Court Opinion

ID: 9543068
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:41:47.390289+00
Date Added: 2024-06-11T15:09:37.827059
License: Public Domain

RATLIFF, Chief Judge,
dissenting.
I respectfully dissent.
The majority places undue emphasis upon Weil v. Neary (1929), 278 U.S. 160, 49 S.Ct. 144, 73 L.Ed. 243. Although I agree that apparently no court has yet addressed the question of whether a failure to disclose a contract pursuant to 11 U.S.C. § 1129(a)(4)1renders the contract unen-foreeable in a separate civil suit, I believe a more appropriate analysis for the facts in the present case is found in a 1924 decision. New Amsterdam Casualty Co. v. Madison County Trust Co. (1924), 81 Ind.App. 157, 142 N.E. 727, involved the receivership of a business under state statutes. Wagner Axle Company entered into a contract with the United States government for military products. The government advanced $80,-000 to Wagner Axle, with New Amsterdam Casualty as surety <to guarantee the government against loss. When Wagner Axle became insolvent, its creditors threatened to commence receivership proceedings. The surety contracted with the Madison County Trust Company to be the court-appointed receiver. The oral contract provided that Madison County Trust would advance money to keep Wagner Axle in operation and would provide management services, all in an attempt to avoid liquidation. In return, New Amsterdam, the surety, promised to pay for such advances and services. Relying upon these promises, Madison County Trust accepted the receivership and conducted Wagner Axle's business. Ultimately, however, Wagner County Trust went into bankruptcy.
Madison County Trust filed suit in state court against New Amsterdam Casualty for breach of the agreements. One of New Amsterdam's defenses was that the agreements were void as against public policy. In addressing this claim, the court held as follows:
"The unquestioned rule is stated that a receiver is bound to maintain an attitude of strict neutrality between all the parties in interest, and any agreement which might tempt him to sacrifice or jeopardize the interests of one for the benefit of another in interest is contrary to public policy. But it does not follow that one interested in the successful management of an industrial plant, that it may, if possible, protect itself against a loss of $80,000, may not use its influence in inducing some one competent to accept an appointment as receiver to operate the plant. Nor does it follow that where, as here, there was no money available with which to operate, such an interested party may not promise such receiver to furnish money for the purpose of manufacturing material which had been purchased for use in carrying out the contract, the default of which it seeks to avoid. Nor does it follow that such money may not legitimately be furnished to *194keep the plant a going concern thereby making it more salable. Such acts, within themselves, were not against public policy. They of necessity inured to the benefit of other creditors. There is not the slightest suggestion that the receiver was in any way partial to [New Amsterdam Casualty], or that it did not in every particular obey the orders of the court. ... To permit appellant under the circumstances of this case to avoid its obligations on the ground that it was against public policy would be unconscionable."
Id. at 164-65, 142 N.E. at 729.
I believe that the New Amsterdam decision is a better approach than Weil v. Neary. In the present case, as in New Amsterdam, Homer Tolliver and Acutus Industries were "vitally interested in the welfare of the [companyl." New Amsterdam, at 162, 142 N.E. at 728. Homer Tolliver and Acutus Industries induced Marte Mathas to make substantial expenditures which inured to the benefit of Tolliver and Acutus. Without the amounts expended by Mathas in buying out David Willis, Acutus could not have acquired the assets of T & M Manufacturing. Furthermore, T & M would have had to close down but for Mathas's cash advances for which Acutus promised reimbursement. Additionally, the majority opinion concedes that these contracts benefitted T & M's creditors. I conclude, as did the court in New Amsterdam, that "[tlo permit appellant under the cireumstances of this case to avoid its obligations on the ground that it was against public policy would be unconscionable." Id. at 165, 142 N.E. at 729.
If a creditor, as opposed to Acutus, opposed the validity of the agreements, I would be compelled to reach an opposite result. The bankruptcy code is designed specifically to protect the rights of creditors. Here, however, Tolliver and Acutus are attempting to avoid their contractual obligations through the guise of the bank-ruptey code. I would not tolerate this result.

. In 1984, Congress amended 11 U.S.C. § 1129(a)(4) to read as follows:
"(a) The court shall confirm a plan only if all of the following requirements are met:
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"(4) Any payment made or to be made by the proponent under the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the court as reasonable."
Thus, due to the deletion of portions of the statute, if this case had arisen under § 1129(a)(4) as amended, there would have been no violation, since the statute presently does not require the disclosure of agreements such as those between Acutus and Mathas.