Court Opinion

ID: 999241
Source: CourtListenerOpinion
Date Created: 2013-07-04 17:22:35.515837+00
Date Added: 2024-06-11T15:27:14.738547
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: WBZE, INCORPORATED,
Debtor.

WBZE, INCORPORATED,
Plaintiff-Appellant,

v.
                                                               No. 98-1888
ANA RADIO NETWORK,
INCORPORATED,
Defendant-Appellee,

and

ARAB NETWORK OF AMERICA,
INCORPORATED,
Defendant.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Peter J. Messitte, District Judge.
(CA-97-3567-PJM, BK-96-130-PM, AP-96-1A098-PM)

Argued: May 6, 1999

Decided: July 12, 1999

Before MURNAGHAN, WILLIAMS, and MICHAEL,
Circuit Judges.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________
COUNSEL

ARGUED: Stanley R. Jacobs, COGAN & JACOBS, P.C., Rockville,
Maryland, for Appellant. John H. More, ROGERS & MORE, Wash-
ington, D.C., for Appellee. ON BRIEF: Tasneem Hussain, ROGERS
& MORE, Washington, D.C., for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

WBZE, Inc. filed suit in the United States Bankruptcy Court for the
Southern District of Maryland against Arab Network of America, Inc.
(Arab Network) and ANA Radio Network, Inc. (ANA Radio) alleging
breach of contract and malicious destruction of property. After hold-
ing a trial on the breach of contract issue with ANA Radio as the sole
defendant,1 the bankruptcy court issued proposed findings of fact and
conclusions of law that concluded that ANA Radio breached its con-
tract with WBZE. The district court declined to adopt this proposed
conclusion, based upon its finding that WBZE anticipatorily breached
this contract, and entered judgment against ANA Radio only for the
outstanding costs and fees ANA Radio incurred under the contract
prior to WBZE's anticipatory breach. WBZE noted a timely appeal
of the district court's order, arguing that the district court erred in
applying a de novo standard of review to the bankruptcy court's pro-
posed findings of fact and conclusions of law, that the district court
erred in concluding that WBZE anticipatorily breached the contract
with ANA Radio, and that the district court erred in not holding ANA
Radio liable as a successor corporation for the debts of Arab Network.
Finding no error, we affirm.
_________________________________________________________________
1 The bankruptcy court entered a default judgment against Arab Net-
work.

                    2
At all relevant times in these proceedings, WBZE, Inc. owned and
operated a radio station in Maryland. WBZE had a Time Brokerage
Agreement (TBA) with Arab Network, a Pennsylvania corporation,
that was "engaged, inter alia, in the business of providing ethnic and
other programming . . . to broadcast stations, cable television systems,
and other media of mass communications in the United States." (J.A.I
at 103.) The TBA ran from September 29, 1989 to September 28,
1992, and month-to-month thereafter (the 1989 TBA). The 1989 TBA
provided that Arab Network would reimburse WBZE for the reason-
able operating expenses of the station, including royalties to music
licensing companies.

As the term of the 1989 TBA ended, WBZE entered into a second
TBA with ANA Radio, a Virginia corporation that was a wholly
owned subsidiary of Arab Network. The term of the second TBA was
to run from October 1, 1993 through October 1, 1996 (the 1993
TBA). Like the 1989 TBA, the 1993 TBA provided that ANA Radio
would reimburse WBZE for the reasonable operating expenses of the
station, including royalties to music licensing companies. Nothing in
the 1993 TBA provided for the assumption of Arab Network's liabili-
ties by ANA Radio, however.

WBZE's president, Peter Gureckis, acknowledged at trial that he
was aware that there were two separate entities involved in the TBAs,
Arab Network and ANA Radio. Gureckis also conceded that there
was nothing in the 1993 TBA that stated that ANA Radio was liable
for the debts of Arab Network. ANA Radio's vice-president of
finance, Cheryl Montalvo, testified that although ANA Radio occa-
sionally paid some of Arab Network's outstanding bills, Gureckis
never asked her, acting in her official capacity, to pay these bills. In
November 1993, Arab Network sold all of the common stock of ANA
Radio to ANA Holdings, Inc., a Delaware corporation, for $1 million.
According to Gureckis, Montalvo, and Curt Turner, ANA Radio's
director of technical operations, Gureckis and WBZE's employees
were aware of the sale of ANA Radio to ANA Holdings at the time
it was made or shortly thereafter.

