Opinion ID: 78363
Heading Depth: 2
Heading Rank: 2

Heading: The $2,000,000 Payment Under the Settlement Agreement

Text: Elizabeth next contends that the district court erred in affirming the bankruptcy court's conclusion that she is not entitled to any portion of the $2,000,000 offered by Saal to the Trustee as consideration for the settlement agreement. Elizabeth argues that the bankruptcy court abused its discretion by exercising its equitable authority under 11 U.S.C. § 105 in contravention of the express provisions of 11 U.S.C. § 363. This argument is without merit. The bankruptcy court based its conclusion that Elizabeth is not entitled to any portion of the $2,000,000 payment on both legal and equitable grounds, saying: I conclude, and equity dictates, that Elizabeth not receive half of the $2,000,000 premium offered by Saal to the estate in exchange for the court's approval of the assumption of the Saal contract. By its own terms, the addendum to the contract between the Trustee and Saal specifically provides that all of the extra funds would be paid to the estate .... Since I have previously ruled that the Saal contract to which Elizabeth agreed in the prior divorce court litigation remains a valid and enforceable executory contract, Elizabeth would have been bound by the $5.85 million sale price but for the filing of the involuntary bankruptcy petition against Denis, which gave rise to the possibility that the contract could be rejected under 11 U.S.C. § 365. The filing of the bankruptcy petition created a whole host of additional legal issues so that it was well worth Saal's while to offer an additional inducement to the Trustee, an inducement which Saal never would have had to offer if this bankruptcy case were not pending. Simply stated, Elizabeth would have received no more than one-half of $5,850,000 for her ownership interest if the Saal sale had gone forward as mandated by the divorce court. That is precisely what she will get for her half interest in the [hotel] if the Saal sale closes .... Moreover, Elizabeth has done nothing to justify an enhancement of her position. To the contrary, her conduct ... reflects a consistent and relentless effort to deprive Denis of his remaining equity in the [hotel] by any and all means possible, including many which no court of equity could countenance. In re Chira, 353 B.R. at 728-29 (footnote omitted). Elizabeth's argument ignores the fact that the district court ruled that she has no legal entitlement to payment under the settlement agreement. Elizabeth was legally bound by the Saal purchase contract prior to the filing of the bankruptcy petition, and she will not receive anything less upon the sale of the hotel under the terms of the settlement agreement than she would have received outside of bankruptcy. The bankruptcy court's discussion of Elizabeth's inequitable conduct does not detract from the force of its legal conclusions. We agree with the district court's finding that the bankruptcy court did not abuse its discretion by ruling that Elizabeth is not entitled to any portion of the $2,000,000 payment under the settlement agreement.