Court Opinion

ID: 626948
Source: CourtListenerOpinion
Date Created: 2012-04-09 23:08:10+00
Date Added: 2024-06-11T17:51:17.755720
License: Public Domain

Case: 11-50217        Document: 00511815186              Page: 1          Date Filed: 04/09/2012

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                                        FILED
                                                                                        April 9, 2012

                                             No. 11-50217                              Lyle W. Cayce
                                                                                            Clerk

In the Matter of: HAROLD F. EGGERS,
also known as Harold F. Eggers, Jr.,

                                                          Debtor
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HAROLD F. EGGERS,
also known as Harold F. Eggers, Jr.,

                                                          Appellant

v.

JOHN TOWNES VAN ZANDT, II; WILLIAM VINCENT VAN ZANDT;
KBV, a Minor, by and through her next friend, Jeanene Van Zandt;
JEANENE VAN ZANDT; TVZ RECORDS, L.L.C.,

                                                          Appellees

                      Appeal from the United States District Court
                           for the Western District of Texas
                                USDC No. 1:10-CV-341

Before JONES, Chief Judge, and HIGGINBOTHAM and SMITH, Circuit Judges.
PER CURIAM:*

        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
   Case: 11-50217     Document: 00511815186     Page: 2   Date Filed: 04/09/2012

                                  No. 11-50217

      This is an appeal from the bankruptcy court judgment, affirmed by the
district court, that authorized the Van Zandts, family members of deceased
singer-songwriter Townes Van Zandt, to recoup a judgment out of royalties owed
to the debtor, who was Townes Van Zandt’s former manager. Finding no
reversible error, we affirm.
      This court has carefully reviewed the state court judgment in favor of the
Van Zandts that precipitated the bankruptcy of Harold F. Eggers (“Eggers”),
together with the parties’ Settlement Agreement, the bankruptcy and district
court opinions, the briefs on appeal, and pertinent portions of the record. No
useful purpose is served by reciting in detail the facts with which the parties are
familiar. We do not rely on findings or legal conclusions that are questionable
in the record from the proceedings below.
      Record review demonstrates that the Van Zandts were entitled to the
benefit of the equitable doctrine of recoupment, a doctrine that “allows a
defendant [the Van Zandts] to reduce the amount of a plaintiff’s [Eggers’s] claim
by asserting a claim against the plaintiff which arose out of the same transaction
to arrive at a just and proper liability on the plaintiff's claim.” In re Holford,
896 F.2d 176, 178 (5th Cir. 1990); see also In re McConnell, 934 F.2d 662, 667
(5th Cir. 1991). Recoupment is authorized by the Bankruptcy Code, as Eggers’s
brief admits, as part of the “process of determining the amount owing to the
bankruptcy estate.”
      Appellant’s principal contentions are that none of the alleged criteria of
recoupment—an identity of parties, a single integrated transaction, and a
balance of equities in favor of the party claiming relief—applies in his dispute
with the Van Zandts. Each of these challenges is ill-founded on the law or facts.

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   Case: 11-50217    Document: 00511815186      Page: 3    Date Filed: 04/09/2012

                                  No. 11-50217

      First, in contrast to the doctrine of setoff, research reveals no case
requiring an absolute identity of parties as a prerequisite to a recoupment claim.
In practice, the single integrated transaction requirement will almost always
involve two parties, resulting in the paradigm that recoupment allows A to
reduce its debt owed to B in the amount of B’s obligation to A. We need not
explore the potential boundaries of recoupment in multiparty dealings, however,
in light of the facts here. Eggers owed the Van Zandts a judgment in the suit
they brought to enforce a prior Settlement Agreement with him over their
mutual rights and duties regarding Townes Van Zandt’s musical works. The
Van Zandts wholly own TVZ Records, LLC (“TVZ Records”), which was (1) the
conduit for musical contracts, (2) named as a “party” (though not a signatory) to
the Settlement Agreement, (3) responsible, inter alia, for collecting and
disbursing royalties owed to the signatories, and (4) a specific beneficiary of the
state court declaratory judgment. If more were needed to support the finding
that the interests of the Van Zandts and TVZ Records are aligned, it is Eggers’s
description in his proposed bankruptcy repayment plan of “Royalties owed to
TVZ Records” as including the Van Zandt parties’ “setoff rights against
pre-petition royalties.” If Eggers considered the family and TVZ Records to be
essentially one unit for calculating his unobjected-to obligation to pay prepetition
royalties arising from the Settlement Agreement, it seems clear they remain one
for future royalties. These connections are close enough, if not exactly congruent
with a two-party arrangement, to support recoupment.
      Second, notwithstanding Eggers’s efforts to portray the Settlement
Agreement as a series of separate recording-type contracts assembled in one
document, the bankruptcy court’s contrary factfinding is not clearly erroneous.

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   Case: 11-50217    Document: 00511815186      Page: 4   Date Filed: 04/09/2012

                                  No. 11-50217

The Settlement Agreement resolved disputes between the Van Zandts and
Eggers over the full range of Townes Van Zandt’s artistic works. It placed
obligations on all three named parties and prescribed various remedies for
non-performance, e.g., liquidated damages for material breaches. That different
royalty schedules and exploitation terms applied to different musical
compositions is hardly surprising.      The purpose of this “single integrated
transaction” was to settle all the parties’ interrelated interests.
      Finally, equity favors recoupment by the Van Zandts on the facts
presented. Eggers owed liquidated damages and attorney fees to the Van Zandts
because a jury found he committed material breaches of the Settlement
Agreement that assured him of future royalties. If recoupment were disallowed,
Eggers would continue to receive royalties through TVZ Records while being
discharged in bankruptcy from the adverse judgment. He would benefit from an
unjustified windfall.
      This court’s decision in In re Gasmark, 193 F.3d 371 (5th Cir. 1999) is not
to the contrary. Gasmark disallowed Southwest, a creditor of the bankrupt gas
supplier, from recouping contractual liquidated damages from the debts it
unquestionably owed for prepetition receipt of the debtor’s gas. The debtor,
however, had experienced no unjust enrichment from failing to deliver other
quantities of gas to Southwest, nor had Southwest proven any injury from the
non-delivery that would undergird the liquidated damages payment.
Consequently, the court “[felt] no equitable tug in Southwest’s favor that
supports application of the narrow doctrine of recoupment.”           Id. at 375.
Enforcing recoupment would have granted a windfall to Southwest. Here, in
contrast, enforcing recoupment prevents Eggers from receiving a windfall.

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 Case: 11-50217   Document: 00511815186     Page: 5   Date Filed: 04/09/2012

                              No. 11-50217

    For these reasons, the judgments of the bankruptcy and district courts are
AFFIRMED.

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