During the period covered by the 1993 TBA, WBZE experienced
serious financial difficulties due in large part to Arab Network's fail-
ure to pay rent and other operating expenses under the 1989 TBA. At

                     3
the date of the inception of the 1993 TBA, Arab Network owed
WBZE approximately $195,000 under the 1989 TBA. As a result,
WBZE fell behind in its payments to creditors, and its broadcast
equipment began to deteriorate noticeably. Two music licensing com-
panies, SESAC and ASCAP, obtained judgments against WBZE and
proceeded to garnish WBZE's bank account. In December 1995, the
IRS placed a lien on WBZE's income and served a notice of levy on
ANA Radio. WBZE's financial situation deteriorated to the point that,
according to WBZE's accountant, any payment by ANA Radio in
December 1995 or January 1996 would pass directly to the IRS.2

WBZE's efforts to recoup the amount it was owed came to a cli-
max in January 1996. On January 3, 1996, WBZE's then-attorney,
Robert Kostecka, sent ANA Radio a letter stating that the judgments
and liens against WBZE from the IRS and ASCAP were required to
be paid by Arab Network pursuant to the 1989 TBA. The letter con-
cluded, "Unless the present situation is resolved, WBZE could be
forced to terminate its Time Brokerage Agreement with ANA Radio
Network, Inc. and to go off the air. It is imperative that a resolution
of this matter is obtained immediately." (J.A.I at 285.) The following
day, January 4, Kostecka sent ANA Radio another letter stating,
"Please be advised that if the situation outlined in my correspondence
to you dated January 3, 1996 . . . is not immediately resolved, WBZE
will be forced to go off the air as of 5:00pm, January 5, 1996." (J.A.I
at 286.)

After meeting with representatives of WBZE, ANA Radio declined
to restructure its payments to WBZE or to advance WBZE any addi-
tional funds. On January 5, ANA Radio's attorney, Gordon Coffee,
wrote Kostecka, notifying him that as of that afternoon ANA Radio
had broadcast the following message on the hour for several hours:
_________________________________________________________________

2 Gureckis testified that ANA Radio made all of its payments due under
the 1993 TBA except for its rent from January 1996 and its payroll taxes
from December 1995 (which it could not make due to the IRS lien), and
that prior to January 1996, he did not have any serious problems with
ANA Radio other than that they were frequently behind in their pay-
ments.

                    4
          WNTL3 has notified us that due to circumstances beyond
          our control broadcast services may cease at 5:00 PM EST
          today, Friday, January 5, 1996. Should an interruption in our
          broadcast occur we assure you that we will resume broad-
          cast as soon as possible. The interruption shall affect the
          Washington, D.C. area only. We apologize in advance
          should this incident occur and state again that this is due to
          circumstances beyond the control of ANA Radio Network,
          Inc.

(J.A.I at 287.) Coffee acknowledged that ANA Radio discontinued
the message upon receiving word from WBZE that it would continue
its contractual obligations until 5:00 p.m. on Tuesday, January 9. Cof-
fee cautioned that "[g]iven WBZE's stated intent to go off the air at
that time, we are planning to run the above message, as modified to
reflect the new termination time, hourly on Tuesday." (J.A.I at 287.)

Kostecka fired a reply on the same day stating that ANA Radio was
in default of the 1993 TBA for failing to make timely payments under
§§ 3.2 and 3.4 of the TBA and failing to provide WBZE with the noti-
fication required to broadcast the aforementioned termination mes-
sage under § 6.1 of the TBA. Kostecka concluded that pursuant to
§ 12.1(a) of the 1993 TBA, WBZE would be terminating the 1993
TBA as of 5:00 p.m. on January 9, 1996, and that"effective immedi-
ately, [ANA Radio] will no longer be permitted access to WBZE's
facilities after the times set forth in the [1993 TBA]." (J.A.I at 289.)

The following day, January 6, WBZE's new attorney, Stanley
Jacobs, notified ANA Radio that WBZE was withdrawing the notice
of termination to afford additional time to see if the matter could be
resolved. Counsel for ANA Radio replied on January 9 that the pur-
ported withdrawal of the notice of termination was rejected "in light
of your client's repeated statements that they would be going off the
air (first on Friday last at 5:00 PM and then today at 5:00 PM) and
your failure to assure our client, ANA Radio Network, Inc., of the sta-
tion's ability and willingness to perform under the[1993 TBA]."
(J.A.I at 292.) The letter concluded, "Accordingly, we consider the
[1993 TBA] to be terminated as of the cut-off time, 5:00 PM, Tues-
_________________________________________________________________
3 The parties do not dispute that this reference is to WBZE.

                    5
day, January 9, 1996, previously noticed to us on behalf of your cli-
ent." (J.A.I at 292.)

