditors of the estate. It does not follow, however, that the same special relationship exists between trustees or debtors in possession and those with whom they deal at arm's length on behalf of the estate. Nothing in the Johnson-Perry contractual relationship gave rise to a special relationship which would impose on Johnson a greater duty of disclosure than that imposed by the common law of fraud. 22 Next, Perry urges that the promise made on February 21, 1981 by Joel Cooper, Johnson's president, that Johnson would assume full responsibility for the cost of removing the sludge, should be enforced on a theory of promissory estoppel. The bankruptcy court noted that it had approved the terms of the Johnson-Perry sale out of the ordinary course of business on January 21, 1981, and that under 11 U.S.C. Sec. 362 the debtor in possession lacked authority to modify those terms without court approval. Moreover, the court found that Perry consummated the transaction without advising the court of any environmental problem or attempting to avoid the sale. 23 The elements of promissory estoppel recognized by South Carolina are: 24 (1) the presence of a promise unambiguous in its terms; (2) reasonable reliance upon the promise by the party to whom the promise is made; (3) the reliance is expected and foreseeable by the party who makes the promise; and (4) the party to whom the promise is made must sustain injury in reliance on the promise. 25 Powers Construction Co., Inc. v. Salem Carpets, Inc., --- S.C. ---, 322 S.E.2d 30, 33 (S.C.App.1984). Mr. Cooper's promise is unambiguous, but it could not have reasonably been relied upon by Perry, an experienced purchaser of industrial plants in bankruptcy and reorganization cases, which knew that the terms of sale had been approved by the court prior to the date of Cooper's promise. Whether Cooper expected and foresaw reliance is hardly relevant, since neither the bankruptcy court nor the other creditors expected or foresaw such reliance. Moreover Perry's going forward with the transaction after becoming aware of the environmental problem suggests that it did not rely on Cooper's promise, but rather was motivated by the profits it expected to make in liquidating the Summerville plant. Thus, the bankruptcy court did not err in rejecting Perry's promissory estoppel claim. 26 Finally, Perry urges that Quanta Resources and Penn Terra require the recognition of its claim as a cost of administration. This contention is without merit. As we note in Part II above, neither of those case rules on the priority to be afforded to claims for cleanup costs incurred in compliance with state environmental protection laws. The relevant case is Ohio v. Kovacs, --- U.S. ----, 105 S.Ct. 705, 711 n. 12, 83 L.Ed.2d 649 (1985) in which the court observed: 27 If the site at issue were [the debtor's] property, the trustee [or debtor in possession] would shortly determine whether it was of value to the estate. If the property was worth more than the costs of bringing it into compliance with state law, the trustee [or debtor in possession] would undoubtedly sell it for its net value, and the buyer would clean up the property, in which event whatever obligation [the debtor] might have had to clean up the property would have been satisfied. If the property were worth less than the cost of cleanup, the trustee [or debtor in possession] would likely abandon it to its prior owner, who would have to comply with the state environmental law to the extent of his or its ability. (emphasis supplied). In this case the debtor in possession opted to sell, and Perry, as purchaser, acquired the leasehold subject to the cleanup obligation.