ANA Radio had moved out of the WBZE premises the previous
day, January 8, taking its equipment with it, and-- according to
WBZE -- leaving the studio in disarray. The 1993 TBA with ANA
Radio was not due to expire for another nine months, but ANA Radio
paid no fees to WBZE thereafter. On January 10, 1996, WBZE filed
for Chapter 11 bankruptcy protection. On March 5, 1996, WBZE filed
the instant action for breach of contract and malicious destruction of
property against Arab Network and ANA Radio.

After the bankruptcy court entered a default judgment against Arab
Network for its failure to file an answer to WBZE's complaint, the
case proceeded to trial against ANA Radio from August 19 through
22, 1997 solely on the breach of contract issue. 4 The bankruptcy court
issued Proposed Findings of Fact and Conclusions of Law and a Pro-
posed Order on October 23, 1997. In its Proposed Findings of Fact
and Conclusions of Law, the bankruptcy court concluded that ANA
Radio was not liable for any of Arab Network's outstanding liabilities
under the 1989 TBA because it was not a successor corporation of
Arab Network and it never assumed by agreement any of Arab Net-
work's liabilities. The bankruptcy court also concluded that ANA
Radio breached the 1993 TBA by its actions of January 8 and its fail-
ure to perform thereafter, and that the correspondence between the
parties in late December 1995 and early January 1996 were "merely
posturing" and did not rise to the level of an anticipatory breach of
the contract. The bankruptcy court recommended that ANA Radio be
held liable for damages of $409,133.49 plus $120.00 in costs.

Pursuant to Bankruptcy Rule 9033(b), ANA Radio filed a timely
objection to the bankruptcy court's Proposed Findings of Fact and
Conclusions of Law, focusing on the bankruptcy court's conclusion
that ANA Radio breached the 1993 TBA and its proposal that ANA
Radio pay the remaining monthly fee of $43,333.00 per month for
nine months under the 1993 TBA, totaling $389,997.00. After exam-
_________________________________________________________________
4 Prior to trial, the bankruptcy court limited the issue to WBZE's claim
for breach of contract and reserved for a separate adversary proceeding
WBZE's claim for malicious destruction of property.

                    6
ining the record and hearing oral argument, the district court con-
ducted a de novo review of the objected-to findings of fact and
conclusions of law. By opinion dated May 19, 1998, the district court
adopted the findings of fact and conclusions of law proposed by the
bankruptcy court, except for the bankruptcy court's conclusion that
ANA Radio breached the 1993 TBA and was liable for the nine
months remaining on the contract. The district court concluded that
WBZE's letters of January 3 and January 4 constituted an anticipatory
breach of the 1993 TBA, excusing ANA Radio's non-performance for
the remaining nine months, because WBZE unjustifiably demanded
that ANA Radio pay the debts of Arab Network and told ANA Radio
that if such payments were not made, WBZE would cease to perform
under the contract. Accordingly, by order dated May 19, 1998 (the
May 19 Order), the district court entered judgment in favor of WBZE
in the amount of $19,136.49, which reflected the outstanding costs
and fees incurred by ANA Radio under the 1993 TBA prior to
WBZE's anticipatory breach.5

WBZE noted a timely appeal of the district court's May 19 Order
as to ANA Radio. Before us, WBZE argues that the district court
erred in three respects. First, WBZE argues, the district court erred in
reviewing de novo the bankruptcy court's Proposed Findings of Fact
and Conclusions of Law because it was bound to accept the findings
of the bankruptcy court unless such findings were clearly erroneous.
Next, WBZE argues, the district court erred in concluding that WBZE
anticipatorily breached the 1993 TBA because WBZE's letters were
merely an attempt to collect payments it was owed and not a positive
and unconditional action to terminate broadcasting. Finally, WBZE
argues, the district court erred in not holding ANA Radio liable as a
successor corporation for the outstanding debts of Arab Network.6
_________________________________________________________________
5 The district court also entered a default judgment against Arab Net-
work in the amount of $163,521.66 plus $120.00 in costs.
6 Because WBZE failed to file a written objection to the bankruptcy
court's recommendation with regard to ANA Radio's successor liability
on the debts owed by Arab Network under the 1989 TBA, it has waived
its right to present this issue to this Court. See Nantahala Village, Inc.
v. NCNB Nat'l Bank (In re Nantahala Village, Inc.) , 976 F.2d 876, 880
(4th Cir. 1992) (holding that party that failed to object to bankruptcy
court's recommendation waived its rights to present in the court of
appeals issues it did not contest in the district court).

                   7
We have reviewed the record, briefs, and pertinent case law on this
matter, and we have had the benefit of oral argument. Our careful
review persuades us that the rulings of the district court were correct.
Accordingly, we affirm on the reasoning set forth in the district
court's opinion. See WBZE, Inc. v. Arab Network of Am., No. CA-97-
3567-PJM (D. Md. May 19, 1998).

AFFIRMED

                    8